Archive for the ‘ITAR’ Category

Department of State Import and Export Electronic Filings for Licenses and License Exemptions

Thursday, March 30th, 2017 by Danielle McClellan

Source: Robert C. Rawls (robert.c.rawls@cbp.dhs.gov)

This pipeline is to provide guidance based on the Department of State, Directorate of Defense Trade Controls Federal Register Notice dated January 3, 2017.  Persons not familiar with the Directorate of Defense Trade Controls (DDTC) import and export regulations are encouraged to read the International Traffic in Arms Regulations (ITAR), 22 CFR Parts 120-130.  DDTC is the controlling and ultimate authority for international movements of United States Munitions List (USML) defense articles, technical data and defense services.

DDTC published a Federal Register Notice (FRN) amending the ITAR.  The amendment requires that importers and exporters electronically submit the data, via their agent/filer or direct,at the time of entry and export via Customs Systems (Automated Commercial Environment and the Automated Export System) for the decrementation of permanent export licenses (DSP-5), temporary import licenses (DSP-61), temporary export licenses (DSP-73), licenses for classified materials (DSP-85), and goods controlled under the Foreign Military Sales (FMS) program (DSP-94), along with the submission of license exemption claims.

The regulatory changes became effective December 31, 2016.

For imports against DSP-61, DSP-73, DSP-85, FMS shipments and shipments under a license exemption, the electronic submission is the DDTC Partnership Government Agency (PGA) message set, and will be submitted at the time of entry.  The PGA message set can only accept the data for one DDTC license or license exemption per one commodity line on the entry.  That commodity line’s entered value will be used as the DDTC endorsement value.  So, filers are required to “split the commodity entry line” to associate a single entry line with a single license whose entered value will represent the DDTC value.

Filing Examples:

<!–[if !supportLists]–>•        <!–[endif]–>9808 – Certified Emergency War Materials – The primary and secondary classification must be included in your BEI. Expeditors will assign the license to the 9808 line item only and transmit to CBP.  Upon receipt, CBP will increment the value associated with the 9808 classification only.

7501 line 1 – 9808.00.3000 – Hardware/DDTC value- *PGA transmission is required and includes license number*

9013.90.9000 – No value (associated HTS)

7501 line 2 –         9808.00.3000 – Repair value

9013.90.9000 – No value (associated HTS)

<!–[if !supportLists]–>•        <!–[endif]–>Any free & dutiable classifications – Any other HTS

7501 line 1 –         9013.90.9000- Hardware/DDTC value- *PGA transmission is required and includes license number 1*

7501 line 2 –         9013.90.9000- Repair value

7501 line 3 –         9013.90.9000- Hardware/DDTC value- *PGA transmission is required and includes license number 2*

7501 line 4 –         9013.90.9000- Repair value

 

Import Valuation Examples:

There are times when the import and export values of a commodity are not the same due to changes in the condition of the commodity, for example repaired items.  The importer/broker has three options regarding how the entry and PGA message set can be filed.

Example:  The item is valued at $750 and it has been sent out of the country for repairs.  The value of the repairs is $350.

Option 1

At the time of export the value declared via the Electronic Export Information is $750.  Upon entry the commodity line value is declared at $1100.  The license will be decremented for $750 for the export and $1100 for the import.

Option 2

At the time of export the value declared via the EEI is $750.  Upon entry the broker files two Harmonized Tariff Schedule (HTS) lines, one for $750 with a DDTC PGA message set and the second HTS line using HTS 9802.00.50 for $350.  The license would be decremented for $750 for both the import and export.  Note, there may be additional documentary requirements is association with using HTS 9802.00.50.

Option 3

At the time of export the value declared via the EEI is $750.  Upon entry the broker files two HTS commodity lines, one for $750 with a DDTC PGA message set and the second HTS commodity for that commodity classification.  The license would be decremented for $750 for both the entry and export.

For Exports related to a DSP5s, DSP-61s, DSP-73s, DSP-85s, FMS shipments, and license exemptions will continue to be filed via the Customs system (Automated Export System (AES)) for each commodity filing.

Per DDTC’s FRN, paper DSP-61 and DSP-73 licenses will no longer be required to be presented for incrementation or decrementation since the import and export transactions against the shipment will be captured in Customs systems.  In order to ensure accurate license balances in Customs systems, for those DSP-61s and DSP-73s issued prior to January 3, 2017, license holders are requested to provide the following information to CBP (insert POC and address) in the form of a letter: the license number, the total value of all prior import shipments incremented against the license, and the date when this information was recorded.  The historic import values are required since the data was not collected on the PGA record set.  .

The license registrant is reminded of its temporary license requirements under 22 CFR 123.3 and 123.5 which will continue to be evidenced using the registrant’s business records.  Given the automation, these business records may be subject to review by CBP in order to meet its requirements under 22 CFR 123.23 to “permit the shipment of defense articles identified on a license when the total value of the export does not exceed the aggregate monetary value (not quantity) stated on the license by more than ten percent…”

For the FMS program, the DSP-94 and the Letters of Offer and Acceptance, along with any amendments or modifications still have to be lodged with CBP.  CBP is working on automation of this process and it is projected that the automation process will be completed in summer/fall 2017.  CBP will provide updated guidance when that automation has been completed.

For the DSP-85 classified program, endorsements continue to be managed by the Defense Security Service.

Corrections related to the electronic import (PGA record set) transmissions can be made within 10 days of entry.  Import corrections needed after 10 days or corrections for exports should be referred to Robert Rawls at Robert.Rawls@dhs.gov.

Any questions about this pipeline should be referred to Mr. Robert Rawls, Outbound Enforcement and Policy Branch Chief via email at Robert.Rawls@dhs.gov or phone at (202) 344-2847.

