DDTC Posts New Dual and Third Country National Guidance
08/15/11 01:27 PM
The
U.S. Department of State’s Directorate of Defense
Trade Controls (DDTC) posted updated
Guidelines for Implementing New
Dual National/Third-Country National Policy for
Agreements. On its
website, DDTC states:
The following guidance relates to the August 15, 2011 implementation of the new §126.18 rule on dual and third country nationals. The first document relates to the changes to agreements and will be incorporated into the new Guidelines as well. D-TCN AG Guidance Final.
The following notional implementation plan is a suggested approach, but is by no means the only way of complying with the rule and its core principle of preventing diversion of defense articles to unauthorized end-users and end-uses. Consistent with local national laws and programs for the control/protection of defense articles/technologies and consistent with the need for private entities to protect proprietary data, technology security plans should be designed with a comprehensive and individualized approach to securing sensitive data of all kinds with appropriate measures for physical security and personnel clearances. D-TCN Policy Implementation Final.
Additional guidance and clarification is provided in the attached Frequently Asked Questions relating to both of the above documents. D-TCN FAQs Final.
The following guidance relates to the August 15, 2011 implementation of the new §126.18 rule on dual and third country nationals. The first document relates to the changes to agreements and will be incorporated into the new Guidelines as well. D-TCN AG Guidance Final.
The following notional implementation plan is a suggested approach, but is by no means the only way of complying with the rule and its core principle of preventing diversion of defense articles to unauthorized end-users and end-uses. Consistent with local national laws and programs for the control/protection of defense articles/technologies and consistent with the need for private entities to protect proprietary data, technology security plans should be designed with a comprehensive and individualized approach to securing sensitive data of all kinds with appropriate measures for physical security and personnel clearances. D-TCN Policy Implementation Final.
Additional guidance and clarification is provided in the attached Frequently Asked Questions relating to both of the above documents. D-TCN FAQs Final.
Applicants Must Use the Newly Revised Commodity Jurisdiction Form (DS-4076)
08/05/11 12:20 PM
Department of
State Directorate of Defense Trade Controls posted
on its web site a notice that, effective
immediately, applicants must use the newly revised
DS-4076 Commodity Jurisdiction form, Version Number
1.2. All prior versions will be rejected at the
time of submission.
One significant change appears in Block 12 where a “none” check box has been added, which will allow applicants to indicate when there is no equivalent U.S. or foreign product. Another change in Block 19 gives the applicant the option of directing DDTC to correspond with the applicant by email, to include notification of the final determination, rather than by means of the U.S. Postal Service. The new guidelines have been posted here.
One significant change appears in Block 12 where a “none” check box has been added, which will allow applicants to indicate when there is no equivalent U.S. or foreign product. Another change in Block 19 gives the applicant the option of directing DDTC to correspond with the applicant by email, to include notification of the final determination, rather than by means of the U.S. Postal Service. The new guidelines have been posted here.
Effective September 26, 2011, ITAR Registration Fees to be Submitted Electronically
07/28/11 11:44 AM
On
July 28, 2011, Department of State issued a
final rule in the Federal
Register amending the International Traffic in
Arms Regulations (ITAR) to change the method of
payment of registration fees.
Effective September 26, 2011, registration fees must be submitted to the Directorate of Defense Trade Controls (DDTC) electronically.
Previously, registrants submitted registration fees to the DDTC by check or money order, and these payments were processed manually. According to the Department of State, electronic submission of registration fees will simplify the collection and verification of payments, eliminate the need to manually process and collect returned payments, and eliminated the possibility of lost payments.
Effective September 26, 2011, registration fees must be submitted to the Directorate of Defense Trade Controls (DDTC) electronically.
Previously, registrants submitted registration fees to the DDTC by check or money order, and these payments were processed manually. According to the Department of State, electronic submission of registration fees will simplify the collection and verification of payments, eliminate the need to manually process and collect returned payments, and eliminated the possibility of lost payments.
DDTC Now Posting the Status of Commodity Jurisdiction Cases
07/15/11 12:54 PM
The
U.S. Department of State’s Directorate of Defense
Trade Controls (DDTC) is now weekly posting the
processing status of commodity jurisdiction (CJ)
requests. Users can look up the status of their
case by the commodity jurisdiction case number via
the CJ Status
Spreadsheet.
DDTC Seeks Comments on Export/Import Licenses, Agreements, Reports, and Record Maintenance Requirements
06/30/11 09:20 PM
On
June 30, 2011, the Department of State posted
a notice in the Federal
Register seeking Office of Management and Budget
(OMB) approval for the information collection
requirements for the following:
Comments are due to the Department of State within 60 days from June 30, 2011 or by August 29, 2011.
- DSP-5:
Application/License for Permanent Export of
Unclassified Defense Articles and Related
Unclassified Technical Data;
• DSP-61: Application/License for Temporary Import of Unclassified Defense Articles;
• DSP-73: Application/License for Temporary Export of Unclassified Defense Articles;
• DSP-83: Non-Transfer and Use Certificate
• DSP-85: Application/License for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Classified Technical Data;
• DSP-94: Authority to Export Defense Articles and Services Sold under the Foreign Military Sales (FMS) Program;
• DSP-6, DSP-62, DSP-74, DSP-84, DSP-119: Application for Amendment to License for Export or Import of Classified or Unclassified Defense Articles and Related Technical Data;
• Request for Approval of Manufacturing License Agreements, Technical Assistance Agreements, and Other Agreements;
• Statement of Political Contributions, Fees, or Commissions in Connection with the Sale of Defense Articles or Services; and
• Maintenance of Records by Registrant.
Comments are due to the Department of State within 60 days from June 30, 2011 or by August 29, 2011.
DDTC Posts a New Commodity Jurisdiction Request Form
06/03/11 09:15 PM
The
U.S. Department of State Directorate of Defense
Trade Controls (DDTC) announced that effective June
3, 2011, applicants must download and use
the updated DS-4074 Version
1.1. All prior
versions of the form will be rejected.
BAES Agrees to $79M Consent Agreement with DDTC
05/17/11 04:05 PM
On
March 2, 2010, in the United States District Court
for the District of Columbia, judgment was filed
against BAE Systems plc (“BAES&rdquo
for conspiracy to violate
certain U.S. laws, including the Arms Export
Control Act (“AECA&rdquo. On May 16, 2011, the Department
issued an Order after entering
into a Consent Agreement
with BAES
regarding alleged civil violations of the AECA
and International Traffic in Arms Regulations
(ITAR) committed by BAES. See Proposed Charging
Letter here.
Under the Consent Agreement, BAES agrees to pay a total civil penalty of $79 million. Sixty-nine million dollars will be paid through several installments: (1) $18M to be paid within 10 days of the Order; (2) $17M to be paid within 1 year of the Order and then on each of the 2nd and 3rd anniversaries of the order; (3) $3M will be suspended on the condition that BAES has applied this amount to self-initiated, pre-Consent Agreement remedial compliance measures; and (4) $7M will be suspended on the condition that BAES applies this amount to the Consent Agreement authorized remedial compliance measures and for the purpose of defraying a portion of the costs associated with the specified remedial compliance measures.
The Consent Agreement also outlines that as a result of the conviction, BAES was statutorily debarred but there was an immediate lifting of the debarment. The Consent Agreement also outlines a policy of denial concerning certain non-U.S. subsidiaries of BAES involved in activities related to the conviction (BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., and their subsidiaries, divisions and business units, and successor entities), which means that there will be a presumption of denial of license and other applications involving these entities. DDTC posted guidance on its website to exporters regarding a policy of denial for BAE Systems plc.
for conspiracy to violate
certain U.S. laws, including the Arms Export
Control Act (“AECA&rdquo. On May 16, 2011, the Department
issued an Order after entering
into a Consent Agreement
with BAES
regarding alleged civil violations of the AECA
and International Traffic in Arms Regulations
(ITAR) committed by BAES. See Proposed Charging
Letter here.
