DDTC Looking for Comments Regarding Amendments to Parts 120, 122, 124, 125 & 126

By: Danielle McClellan

The Department of State wants to clarify requirements for the licensing and registration of US person providing defense services while in the employ of foreign persons. They also want to clarify when these same persons may be covered under existing DDT C authorizations previously issued to their employers and affiliates, and when they are instead obligated to apply for their own license or agreement prior to engaging in the provisions of the defense service.

Comments regarding the following proposed rules will be accepted until July 27, 2015

FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-1282; email DDTCResponseTeam@state.gov. ATTN: Regulatory Change, U.S. Persons Employed by Foreign Persons.

The Department of State’s full plan can be accessed here.

For the reasons set forth above, Title 22, Chapter I, Subchapter M, parts 120, 122, 124, 125 and 126 are proposed to be amended as follows:


1. The authority citation for part 120 continues to read as follows:     . . . .

2. Section 120.39 is amended by revising paragraph (a)(2) to read as follows:

Sec.  120.39  Regular employee.

(a) * * *

(2) An individual in a long term (i.e., 1 year or longer) contractual relationship with the company where the individual:

(i) Works at the company’s facilities;

(ii) Works under the company’s direction and control;

(iii) Works full time and exclusively for the company;

(iv) Executes nondisclosure certifications for the company; and

(v) Where the staffing agency that has seconded the individual (if applicable) has no role in the work the individual performs (other than providing that individual for that work) and does not have access to any controlled technology (other than where specifically authorized by a license).

3. Section 120.40 is amended by removing the Note and adding Note 1 and Note 2 to read as follows:

Sec.  120.40  Affiliate.

Note 1 to Sec.  120.40: For purposes of this section, “control” means having the authority or ability to establish or direct the policies or operations of the firm with respect to compliance with this subchapter. Control is rebuttably presumed to exist where there is ownership of 25 percent or more of the outstanding voting securities if no other person controls an equal or larger percentage.

Note 2 to Sec.  120.40: A registrant may establish a control relationship with another entity via written agreement such that the entity then becomes an affiliate in accordance with section. The registrant may include such an affiliate on its registration, in accordance with this subchapter and subject to DDTC’s disallowance. If an affiliate listed on a registration ceases to meet the requirements of this section, the registrant must immediately remove the affiliate from its registration and notify DDTC pursuant to Sec.  122.4(a) of this subchapter.

4. Section 120.43 is added to read as follows:

Sec.  120.43  Natural person.

Natural person means an individual human being, as distinguished from a corporation, business association, partnership, society, trust, or any other entity, organization or group.


5. The authority citation for part 122 continues to read as follows:…

6. Section 122.1 is amended by revising paragraph (a) and adding a note to paragraph (a) to read as follows:

Sec.  122.1  Registration requirements.

(a) Any person who engages in the United States in the business of manufacturing, exporting, or temporarily importing defense articles or furnishing defense services; and any U.S. person who engages in the business of furnishing defense services wherever located, is required to register with the Directorate of Defense Trade Controls under Sec. 122.2. For the purpose of this subchapter, engaging in such a business requires only one occasion of manufacturing or exporting or temporarily importing a defense article or furnishing a defense service. A manufacturer who does not engage in exporting must nevertheless register. (See part 129 of this subchapter for requirements for registration of persons who engage in brokering activities.)

Note to paragraph (a): Any natural person directly employed by a DDTC-registered person, or by a person listed on the registration as a subsidiary or affiliate of a DDTC-registered U.S. person, is deemed to be registered.

Sec.  122.2  [Amended]

7. Section 122.2(a) is amended by adding a comma between the words “registrant” and “or” in the third sentence.

8. Section 122.4 is amended by revising paragraph (a)(2)(v) to read as follows:

Sec.  122.4  Notification of changes in information furnished by registrants.

(a) * * *

(2) * * *

(v) The establishment, acquisition, or divestment of a U.S. or foreign subsidiary or other affiliate who is engaged in manufacturing defense articles, exporting defense articles or defense services, or the inability of an affiliate listed on the registration to continue meeting the requirements in Sec.  120.40 of this subchapter;



9. The authority citation for part 124 continues to read as follows:  . . . .

10. Section 124.1 is amended as follows:

a. Add two sentences at the end of paragraph (a).

b. Revise paragraph (b).

