Archive for the ‘Defense Trade Controls’ Category

The Last Hoorah for Reform?

Tuesday, September 6th, 2016 by Danielle McClellan

2016/09/06

By: Danielle McClellan

Over three years ago (April 2013) the first set of Export Control Reform regulations were published in the Federal Register, they were over 100 pages long and made the regulations more complex but also significantly relaxed controls on some items. Over the last few years reform has come in the form of waves and moved items from the USML onto the CCL in batches. Now, as the Obama Administration is moving out it looks as though we are about to see the last list shift for a while.

The final rule, which will be effective December 31, 2016, will move specific items controlled under Category XIV and Category XVIII. Basically, items that have been determined to no longer warrant ITAR control (toxicological agents, including chemical agents, biological agents, and associated equipment, along with directed energy weapons) will be controlled under the Commerce Control List (CCL). The affected Category XIV items consist of dissemination, detection, and protection “equipment” and related articles, such as production and test “equipment,” and will be controlled under new ECCNs 1A607, 1B607, 1C607, 1D607 and 1E607. The affected Category XVIII articles will follow in suit with being primarily tooling, production “equipment,” test and evaluation “equipment,” test models, and related articles and will be controlled under new ECCNs 6B619, 6D619, and 6E619.

Specific Regulation Changes:

ITAR:

  • This final rule adopts for those pathogens and toxins that meet specific capabilities listed in paragraph (b) the ‘‘Tier 1’’ pathogens and toxins established in the Department of Health and Human Services and the United States Department of Agriculture select agents and toxins regulations (42 CFR part 73 and 9 CFR part 121). The Tier 1 pathogens and toxins that do not meet these capabilities remain controlled in Export Control Classification Number (ECCN) 1C351 on the CCL.
  • Additionally, this rule, in concert with the analogous rule published by the Department of Commerce, moves riot control agents to the export jurisdiction of the Department of Commerce, as well as the articles covered previously in paragraphs (j), (k), and (l), which include test facilities, equipment for the destruction of chemical and biological agents, and tooling for production of articles in paragraph (f), respectively.
  • Other changes include the addition of paragraph (a)(5) to control chemical warfare agents ‘‘adapted for use in war’’ and not elsewhere enumerated, as well as the removal of paragraphs (f)(3) and (f)(6) and movement to the CCL of equipment for the sample collection and decontamination or remediation of chemical agents and biological agents.
  • Paragraph (f)(5) for collective protection was removed and partially combined in paragraph (f)(4) or the CCL.
  • Paragraph (g) enumerates antibodies, recombinant protective antigens, polynucleotides, biopolymers, or biocatalysts exclusively funded by a Department of Defense contract for detection of the biological agents listed in paragraph (b)(1)(ii).
  • The Department notes that the controls in paragraph (f)(2) that include the phrase ‘‘developed under a Department of Defense contract or other funding authorization’’ do not apply when the Department of Defense acts solely as a servicing agency for a contract on behalf of another agency of the U.S. government. Moreover, ‘‘other funding authorization’’ refers to other funding authorization from the Department of Defense.
  • The Department notes that the controls in paragraphs (g)(1) and (h) that include the phrase ‘‘exclusively funded by a Department of Defense contract’’ do not apply when the Department of Defense acts solely as a servicing agency for a contract on behalf of another agency of the U.S. government, or, for example, in cases where the Department of Defense provides initial funding for the development of an item but another agency of the U.S. government provides funding to further develop or adapt the item.
  • Paragraph (h) enumerates certain vaccines funded exclusively by the Department of Defense, as well as certain vaccines controlled in (h)(4) that are specially designed for the sole purpose of protecting against biological agents and biologically derived substances identified in (b). Thus, the scope of vaccines controlled in (h)(4) is circumscribed by the nature of funding and the satisfaction of the term ‘‘specially designed’’ as that term is defined in ITAR § 120.41. In evaluating the scope of this control, please note that the Department offers a decision tool to aid exporters in determining whether a defense article meets the definition of ‘‘specially designed.’’ This tool is available at http://www.pmddtc.state.gov/licensing/dtSpeciallyDesigned.htm.
  • Paragraph (i) is updated to provide better clarity on the scope of the control by including examples of Department of Defense tools that are used to determine or estimate potential effects of chemical or biological weapons strikes and incidents in order to plan to mitigate their impacts.
  • A new paragraph (x) has been added to USML Category XIV, allowing ITAR licensing on behalf of the Department of Commerce for commodities, software, and technology subject to the EAR, provided those commodities, software, and technology are to be used in or with defense articles controlled in USML Category XIV and are described in the purchase documentation submitted with the application. The intent of paragraph (x) is not to impose ITAR jurisdiction on commodities, software, and technology subject to EAR controls. Items described in paragraph (x) remain subject to the jurisdiction of the EAR. The Department added the paragraph as a regulatory reference point in response to industry requests to be able to use a Department of State license to export shipments that have a mix of ITAR controlled items and EAR controlled items for use in or with items described in that category.
  • Finally, this rule establishes USML control in subparagraph (f)(2) of certain chemical or biological agent equipment only when it contains reagents, algorithms, coefficients, software, libraries, spectral databases, or alarm set point levels developed under a Department of Defense contract or other funding authorization.