Under the Consent Agreement, BAES agrees to pay a total civil penalty of $79 million. Sixty-nine million dollars will be paid through several installments: (1) $18M to be paid within 10 days of the Order; (2) $17M to be paid within 1 year of the Order and then on each of the 2nd and 3rd anniversaries of the order; (3) $3M will be suspended on the condition that BAES has applied this amount to self-initiated, pre-Consent Agreement remedial compliance measures; and (4) $7M will be suspended on the condition that BAES applies this amount to the Consent Agreement authorized remedial compliance measures and for the purpose of defraying a portion of the costs associated with the specified remedial compliance measures.
The Consent Agreement also outlines that as a result of the conviction, BAES was statutorily debarred but there was an immediate lifting of the debarment. The Consent Agreement also outlines a policy of denial concerning certain non-U.S. subsidiaries of BAES involved in activities related to the conviction (BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., and their subsidiaries, divisions and business units, and successor entities), which means that there will be a presumption of denial of license and other applications involving these entities. DDTC posted guidance on its website to exporters regarding a policy of denial for BAE Systems plc.
DDTC Publishes Final Rule on Dual and Third-Country Nationals Employed by Foreign End Users
05/16/11 04:38 PM
On May
16, 2011, the Department of State published
a final rule amending the
International Traffic in Arms Regulations (ITAR)
to establish a policy to address those who are
unable to implement the exemption for
intra-company, intra-organization, and
intra-government transfers of defense articles
and defense services by approved end-users to
dual national and third-country nationals who
are employees of such approved end-users.
Prior to making transfers to certain dual national and third-country national employees under this policy, approved end-users must screen employees, make an affirmative decision to allow access, and maintain records of screening procedures to prevent diversion of ITAR-controlled technology for purposes other than those authorized by the applicable export license or other authorization.
The Department of State is amending parts 124 and 126 of the ITAR to reflect new policy regarding end-user employment of dual nationals and third-country nationals. As a part of the President’s Task Force on Export Control Reform, the previous policy regarding the treatment of dual nationals and third-country nationals employed by approved end users was re-evaluated. A proposed rule to eliminate the separate licensing requirement for dual nationals and third-country nationals employed by licensed end-users was presented for public comment. The proposed rule had a comment period ending September 10, 2010. Thirty-two parties filed comments recommending changes, which the DDTC analyzes and addresses in the publication.
The rule is effective August 15, 2011.
Prior to making transfers to certain dual national and third-country national employees under this policy, approved end-users must screen employees, make an affirmative decision to allow access, and maintain records of screening procedures to prevent diversion of ITAR-controlled technology for purposes other than those authorized by the applicable export license or other authorization.
The Department of State is amending parts 124 and 126 of the ITAR to reflect new policy regarding end-user employment of dual nationals and third-country nationals. As a part of the President’s Task Force on Export Control Reform, the previous policy regarding the treatment of dual nationals and third-country nationals employed by approved end users was re-evaluated. A proposed rule to eliminate the separate licensing requirement for dual nationals and third-country nationals employed by licensed end-users was presented for public comment. The proposed rule had a comment period ending September 10, 2010. Thirty-two parties filed comments recommending changes, which the DDTC analyzes and addresses in the publication.
The rule is effective August 15, 2011.
DDTC No Longer Accepts DSP-85 License Application in Paper Form
05/13/11 03:23 PM
Effective May 13,
2011, Department of State Directorate of Defense
Trade Controls (DDTC) Licensing no longer accepts
the multi-page DSP-85 license application in paper
form. All submissions must now be made using the
DSP-85 downloadable and fillable
form, and mailed or
delivered to DDTC. The DSP-85 form may be found
under the Licensing tab under “Forms”. The
content of the form has not been changed.
DDTC Posts Testimony of Under Secretary Ellen Tauscher on Export Controls Reform
05/12/11 04:33 PM
On May
12, 2011, Department of State posted testimony of
Under Secretary for Arms Control and
International Security Ellen Tauscher on export
controls reform before the House Foreign Affairs
Committee.
The Under Secretary testified that the task force created to develop the new export controls regime is currently implementing Phase II. This includes working to revise the U.S. Munitions List (USML) and the Commerce Control List (CCL) so that they use common technologies and structures.
The Under Secretary said that, “State, Commerce, and Treasury are also in the process of adopting the Department of Defense’s export licensing computer system, which will be part of a unified, cross-government computer system for export control purposes. As part of this effort, exporters eventually will use a single form for applications to State, Commerce and Treasury. Exporters also will be able to submit those applications through a single electronic portal. This isn’t rocket science; we are simply adopting modern business practices.”
To address commodity jurisdiction determination issues, the State Department is working with the Departments of Defense and Commerce to create a “bright line” between munitions and dual-use items, which will finally provide clear guidance to exporters on commodity jurisdiction issues. Ellen Tauscher stated that, “this is necessary to update our system that is still designed with the assumption that technologies are developed for the military and only later find their way into the commercial sector, whereas, today, that is often the exception rather than the rule.”
As part of the USML review, agencies are developing a process for transferring items from the USML to the CCL which includes deciding on the appropriate licensing requirements on items that are moved to the CCL.
The Under Secretary also noted the Obama Administration also wants to improve the process for notifying Congress about arms sales and the transfer of items from the United USML as over the years the “process has become lengthy and unpredictable.”
The Under Secretary concluded that Phase III will complete the reform process by creating the “four singularities” – a single control list, a single information technology system, a single enforcement coordination agency, and a single licensing agency.
The Under Secretary testified that the task force created to develop the new export controls regime is currently implementing Phase II. This includes working to revise the U.S. Munitions List (USML) and the Commerce Control List (CCL) so that they use common technologies and structures.
The Under Secretary said that, “State, Commerce, and Treasury are also in the process of adopting the Department of Defense’s export licensing computer system, which will be part of a unified, cross-government computer system for export control purposes. As part of this effort, exporters eventually will use a single form for applications to State, Commerce and Treasury. Exporters also will be able to submit those applications through a single electronic portal. This isn’t rocket science; we are simply adopting modern business practices.”
To address commodity jurisdiction determination issues, the State Department is working with the Departments of Defense and Commerce to create a “bright line” between munitions and dual-use items, which will finally provide clear guidance to exporters on commodity jurisdiction issues. Ellen Tauscher stated that, “this is necessary to update our system that is still designed with the assumption that technologies are developed for the military and only later find their way into the commercial sector, whereas, today, that is often the exception rather than the rule.”
As part of the USML review, agencies are developing a process for transferring items from the USML to the CCL which includes deciding on the appropriate licensing requirements on items that are moved to the CCL.
The Under Secretary also noted the Obama Administration also wants to improve the process for notifying Congress about arms sales and the transfer of items from the United USML as over the years the “process has become lengthy and unpredictable.”
The Under Secretary concluded that Phase III will complete the reform process by creating the “four singularities” – a single control list, a single information technology system, a single enforcement coordination agency, and a single licensing agency.
Proposed ITAR Rule Amends Licensing Requirements for Replacement Parts and Incorporated Articles
03/15/11 12:44 AM
On
March 15, 2011, the Department of State
proposed to amend Parts
123 and 126 of the International Traffic in Arms
Regulations (ITAR) to reflect new policies
regarding coverage of replacement
parts/components and incorporated articles.