The addition and revision read as follows: Sec.  124.1  Manufacturing license agreements and technical assistance agreements.

(a) * * * The provision of defense services by a natural U.S. person may be authorized on a Form DSP-5. Natural U.S. persons employed as regular employees of a foreign subsidiary or affiliate listed on the registration of a U.S. person may receive authorization to provide defense services via an agreement between the registered U.S. person and the foreign subsidiary or affiliate, provided the registered U.S. person accepts responsibility for, and demonstrates ability to ensure, the natural U.S. person’s compliance with the provisions of this subchapter.

(b) Classified Articles. Copies of approved agreements involving the release of classified defense articles will be forwarded by the applicant to the Defense Security Service of the Department of Defense.

11. Section 124.17 is added to read as follows:

Sec.  124.17  Exemption for natural U.S. persons employed by foreign persons.

(a) A natural U.S. person employed by a foreign person may furnish defense services to and on behalf of the foreign person employer without a license if all of the following conditions are met:

(1) The employer is located within a NATO or EU country, Australia, Japan, New Zealand, and/or Switzerland, and the defense services are provided only in these countries;

(2) The end user(s) of the associated defense article(s) are located within NATO, EU, Australia, Japan, New Zealand, and/or Switzerland;

(3) No U.S.-origin defense articles, to include technical data, are transferred from the U.S. persons to the employer without separate authorization;

(4) No classified, SME, or MT technical data is transferred (even if separately authorized) in connection with the furnishing of defense services; and

(5) The U.S. person furnishing the defense services maintains records of such activities and complies with registration requirements in accordance with part 122 of this subchapter.

(b) [Reserved]


12. The authority citation for part 125 continues to read as follows:  . . . .

Sec.  125.4  [Amended]


13. Section 125.4 is amended by removing and reserving paragraphs (b)(2) and (b)(12).


14. The authority citation for part 126 continues to read as follows:  . . . .

15. Section 126.6 is amended by revising paragraph (c) introductory text and adding paragraph (c)(7) to read as follows:

Sec.  126.6  Foreign-owned military aircraft and naval vessels, and the Foreign Military Sales program.

(c) Foreign Military Sales Program. A license from the Directorate of Defense Trade Controls is not required if the classified or unclassified defense article or defense service to be transferred was sold, leased, or loaned by the Department of Defense to a foreign country or international organization under the Foreign Military Sales (FMS) Program of the Arms Export Control Act pursuant to a Letter of Offer and Acceptance (LOA) authorizing such transfer (permanent or temporary), which meets the criteria stated below:

(7) Natural U.S. persons employed by foreign persons may provide defense services to and on behalf of their employers without a license if all of the following conditions are met:

(i) The defense services are provided in support of an active FMS contract and are identified in an executed LOA;

(ii) No U.S.-origin defense articles are transferred from the U.S. person to the employer, without separate authorization;

(iii) The provision of defense services is not to a country identified in Sec.  126.1;

(iv) No classified or SME technical data is disclosed (even if separately authorized) in connection with the furnishing of defense services; and

(v) The U.S. person furnishing the defense services maintains records of such activities and complies with registration requirements in accordance with part 122 of this subchapter.

2 Regulations…1 Destination Control Statement

By: Danielle McClellan

On May 22, 2015 the Directorate of Defense Trade Controls and the Bureau of Industry and Security proposed rules that would change the EAR destination control statement to read the same as the ITAR destination control statement. Many exporters have shipments that contain both EAR and ITAR goods which creates issues when deciding which statement should be included…or if both statements should be included. The goal of this proposed  rule is to make exporter’s lives a bit easier…something we don’t see very often—but then again this is only a proposed rule.

To a certain extent, BIS already fixed the dual DCS problem for shipments containing both EAR and ITAR items.  BIS previously revised 758.6(a) of the EAR to state that using the ITAR DCS constitutes compliance with the EAR DCS requirement for shipments containing both EAR and ITAR items.  The proposed rules, if implemented, would go beyond this BIS quick fix for mixed shipments to a single DCS for all exports.