EAR:

This final rule creates five new “600 series” ECCNs in CCL Category 1 (ECCNs 1A607, 1B607, 1C607, 1D607, and 1E607) that clarify the EAR controls applicable to certain dissemination, detection and protection “equipment” and related items that the President has determined no longer warrant control under USML Category XIV. Terms such as “part,” “component” “accessories,” “attachments,” and “specially designed” are applied in the same manner in this rule as those terms are defined in Section 772.1 of the EAR. In addition, to assist exporters in determining the control status of their items, a “Specially Designed” Decision Tool and a CCL Order of Review Decision Tool are available on the BIS Web site at: http://www.bis.doc.gov/index.php/decision-tree-tools.

  • New ECCN 1A607 Military dissemination “equipment” for riot control agents, military detection and protection “equipment” for toxicological agents (including chemical, biological, and riot control agents), and related commodities. In new ECCN 1A607, paragraphs .a through .d, paragraph .i, and paragraphs .l through .w are reserved. Paragraph .e of ECCN 1A607 controls “equipment” “specially designed” for military use and for the dissemination of any of the riot control agents controlled in ECCN 1C607.a. Paragraph .f of ECCN 1A607 controls protection “equipment” “specially designed” for military use and for defense against either materials controlled by USML Category XIV(a) or (b) or any of the riot control agents in new ECCN 1C607.a. Paragraph .g of ECCN 1A607 controls decontamination “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for the decontamination of objects contaminated with materials controlled by USML Category XIV(a) or (b). Paragraph .h controls “equipment” not controlled by USML Category XIV(f) that is “specially designed” for military use and for the detection or identification of either materials specified by USML Category XIV(a) or (b) or riot control agents controlled by new ECCN 1C607.a. Paragraph .j controls “equipment” “specially designed” to: (i) Interface with a detector, shelter, vehicle, vessel, or aircraft controlled by the USML or a “600 series” ECCN; and (ii) collect and process samples of articles controlled in USML Category XIV(a) or (b). Paragraph .k controls medical countermeasures that are “specially designed” for military use (including pre- and post- treatments, antidotes, and medical diagnostics) and “specially designed” to counter chemical agents controlled by USML Category XIV(a). Paragraph .x controls “parts,” “components,” “accessories,” and “attachments” that are “specially designed” for a commodity controlled under ECCN 1A607.e, .f, .g, .h, or .j or a defense article controlled in USML Category XIV(f) and that are not enumerated or otherwise described elsewhere in the USML.
  • New ECCN 1B607 Military test, inspection, and production “equipment” and related commodities “specially designed” for the “development,” “production,” repair, overhaul, or refurbishing of commodities identified in ECCN 1A607 or 1C607, or defense articles enumerated or otherwise described in USML Category XIV.
  • In new ECCN 1B607, paragraph .a controls “equipment,” not including incinerators, that is “specially designed” for the destruction of chemical agents controlled by USML Category XIV(a). Paragraph .b of ECCN 1B607 controls test facilities and “equipment” that are “specially designed” for military certification, qualification, or testing of commodities controlled by new ECCN 1A607.e, .f, .g, .h, or .j or by USML Category XIV(f), except for XIV(f)(1). Paragraph .c of ECCN 1B607 controls tooling and “equipment” “specially designed” for the “development,” “production,” repair, overhaul, or refurbishing of commodities controlled under new ECCN 1A607.e, .f, .g, .h, or .j or USML Category XIV(f). Paragraphs .d through .w are reserved. Paragraph .x controls “parts,” “components,” “accessories,” and “attachments,” not enumerated or otherwise described elsewhere in the USML, that are “specially designed” for a commodity controlled by ECCN 1B607.b or .c or for a defense article controlled by USML Category XIV(f). As indicated above, ECCN 1B607.b does not control test facilities and “equipment” that are “specially designed” for military certification, qualification, or testing of commodities and are enumerated or otherwise described in