The current rule regarding parts and components requires additional licenses for licensed end-users and end-uses for systems and components already vetted in earlier licenses. The proposed rule adds a new section (§123.28) that eliminates the requirement for a license for parts and components for systems approved in a previous license. This proposed exemption applies only to exporters specifically identified in a previously approved authorization to export the end-item in question. It would not be applicable to upgrades of capabilities of the original end-item.
With respect to ITAR treatment of incorporated articles, the proposed new section of the ITAR (§126.19) lists three conditions under which a DDTC license is not required for the export or re-export of defense articles incorporated into an end-item that is subject to the EAR: (1) where the end-item would be “rendered inoperable” by the removal of the defense articles; (2) where no technical data for development or production are transferred with the defense article; and (3) where the incorporation of the defense article does not provide (or is not related to) a military application.
In addition, under the proposed rule, no license is required for the export or re-export of a defense article when that article would be rendered inoperable by removal form the end-item. A license would be required for the export of defense articles that are spare or replacement parts when they are embedded into a larger assembly such that they can be removed without destroying the defense articles.
Comments to the DDTC are due before April 14, 2011.
The current rule regarding parts and components requires additional licenses for licensed end-users and end-uses for systems and components already vetted in earlier licenses. The proposed rule adds a new section (§123.28) that eliminates the requirement for a license for parts and components for systems approved in a previous license. This proposed exemption applies only to exporters specifically identified in a previously approved authorization to export the end-item in question. It would not be applicable to upgrades of capabilities of the original end-item.
With respect to ITAR treatment of incorporated articles, the proposed new section of the ITAR (§126.19) lists three conditions under which a DDTC license is not required for the export or re-export of defense articles incorporated into an end-item that is subject to the EAR: (1) where the end-item would be “rendered inoperable” by the removal of the defense articles; (2) where no technical data for development or production are transferred with the defense article; and (3) where the incorporation of the defense article does not provide (or is not related to) a military application.
In addition, under the proposed rule, no license is required for the export or re-export of a defense article when that article would be rendered inoperable by removal form the end-item. A license would be required for the export of defense articles that are spare or replacement parts when they are embedded into a larger assembly such that they can be removed without destroying the defense articles.
Comments to the DDTC are due before April 14, 2011.
Defense Contractor Charged with ITAR Violations
03/04/11 12:43 AM
On
March 4, 2011, Sixing “Steve” Liu was
indicted with illegally
exporting technical data in violation of the
International Traffic in Arms Regulations (ITAR)
without the required Department of State,
Directorate of Defense Trade Controls (DDTC)
license.
The complaint alleges that Liu, a 47-year-old Chinese national who is a permanent resident of the U.S, was detained by the U.S. Customs officials on November 29, 2010, at Newark Liberty International Airport when he was returning from China.
At the time Liu was detained, he worked as a senior staff engineer for a New Jersey-based division of a technology company (Company) that develops precision navigation devices and other innovative components for the U.S. Department of Defense (DoD). Due to highly sensitive nature of the technology projects developed at the Company where Liu worked, most employees, including Liu, were forbidden from removing work product from the Company’s corporate facility.
On November 29, 2010, Liu arrived at Newark Liberty International Airport on a commercial airline flight from Shanghai and was selected for secondary inspection by Customs officers. When asked, Liu stated that the only purpose of his visit to China was to visit his family. An inspection of Liu’s baggage revealed an access card that had “ICMAN 2010, The 4th Annual International Workshop on Innovative and Commercialization of Micro & Nano Technologies, November 22-24, 2010” inscribed on it. Liu explained that it was a small conference that was not formal.
Investigation of ICMAN by the FBI revealed that the annual conference is organized and sponsored by various Chinese government entities. Its stated goal is to “gather people related with micro and nanotechnologies from all over the world, including the renowned researchers in the field, chief administrators and senior engineers from industries, research agencies and inventors, as well as venture capital and government representatives.”
The FBI also discovered that the schedule of events for the ICMAN 2010 forum included presentations and remarks given by China’s government entities. Liu was one of the presenters as well as the co-chair for ICMAN 2010.
Upon inspection of Liu’s belongings on November 29, 2010, Customs officers found a folder containing multiple pages of technical language, pictures of military weapons systems, and documents written in Chinese. Liu also had a non-Company issued laptop computer and other electronic storage devices and media, which contained hundreds of documents belonging to the Company he worked for, including internal communications, analyses, data, test results, schematics, images, and security protocols.
Numerous documents on Liu’s computer included prominent markings indicating that the contents contain export-controlled technical data under the Arms Export Control Act (AECA) and ITAR. One such documents is titled “Summary of Simulation Analysis for [Technology Program No. 1]” and pertains to a precision navigation/positioning system that the company where Liu worked, developed for the DoD. Each page of the documents is prominently marked “ITAR Controlled.”
On February 10, 2011, the DDTC certified that the document contains technical data that is covered by the USML Category XII. Accordingly, export of that document from the U.S. to China is prohibited by any person who is unlicensed to do so.
The complaint alleges that Liu, a 47-year-old Chinese national who is a permanent resident of the U.S, was detained by the U.S. Customs officials on November 29, 2010, at Newark Liberty International Airport when he was returning from China.
At the time Liu was detained, he worked as a senior staff engineer for a New Jersey-based division of a technology company (Company) that develops precision navigation devices and other innovative components for the U.S. Department of Defense (DoD). Due to highly sensitive nature of the technology projects developed at the Company where Liu worked, most employees, including Liu, were forbidden from removing work product from the Company’s corporate facility.
On November 29, 2010, Liu arrived at Newark Liberty International Airport on a commercial airline flight from Shanghai and was selected for secondary inspection by Customs officers. When asked, Liu stated that the only purpose of his visit to China was to visit his family. An inspection of Liu’s baggage revealed an access card that had “ICMAN 2010, The 4th Annual International Workshop on Innovative and Commercialization of Micro & Nano Technologies, November 22-24, 2010” inscribed on it. Liu explained that it was a small conference that was not formal.
Investigation of ICMAN by the FBI revealed that the annual conference is organized and sponsored by various Chinese government entities. Its stated goal is to “gather people related with micro and nanotechnologies from all over the world, including the renowned researchers in the field, chief administrators and senior engineers from industries, research agencies and inventors, as well as venture capital and government representatives.”
The FBI also discovered that the schedule of events for the ICMAN 2010 forum included presentations and remarks given by China’s government entities. Liu was one of the presenters as well as the co-chair for ICMAN 2010.
Upon inspection of Liu’s belongings on November 29, 2010, Customs officers found a folder containing multiple pages of technical language, pictures of military weapons systems, and documents written in Chinese. Liu also had a non-Company issued laptop computer and other electronic storage devices and media, which contained hundreds of documents belonging to the Company he worked for, including internal communications, analyses, data, test results, schematics, images, and security protocols.
Numerous documents on Liu’s computer included prominent markings indicating that the contents contain export-controlled technical data under the Arms Export Control Act (AECA) and ITAR. One such documents is titled “Summary of Simulation Analysis for [Technology Program No. 1]” and pertains to a precision navigation/positioning system that the company where Liu worked, developed for the DoD. Each page of the documents is prominently marked “ITAR Controlled.”
On February 10, 2011, the DDTC certified that the document contains technical data that is covered by the USML Category XII. Accordingly, export of that document from the U.S. to China is prohibited by any person who is unlicensed to do so.