ITAR Corrected and Additions to Parts 120, 121, 122, 124, 126 and 127

Tuesday, January 31st, 2017 by Danielle McClellan

Effective December 5, 2016, the Department of State has amended the International Traffic in Arms Regulations (ITAR) to clarify recent revisions due to Export Control Reform (ECR), the scope of disclosure of information submitted to the Directorate of Defense Trade Controls (DDTC), the policies and procedures regarding statutory debarments, as well as correcting administration and typographical errors.

The following changes have been made following this final rule:

  • A definition of ‘‘classified’’ is moved from § 121.1(e) to § 120.46;
  • The structure of § 121.1(a)–(e) is realigned, with paragraphs (a) and (b) revised to clarify the existing requirements for United States Munitions List (USML) controls, and paragraphs (c), (d) and (e) removed;
  • Thirteen USML categories are amended to clarify that commodities, software, and technology subject to the Export Administration Regulations (EAR) and related to defense articles in a USML category may be exported or temporarily imported on the same license with defense articles from any category, provided they are to be used in or with that defense article;
  • In three places within the USML, the word ‘‘enumerated’’ is replaced with the word ‘‘described’’ to make the language consistent with changes directed in the Final Rule published at 79 FR 61226, Oct. 10, 2014;
  • Section 122.4(c)(4) is revised to permit the Directorate of Defense Trade Controls (DDTC) to approve an alternative timeframe, not less than 60 days, to the current 60-day requirement for registrants to provide a signed amended agreement;
  • Section 124.2(c)(5)(v) is revised to correct errors to the USML category references for gas turbine engine hot sections, from VI(f) and VIII(b) to Category XIX;
  • Section 124.12 is amended in paragraph (a)(9) to update the name of the Defense Investigative Service to Defense Security Service;
  • Section 126.9 on Advisory Opinions and Related Authorizations is amended to correct paragraph (a);
  • Paragraph (b) of § 126.10 is amended to clarify the scope of control and disclosure of information, however, notwithstanding the changes to paragraph (b) it is the Department’s policy not to publicly release information relating to activities regulated by the ITAR except as required by law or when doing so is otherwise in the interest of the United States Government; and;
  • Section 127.7(b) is amended to clarify the policies and procedures regarding statutory debarments (addressing inadvertent omissions resulting from a prior amendment to that section), and § 127.11 is amended to make conforming revisions to paragraph (c) omitted from prior amendment to that section.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-12-05/pdf/2016-28406.pdf

New Portal for Declaring Imports and Exports to CBP

Tuesday, January 31st, 2017 by Danielle McClellan

The Department of State issued a final rule which has amended the International Traffic in Arms Regulations (ITAR) to enable US Customs and Border Protection (CBP) to implement the International Trade Data System (ITDS). This system will allow importers and exporters to create only a single set of data for each import and export and they will have access the system thru an integrated web portal that will be hosted by CBP. Users may visit https:// www.cbp.gov/trade/automated for more information on the single portal. The final rule was published January 3, 2017, but was effective on December 31, 2016.

The rule makes the following changes to the ITAR (22 CRF parts 120-130):

  • Section 120.28—Listing of Forms Referred to in This Subchapter
    • Section 120.28 is revised to strike the reference to the Automated Export System and add, in its place, ‘‘U.S. Customs and Border Protection’s electronic system(s)’’.
  • Section 120.30—The Automated Export System (AES)
    • Section 120.30 is removed and reserved.
  • Section 123.4—Temporary Import License Exemptions
    • Section 123.4(d)(2) is revised to strike the reference to the Automated Export System (AES) and add, in its place, instructions to electronically file information with CBP.
  • Section 123.5—Temporary Export Licenses
    • Section 123.5(b) is revised to update certain reporting procedures and to clarify that license information will be submitted to CBP electronically.
  • Section 123.16—Exemptions of General Applicability
    • Sections 123.16(b)(4) and (5) are revised to clarify that certifications will be sent to CBP electronically and not via hard copy.
  • Section 123.17—Exports of Firearms, Ammunition, and Personal Protective Gear
    • All references to AES in § 123.17 are struck and, in their place, instructions to electronically file with CBP are inserted. Additionally, § 123.17(g)(2) and (h) are revised to update certain documentation procedures.
  • Section 123.22—Filing, Retention, and Return of Export Licenses and Filing of Export Information
    • Section 123.22 of the ITAR is revised by making certain grammatical changes and to clarify procedures for the electronic reporting of exports and temporary imports of defense articles, services, and technical data pursuant to a license or other approval. All references to AES in § 123.22 are struck and, in their place, instructions to electronically file with CBP are inserted.
    • Section 123.22(a) is revised to clarify electronic reporting procedures for exports. Paragraphs (a)(1) and (a)(2) are also revised for clarification of certain procedures.
    • Section 123.22(b)(2) is revised to clarify that emergency shipment data shall no longer be required to be sent directly to DDTC, but rather be electronically declared to CBP, which will make the data available to DDTC via an electronic data exchange.
    • Section 123.22(b)(3)(iii) is revised to update electronic reporting procedures for technical data and defense service exemptions.
    • Section 123.22(c) is revised to strike a provision relating to the return of licenses and to reorder the sub- paragraphs.
  • Section 123.24—Shipments by U.S. Postal Service
    • Section 123.24 is revised to strike references to AES and insert, in their place, instructions to electronically file with CBP. The underlying content of this section is not affected by this change.
  • Section 126.4—Shipments by or for United States Government Agencies
    • Section 126.4(d) is amended by revising the first sentence to account for electronic reporting, and by striking the second sentence.
  • Section 126.6—Foreign-Owned Military Aircraft and Naval Vessels, and the Foreign Military Sales Program
    • Section 126.6(c) is revised to clarify certain procedures relating to the declaration of information to CBP, and to remove references to form DSP–94.
    • Section 126.6(c)(5)(iii) is revised to require that the exporter provide CBP with a copy of the transportation plan under the Department of Defense National Industrial Security Program Operating Manual for shipments of classified defense articles exported pursuant to a Foreign Military Sale Letter of Offer and Acceptance. Section 126.6(c)(6)(iii) is revised to correct a punctuation error made in a previous rulemaking.
  • Section 126.16—Exemption Pursuant to the Defense Trade Cooperation Treaty Between the United States and Australia
    • Section 126.16(l) is revised to strike references to the Automated Export System and insert, in their place, instructions to electronically file with CBP. The underlying content of this section will not be affected by this change.
  • Section 126.17—Exemption Pursuant to the Defense Trade Cooperation Treaty Between the United States and the United Kingdom
    • Section 126.17(l) is revised to strike references to the Automated Export System and insert, in their place, instructions to electronically file with CBP. The underlying content of this section will not be affected by this change.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-03/pdf/2016-31655.pdf