USML Category XIV(f)(1), as set forth in State’s companion rule to this final rule (e.g., see the equipment in USML Category XIV(f)(1)(ii) that is “specially designed” for testing the articles controlled in paragraph (a), (b), (c), (e), or (f)(4) of USML Category XIV). In addition to the test facilities and “equipment” controlled by ECCN 1B607.b, see the tooling and “equipment” classified under ECCN 2B350 or 2B352 for producing the chemical/biological agents, precursors, or defoliants described in USML Category XIV(a), (b), (c), or (e). The EAR also control tooling and “equipment” to produce the antibodies/polynucleotides and vaccines described in USML Category XIV(g) and (h), respectively, as follows: lab “equipment” designated as EAR99 under the EAR; biological dual-use “equipment” (including protective “equipment”) classified under ECCN 2B352; and EAR-controlled biological systems for making vaccines (involving the use of mice, rabbits, etc.).
  • New ECCN 1C607?Tear gases, riot control agents and materials for the detection and decontamination of chemical warfare agents. New ECCN 1C607.a controls specified tear gases and riot control agents. Paragraph .b of ECCN 1C607 controls “biopolymers” not controlled by USML Category XIV(g) that are “specially designed” or processed for the detection or identification of chemical warfare (CW) agents specified by USML Category XIV(a) and the cultures of specific cells used to produce them. Paragraph .c controls specified “biocatalysts” and biological systems that are not controlled by USML Category XIV(g) and are “specially designed” for the decontamination or degradation of CW agents specified by USML Category XIV(a). Paragraph .d controls chemical mixtures not controlled by USML Category XIV(f) that are “specially designed” for military use for the decontamination of objects contaminated with materials specified by USML Category XIV(a) or (b).
  • New ECCN 1D607?“Software” “specially designed” for the “development,” “production,” operation, or maintenance of items controlled by 1A607, 1B607 or 1C607. New ECCN 1D607.a controls “software” “specially designed” for the “development,” “production,” operation, or maintenance of items controlled by ECCN 1A607, 1B607 or 1C607. Paragraph .b of ECCN 1D607 is reserved.
  • New ECCN 1E607?“Technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of items controlled by ECCN 1A607, 1B607, 1C607, or 1D607. New ECCN 1E607.a controls “technology” “required” for the “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of items controlled by ECCN 1A607, 1B607, 1C607, or 1D607. Paragraph .b of ECCN 1E607 is reserved.
  • Amendments to License Exceptions BAG and TMP related to Individual Protection “Equipment” in ECCN 1A607.f. This final rule amends the License Exception BAG provisions in Section 740.14(h) of the EAR to authorize exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. In a corresponding change, this final rule also amends the License Exception TMP provisions in Section 740.9(a)(11) of the EAR to authorize temporary exports, reexports, or in-country transfers of chemical or biological agent protective gear consistent with the requirements and restrictions described therein. The amendments to License Exceptions BAG and TMP also change the requirements for Afghanistan to be consistent with those of the majority of other Country Group D:5 destinations (i.e., the U.S. person authorized to use the license exception must be affiliated with the U.S. Government and be traveling on official business or traveling in support of a U.S. Government contract). The same requirement applies to the use of these license exception provisions for Iraq, also a D:5 country, with the additional option that the U.S. person must be traveling to Iraq under a direct authorization by the Government of Iraq and engaging in activities for, on behalf of, or at the request of, the Government of Iraq. These amendments are also intended to ensure that the scope of these license exceptions, as they apply to chemical or biological agent protective gear controlled under new ECCN 1A607.f, conforms with the scope of the ITAR exemption for personal protective equipment in Section 123.17 of the ITAR (e.g., by correcting the provisions for Afghanistan, as described above, to be consistent with those of the majority of other Country Group D:5 destinations).