DDTC Posts Notice of Suspension of ITAR Licenses for Libya
02/28/11 10:05 PM
The
State Department’s Directorate of Defense Trade
Controls (DDTC) posted a notice on its website
announcing the suspension of all export licenses
issued pursuant to the authorities of the Arms
Export Control Act and the International Traffic
in Arms Regulations (22 CFR 120-130) until
further notice. Additionally, no exemptions may
be utilized for exports to Libya. Further
guidance related to exports to Libya will be
promulgated via a Federal Register
Notice.
DDTC Proposes Electronic Payment of Registration Fees
02/24/11 05:26 PM
On
February 24, 2011, the State Department’s
Directorate of Defense Trade Controls (DDTC) posted
in the Federal Register a proposed amendment
to
the International Traffic in Arms Regulations
(ITAR) to change the method of payment of
registration fees to electronic submission.
Comments on the proposed amendment are due by April 25, 2011.
Comments on the proposed amendment are due by April 25, 2011.
DDTC Issues a Proposed Rule Revising Category VII of the USML
12/10/10 02:25 PM
As
part of the President’s Export Control Reform
effort, the Department of State issued a
proposed rule
on
December 10, 2010 to amend the International
Traffic in Arms Regulations (ITAR) to revise
Category VII of the U.S. Munitions List. The
proposed rule would revise Category VII (tanks
and military vehicles) to describe more
precisely the defense articles described
therein.
The DDTC administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120–130). The items subject to the jurisdiction of the ITAR, i.e., ‘‘defense articles,’’ are identified on the ITAR’s U.S. Munitions List (USML) (22 CFR 121.1). The descriptions in many USML categories are general and include design intent as an element of causing an item to be controlled. The descriptions in most CCL categories are specific and generally include technical parameters as an element for causing an item to be controlled.
Both the ITAR and the EAR impose license requirements on exports and re- exports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR. A key part of the Administration’s Export Control Reform effort is to review and revise these two lists of controlled items to enhance national security so that they: (1) Are “tiered” consistent with the criteria the U.S. Government is establishing to distinguish the types of items that should be controlled at different levels for different types of destinations, end-uses, and end-users (“Criteria” (2) create a “bright line”
between the two lists to clarify
jurisdictional determinations and reduce
government and industry uncertainty about
whether particular items are subject to the
jurisdiction of the ITAR or the EAR; and (3)
are structurally “aligned” so that they later
can be combined into a single list of
controlled items.
In the process of revising the USML, articles will be screened to determine which items that are currently USML-controlled defense articles should remain on the USML, which items that are currently USML controlled defense articles could be controlled under the CCL, and which items should be subject to the EAR without a specific Export Control Classification Number (ECCN) on the CCL. This proposed rule addresses both the need for “tiering” Category VII and the need for establishing a “bright line” between the USML and the CCL so that, after application of this process to the remaining categories of the USML and meeting the statutory and other requirements of Export Control Reform, the two lists can be combined into a single list of controlled items. Prior to the completion of a single U.S. Government control list, DDTC plans to publish in the existing ITAR a final rule amending Category VII after it has reviewed and considered all comments received on this proposed rule, received interagency input and approval, and satisfied its obligations under section 38(f) of the Arms Export Control Act.
The DDTC has revised Category VII to assign all controlled defense articles under this category one of the three control Criteria, that is Tier 1 (T1), Tier 2 (T2), or Tier 3 (T3). These tier designations were made upon a government-wide assessment of the appropriate level of export control for each item based upon different types of destinations, end-uses, and end-users. As other USML categories are reviewed and revised, the same “tiering” structure is planned to be applied to the remaining USML categories.
The DDTC administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120–130). The items subject to the jurisdiction of the ITAR, i.e., ‘‘defense articles,’’ are identified on the ITAR’s U.S. Munitions List (USML) (22 CFR 121.1). The descriptions in many USML categories are general and include design intent as an element of causing an item to be controlled. The descriptions in most CCL categories are specific and generally include technical parameters as an element for causing an item to be controlled.
Both the ITAR and the EAR impose license requirements on exports and re- exports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR. A key part of the Administration’s Export Control Reform effort is to review and revise these two lists of controlled items to enhance national security so that they: (1) Are “tiered” consistent with the criteria the U.S. Government is establishing to distinguish the types of items that should be controlled at different levels for different types of destinations, end-uses, and end-users (“Criteria&rdquo
; (2) create a “bright line”
between the two lists to clarify
jurisdictional determinations and reduce
government and industry uncertainty about
whether particular items are subject to the
jurisdiction of the ITAR or the EAR; and (3)
are structurally “aligned” so that they later
can be combined into a single list of
controlled items.
In the process of revising the USML, articles will be screened to determine which items that are currently USML-controlled defense articles should remain on the USML, which items that are currently USML controlled defense articles could be controlled under the CCL, and which items should be subject to the EAR without a specific Export Control Classification Number (ECCN) on the CCL. This proposed rule addresses both the need for “tiering” Category VII and the need for establishing a “bright line” between the USML and the CCL so that, after application of this process to the remaining categories of the USML and meeting the statutory and other requirements of Export Control Reform, the two lists can be combined into a single list of controlled items. Prior to the completion of a single U.S. Government control list, DDTC plans to publish in the existing ITAR a final rule amending Category VII after it has reviewed and considered all comments received on this proposed rule, received interagency input and approval, and satisfied its obligations under section 38(f) of the Arms Export Control Act.
The DDTC has revised Category VII to assign all controlled defense articles under this category one of the three control Criteria, that is Tier 1 (T1), Tier 2 (T2), or Tier 3 (T3). These tier designations were made upon a government-wide assessment of the appropriate level of export control for each item based upon different types of destinations, end-uses, and end-users. As other USML categories are reviewed and revised, the same “tiering” structure is planned to be applied to the remaining USML categories.
State Department Clarifies Exemption for Technical Data under ITAR
08/27/10 11:16 PM
On
August 27, 2010, the U.S. State Department’s
Directorate of Defense Trade Controls (DDTC) issued
a final rule in the Federal
Register that clarifies an exemption for
technical data under International Traffic in
Arms Regulations (ITAR), 22 C.F.R. §125.4(b)(9).
The exemption as amended covers technical data, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the U.S.
The change is effective August 27, 2010.
The exemption as amended covers technical data, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the U.S.
The change is effective August 27, 2010.
Blackwater to Pay $42 Million to Settle Allegations of Violating U.S. Export Controls Regulations
08/23/10 10:53 PM
On
August 23, 2010, the U.S. State Department’s
Directorate of Defense Trade Controls (DDTC)
announced that Blackwater
Worldwide, a private security company now called
Xe Services (Blackwater), has entered into
a consent agreement
to
settle 288 violations of the Arms Export Control
Act (AECA) and International Traffic in Arms
Regulations (ITAR) in connection with
unauthorized export of defense articles,
including technical data, unauthorized provision
of defense services, violating the terms of
license authorizations, unauthorized sales
activity involving a proscribed country, failure
to maintain records involving ITAR-controlled
transactions and false statements,
misrepresentations, and omissions of material
facts.
According to the State Department, Blackwater sought training contracts from foreign governments and other foreign organizations without adhering closely to U.S. export regulations. Blackwater also shipped automatic weapons and other military equipment for use by its personnel in Iraq and Afghanistan in violation of export controls and in some cases sought to hide its actions. In one incident, Blackwater shipped weapons to Iraq hidden inside containers of dog food.
To settle the alleged violations, Blackwater must pay a civil penalty of $42 million, a portion of which will be suspended on the condition that Blackwater spends the funds on self-initiated or consent agreement-authorized remedial compliance measures.