New Changes to EAR and ITAR Related to Military Aircraft and Gas Turbine Engines

Tuesday, December 20th, 2016 by Danielle McClellan

On November 21, 2016, DDTC published a final rule revising USML paragraphs VII(h)(29) and XIX (f) (12). This rule mainly affects a narrow range of articles related to next-generation platforms that were previously subject to the Export Administration Regulations (EAR) and will soon become subject to the International Traffic in Arms Regulations (ITAR) as of December 31, 2016.

It’s important to remember the following related to this rule beginning December 31, 2016:

  • Articles subject previously to the EAR but now subject to the ITAR under this rule, any unshipped balance under a Department of Commerce authorization will be null and void
  • The ITAR will regulate the reexport or retransfer of articles subject previously to the EAR but now subject to the ITAR under this rule

ITAR regulation Changes:

  • VIII(h)(29) Any of the following equipment if specially designed for a defense article described in paragraph (h)(1): (i) Scale test models; (ii) Full scale iron bird ground rigs used to test major aircraft systems; or (iii) Jigs, locating fixtures, templates, gauges, molds, dies, or caul plates.
    (i) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (h) of this category and classified technical data directly related to items controlled in ECCNs 9A610, 9B610, 9C610, and 9D610 and defense services using classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)
  • XIX (f)(12) Any of the following equipment if specially designed for a defense article described in paragraph (f)(1): Jigs, locating fixtures, templates, gauges, molds, dies, caul plates, or bellmouths.
    (g) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (f) of this category and classified technical data directly related to items controlled in ECCNs 9A619, 9B619, 9C619, and 9D619 and defense services using the classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)

The Bureau of Industry and Security (BIS) simultaneously published a rule related to this rule that adds clarifying text to the descriptions of the types of military aircraft controlled by the CCL (items subject only to the anti-terrorism reason for control).

BIS Changes:

  • This rule updates the text of ECCN 9A610.w to reflect amendments made to that paragraph since the February 9 rule was published by adding references to ‘‘pneumatic’’ and ‘‘fly-by-light’’ flight control systems (see 81 FR 19026, April 4, 2016). These additions were made to align the descriptions in ECCN 9A610.w with the description of such systems in the current Equipment, Software And Technology Annex Technology Annex of the MTCR.
  • Section 770.2 is amended by adding paragraph (n)
  • ECCN 0A604—[Amended] 4. In in Supplement No. 1 to part 774, ECCN 0A604, remove Note 1 to 0A604.x and redesignate Note 2 to 0A604.x as Note to 0A604.x.
  • ECCN 0A614—[Amended]
  •  In ECCN 0A614, remove Note 3 to 0A614.
  • In ECCN 3A611, in the ‘‘List of Items Controlled’’ section, ‘‘Items’’ paragraph, revise paragraph .x and revise paragraph .y, introductory text
  • In ECCN 8A992, revised the related controls paragraph
  • Revise ECCN 9A115
  • In ECCN 9A604, remove Note 1 to 9A604.x and redesignate Note 2 to 9A604.x as Note to 9A604.x.
  • In ECCN 9A610, revise the ‘‘Control(s)’’ table in the ‘‘License Requirements’’ section and the ‘‘List of Items Controlled”
  • In ECCN 9A619, the List of Items Controlled section is amended by:
    • Revising the ‘‘Related Controls’’ paragraph;
    •  Revising the ‘‘Related Definitions’’ paragraph;
    • Removing the note that immediately follows paragraph .e in the ‘‘Items’’ paragraph;
    • Revising paragraph .x in the ‘‘Items’’ paragraph; and
    • Revising paragraph .y in the ‘‘Items’’ paragraph.
  • In ECCN 9A620, remove the note to 9A620.b that immediately follows paragraph .x.
  • In ECCN 9B610, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section
  • In ECCN 9B619, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section
  • In ECCN 9C610, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section
  • In ECCN 9C619, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section
  • In ECCN 9E610, in the ‘‘List of Items Controlled’’ section, the ‘‘Items’’ paragraph is amended by:
    • Removing the word ‘‘or’’ from the end of paragraph .b.13;
    • Removing the period from the end of paragraph .b.14 and adding in its place a semicolon followed by the word ‘‘or’’; and
    • Adding paragraph .b.15.
  • In ECCN 9E619, the ‘‘List of Items Controlled’’ section is amended by revising the ‘‘Related Controls’’ paragraph, and in the ‘‘Items’’ paragraph:
    • Revising the Note that immediately follows paragraph .a;
    • Removing the word ‘‘or’’ from the end of paragraph .b.8;
    • Removing the period from the end of paragraph .b.9 and adding in its place a semicolon followed by the word ‘‘or’’;  and
    • Adding paragraph b.10.