DDTC Agreements Guidelines Updated

Tuesday, September 6th, 2016 by Danielle McClellan

2016/09/06

On August 11, 2016, the Directorate of Defense Trade Controls (DDTC) announced its newest revision to the Guidelines for Preparing Agreements, which will become effective September 1, 2016. The changes will bring the Agreement Guidelines in line with certain revisions to the International Traffic in Arms Regulations (ITAR) that will also take effect on September 1, 2016.
Highlights of the changes:

  • Various sections of the Agreement Guidelines have been updated to reflect the new definitions for the terms “export,” “reexport” and “retransfer” that will go into effect on September 1.
  • Revision of Section 3.5: Dual/Third Country National (DN/TCN) to remove § 124.16 from Option 2, add references to § 126.18(d) in Option 1, redact the term “retransfer” from the guidance and required statements, remove country of birth as a consideration when vetting DN/TCNs via Option 2, update the required agreement statements for DN/TCN requests pursuant to § 124.8(5), and remove the optional agreement statement for § 126.1 non-(a) TCN requests.
  • The required statements throughout the Agreement Guidelines are updated, including the statement on sublicensing to U.S. Persons, the required statements for DN/TCN requests pursuant to § 124.8(5), and the § 124.8(5) verbatim clause.
  • Templates in Appendix A are updated to remove the § 124.12(a)(10) statement from the transmittal letter, remove the § 124.16 statement from the agreement, and update the required statements mentioned above.

Note:  Applicants are not required to submit an amendment for the sole purpose of updating these statements or removing the § 124.16 statement.  However, the statements must be updated at the next major amendment.  All agreement/amendment applications submitted after September 1, 2016, must include the new required statements, if applicable.  If an old statement is used, a proviso will be added instructing the applicant to change it prior to execution.  Applicants may begin using the new statements prior to September 1.

The templates in Appendix A have been updated to: – Remove the § 124.12(a)(10) statement from the transmittal letter – Remove the § 124.16 statement from the agreement – Update the mandatory statements listed above.

Revised Guidelines: https://www.pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.4.pdf

Summary of Changes: https://www.pmddtc.state.gov/licensing/documents/agreement_guidelines_preamblev4.4.pdf

EAR and ITAR Will Require the Same New Destination Control Statement on November 15, 2016

Tuesday, September 6th, 2016 by Danielle McClellan

2016/09/06

By: John Black

In the August 17, 2016 Federal Register the Bureau of Industry and Security (BIS) and the Directorate of Defense Trade Controls (DDTC) announced that effective November 1, 2016, the same Destination Control Statements (DCS) will be required for exports under the Export Administration Regulations (EAR) and exports under the International Traffic in Arms Regulations (ITAR).  The good news is that exporters no longer will have to use one statement for EAR exports and a different statement for ITAR exports.

The bad news is neither the current EAR DCS nor the current ITAR DCS will be required under the new rules.  When it comes to reprogramming our software that prints documents, it might have been easier if the government had chosen one of the existing statements already in use.  On the other hand, several adjustments to the ITAR and EAR will make life easier for exporters in the long run.

 

Practical Considerations When Implementing the Change

As you prepare to comply with the requirement to comply with the new rules beginning on for the November 15, 2016, here are some important considerations.

 

The New DCS:

‘‘These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations.’’

 

(Interestingly to me, the EAR Federal Register notice does not put a period after the last word “regulations” in the EAR DCS while the ITAR Federal Register notice does place a period after the last word “regulations” in the ITAR DCS.  I doubt anybody else noticed that.  I also doubt this is a deliberate conspiracy by DDTC and BIS to set up exporters who do not properly include or not include the period in their DCS.)