According to the State Department, Blackwater sought training contracts from foreign governments and other foreign organizations without adhering closely to U.S. export regulations. Blackwater also shipped automatic weapons and other military equipment for use by its personnel in Iraq and Afghanistan in violation of export controls and in some cases sought to hide its actions. In one incident, Blackwater shipped weapons to Iraq hidden inside containers of dog food.
To settle the alleged violations, Blackwater must pay a civil penalty of $42 million, a portion of which will be suspended on the condition that Blackwater spends the funds on self-initiated or consent agreement-authorized remedial compliance measures.
Agreements to DDTC Must Be Submitted Via D-Trade 2 System
08/15/10 11:20 PM
Effective
September 1, 2010, Directorate of Defense Trade
Controls (DDTC) will no longer accept
unclassified paper submissions
of
Technical Assistance Agreements, Manufacturing
License Agreements, and Warehouse Distribution
Agreements (including major amendments).
After September 1, 2010, all submissions must be made electronically via D-Trade 2 utilizing the DSP-5 form. Paper submissions received after August 31 will be returned to the applicant will a letter from DDTC instructing the applicant to resubmit the agreement via the D-Trade 2 System. Minor amendments against active paper agreements may continue to be submitted on paper.
For information on submitting agreements electronically please reference the Guidelines for Preparing Electronic Agreements.
After September 1, 2010, all submissions must be made electronically via D-Trade 2 utilizing the DSP-5 form. Paper submissions received after August 31 will be returned to the applicant will a letter from DDTC instructing the applicant to resubmit the agreement via the D-Trade 2 System. Minor amendments against active paper agreements may continue to be submitted on paper.
For information on submitting agreements electronically please reference the Guidelines for Preparing Electronic Agreements.
Chinese Nationals Convicted of Illegally Exporting ITAR-Controlled Items to China
05/17/10 12:28 PM
On May
17, 2010, Bureau of Industry and Security
(BIS) announced that a federal
jury in Massachusetts convicted Chinese
nationals Zhen Zhou Wu (Wu) and Yufeng Wei (Wei)
of conspiracy to violate U.S. export laws and
illegally exporting electronic equipment from
the U.S. to China on numerous occasions from
2004 to 2007.
Evidence presented at trial showed that between April 2004 and June 2006 Wu and Wei illegally exported military electronic components, designated on the U.S. Munitions List (USML), to mainland China via Hong Kong. The defense articles that defendants exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications.
Also indicted was Chitron Electronics, Inc. (Chitron), a company created by Wu. Using Chitron, Wu targeted Chinese military factories and research institutes as customers of Chitron, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development, and manufacture of electronics for the Chinese military.
Based on the correspondence, Wu, Wei and other Chitron employees knew that exports of restricted parts were being shipped to Chinese customers without required export licenses. Wu instructed Wei and Chitron employees to never tell U.S. companies that parts were being exported overseas. Instead, U.S. companies were told to ship all ordered products to the Chitron office located in Waltham, Massachusetts. Upon receiving the products, Chitron employees forwarded them to Chitron’s Shenzhen office using freight forwarders in Hong Kong. The shipments were done without the requisite Department of State and Department of Commerce export licenses.
Wu and Wei both face up to 20 years imprisonment to be followed by three years supervised release and a $1 million fine. After serving their sentence, both will face deportation to China.
Chitron faces up to a $1 million fine for each count in the indictment charging them with illegal export of U.S. Munitions List items and $500,000 for each count in the indictment charging them with illegal export of Commerce controlled electronics. Sentencing is scheduled for August 17, 2010.
Evidence presented at trial showed that between April 2004 and June 2006 Wu and Wei illegally exported military electronic components, designated on the U.S. Munitions List (USML), to mainland China via Hong Kong. The defense articles that defendants exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications.
Also indicted was Chitron Electronics, Inc. (Chitron), a company created by Wu. Using Chitron, Wu targeted Chinese military factories and research institutes as customers of Chitron, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development, and manufacture of electronics for the Chinese military.
Based on the correspondence, Wu, Wei and other Chitron employees knew that exports of restricted parts were being shipped to Chinese customers without required export licenses. Wu instructed Wei and Chitron employees to never tell U.S. companies that parts were being exported overseas. Instead, U.S. companies were told to ship all ordered products to the Chitron office located in Waltham, Massachusetts. Upon receiving the products, Chitron employees forwarded them to Chitron’s Shenzhen office using freight forwarders in Hong Kong. The shipments were done without the requisite Department of State and Department of Commerce export licenses.
Wu and Wei both face up to 20 years imprisonment to be followed by three years supervised release and a $1 million fine. After serving their sentence, both will face deportation to China.
Chitron faces up to a $1 million fine for each count in the indictment charging them with illegal export of U.S. Munitions List items and $500,000 for each count in the indictment charging them with illegal export of Commerce controlled electronics. Sentencing is scheduled for August 17, 2010.
DDTC Updates Firearm Guidance
01/19/10 01:16 AM
President Obama Advances Reform of the U.S. Export Controls
01/01/10 04:27 PM
Space
News reported that in a
presidential directive signed on December 21,
2009, President Barack Obama has directed his
administration to provide a comprehensive set of
recommendations to create a new U.S. export
control regime.
The recommendations, which are due on January 29, 2010, must be based on the findings of interagency review of U.S. regulations that govern exports of unclassified military and dual use technologies and that was announced by the White House on August 13, 2009. In his directive, the President requires that the recommendations include statutory and regulatory steps necessary for implementation.
The review is being conducted by a joint task force established by National Security Adviser and National Economic Council Director, and includes staff members of the National Security Council. The establishment of the review on August 13, 2009, was the first official indication that Obama would develop export control reform.
Some U.S. industries may benefit from a complete transformation of the current export controls system. The U.S. space industry’s market share declined since increased restrictions on U.S. commercial communications satellite exports in 1999, when Congress made all commercial satellites subject to International Traffic in Arms Regulations (ITAR) following allegations that China’s military was benefiting from launches of U.S. spacecraft. Prior to this legislation, the Commerce Department had export licensing authority over all commercial communications satellites, with the exception of the most sophisticated ones.
Defense News reported that 19 industry lobbying groups, representing hundreds of U.S. companies from warplane manufacturers to software encoders, have relaunched a campaign for export controls reform.
Specifically, the groups seek to de-emphasize current reliance on munitions and dual use technology lists, and instead want to base export decisions on factors such as whether an item can be bought from a foreign country, whether it is widely used outside of defense industry and whether the buyer is a trusted partner.
A key factor in the reform would be consideration of “foreign availability” in deciding whether an item can be exported. According to the lobbyists, if weapons technology can be bought from other countries, there may be little gain in terms of security by restricting U.S. export of those items or technology.
Furthermore, the groups seek that export rules be more specific: e.g., unarmed unmanned aerial vehicles (UAVs) and blimps should not be controlled in the same way that missiles are. Similarly, commercial satellites should not be treated as munitions.
The lobbyists argue that the U.S. Munitions List should be edited to remove items no longer controlled, and a more concrete process should be established for qualifying goods as defense items. One of the lobbying groups seeks that the Commerce Department’s dual-use technology list would be completely erased, after which the Commerce Department would provide reasons for why any one item should be placed on the list.
The groups also recommend that export controls should be switched from a transaction-based approach to a trusted partner process. Accordingly, licenses would not be required for each sale if items were sold to companies and countries that are designated trusted partners.
Current push for reform is likened to a group effort in 2007 to convince Bush administration to reform U.S. export control regime. As a result of the 2007 process, licensing procedures were improved and waiting periods for export licenses were greatly decreased.