The Department of State Federal Register notice can be accessed online here.

The BIS Federal Register notice can be accessed online here.

CCL Revisions from Wassenaar Meeting

By: Danielle McClellan

The Bureau of Industry and Security (BIS) issued a final rule on May 21, 2015 that revises the Commerce Control List (CCL) to implement changes made to the Wassenaar Arrangement’s List of Dual-Use Goods and Technologies.

Wassenaar Participating States agreed to new controls on spacecraft equipment and technology for fly-by-wire/flight-by-light systems and revised the text for the controls of machine tools and military utility and finber laser components in optical equipment. Changes involving the deletion of obsolete controls relating to vessels and UAVs have also occurred. The new rule revises 42 ECCNs and adds one ECCN while removing another. The General Technology Note was also amended as well as adding License Exception CIV to 3 ECCNs for Anisotropic plasma dry etching equipment and related software and technology.


  • Revises:  0A606, 1A613, 1C002, 1C007, 1C008, 1C010, 1E002, 2B001, 3A001, 3A002, 3A991, 3B001, 4D001, 4E001, 5D001, 5E001, 5A002, 6A001, 6A003, 6A004, 6A005, 6C005, 6D003, 7A003, 7D004, 7E004, 7E001, 8A001, 8A002, 8A620, 8E002, 9A001, 9A003, 9D003, 9A004, 9A010, 9A012, 9B001, 9B010, 9D003, 9D004, and 9E0032
  • Adjusts 0D521 and 0E521 controls on flight controls
  • Adds  9D005
  • Removes 4D002
  • Revises because of the Foreign Availability Assessment: 3B001, 3D001, and 3E001

FOR FURTHER INFORMATION CONTACT: Sharron Cook, Office of Exporter Services, Bureau of Industry and Security, U.S. Department of Commerce at 202-482-2440 or by email: Sharron.Cook@bis.doc.gov.


For technical questions contact:

  • Categories 0, 1 & 2: Michael Rithmire at 202-482-6105
  • Category 3: Brian Baker at 202-482-5534
  • Categories 4 & 5: ITCD staff 202-482-0707
  • Category 5 (Satellites): Mark Jaso at 202-482-0987 or Reynaldo Garcia at 202-482-3462
  • Category 6 (optics): Chris Costanzo at 202-482-0718
  • Category 6 (lasers): Mark Jaso at 202-482-0987
  • Category 6 (sensors and cameras): John Varesi 202-482-1114
  • Category 8: Darrell Spires 202-482-1954
  • Categories 7 & 9: Daniel Squire 202-482-3710 or Reynaldo Garcia 202-482-3462

ECCN 1C352 Removed to Implement Australia Group November 2013 Decisions

By: Danielle McClellan

The Bureau of Industry and Security (BIS) is implementing a few minor changes to the Commerce Control List (CCL) in order to adopt recommendations that were recommended during the November 2013 Australia Group (AG) intersessional implementation meeting.

Effective June 16, 2015, BIS has published a final rule in which the AG “List of Animal Pathogens for Export Control” has been merged with the AG “List of Biological Agents for Export Control.”  There is now a single common control list for these items now known as the AG “List of Human and Animal Pathogens and Toxins for Export Control.” This change does not affect any of the controls on these items.

CHANGE CHEAT SHEET: ECCN 1C352 has been removed and added to ECCN 1C351. The following sections have been changed to reflect the removal of ECCN 1C352 from the CCL:

  • Section 740.20
  • CB Column on the Commerce Country Chart
  • Section 742.2(a)(1)(i) 
  • Supplement No. 1 to part 742 paragraph (3), (9)(ii), (9)(iii) and 12
  • Section 752.3 paragraph (a)(2)

In addition to this minor change this rule amends the CCL entry that controls chemical manufacturing facilities and equipment to reflect changes to the AG “Control List of Dual-Use Chemical Manufacturing Facilities and Equipment and Related Technology and Software” which revised controls on certain valves, casings (valve bodies) designed for such valves, and preformed casing liners on such valves. This rule also adds a Technical Note clarifying how the terms “multi-seal” and “seal-less” are used with respect to the controls on pumps.