 

When the DCS Is Required:

  • ITAR:  For all defense articles exported in tangible form
  • EAR:  For all items exported in tangible form except a DCS is not required for EAR99 items and items eligible for license exceptions BAG or GFT.

 

ITAR and EAR DCS Required only for Tangible Shipments.  A DCS is not required for items being exported in intangible form such as electronic, oral or visual exports.

 

Where Do You Have to Put the DCS:   The new DCS must be put on the commercial invoice, and not on the airway bill, bill of lading, or other documents.

 

Other Information You Must Put on the Commercial Invoice:  The ITAR and EAR will require the following be put on the commercial invoice, in addition to the DCS:

 

  • ITAR:  1) The country of ultimate destination,

2) The end-user, and

3) The license or other approval number or exemption citation.

  • EAR:    The ECCN for any 9×515 or 600 series items

 

Information Required When Using ITAR Authorizations to Export EAR-Controlled Items:  The new rule clearly requires that when an ITAR license or authorization (exemption) is used to export EAR controlled items, the exporter must give the ECCN or EAR99 classification for each EAR-controlled item to the end-user and consignees.

Removal of Special Requirements for Certain EAR Exports to India:  The new EAR rule will remove the special DCS requirement for exports to India of items controlled for crime control column 1 or 3 reasons or regional stability column 2 reasons.

Other ITAR Changes

Exports of EAR Items under ITAR Exemptions:  The rule clarifies that EAR Items may be exported under ITAR exemptions only if they are being shipped with ITAR items.

Changes to Required Language in ITAR Agreements and Transmittal Letters:  The rule makes several changes to the required language and clauses in ITAR agreements and transmittal letters.

To see the new EAR and ITAR rules, go to http://www.bis.doc.gov/index.php/regulations/federal-register-notices#fr54721

Successful Violations for Dummies: Don’t Fly to the US when Attempting to Arrange Illegal Exports

Friday, May 27th, 2016 by Danielle McClellan

2016/05/27

New Zealand Man Arrested in Seattle After Contacting Undercover Agent

By: Danielle McClellan

William Ali, a New Zealand man has been indicted in Seattle on federal charges that he attempted to purchase aircraft parts in the US that he planned to sell to a client in China. Last year Ali contacted a US company looking for “aircraft parts called accelerometers.” These parts are developed for low or zero gravity navigation systems used in spacecraft and aircraft and any one selling the items must have an export license (Ali did not).

A Homeland Security agent began to investigate Ali shortly after he contacted the company looking to purchase the accelerometers. The agent and Ali exchanged emails and Ali admitted that he knew there were controls on the sale of the items that he was looking to buy and that trying to buy them was turning out to be difficult. He also explained that he didn’t think he could get an export license for the parts so he was trying to purchase them through different sources. His client was looking for a “huge quantity” of the product because they were “manufacturing a variant of the MA60 aircraft and needed high-quality US parts” according to the criminal complaint.

After considering all of his options, Ali flew to Seattle to pick up the pars where he was arrested when he arrived on April 11, 2016.

More Details: http://www.seattletimes.com/seattle-news/crime/new-zealand-man-faces-illegal-export-charges-in-seattle/

BIS & DDTC Release Another Set of Proposed Rules on Military Aircraft

Tuesday, March 29th, 2016 by Danielle McClellan

2016/03/29

By: Danielle McClellan

BIS and Department of State simultaneously released proposed rules based on a review of Categories VII and XIX as well as ECCNs 9A610, 9A619, 9C610, 9C619, and 9E619.