The recommendations, which are due on January 29, 2010, must be based on the findings of interagency review of U.S. regulations that govern exports of unclassified military and dual use technologies and that was announced by the White House on August 13, 2009. In his directive, the President requires that the recommendations include statutory and regulatory steps necessary for implementation.
The review is being conducted by a joint task force established by National Security Adviser and National Economic Council Director, and includes staff members of the National Security Council. The establishment of the review on August 13, 2009, was the first official indication that Obama would develop export control reform.
Some U.S. industries may benefit from a complete transformation of the current export controls system. The U.S. space industry’s market share declined since increased restrictions on U.S. commercial communications satellite exports in 1999, when Congress made all commercial satellites subject to International Traffic in Arms Regulations (ITAR) following allegations that China’s military was benefiting from launches of U.S. spacecraft. Prior to this legislation, the Commerce Department had export licensing authority over all commercial communications satellites, with the exception of the most sophisticated ones.
Defense News reported that 19 industry lobbying groups, representing hundreds of U.S. companies from warplane manufacturers to software encoders, have relaunched a campaign for export controls reform.
Specifically, the groups seek to de-emphasize current reliance on munitions and dual use technology lists, and instead want to base export decisions on factors such as whether an item can be bought from a foreign country, whether it is widely used outside of defense industry and whether the buyer is a trusted partner.
A key factor in the reform would be consideration of “foreign availability” in deciding whether an item can be exported. According to the lobbyists, if weapons technology can be bought from other countries, there may be little gain in terms of security by restricting U.S. export of those items or technology.
Furthermore, the groups seek that export rules be more specific: e.g., unarmed unmanned aerial vehicles (UAVs) and blimps should not be controlled in the same way that missiles are. Similarly, commercial satellites should not be treated as munitions.
The lobbyists argue that the U.S. Munitions List should be edited to remove items no longer controlled, and a more concrete process should be established for qualifying goods as defense items. One of the lobbying groups seeks that the Commerce Department’s dual-use technology list would be completely erased, after which the Commerce Department would provide reasons for why any one item should be placed on the list.
The groups also recommend that export controls should be switched from a transaction-based approach to a trusted partner process. Accordingly, licenses would not be required for each sale if items were sold to companies and countries that are designated trusted partners.
Current push for reform is likened to a group effort in 2007 to convince Bush administration to reform U.S. export control regime. As a result of the 2007 process, licensing procedures were improved and waiting periods for export licenses were greatly decreased.
DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Issues New Guidance on Temporary Import Violations
12/15/09 05:22 PM
The
Directorate of Defense Trade Controls (DDTC) has
published a notice on its website
regarding temporary imports of defense articles.
The notice provides that such imports require
the recipient to obtain a DSP-61 (a Temporary
Import License), or to claim the exemption under
22 CFR §123.4.
According to DDTC, the number of instances where a foreign person temporarily returns a defense article for repair or replacement without authorization to a U.S. person without their prior knowledge has increased. In this type of situation, the U.S. person is unable to coordinate the return and obtain the requisite DSP-61 license or claim the regulatory exemptions under the International Traffic in Arms Regulations (ITAR).
DDTC has established new guidance regarding unauthorized temporary imports and the subsequent exports to return the items to the foreign person. In such case, the U.S. person should investigate the nature and cause of violation and determine if the U.S. person had any responsibility for the violation.
If the U.S. person determines he was not responsible for a licensing violation, then in lieu of submitting a separate Voluntary Disclosure in accordance with ITAR §127.12, the U.S. person can submit a DSP-5 license application to return the defense article to the foreign person. The DSP-5 application must be accompanied by a transmittal letter which explains why the applicant believes they do not share any responsibility for the violation and the steps taken to make this determination; the identities and addresses of all persons known or suspected to be involved in the activities giving rise to the unauthorized temporary import; and any measures taken to prevent such reoccurrence.
According to DDTC, the number of instances where a foreign person temporarily returns a defense article for repair or replacement without authorization to a U.S. person without their prior knowledge has increased. In this type of situation, the U.S. person is unable to coordinate the return and obtain the requisite DSP-61 license or claim the regulatory exemptions under the International Traffic in Arms Regulations (ITAR).
DDTC has established new guidance regarding unauthorized temporary imports and the subsequent exports to return the items to the foreign person. In such case, the U.S. person should investigate the nature and cause of violation and determine if the U.S. person had any responsibility for the violation.
If the U.S. person determines he was not responsible for a licensing violation, then in lieu of submitting a separate Voluntary Disclosure in accordance with ITAR §127.12, the U.S. person can submit a DSP-5 license application to return the defense article to the foreign person. The DSP-5 application must be accompanied by a transmittal letter which explains why the applicant believes they do not share any responsibility for the violation and the steps taken to make this determination; the identities and addresses of all persons known or suspected to be involved in the activities giving rise to the unauthorized temporary import; and any measures taken to prevent such reoccurrence.
DDTC Amends Policy on Review Time for ITAR License Applications
12/03/09 04:39 PM
On
December 3, 2009, the Department of State's
Directorate of Defense Trade Controls (DDTC) issued
a notice in the Federal
Register adding a sixth national security
exception to the general 60 day license
adjudication deadline.
National Security Presidential Directive-56 signed on January 22, 2008, instructs the Department of State to complete the review and adjudication of license applications within 60 days of receipt, except in cases where national security exceptions apply. In addition to the five national security exceptions published in April 2008, Department of State’s experience has shown that an additional exception to the license review time is required.
Specifically, it has been noted that certain circumstances may require the Department of State to initiate a review of an established export policy relevant to license applications, which might result in cases that have been approvable before the review being returned without action to the applicant while the review is ongoing. In such situations, enforcing the 60-day deadline without ability to account for these types of situations might result in another applicant’s license, submitted after the first license but that had not reached the 60-day headline, being approved once the review is complete, thus creating an unlevel playing field. Therefore, the Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding the sixth exception to account for this issue, and now the following national security exceptions are applicable:
(1) When a Congressional Notification is required (notification thresholds differ based on the dollar value, countries involved in the transaction and defense articles and services);
(2) When required Government Assurances have not been received;
(3) When end-use checks have not been completed;
(4) When the Department of Defense has not yet completed its review;
(5) When a Waiver of restrictions is required; and
(6) When a related export policy is under active review and pending final determination by the State Department.
National Security Presidential Directive-56 signed on January 22, 2008, instructs the Department of State to complete the review and adjudication of license applications within 60 days of receipt, except in cases where national security exceptions apply. In addition to the five national security exceptions published in April 2008, Department of State’s experience has shown that an additional exception to the license review time is required.
Specifically, it has been noted that certain circumstances may require the Department of State to initiate a review of an established export policy relevant to license applications, which might result in cases that have been approvable before the review being returned without action to the applicant while the review is ongoing. In such situations, enforcing the 60-day deadline without ability to account for these types of situations might result in another applicant’s license, submitted after the first license but that had not reached the 60-day headline, being approved once the review is complete, thus creating an unlevel playing field. Therefore, the Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding the sixth exception to account for this issue, and now the following national security exceptions are applicable:
(1) When a Congressional Notification is required (notification thresholds differ based on the dollar value, countries involved in the transaction and defense articles and services);
(2) When required Government Assurances have not been received;
(3) When end-use checks have not been completed;
(4) When the Department of Defense has not yet completed its review;
(5) When a Waiver of restrictions is required; and
(6) When a related export policy is under active review and pending final determination by the State Department.
