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.

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!

DDTC Migrates All External Systems to a New Platform

Source: http://pmddtc.state.gov/

DDTC is modernizing its technology infrastructure, and migrating all external systems to a new platform. The migration will occur on Friday, April 17, 2015.

New versions of the DTrade DSP forms will be available from the DDTC web site on April 3, 2015. DS-2032 and DS-4076 form versions will remain unchanged. If you have any questions, please contact the DDTC Helpdesk at 202-663-2838 or dtradehelpdesk@state.gov

Following the migration, Users will be required to submit a DSP-85 for any amendment applications to License for Export/Import of Defense Articles that were previously submitted using a DSP-119. The Ellie system will be decommissioned as of Friday, April 17, 2015.

Industry users will see no functional changes to the remaining online applications. However, effective April 18, 2015, users will access DTrade, Electronic Forms Submission, and MARY using the following new URLs:

– DTrade Application: https://dtrade.pmddtc.state.gov
– Electronic Forms Submission for DS-2032 and DS-4076: https://efs.pmddtc.state.gov
– MARY status application: https://mary.pmddtc.state.gov/mary

State Department Posts Industry Notice Regarding Temporary Import without a License of Unclassified and Classified Defense Items

Source: https://www.pmddtc.state.gov/

Pursuant to §126.6(c), the temporary import (and subsequent export) without a license of unclassified and classified defense items that are transferred through the sale, lease or loan by the Department of Defense under the FMS program, and that are specifically identified in an executed U.S. Department of Defense Letter of Offer and Acceptance (LOA) pursuant to the U.S. Foreign Military Sales (FMS) program, is authorized. FAQs are available under “Export Control Reform.”

DDTC Corrects July 1 Category XI Amendments

By: Brooke Driver

In December, the State Department released corrections to its July 1 revisions of the USML Category XI (Military Electronics). The changes are minor and meant to clarify the original rule and included revisions of certain text, conforming updates to Supplement No. 1 to part 126 and a few alterations to section 126.6. The section has been altered to remove subparagraphs (c)(4) and (c)(7)(iv) and revise subparagraph (c)(6)(ii) to replace the obsolete term “Shippers Export Declaration” with “Electronic Export Information.”

State Department Upgrades DSP Forms and Common Schema to Accommodate Changes to Categories VIII, XI, XV and XIX of the USML

Source: http://www.pmddtc.state.gov/

Industry Notice: In support of Federal Register Notices 79 FR 37536 and 79 FR 66608 , DTrade DSP forms (i.e., DSP-5, -61, and -73), DSP-85 (a fillable PDF form), and the Common Schema have been upgraded to accommodate the additions and revisions to USML Categories VIII, XI, XV and XIX. Beginning December 30, 2014, DTrade users must use version 8.5 for the DSP-5 and -61, version 8.6 for the DSP-73, version 3.0 for the DSP-85, and version 7.4 for the Common Schema to submit license applications. Earlier versions of these forms and schema will automatically be rejected by the system beginning on December 30, 2014. To access the new DTrade forms and Common Schema, go http://1.usa.gov/1B1WdVL. To access the new DSP-85, go to http://1.usa.gov/1zO061t.

State Department Amends ITAR to Allow Certain Defense Exports to Vietnam

By: Brooke Driver

Effective November 10, 2014, DDTC has revised the International Traffic in Arms Regulations to allow for case-by-case exports of lethal defense articles and services to Vietnam when in support of maritime security and domain awareness. The text of 22 CFR Part 126 has been revised accordingly:   (l) Vietnam. It is the policy of the United States to deny licenses or other approvals for exports or imports of defense articles and defense services destined for or originating in Vietnam, except that a license or other approval may be issued, on a case-by-case basis, for:

(l) Vietnam. It is the policy of the United States to deny licenses or other approvals for exports or imports of defense articles and defense services destined for or originating in Vietnam, except that a license or other approval may be issued, on a case-by-case basis, for:

(1) Lethal defense articles and defense services to enhance maritime security capabilities and domain awareness;

(2) Non-lethal defense articles and defense services; or,

(3) Non-lethal, safety-of-use defense articles (e.g., cartridge actuated devices, propellant actuated devices and technical manuals for military aircraft for purposes of enhancing the safety of the aircraft crew) for lethal end-items.

Note to paragraph (l). For non-lethal defense end-items, no distinction will be made between Vietnam’s existing and new inventory.

DDTC Waives Requirement for CBP to Decrement DSP-73 for Some Government Furnished Equipment

By: John Black

DDTC announced on its website that in many cases it is waiving the requirement for exporters to present DSP-73 temporary export licenses to U.S. Customs and Border Protection (CBP) to record (“decrement”) the export when “Government Furnished Equipment” is being exported for use by U.S. companies to equip personnel with certain defense articles for overseas deployment to support U.S. Government missions. This should facilitate export clearance, and should be particularly helpful for travelers carrying defense articles, because they do not have to go find a CBP officer, who typically are not close to the airline ticket counter, to decrement the DSP-73.