BIS Revisions would be as follows:

Changes to ECCN 9A610

  • This proposed rule would remove text currently in the “Control(s)” table that excludes paragraphs .t, .u, .v and .w from national security controls. Although the text of those paragraphs is taken from the Missile Technology Control Regime Annex, the commodities that they control are unmanned aerial vehicle parts, components or associated equipment that also are subject to category ML10 on the Munitions List of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The addition of the national security controls would not increase the number of destinations to which a license is required for the commodities controlled by these paragraphs as those paragraphs already have missile technology and regional stability controls. …

Changes to ECCN 9A619

  • This rule would make three additions to the “Related Controls” paragraph. The first would state explicitly the historical practice of controlling 501-D22 gas turbine engines in ECCN 9A991.d, which is the classification that has been used for many years. The second would add a reference to USML Category XIX(f) to alert readers that some aircraft parts and components are enumerated in that paragraph. Finally, a note would be added reminding readers that the commodities enumerated in paragraph .y are subject to the controls in that paragraph rather than the broader controls elsewhere in this ECCN. …

Changes to ECCN 9C610

  • ECCN 9C610 would be revised by adding references to USML Category VIII in both the heading and in paragraph .a, to make clear that materials specially designed for commodities enumerated or otherwise described in that category are controlled in ECCN 9C610.

Changes to ECCN 9C619

  • ECCN 9C619 would be revised by adding references to USML Category XIX in both the heading and in paragraph .a, to make clear that materials specially designed for commodities enumerated or otherwise described in that category are controlled in ECCN 9C619.

Change to ECCN 9E619

  • The related controls paragraph in ECCN 9E619 would be amended by removing the sentence that reads “Technology described in ECCN 9E003 is controlled by that ECCN.” Although true, the placement of the sentence in a 600 series ECCN could mislead readers into thinking that the order of review does not apply in this instance.

Comments must be received by BIS by March 25, 2016. You may submit comments by any of the following methods:

  • Federal eRulemaking Portal: http://www.regulations.gov. Search for this rule using its regulations.gov docket number: BIS-2016-0009.
  • By email directly to publiccomments@bis.doc.gov. Include RIN 0694-AG76 in the subject line.
  • By mail or delivery to Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 0694-AG76.
  • FOR FURTHER INFORMATION CONTACT: Thomas DeFee or Jeffrey Leitz in the Office of Strategic Industries and Economic Security, Munitions Control Division by telephone at (202) 482-4506 or by email at Thomas.DeFee@bis.doc.gov or Jeffrey.Leitz@bis.doc.gov.

Department of State Revisions would be as follows:

Revision of Category VIII

This proposed rule revises USML Category VIII, covering aircraft and related articles, to describe more precisely the articles warranting control on the USML.

  • Paragraph (a) is revised to clarify that the controls for all paragraphs are applicable “whether manned, unmanned, remotely piloted, or optionally piloted,” by modifying paragraph (a)(5) to clarify the features meriting USML control, and by deleting paragraph (a)(6) and placing it into reserve, because the relevant control would be subsumed by paragraph (a)(5).
  • Paragraphs (a)(7) and (a)(8) are modified to clarify the features meriting USML control.
  • Paragraphs (a)(11) and (a)(13) are deleted and placed into reserve.
  • Paragraph (a)(14) is modified to exclude L-100 aircraft manufactured prior to 2013 from the scope of control.
  • The Note to paragraph (a) is revised to incorporate technical corrections.
  • Paragraph (d) is modified to delete the “ship-based” control parameter and to clarify the intent and scope of the control.
  • Notes 1 and 3 to paragraph (f) are modified to incorporate clarifying language. …

Revision of Category XIX

This proposed rule revises USML Category XIX, covering gas turbine engines and associated equipment, to describe more precisely the articles warranting control on the USML.

  • Paragraph (a) is modified to clarify the scope of controlled engines and to incorporate technical corrections.
  • Paragraph (b) is revised to provide additional technical parameters to clarify the scope of controlled engines. With respect to paragraph (b)(1), public comment is requested on whether any commercial models exceed the capability described in this paragraph. In any public comment submitted in reply to this request, please provide specific examples of the commercial models at issue.
  • Paragraph (c) is modified to incorporate conforming changes and to make clear that the paragraph applies only to gas turbine engines, while paragraph (d) is modified to update the list of subject engines.
  • The Note to paragraph (e) is modified to incorporate a conforming change.