Physicist Sentenced to 28 Months Imprisonment for ITAR Violations
08/12/09 08:45 PM
On
August 11, 2009, Knoxnews.com
reported that
Daniel Max Sherman, a 38-year old physicist, was
sentenced to 28 months in federal prison for his
involvement with a Knoxville company and former
University of Tennessee professor, John Reece
Roth, who violated the International Traffic in
Arms Regulations (ITAR) by allowing foreign
nationals to have access to military-related
technical information.
Sherman faced a potential sentence of five years in prison and $250,000 fine, but received a lesser sentence because of his cooperation in the federal investigation. He already served fourteen months of his sentence. Roth, 73-year old former professor, was sentenced to four years in prison.
Roth, an expert in plasma research, was a subcontractor on a U.S. Air Force project awarded to Atmospheric Glow Technologies Inc. (AGT), a plasma technology company based in Knoxville and Sherman's employer. The project developed advanced plasma actuators for Air Force drones, which are covered by U.S. governing munitions. Both Roth and Sherman were involved in the project for which they allowed foreign and Chinese graduate students to work. Additionally, Roth was convicted of taking protected information with him on a lecture trip to China, a felony regardless of the intent.
Sherman faced a potential sentence of five years in prison and $250,000 fine, but received a lesser sentence because of his cooperation in the federal investigation. He already served fourteen months of his sentence. Roth, 73-year old former professor, was sentenced to four years in prison.
Roth, an expert in plasma research, was a subcontractor on a U.S. Air Force project awarded to Atmospheric Glow Technologies Inc. (AGT), a plasma technology company based in Knoxville and Sherman's employer. The project developed advanced plasma actuators for Air Force drones, which are covered by U.S. governing munitions. Both Roth and Sherman were involved in the project for which they allowed foreign and Chinese graduate students to work. Additionally, Roth was convicted of taking protected information with him on a lecture trip to China, a felony regardless of the intent.
ITAR License Exemption for Temporary Export of Body Armor for Personal Use Added
08/06/09 08:06 AM
On
August 6, 2009, the Department of State,
Directorate of Defense Trade Controls (DDTC) issued
a final rule in the Federal
Register amending the International Traffic in
Arms Regulations (ITAR). The new rule, effective
immediately, adds an exemption for the temporary
export of body armor covered by 22 CFR 121.1,
Category X(a)(1). The new rule exempts U.S.
individuals who wear body armor for personal
safety when traveling to hazardous areas from
obtaining a license.
To qualify for the exemption, the body armor must be used exclusively by the individual and must be returned to the U.S. The individual may not re-export the protective equipment to a foreign person or otherwise transfer the ownership. Upon departure, such exports must be declared by filing CBP Form 4457 and require inspection by a U.S. Customs and Border Protection (CBP) officer.
Such body armor may be exported to countries not subject to restrictions under ITAR §126.1 and also specifically to Iraq and Afghanistan. For temporary exports to Afghanistan, the rule requires that the general conditions of the rule be met. For temporary exports to Iraq, the U.S. person utilizing the license exemption must either be affiliated with the U.S. Government or, not affiliated with the U.S. Government but traveling to Iraq under direct authorization by the Government of Iraq and engaging in humanitarian activities on behalf of Government of Iraq.
To qualify for the exemption, the body armor must be used exclusively by the individual and must be returned to the U.S. The individual may not re-export the protective equipment to a foreign person or otherwise transfer the ownership. Upon departure, such exports must be declared by filing CBP Form 4457 and require inspection by a U.S. Customs and Border Protection (CBP) officer.
Such body armor may be exported to countries not subject to restrictions under ITAR §126.1 and also specifically to Iraq and Afghanistan. For temporary exports to Afghanistan, the rule requires that the general conditions of the rule be met. For temporary exports to Iraq, the U.S. person utilizing the license exemption must either be affiliated with the U.S. Government or, not affiliated with the U.S. Government but traveling to Iraq under direct authorization by the Government of Iraq and engaging in humanitarian activities on behalf of Government of Iraq.
DDTC Permits Selected U.S. Applicants to Submit Agreements Via DTrade2
07/07/09 10:55 PM
Beginning July 6,
2009, the Directorate of Defense Trade Controls
(DDTC) has allowed selected U.S. applicants to
submit agreements and their amendments
electronically via the D-Trade2 system. (See the
press release here.) This system
uses the D-Trade2 Production application to
submit, review, and approve agreement proposals,
and incorporates the DSP-5 as the primary tool
for transitioning agreements and their
amendments from one phase of the adjudication
process to the next. Due to this process, DDTC
will no longer have to issue a separate
authorization letter upon approval of a case.
DDTC will follow the success of these pilot electronic agreement submissions, and expects to make this application available to all U.S. applicants on October 1, 2009. Electronic submission of the agreements will become mandatory in Spring 2010. During the initial phase of electronic submission, DDTC will continue to accept paper submissions until further notice.
In addition to the new DTrade2 component that supports the electronic submission function, DDTC has compiled a list of issues that users encounter with DTrade2 system, and published it with solutions and workarounds. Technical support for DTrade2 can be reached at (202) 663-2838, or via dtradehelpdesk@state.gov.
DDTC will follow the success of these pilot electronic agreement submissions, and expects to make this application available to all U.S. applicants on October 1, 2009. Electronic submission of the agreements will become mandatory in Spring 2010. During the initial phase of electronic submission, DDTC will continue to accept paper submissions until further notice.
In addition to the new DTrade2 component that supports the electronic submission function, DDTC has compiled a list of issues that users encounter with DTrade2 system, and published it with solutions and workarounds. Technical support for DTrade2 can be reached at (202) 663-2838, or via dtradehelpdesk@state.gov.
Retired University Professor Sentenced to 4 Years Imprisonment for Export Violations
07/02/09 10:34 PM
On
July 1, 2009, the Department of Justice issued
a press release announcing the
sentencing of a retired university professor
convicted of the Arms Export Control Act (AECA)
violations. The AECA prohibits the exports of
defense-related materials, including the
technical information or data, to a foreign
national or foreign nation.
In a U.S. District Court in Knoxville, Tennessee, Dr. John Reece Roth, a retired University of Tennessee professor, was sentenced to four years in prison.
In a highly publicized trial that ended in September 2008, Dr. Roth was convicted of more than a dozen AECA violations for illegally exporting to China technical information relating to a U.S. Air Force research and development contract. The illegal exports of military technical information for use in an unmanned aerial vehicle involved specific information about advanced plasma technology that had been designed and was being tested for use on the wings of UAVs operating as weapons or surveillance systems.
In a U.S. District Court in Knoxville, Tennessee, Dr. John Reece Roth, a retired University of Tennessee professor, was sentenced to four years in prison.
In a highly publicized trial that ended in September 2008, Dr. Roth was convicted of more than a dozen AECA violations for illegally exporting to China technical information relating to a U.S. Air Force research and development contract. The illegal exports of military technical information for use in an unmanned aerial vehicle involved specific information about advanced plasma technology that had been designed and was being tested for use on the wings of UAVs operating as weapons or surveillance systems.
Court Overturns ITAR Conviction Based on the Vagueness of the Regulations
07/01/09 11:00 PM
On
June 15, 2009, the U.S. Court of Appeals for the
7th Circuit issued its decision in
U.S. v.
Doli Syarief Pulungan, (No. 08-3000),
overturning the conviction of the defendant that
was found guilty of exporting rifle scopes in
violation of the International Traffic in Arms
Regulations (ITAR).
In support of its decision, the court stated that the government failed to properly identify which specific items were subject to export control regulations, or to justify the criteria for controlling them. According to the court, because the regulations were so vague, the defendant could not be held responsible for violating such vague regulations.