Send comments regarding this collection of information, including suggestions for reducing the burden, to Jasmeet Seehra, Office of Management and Budget (OMB), by email to Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285; and to the Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, 14th Street & Pennsylvania Avenue NW., Room 2705, Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: Richard P. Duncan, Ph.D., Director, Chemical and Biological Controls Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, Telephone: (202) 482-3343, Email: Richard.Duncan@bis.doc.gov.

Free, Updated Searchable ITAR and CCL Available Now!

By: Jill Kincaid

ECTI strives to provide useful tools and resources for trade compliance professionals in addition to our live training seminars, webinars and e-Seminars.   For that reason, ECTI has created a searchable ITAR and a searchable CCL.  You might think DDTC and BIS already offer these—in which case you would be wrong.

ECTI’s newest tool is a FREE Searchable ITAR document.  The ITAR document includes all of Parts 120-130 in one single pdf file which is updated and current with all ITAR  changes on a monthly basis.  The document is downloadable in searchable PDF format with bookmarks so it is easy to find what you are looking for—in one convenient file!

Similarly, for some time now ECTI has been offering a CCL tool that includes all of CCL categories 0 – 9 in a single pdf file which is updated and current with all CCL changes on a monthly basis.    Both of these tools are FREE and available for download at any time on our website!

Searchable ITAR

Searchable CCL

Commerce and State Publish PROPOSED Changes for Night Vision, Optics, and Guidance Items

By: Danielle McClellan

Export Control Reform has returned with a proposed rule change to Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) of the USML.  New, proposed changes to the ITAR and EAR, if implemented, would eventually shift certain less sensitive items out of Category XII to the CCL, where they normally would end up in proposed:

  • New “600 series” ECCNs  6A615, 6B615, and 6D615 for military fire control, range finder, and optical items, and
  • Revised ECCN 7A611 and new ECCNs 7B611, 7C611, and 7E611 for military optical and guidance items.

The proposed rule would also expand in a new way the scope of end-use restrictions on certain exports and reexports of certain cameras, systems or equipment and expand the scope of military commodities described in ECCN 0A919.

The proposed rule is focused on identifying the types of articles that are currently controlled by USML Category XII that are either: inherently military and otherwise warrant control on the USML or if it is a type of common to non-military equipment, possess parameters or characteristics that provide a critical military or intelligence advantage to the US, and that are almost exclusively available from the US. If an article met one or both of these criteria, the article will remain on the USML. If it did not satisfy either requirement because of differences in form or fit, “specially designed” for military applications, it was identified in current or new ECCNs proposed above.

BIS and DDTC are seeking public comments on their respective proposed changes.   DDTC and BIS will accept comments until July 6, 2015.

Once the US Government analyzes the public comments on the proposed changed, the departments of Commerce, State and Defense will determine what, if any changes to make to the proposed rules and then DDTC and BIS will publish final rules to make actual changes to their regulations.  It seems optimistic to think the new final rules could be published by early 2016 (or late 2015) and the final rules will have a six-month delay after publication before they enter into force.  That would mean that actual changes to the controls on these items would enter into force in the summer of 2016.

To review the ITAR proposal go to:  http://www.pmddtc.state.gov/FR/2015/2015-09673.pdf

To review the EAR proposed rule go to:  http://www.bis.doc.gov/index.php/regulations/federal-register-notices#FR25798

Learn more by viewing ECTI’s On Demand, Export Control Reform for Category XII webinar today!

Russia/Crimea Restrictions…You Are Responsible—You Can’t Say BIS Didn’t Officially Warn You

By: Danielle McClellan and John Black

Without reading the details of this guidance, you should get this message:  You better be careful so you do not end up being the first one caught with a significant violation of the new, complicated US sanctions and export controls put in place in response to Russia’s actions in Ukraine and the situation in Crimea.

If you have not studied the complicated array of various new BIS and OFAC rules, you should do so immediately

If you do not understand that these BIS and OFAC rules can have a dramatic impact in your business activities in Russia, Ukraine, Crimea and nearly every other country in the world, you need to study the rules again and study the guidance from the departments of Commerce and Treasury regarding the scope of their respective rules.