State Federal Register Notice: http://pmddtc.state.gov/documents/1400_AD89.pdf

BIS Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-11-21/pdf/2016-27777.pdf

USML Categories VIII, XII, and XV Amended and Some Items Shifting to CCL

Tuesday, November 15th, 2016 by Danielle McClellan

The Department of State has published a final rule that will be effective December 31, 2016 that will revise Category XII (fire control, laser, imaging, and guidance equipment) of the U.S. Munitions List (USML) to remove certain items from control on the USML and to describe more precisely the articles continuing to warrant control on the USML. The Department of State also amends USML Categories VIII, XIII, and XV to reflect that items previously described in those Categories are now controlled under the revised Category XII or Commerce Control List. Further, the Department revises USML Category XI to move items to the CCL as a result of changes to related control in USML Category XII. The Export Administration Regulations (EAR) amends Export Control Classification Number (ECCN) 7A611 and creates a new ‘‘600 series’’ ECCNs 7B611, 7D611, and 7E611. In addition, for certain dual-use infrared detection items, this final rule expands controls for certain software and technology, eliminates the use of some license exceptions, revises licensing policy, and expands license requirements for certain transactions involving military end users or foreign military commodities. This final rule also harmonizes provisions within the EAR by revising controls related to certain quartz rate sensors.

ITAR Changes Below:

Section 121.1 is amended by:

  • Removing and reserving paragraph (e) in U.S. Munitions List Category VIII;
  • Revising paragraphs (a)(3)(ii) and (a)(10) of U.S. Munitions List Category XI;
  • Revising U.S. Munitions List Category XII; Removing and reserving paragraph (a) in U.S. Munitions List Category XIII; and
  • Removing and reserving paragraph (c) in U.S. Munitions List Category XV

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-10-12/pdf/2016-24225.pdf

 

EAR Changes Below:

  • Part 734
    • Section 734.4 is amended by removing and reserving paragraph (a)(3) and revising paragraph (a)(5).
  • Part 740
    • Section 740.2 is amended by adding paragraph (a)(7) and removing and reserving paragraph (a)(9).
    • Section 740.16 is amended by revising paragraphs (a)(2) and (b)(1) through (3)
    • Section 740.20 is amended by revising paragraphs (b)(2)(ii) and (b)(2)(x)
  • Part 742
    • Section 742.6 is amended by revising paragraph (b)(1)
  • Part 744
    • Section 744.9 is amended by revising the section heading and paragraphs (a) and (b)
  • Part 772
    • Section 772.1 is amended by revising the last sentence in Note 1 to the definition of ‘‘specially designed’’
  • Part 774
    • In Supplement No. 1 to part 774, Category 0, ECCN 0A919 is amended by revising the Items paragraph of the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 0, ECCN 0A987 is amended by:
      • Revising the Related Controls paragraph in the List of Items Controlled section;
      • Revising paragraph f. in the Items paragraph in the List of Items Controlled section; and
      • Adding a note to 0A987.f
    • In Supplement No. 1 to part 774, Category 2, ECCN 2A984 is amended by revising the heading and Note 1 of the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A002 is amended by:
    • Removing the ‘‘Special Conditions for STA’’ section; and
    • Revising the Related Controls paragraph in the List of Items Controlled section.
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A003 is amended by:
      • Adding a License Requirement Note in the License Requirements section;
      • Revising notes 3 and 4 in the Related Controls paragraph in the List of Items Controlled section; and
      • Adding note 5 to the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A004 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A005 is amended by revising the last two sentences in the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A007 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A008 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A107 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A611 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A990 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A993 is amended by revising the Related Controls paragraph in the List of Items Controlled sectionn Supplement No. 1 to part 774, Category 6, ECCN 6D002 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6D003 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6D991 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6E001 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6E002 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, The following ECCNs will be amended by revising the Related Controls paragraph in the List of Items Controlled section
      • ECCN 6E990
      • ECCN 7A001
      • ECCN 7A002
      • ECCN 7A003
      • ECCN 7A005
      • ECCN 7A101
      • ECCN 7A102
    • In Supplement No. 1 to part 774, Category 7, ECCN 7A611 is revised
    • In Supplement No. 1 to part 774, Category 7, ECCN 7A994 is revised
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7B611 between ECCNs 7B103 and 7B994
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7D611 between ECCNs 7D103 and 7D994
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7E611 between ECCNs 7E104 and 7E994
    • In Supplement No. 1 to part 774, Category 7, ECCN 7E994 is amended by revising the Related Controls paragraphin the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 8, ECCN 8A002 is amended by adding a sentence to the end of the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 9, ECCN 9A991 is amended by:
      • Removing the License Requirement Notes paragraph in the License Requirements section, and
      • Revising the Related Controls paragraph in the List of Items Controlled section.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-10-12/pdf/2016-24220.pdf

Want a more detailed overview of these regulation changes? Our Export Control Reform for USML Category XII: Fire Control, Laser, Imaging, and Guidance Webinar will cover the following:

  • Significant changes to USML Category XII and corresponding revisions to Categories VIII, XI, XIII, and XV, which will result in some items moving off the USML
  • What the definition of “specially designed” really means for classification purposes, and how Category XII has introduced a new concept of “specially designed for a military end-user”
  • How to classify formerly ITAR-controlled items on the Commerce Control List, especially the new and revised “600 series” Export Control Classification Numbers (ECCNs) (7A611, 7B611, 7D611, and 7E611)
  • Adjustments to several related non-600 series ECCNs is CCL Categories 0, 2, 6, 7, 8, and 9
  • License exception eligibility for these items, including important changes to License Exceptions APR, GOV, and STA
  • Revisions to unique EAR military end use and end user controls
  • The actions exporters should take now to prepare for the rapidly approaching effective date of these changes

Learn More at: http://www.learnexportcompliance.com/Webinars/Export-Control-Reform-for-USML-Category-XII-Fire-C.aspx

DDTC Posts Revision 4.4a of the Agreement Guidelines

Wednesday, October 12th, 2016 by Danielle McClellan

(Source: State/DDTC)

Revision 4.4a of the Agreement Guidelines has been posted and replaces Revision 4.4.