DDTC created specific procedures that exporters must use to take advantage of this waiver. One key aspect of the new procedure is that the application for such DSP-73s must include a specified cover letter, a copy of the pertinent government contract and a copy of the DDTC website announcement. (You may ask why you need to send to DDTC a copy of its own website announcement. The answer is if you do not do it, you do not qualify for the special procedure. Go to your room!) In addition, travelers carrying defense articles should have a copy of the DSP-73 and a copy of “the hand receipt for the equipment.” After each deployment or redeployment the traveler has 15 days to upload a special report to D-Trade regarding the use of the DSP-73.

Here is the DDTC Notice (in case it is dropped from the DDTC website and neither you nor DDTC has a copy to support your license application):

Government Furnished Equipment (GFE) For Use by Contractors:

Pursuant to §126.3 of the ITAR and only for the export of Government Furnished Equipment hand carried out of the United States for use in service of a U.S. government contract, the Deputy Assistant Secretary for Defense Trade Controls has waived the provision in §123.22(a)(2) which requires Customs and Border Protection (CBP) to decrement DSP-73 temporary export licenses under certain circumstances. This will serve as a temporary solution addressing the need for U.S. companies to equip personnel with certain defense articles when deploying overseas in support of U.S. government missions. DDTC has worked out this arrangement with CBP in order to ease the overseas transit of contract personnel to and from military facilities which do not have a regular CBP presence. Under this new policy, companies will be required to obtain a DSP-73 for all of the defense articles to be carried abroad by their personnel. CBP may review the documents as they see fit, but for DSP-73s issued under this policy CBP will not be required to decrement the license at the time of export or import. The license holder will need to account for exported equipment with regular updates to the license case in D-Trade. This policy will cover any defense articles approved under the DSP-73 and carried by the company personnel into or out of any U.S. Port of Entry.

Please remember that any export of defense articles not authorized on a license or claimed under an exemption with the required electronic filing with CBP is a violation of the ITAR and the reporting requirement in section 38(i) of the Arms Export Control Act (22 U.S.C. §2778(i)). In reviewing the scenarios for this policy, the §123.17(f) exemption did not allow for all of the equipment that was needed, and the §126.4 exemptions were not applicable to the majority of the transactions taking place.

PROCEDURE (http://1.usa.gov/1pp9Tad):

 (1) Your company must be registered with DDTC in order to apply for a DSP-73 via DTrade and to use this procedure.

 (2) Your company should estimate your projected deployment needs and allow for more items than personnel to prevent situations that would make an export in a short notice situation impossible. The DSP-73 should overestimate your needs (within a reasonable amount) to allow for the missions to be completed and the personnel deployed.

 (3) Apply for a DSP-73 as normal with the following supporting documentation.

           a. A cover letter explaining that you are supporting a U.S. government contract that requires personnel to carry defense articles issued by the U.S. Government.

 b. A copy of your service contract.

 c. A copy of this web notice.

 (4) Once the DSP-73 is approved, please read and adhere to any provisos. At the time of export, ensure that the company personnel have a copy of the license under which the equipment issued to them will be exported, in addition to a copy of the hand receipt for the equipment. (Please remember that internet access may be limited and having paper copies to present to CBP if requested will be the most expeditious way to clear Customs).

 (5) Ensure that the defense articles to be exported by the company personnel are identified on your license. Equipment that is not subject to Department of State jurisdiction will not be approved for export under these licenses. Defense articles not identified on the DSP-73 will not be authorized by this policy and may require separate licensing or authorization.

 (6) After each deployment or re-deployment you must upload additional information (within 15 days) to the license case in D-Trade. This updated information must identify the date of transaction, equipment description, and number of items that have been exported or returned.

 (7) Ensure that prior to re-deployment, your personnel are in possession of their DSP-73 and their hand receipt. This will expedite the process upon return.

 (8) This policy in no way alleviates you from any other CBP regulations, documentation, or inspections requirements.

DDTC Amends USML Category XV

By: John Black

Effective November 10, 2014, DDTC published various changes to the ITAR to adjust its previous Export Control Reform list shift changes for USML Category XV.   Depending on how you count, the rule made 10 – 15 changes to Category XV.  The rule also revised Category XIII.

In addition, DDTC revised Supplement No. 1 to Part 126 which, among other things, identifies the items excluded from the ITAR exemptions for Canada, the UK, and Australia.  One of the revisions to Supp. 1 to 126 is Note 17 clarifying the availability of the exemptions for activities requiring Congressional Notification.

Please read the rule here: http://www.pmddtc.state.gov/FR/2014/79FR66608.pdf