The Department of State will accept comments on this proposed rule until March 25, 2016. Interested parties may submit comments within 45 days of the date of publication by one of the following methods:

  • Email: DDTCPublicComments@state.gov with the subject line, “ITAR Amendment–Categories VIII and XIX.”
  • Internet: At www.regulations.gov, search for this notice by using this rule’s RIN (1400-AD89).
  • Comments received after that date will be considered if feasible, but consideration cannot be assured. Those submitting comments should not include any personally identifying information they do not wish to be made public or information for which a claim of confidentiality is asserted, because those comments and/or transmittal emails will be made available for public inspection and copying after the close of the comment period via the Directorate of Defense Trade Controls Web site at www.pmddtc.state.gov. Parties who wish to comment anonymously may do so by submitting their comments via www.regulations.gov, leaving the fields that would identify the commenter blank and including no identifying information in the comment itself. Comments submitted via www.regulations.gov are immediately available for public inspection.
  • FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-2792; email DDTCPublicComments@state.gov. ATTN: ITAR Amendment–USML Categories VIII and XIX.

Military Importers and Exporters Beware: State Department Modifies Sanctions against Rosoboronexport

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

It is the significance of the target, Rosoboronexport, that makes this a noteworthy development.   According to its own website:

The Joint Stock Company Rosoboronexport, part of the Russian Technologies State Corporation, is the sole Russian state intermediary agency responsible for import/export of the full range of defense and dual-use end products, technologies and services.

Rosoboronexport was set up by RF President’s Decree 1834 of 4 November 2000 as a federal state unitary enterprise tasked to implement the national policy in the area of military-technical cooperation between Russia and foreign countries. Since 1 July 2011 Rosoboronexport has been operating as an open joint stock company.
Rosoboronexport operates under the strict supervision of the Russian President, the Russian Government, and in full conformity with the UN arms control treaties and the relevant international agreements.
Only Rosoboronexport has the right to supply the world market with a full range of arms and military equipment manufactured by Russia’s defense industrial complex and approved to be exported. Rosoboronexport accounts for more than 85% of Russia’s arms exports.
Rosoboronexport is among the major operators in the world market for arms and military equipment. Rosoboronexport cooperates with more than 70 countries.

The official status of the exclusive state intermediary agency gives Rosoboronexport unique opportunities to expand long-term mutually beneficial cooperation with foreign partners, provide guaranteed state support of all export-import operations, and strengthen Russia’s leadership in the world arms market.

On September 2, 2015 the US Government  released the following notice: ‘No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from [Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof], except to the extent that the Secretary of State otherwise may determine .  .  .  .’’

The Department of State has now released (November 19, 2015) the following modification to the September notice: “The United States Government has decided to modify the measure described above against ROE and any successor, sub-unit, or subsidiary thereof as follows. The measure described above shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally.”

This modification includes subcontracts for the purchase of spare parts, supplies, and related services for these purposes and can be applied retroactively as of the effective dates of the sanctions (they will remain in place for 2 years unless otherwise determined by the US Government).

This change does not apply to any other measures imposed pursuant to INKSNA.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2015-11-25/pdf/2015-30058.pdf

DDTC Agrees that the Public Domain Prior Approval Requirement is Unreasonable

Thursday, November 5th, 2015 by Danielle McClellan

2015/11/05

Source: Author. Reprinted by permission.

By: Christopher B. Stagg, Esq., chris@staggpc.com, 202-765-2278; Stagg P.C..

On June 3, 2015, the Directorate of Defense Trade Controls issued a proposed rule to amend the public domain exclusion within ITAR § 120.11 to include a prior government approval requirement. In proposing this revision, DDTC made a curious statement in the preamble that prior government approval is not a new requirement and that the proposed revision is merely “a more explicit statement of the ITAR’s requirement that one must seek and receive a license or other authorization [to put information into the public domain].”  The federal court case where DDTC made these statements is Bernstein v. Department of State in DDTC’s opposition to the plaintiff’s motion for summary judgment at 25, 945 F. Supp. 1279 (N.D. Cal. 1996).  A copy of DDTC’s statements to the federal court is provided here.

This is a curious statement because DDTC has previously stated to the federal courts that reading ITAR § 120.11 to impose a prior approval requirement is “by far the most un-reasonable interpretation of the provision” and also “one that people of ordinary intelligence are least likely to assume is the case.” Accordingly, DDTC confirmed to the federal courts in 1996 that there is no prior approval requirement to put information into the public domain.