Revision 4.4a corrects an inadvertent omission on page 152. Both Revision 4.4a and a preamble with a summary of changes can be found here. Revision 4.4a is effective September 1, 2016.

The Last Hoorah for Reform?

Tuesday, September 6th, 2016 by Danielle McClellan

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 Reinterprets Defense Services Related to Firearms: Not all Gun Activities are Created Equal…or Covered by the ITAR

Tuesday, August 9th, 2016 by Danielle McClellan

By: Danielle McClellan

Previously, several activities related to firearms constituted manufacturing for ITAR purposes. This meant that many activities related to firearms required registration with DDTC. After a review of the policy, DDTC has found that many traditional gunsmithing activities do not constitute manufacturing for ITAR purposes and will no longer require DDTC registration.

The guidance below is limited to domestic (U.S.) activities involving firearms (as defined in Category I(j)(1) of the United States Munitions List (USML) (22 CFR § 121.1)) and related ammunition that are .50 caliber (12.7 mm) or smaller – i.e., firearms in Category I, paragraphs (a) and (b), related items in paragraphs (e)-(h), and ammunition in Category III(a) for those firearms.  Activities involving items elsewhere on the USML, including Category I, paragraphs (c) and (d), are not included in the scope of this guidance.

  1. Registration not Required – Not Manufacturing:  In response to questions from persons engaged in the business of gunsmithing, DDTC has found in specific cases that ITAR registration is not required because the following activities do not meet the ordinary, contemporary, common meaning of “manufacturing” that DDTC employs in implementing the ITAR and, therefore, do not constitute “manufacturing” for ITAR purposes:
  1. Occasional assembly of firearm parts and kits that do not require cutting, drilling, or machining;
  2. Firearm repairs involving one-for-one drop-in replacement parts that do not require any cutting, drilling, or machining for installation;
  3. Repairs involving replacement parts that do not improve the accuracy, caliber, or other aspects of firearm operation;
  4. Hydrographic paint or Cerakote application or bluing treatments for a firearm;
  5. Attachment of accessories to a completed firearm without drilling, cutting, or machining-such as attaching a scope, sling, or light to existing mounts or hooks, or attaching a flash suppressor, sound suppressor, muzzle brake, or similar item to a prethreaded muzzle;
  6. Cosmetic additions and alterations (including engraving) that do not improve the accuracy, caliber, or other aspects of firearm operation beyond its original capabilities;
  7. Machining new dovetails or drilling and tapping new holes for the installation of sights which do not improve the accuracy or operation of the firearm beyond its original capabilities; and
  8. Manual loading or reloading of ammunition of .50 caliber or smaller.

Activities limited to the domestic sale or resale of firearms, the occasional assembly of firearms without drilling, cutting, or machining, and/or specific gunsmithing activities that do not improve the accuracy, caliber, or operations of the firearm beyond its original capabilities (as described above) are not manufacturing within the context of the ITAR.  If you are not manufacturing, exporting, temporarily importing or brokering defense articles or services, you are not required to register with DDTC.

  1. Registration Required – Manufacturing:  In response to questions from persons engaged in the business of gunsmithing, DDTC has found in specific cases that ITAR registration is required because the following activities meet the ordinary, contemporary, common meaning of “manufacturing” and, therefore, constitute “manufacturing” for ITAR purposes:
  1. Use of any special tooling or equipment upgrading in order to improve the capability of assembled or repaired firearms;
  2. Modifications to a firearm that change round capacity;
  3. The production of firearm parts (including, but not limited to, barrels, stocks, cylinders, breech mechanisms, triggers, silencers, or suppressors);
  4. The systemized production of ammunition, including the automated loading or reloading of ammunition;
  5. The machining or cutting of firearms, e.g., threading of muzzles or muzzle brake installation requiring machining, that results in an enhanced capability;
  6. Rechambering firearms through machining, cutting, or drilling;
  7. Chambering, cutting, or threading barrel blanks; and
  8. Blueprinting firearms by machining the barrel.

3) Registration Required – Other than Manufacturing:

  1. Assisting foreign persons in the design, development, and repair of firearms may constitute the export of a defense service (see 22 CFR § 120.9) and require ITAR registration with and authorization from DDTC; and
  2. Exporting a firearm or any other item on the USML requires ITAR registration with and authorization from DDTC.

It should be noted that there are two US laws that are related to the manufacturing of firearms and just because one regulation controls an activity it does not mean the other will or will not. The Gun Control Act (GCA) and the Arms Export Control Act (AECA) both control the manufacturing of firearms. The GCA requires manufacturers to obtain licenses as manufacturers (Federal Firearms Licenses from the Department of Justice’s Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)). The GCA is intended to cover a broader scope of activity than the AECA. The term firearm is defined differently thus, not every firearm controlled by the ATF regulations is also controlled by the ITAR.

If, after careful review of this guidance, you are unsure as to whether you are required to register with DDTC, you may submit an advisory opinion request (see 22 CFR § 126.9) detailing exactly what you do or intend to do with regard to firearms and ammunition.  This request should be sent in hard copy (services like UPS or FedEx recommended for faster delivery) as indicated on our website: http://pmddtc.state.gov/about/contact_information.html.

If you have any general follow-on questions, please feel free to contact the Response Team at (202) 663-1282 or DDTCResponseTeam@state.gov.