The new rules have a remarkably broad potential scope when compared to other US sanctions and export controls.  The broad scope is at least partially due to the new, prohibited parties lists that target important and large Russian entities and the multitude of the unlisted affiliates of the listed parties that often are subject to the same restrictions as the listed parties.

Now, you add to that the BIS guidance that says if you are dealing with a company in Panama and that company’s website says or hints that it is related to a certain listed party, you may have a problem.

And don’t fail to notice that for purposes of these sanctions BIS says “Exporters.”

Finally, one purpose of the guidance may be to give exporters and reexporters friendly advice.  Another purpose may be to put exporters and reexports officially on notice regarding how to comply with the complex rules so as to remove the “we didn’t know BIS wanted us to do that” argument from the list of possible arguments to use to negotiate smaller penalties if you end up doing something BIS doesn’t like.

Anyway, enough of the warnings.  Here is the news:

BIS recently released guidance related to the current export restrictions imposed on Russia due to the “ongoing situation in Crimea.” In August 2014, BIS placed restrictions on exports of certain items to Russia and expanded some licensing requirements later in December 2014.

BIS is now providing additional guidance to US exporters in order to prevent unauthorized reexports to Russia, mainly those involving NS-controlled items or items listed in Supplement No. 2 to Part 744 of the EAR.  BIS advised that exporters should remember that when a party who is not going to use the item is listed as the final destination (e.g., a freight forwarder), exporters have an affirmative duty to inquire about the end use, end user, and ultimate destination of the item(s) to ensure their transaction fully complies with the EAR.  BIS is reminding exporters to do the following:

  • When inquiring into the ultimate destination of the item consider e-mail addresses, telephone number country codes and languages used in communications as well as the customers website
  • Research the intermediate and ultimate consignees and purchaser (addresses, business registers, company profiles, websites etc.)
  • Screen all customers using an export screening tool
  • Pay attention to the countries that freight forwarders serve
  • Look into industry sectors and distributors or non-end user customer supplies

If you have any concerns about suspicious inquires that come to your company, BIS encourages you to contact local BIS Export Enforcement Office or use BIS’s online tip form.  Of course, before you contact the BIS law enforcement agents, it would be prudent to discuss the situation you are considering and the related history with your management and legal counsel.

BIS Guidance: http://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/russia-due-diligence-guidance

Potential Poster Child for Violating US Export Controls on Russia?: Flider Electronics’ Put on the U.S. Denial List for Shipments to Russia

By: Brooke Driver

BIS recently issued a temporary denial order suspending Californian-based Flider Electronics, LLC’s export privileges for 180 days, due to two of its officers’ illegal activities, who are accused of smuggling and money laundering.

BIS claims that the company exported items subject to the EAR to Russia without a license by transshipment through third countries, listing in AES filings Estonian and Finnish end-users who, in reality, acted as freight forwarders. In addition, BIS discovered no licensing history from the company of controlled U.S.-origin electronics to Russia.

BIS chose to issue the temporary denial order due to its belief that a violation of the EAR was “imminent in both time and degree of likelihood.”  This temporary denial leaves the door open for BIS to impose further penalties.

Russia likely is joining China and Iran at the top of the list of countries that will get you in the most trouble for violating US export or reexport controls.  The US Government is certainly looking for a more well-known company to be the “Don’t Let This Happen to You” poster child for violations of US trade controls on Russia.

BIS Revises Support Document Requirements for License Applications

By: Brooke Driver

Effective March 13, 2015, the BIS has amended the EAR to streamline the support document requirements for license applications in part 748. Under the new rule, it is no longer necessary to obtain an International Import Certificate or Delivery Verification during the licensing process. The changes also limit the requirement to obtain a Statement by Ultimate Consignee and Purchaser to exports, reexports and transfers (in-country) of 600 Series Major Defense Equipment.

BIS Corrects Amendments that Shifted USML Cat. XI to CCL

By: Brooke Driver

Effective December 29, 2014, BIS corrected certain provisions of the EAR that were amended in 13 past final rules taking place between November 5, 2007 and October 14, 2014. The changes enact corrections meant to improve clarity and consistency in the regulations. The rule also addresses typographical errors included in the 13 final rules.