The federal court case where DDTC made these statements is Bernstein v. Department of State. A copy of DDTC’s statements to the federal court is provided here (click on image for a high-resolution version):

These are highly damaging statements by DDTC. Not only does DDTC’s statement unequivocally maintain that there is no prior approval requirement, but it also establishes that the position DDTC now takes is admittedly “by far the most un-reasonable interpretation of the provision” and “that people of ordinary intelligence are least likely to assume is the case.”

Since DDTC concedes that “people of ordinary intelligence” would not read the public domain exclusion to impose a prior approval requirement, this raises a due process claim under the Fifth Amendment that DDTC’s new interpretation is unconstitutionally vague. The legal standard for a due process vagueness claim is whether the law would give fair notice to persons of ordinary intelligence of the legal requirements. Also, in laws that concern speech covered by the First Amendment, the federal courts impose an even higher standard by requiring that the law has even greater clarity. Here, DDTC concedes that such persons would not have notice.

DDTC’s statements in the court case also confirms that it has a long-standing practice of not requiring prior government approval to put information into the public domain. In changing its practice, it is well-established law that a regulatory agency must (1) acknowledge it is departing from prior practice and (2) explain the reason for the departure. The failure by a regulatory agency to follow these requirements raises due process issues. For instance, without an agency following these procedural requirements in changing its position, courts could not know whether a regulatory agency acted erroneously.

Here, DDTC fails both requirements. Instead of recognizing it is departing from prior practice, DDTC simply asserts that this is not a new requirement. Yet, the regulatory history of the public domain exclusion and DDTC’s own admissions to the federal courts clearly evidences this is incorrect. Since DDTC failed to acknowledge it is departing from prior practice, it also failed to fulfill the second well-established requirement of explaining the reason for its departure.

To read the rest of this article (including exhibits), please click here.

Another Contract Bites the Dust

Thursday, November 5th, 2015 by Danielle McClellan

2015/11/05

By: Danielle McClellan

The United States Naval Air Warfare Center (NAVAIR) Aircraft Division awarded Tactical Lighting Systems Inc. (Tactical) with a contract to develop landing lights. Tactical announced on May 19, 2015 that they planned to add Carmanah Technologies Corporation (Carmanah) of Victoria, BC as a subcontractor to the contract.

Fast forward about 6 months, after struggles with the International Traffic in Arms Regulations (ITAR), Tactical and Carmanah have mutually agreed to stop working together on the project. The decision was based on significant operational challenges related to the ITAR under the contract with NAVAIR. The two companies agreed that the ITAR placed such significant barriers for the two to work together on the project that they could not jointly work together and comply with the export controls required.

More information: http://www.marketwatch.com/story/carmanah-ceases-work-on-joint-development-contract-2015-09-22-18173634

DDTC Provides Average Licensing Processing Times

Friday, September 11th, 2015 by Danielle McClellan

2015/09/11

The Directorate of Defense Trade Controls (DDTC) is now providing a monthly update on the current license processing times. For electronic cases, the average is based on the date the case was signed by the applicant until the date of final action. In the case of hardcopy cases, the time is determined by the date the case enters the Directorate until the time it is signed out of the Directorate. The processing time below include all cases except for Commodity Jurisdictions (CJs), Government Jurisdictions (GJs), and Electronic Rejections.

The monthly licensing update can be accessed at: http://pmddtc.state.gov/metrics/index.html

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

Tuesday, July 14th, 2015 by Danielle McClellan

2015/07/14

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:

PART 120–PURPOSE AND DEFINITIONS

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.

PART 122–REGISTRATION OF MANUFACTURERS AND EXPORTERS

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;

or

PART 124–AGREEMENTS, OFF-SHORE PROCUREMENT, AND OTHER DEFENSE SERVICES

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]

PART 125–LICENSES FOR THE EXPORT OF TECHNICAL DATA AND CLASSIFIED DEFENSE ARTICLES

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).

PART 126–GENERAL POLICIES AND PROVISIONS

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.