Court of Appeals Judges Question Justice Department on ITAR Prior Restraint Against Speech at Libraries, the Internet, and other Public Forums

Tuesday, July 12th, 2016 by Danielle McClellan

By: Matthew A. Goldstein, Esq., matthew@goldsteinpllc.com, 202-550-0040

Originally filed in the U.S. Federal District Court for the Western District of Texas in Austin under Case No. 1:15-cv-00372, the case of Defense Distributed and the Second Amendment Foundation against the U.S. Department of State and other government defendants seeks to prevent application of the International Traffic in Arms Regulations [FN/1] (“ITAR”) as a prior restraint against public speech.

Following the District Court’s denial of the plaintiffs’ request for a preliminary injunction against the State Department, the plaintiff’s appealed to the United States Court of Appeals for the Fifth Circuit.

At last week’s oral argument before the Court of Appeals, a panel of judges questioned the Justice Department on the scope of the State Department’s prior restraint.  The Justice Department’s responses were inconsistent with prior State Department positions in the case and contrary to the State Department’s June 13, 2015 notice of proposed rulemaking that announced the government’s sudden application of the ITAR as a prior restraint on public speech. [FN/2]

 

Has the State Department Previously Enforced the Prior Restraint?

Considering how the regulations have been in effect for 60 years, the Court asked the Justice Department to provide examples of when the State Department previously regulated prepublication of information about guns.  The Justice Department responded that it did not know of any examples, “but there certainly aren’t a lot…” [FN/3]

 

The Justice Department’s representation that “there certainly aren’t a lot” of examples is unclear, but seems to assume there is at least one.  Yet, the State Department has not cited a single case of enforcement in its briefs filed with the court.

The Justice Department claim there “aren’t not a lot” of examples also conflicts with a Justice Department representation to the court that followed its original response, where it concedes the State Department has not previously regulated information about handguns. [FN/4]

 

Is Exposing Technical Data to a Foreign Person Controlled?

The Justice Department told the Court that exposing technical data to a foreign is not the relevant standard. [FN/5]  However, the State Department’s June 3, 2016 proposed rule discussing the prior restraint states: “‘technical data’ may not be made available to the public without authorization.” [FN/6]

 

Does the Prior Restraint Apply to Scientific Information?

The Justice Department told the court that it did not think that anybody could read the prior restraint to apply to scientific exchanges. [FN/7]  However, the ITAR U.S. Munitions List (“USML”) designates a vast amount of scientific information as technical data and the State Department’s rule does not provide any across-the-board exclusion from the prior restraint for exchanges of scientific information.

There is a limited exclusion for information that arises or results from “fundamental research,” but the State Department takes a very narrow interpretation of the scope of this exclusion-to the point that it does not exist in reality. This is because the fundamental research exclusion, codified at 120.11(a)(8), is nested within the ITAR definition of public domain at 120.11(a) [FN/8]-and is therefore under the shadow of the State Department’s prepublication approval requirement.  Here, the State Department warns universities: “The only part of fundamental research that is not controlled by the ITAR is the published information that meets the definition of public domain.” [FN/9]

 

Does the Prior Restraint Apply to Information on Guns?

The Justice Department told the court the ITAR does not prohibit the dissemination of information about guns for a number of reasons and claimed that a lot of that information is already in the public domain. [FN/10]

Of course, the ITAR definition of “technical data” includes information on any article listed on the ITAR USML, not just guns.  But it most definitely controls “information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification” of guns listed on the USML. [FN/11]

Moreover, the State Department’s June 3, 2015 proposed rule prevents reliance on the public domain exclusion for the vast majority of information on the Internet, public libraries, and other public forums where it states:

“‘Technical data’ and software that is made publicly available without proper authorization remains ‘technical data’ or software and therefore remains subject to the ITAR.” [FN/12]

Considering how the State Department has not publicly enforced its prepublication approval requirement against anyone other than Defense Distributed, most, if not all, persons who previously posted technical data to the Internet, at libraries, and other public forums had no reason to know that the State Department required prior U.S. government authorization for public speech.  As a result, the vast majority of publicly available technical data on guns is not “already in the public domain” because the publishers did not obtain U.S. government authorization before publication.

 

Does the Prior Restraint Criminalize Placing Books at Libraries?

The Court asked the Justice Department whether the State Department restricts placing books at public libraries. [FN/13]  The Justice Department did not clearly answer “yes” or “no.”  Instead, it argued that the State Department has not faced the issue and that upholding the State Department’s prior restraint in the present case would not impact the issue. [FN/14]

However, the State Department’s June 3, 2015 proposed rule claims that prior government authorization is required for any transmission of technical data into the public domain, regardless of the means of transmission.  As announced by the Stated Department in its proposed rule:

Prior to making available ”technical data” or software subject to the ITAR, the U.S. government must approve the release through one of the following: (1) The Department; (2) the Department of Defense’s Office of Security Review; (3) a relevant U.S. government contracting authority with authority to allow the ”technical data” or software to be made available to the public, if one exists; or (4) another U.S. government official with authority to allow the ”technical data” or software to be made available to the public. [FN/15]

There is no carve-out for technical data in books placed at public libraries.  To the contrary, the proposed rule states the ITAR prior restraint applies to a release of technical data by publishing in a book as much as publishing on the Internet:

The requirements of paragraph (b) are not new. Rather, they are a more explicit statement of the ITAR’s requirement that one must seek and receive a license or other authorization from the Department or other cognizant U.S. government authority to release ITAR controlled ”technical data,” as defined in § 120.10. A release of ”technical data” may occur by disseminating ”technical data” at a public conference or trade show, publishing ”technical data” in a book or journal article, or posting ”technical data” to the Internet. [FN/16]

Accordingly, if the Court of Appeals rules in favor of the State Department, the Court will indeed be upholding a broad prior restraint on the placing of books at public libraries, as well as releases of technical data at public conferences, and any other public forum.

Moreover, same as the exclusion for fundamental research discussed above, because the exclusion for information that is available at “libraries open to the public”, as codified at 120.11(a)(4), is nested within the ITAR definition of public domain at 120.11(a) [FN/17]-it is subsumed within the State Department’s prepublication approval requirement-as are the other public forums nested below 120.11(a) (i.e., through sales at newsstands and bookstores, subscriptions, second class mailing privileges, etc.)-which are all subject to the State Department’s prior restraint.

 

Does the ITAR Restrict Republications of Information?

The Justice Department told the court that republication of technical data that was made available without government authorization is a violation under the State Department’s proposed rule if made with “knowledge that it was put out originally in violation of the regulations…” [FN/18]  But the Justice Department did not explain what it means by “knowledge”-a legal term of art that can include actual knowledge of a fact or constructive knowledge of a fact.

Are suspicious circumstances enough for prosecution?

Is it sufficient that a speaker knows or should know the facts indicate technical data or software was made publicly available without an authorization?

What, if any, actions constitute sufficient due diligence to guard against imputation of such knowledge?

These questions are particularly relevant considering how the government has not publicly enforced the prior restraint, which means the public is on constructive notice that the vast majority of all technical data in the public domain was placed there without U.S. government authorization.

For instance, under the proposed rule, it is unclear whether a person can be held liable for reposting technical data if they do not actually know whether the original poster of technical data had permission from the government, but circumstances exist indicating a lack of such approval (i.e., no indication that government approval was obtained, technology of a nature that the government is unlikely to approve, etc.).

The republication requirement will also violate the First Amendment under the Supreme Court’s holding in Bartnicki v. Vopper Williams, 532 U.S. 514 (2001). In Bartnicki the Supreme Court addressed the question: “Where the publisher has lawfully obtained information from a source who obtained it unlawfully, may the government punish the ensuing publication based on the defect in a chain?” [FN/19]

 

The Supreme Court concluded that, under the statutory language at issue in the case, a person speaking on matters of public concern could not be prohibited from publishing the contents of an electronic communication, even where he or she knows or has reason to know that the information was obtained through an illegal interception. The Supreme Court noted:

“It would be quite remarkable to hold that speech by a law-abiding possessor of information can be suppressed in order to deter conduct by a non-law-abiding third party.” [FN/20]

Equally important to note, the Supreme Court has held that government bans on the republication of information does not meaningfully advance any legitimate government interest. [FN/21]

 

What Happens Next?

As explained in the plaintiffs’ briefings to the Court, the State Department’s prior restraint is unconstitutional under the First Amendment and for a variety of other reasons.  However, much more than protection of the First Amendment and other fundamental rights are at stake in the upcoming Court of Appeals decision.

 

A Dangerous Precedent

A decision in favor of the State Department will establish a dangerous precedent wherein the government is allowed to maintain a list of topics that citizens cannot discuss publicly without a license from some unnamed government official (or contractors working for the State Department).

Although the case concerns information about guns and other topics listed on the USML, future lists can include virtually any topic that some unnamed government official or contractor decides to “designate” or otherwise place on a list-unless the prospective speaker has the time and money to hire a team of attorneys, file a lawsuit, and eventually wins in court.

 

Adversely Impact Innovation

The ITAR controls many developmental electronics, aeronautics, and other technologies. [FN/22]  It even controls emerging technologies not yet enumerated on the USML. [FN/23]  Although it is important to protect these technologies, the development of advanced and innovative technologies through open research and development is the key to U.S. National Security.  The State Department’s proposed prepublication approval requirement will defeat this important government interest by creating increased caution and restraint in the scientific community that will inhibit the free exchange of information necessary to innovation.

 

Chilling Effect on Speech

The prior restraint’s impact will be far-reaching because a prepublication review requirement will necessarily subject a wide range of technical information to review. Most persons publishing information in books, newspapers, magazines, journals, and on the Internet are not generally knowledgeable about export controls. Because of this, they are unlikely to recognize the proper scope of ITAR controls and will likely refrain from participating on exchanges for fear of inadvertently violating the regulations.

 

Changes Contrary to Stated ECR Goals

The prior restraint is contrary to the stated goal of the President’s Export Control Reform (“ECR”).  The primary ECR goal is a system where “higher walls are placed around fewer, more critical items” that focuses agency resources on license reviews of critical technologies that matter. The proposed prepublication approval requirement is contrary to this stated goal because it will require the devotion of significant agency resources to reviews of unclassified, non-proprietary information, which does not generally describe the state of art technology or implicate military critical technologies.

 

Ineffective and Waste of Taxpayer Dollars

Considering the annual volume of academic and professional publications and the sheer volume of daily publications on the Internet that may contain technical data, the costs of adding more staff with the technical expertise required to administer the proposed prepublication review requirement will no doubt exceed existing DDTC capacities.  In the meantime, further lawsuits by newspapers, magazines, academic journals, and other would-be publishers will further burden agency resources and waste taxpayer dollars.

—————

[FN/1] 22 C.F.R. Part 120 et seq.

[FN/2] See 80 Fed. Reg. 31,525 (June 13, 2015).

[FN/3] June 6, 2016 Hearing Record (hereinafter “06/06/16 H.R.”) at 23:32-25:40.

[FN/4] 06/06/16 H.R. at 24:21-25:17.

[FN/5] 06/16/16 H.R. at 30:48-31:26 (Justice Department stating, inter alia, that “exposed to a foreigner is not the standard”).

[FN/6] 80 Fed. Reg. at 31,528.

[FN/7] 06/06/16 H.R. at 28:09-28:47; See also 24:11-25:40.

[FN/8]  22 C.F.R. § 120.11   Public domain.

(a) Public domain means information which is published and which is generally accessible or available to the public:

(1) Through sales at newsstands and bookstores;

(2) Through subscriptions which are available without restriction to any individual who desires to obtain or purchase the published information;

(3) Through second class mailing privileges granted by the U.S. Government;

(4) At libraries open to the public or from which the public can obtain documents;

(5) Through patents available at any patent office;

(6) Through unlimited distribution at a conference, meeting, seminar, trade show or exhibition, generally accessible to the public, in the United States;

(7) Through public release (i.e., unlimited distribution) in any form (e.g., not necessarily in published form) after approval by the cognizant U.S. government department or agency (see also §125.4(b)(13) of this subchapter);

(8) Through fundamental research in science and engineering at accredited institutions of higher learning in the U.S. where the resulting information is ordinarily published and shared broadly in the scientific community. Fundamental research is defined to mean basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U.S. Government access and dissemination controls…

[FN/9] (emphasis in original) See here.

The State Department also advised that the fundamental research exclusion does not apply to the provision of information to foreign parties during the performance of research involving technical data or a defense article because the provision of such information constitutes a defense service that requires DDTC authorization under ITAR sections 120.9(1) and 124.1(a). Under this DDTC interpretation of the exclusion, the provision of information to foreign parties in the course of research, regardless of if in the public domain or otherwise falling under any other ITAR exclusion, requires DDTC authorization if the research involves ITAR-controlled technical data or a defense article.

[FN/10] 06/06/16 H.R. at 18:51-19:47; 21:45-22:39.

[FN/11] 22 C.F.R. § 120.10.

[FN/12] 80 Fed. Reg. 31,528 (June 3, 3015) (“‘Technical data’ and software that is made publicly available without proper authorization remains ‘technical data’ or software and therefore remains subject to the ITAR.”).

[FN/13] 06/06/16 H.R. at 25:39-27:13.

[FN/14] 06/06/16 H.R. at 26:27-27:13.

[FN/15] 80 Fed. Reg. at 31,528.

[FN/16] Id.

[FN/17] 22 C.F.R. § 120.11 (“(a) Public domain means information which is published and which is generally accessible or available to the public… (4) At libraries open to the public or from which the public can obtain documents…”)

[FN/18] 06/06/16 H.R. at 31:26-33:00.

[FN/19] Id. at 528.

[FN/20] Bartnicki at 529-530.

[FN/21] Florida Star v. B.J.F., 491 U.S. 524, 535 (1989) (“punishing the press for its dissemination of information which is already publicly available is relatively unlikely to advance the interests in the service of which the State seeks to act.”).

[FN/22] See e.g., USML at 22 C.F.R. § 121.1 paragraphs VI(c), VIII(f), X(f), XI(a)(7), and XX(a)(8).

[FN/23] See e.g., USML Category XXI-Articles, Technical Data, and Defense Services Not Otherwise Enumerated

*(a) Any article not enumerated on the U.S. Munitions List may be included in this category until such time as the appropriate U.S. Munitions List category is amended. The decision on whether any article may be included in this category, and the designation of the defense article as not Significant Military Equipment (see §120.7 of this subchapter), shall be made by the Director, Office of Defense Trade Controls Policy.

(b) Technical data (see §120.10 of this subchapter) and defense services (see §120.9 of this subchapter) directly related to the defense articles covered in paragraph (a) of this category.

It Never Pays to Use Your Church to Cover Your Export Violations

Thursday, May 5th, 2016 by Danielle McClellan

By: Danielle McClellan

What does a system analyst for a defense contractor, a church volunteer and an owner of 3 US companies all have in common?  They all involve one woman, who will now spend 57 months in prison, encompassed each, and all at the same time. Hannah Robert, of North Burnswick, New Jersey recently plead guilty to conspiring to violate the Arms Export Act by exporting military technical drawings to India without government approval.

The story begins with Robert being an employee for a defense contractor where she worked as a system analyst and had access to thousands of export controlled drawings that were used for bids on US Department of Defense (DoD) contracts (Robert held this position until November 2012). In June 2010, she became the founder, owner and president of One Source USA LLC where she contracted with the DoD to supply defense hardware items and spare parts. In September 2012, Robert opened another defense company, Caldwell Components, Inc. as well as Once Source India (located in India), with a resident of India (identified on as R.P. in court documents) that manufactured defense hardware items and spare parts.

Between June 2010 and December 2012 Robert illegally exported defense technical drawings for parts used in the torpedo systems for nuclear submarines, military attack helicopters and F-15 fighter aircraft to R.P. in India. Robert and her India counterpart also sold defense hardware items to foreign customers including the United Arab Emirates Ministry of Defence. Hannah Robert volunteered at a church in Camden County, New Jersey, as a web administrator. This allowed her access to the church’s website where she uploaded the defense technical data. She provided her login and password to the church’s website to R.P. so that he/she could download the files. This process went on for two years and was the way in which Robert and R.P. were able to pass the technical information amongst themselves.

Hannah Robert was also faced with the issue of providing US DoD with faulty wing pins for the F-15 fighter aircraft. Robert provided false and misleading material certificates and inspection reports for the parts. The documents also failed to list that the actual manufacturer of the pins was located in India, not One Source USA’s New Jersey location which was listed on all of her DoD bids. The failed wing pins grounded approximately 47 F-15 fighter aircraft and cost DoD over $150,000 to inspect and repair the pins. Robert must pay $181,000 to the DoD to cover the repair costs as well as forfeiting more than $77,000 that she earned from the contracts.

The case was investigated by the special agents of the Defense Criminal Investigative Service’s Northeast Field Office and the special agents of the Department of Homeland Security’s Counter Proliferation Investigations.

More Information: https://www.justice.gov/usao-nj/pr/former-owner-defense-contracting-businesses-sentenced-57-months-prison-illegally