The court stated that the State Department’s claim of “authority to classify any item as a “defense article,” without revealing the basis of the decision and without allowing any inquiry by the jury, would create serious constitutional problems.” The court went on to state that in regular circumstances, a regulation is published for all to see, giving people an opportunity “to adjust their conduct to avoid liability.” But, “a designation by an unnamed official, using unspecified criteria, put in a desk of a drawer, and taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian regimes.” “Government must operate through public laws and regulations” and not through “secret laws,” the court declared.
Some commentators suggest this ruling could have a great effect on the export controls, as it discusses the ambiguity of the ITAR, which provide the State Department with great latitude in determining what articles are covered under the ITAR.
In support of its decision, the court stated that the government failed to properly identify which specific items were subject to export control regulations, or to justify the criteria for controlling them. According to the court, because the regulations were so vague, the defendant could not be held responsible for violating such vague regulations.
The court stated that the State Department’s claim of “authority to classify any item as a “defense article,” without revealing the basis of the decision and without allowing any inquiry by the jury, would create serious constitutional problems.” The court went on to state that in regular circumstances, a regulation is published for all to see, giving people an opportunity “to adjust their conduct to avoid liability.” But, “a designation by an unnamed official, using unspecified criteria, put in a desk of a drawer, and taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian regimes.” “Government must operate through public laws and regulations” and not through “secret laws,” the court declared.
Some commentators suggest this ruling could have a great effect on the export controls, as it discusses the ambiguity of the ITAR, which provide the State Department with great latitude in determining what articles are covered under the ITAR.
D-Trade License Application or Amendment Subject to New Requirements
04/16/09 03:29 PM
On
April 16, 2009, U.S. Department of State (DOS)
Directorate of Defense Trade Controls (DDTC)
launched a new DTrade2
application and database.
While the old DTrade will remain active to track
or upload supplemental information to
applications submitted prior to April 16, 2009,
the new DTrade2 system must be used for all new
license applications. DDTC will return all
submissions uploaded to the old DTrade system
after April 16, 2009 without action.
Several important changes are effective with the launch of the DTrade2:
Applicants who routinely use subsidiary names or “doing business as” names on the D-Trade submission must now use the DDTC-approved registrant/applicant name identifications. This name can be found on the addressee line of the registration letter sent by the Office of Defense Trade Controls Compliance at the time of registration or renewal.
Users unsure of their DDTC-approved name must contact their central export control office to obtain the information. DDTC will not provide this information to D-Trade users over the phone or via e-mail.
New and updated forms are available on DDTC’s website.
Several important changes are effective with the launch of the DTrade2:
- The new system will use the new license amendment form (DSP-6; DSP-62; and DSP-74);
- The DTrade2 will no longer accept paper DSP-119 forms. DDTC also intends to discontinue usage of ELLIENet for DSP-119 submission, however, EELIENet submissions will be available for approx. 60 days after DTRade2 launch; and
- All D-Trade users must use their DDTC-approved registrant/applicant name which corresponds to their DDTC registration record before an application or amendment will be accepted by the new system. D-Trade request will be checked against DDTC’s registration records to confirm that the name submitted on the request matches DDTC’s official records. Applications or amendments that do not match the records will be automatically rejected. DDTC explains that this extra level of security will aid in prevention of improper third party use of a registrant’s name, their code or licensing privileges.
Applicants who routinely use subsidiary names or “doing business as” names on the D-Trade submission must now use the DDTC-approved registrant/applicant name identifications. This name can be found on the addressee line of the registration letter sent by the Office of Defense Trade Controls Compliance at the time of registration or renewal.
Users unsure of their DDTC-approved name must contact their central export control office to obtain the information. DDTC will not provide this information to D-Trade users over the phone or via e-mail.
New and updated forms are available on DDTC’s website.
DDTC Posts 2007 End Use Monitoring Report
02/10/09 05:29 PM
On
February 9, 2009, the Directorate of Defense Trade
Controls (DDTC) posted to its website its
End Use Monitoring Report for
2007. The report
begins:
Finally, it was interesting to note that the DDTC found various reasons for unfavorable determinations, with the two largest categories being: (1) the failure of applicants to properly identify foreign parties on the license application, and (2) a party violated terms of the license or agreement. The DDTC noted that the failure to identify all parties to a license application creates the increased likelihood of diversion to unauthorized end-users and end-use.
The report goes on to state:This report describes actions taken by the Department of State during the past fiscal year to implement the “Blue Lantern” end-use monitoring program. The Blue Lantern program, operated in accordance with section 40A of the Arms Export Control Act, as Amended (AECA), monitors the end-use of commercially exported defense articles, defense services, and related technical data subject to licensing or other authorizations under section 38 of the AECA
Additionally, the report states:The Blue Lantern program is managed within PM/DDTC by the Office of Defense Trade Controls Compliance’s (DTCC) Research and Analysis Division (RAD). Blue Lantern end-use monitoring entails pre-license, post license or post-shipment checks undertaken to verify the legitimacy of a transaction and to provide “reasonable assurance that – i) the recipient is complying with the requirements imposed by the United States Government with respect to use, transfers, and security of defense articles and defense services; and ii) such articles and services are being used for the purposes for which they are provided.”
Last fiscal year, PM/DDTC completed action on approximately 81,000 license applications and other export requests. Blue Lantern checks are not conducted randomly, but are rather the result of a careful selection process to identify transactions that appear most at risk for diversion or misuse. License applications and other requests undergo review by licensing officers and compliance specialists, who check case details against established criteria for determining potential risks: unfamiliar foreign parties, unusual routing, overseas destinations with a history of illicit activity or weak export/customs controls, commodities not known to be in the inventory of the host country’s armed forces and other indicators of concern. The information derived from Blue Lantern checks helps PM/DDTC licensing officers and compliance specialists assess risks associated with the export of certain defense articles and services to various countries and regions, and provides significant insight into the reliability of companies and individuals involved in defense procurement overseas.
Finally, it was interesting to note that the DDTC found various reasons for unfavorable determinations, with the two largest categories being: (1) the failure of applicants to properly identify foreign parties on the license application, and (2) a party violated terms of the license or agreement. The DDTC noted that the failure to identify all parties to a license application creates the increased likelihood of diversion to unauthorized end-users and end-use.
DDTC Updates Agreement Guidance
01/30/09 05:32 PM
State Amends ITAR to Include Eritrea on Prohibited Exports List
10/06/08 12:05 AM
On October 6, 2008, the U.S. Department of State
published a
final rule
amending the International Traffic in Arms
Regulations (ITAR) with respect to Eritrea. The
U.S. Department of State has added Eritrea to its
regulations on prohibited exports and sales to
certain countries as a result of Eritrea’s
designation as country not cooperating fully with
antiterrorism efforts.
This rule is effective October 3, 2008.
This rule is effective October 3, 2008.
Retired Professor Convicted of Arms Export Violations
09/05/08 09:44 PM
On
September 3, 2008, Dr. J. Reece Roth, a retired
University of Tennessee (UT) professor, was
found guilty
of
conspiracy to violate the Arms Export Control
Act (AECA) and fifteen separate violations of
illegally exporting sensitive information
relating to a U.S. Air Force research and
development contract. The information concerned
plasma technology to be used in the construction
of drones under the U.S. Air Force contract.
The AECA prohibits transfer of defense-related materials, including technical data, to a foreign national without permission. Dr. Roth was convicted of conspiring with Atmospheric Glow Technology, Inc. (AGT), a Knoxville, Tennessee, technology company, with unlawfully transferring fifteen different "defense articles" to a graduate student, a national of China, in violation of the AECA. As part of a plea agreement, AGT recently pleaded guilty to 10 counts of exporting defense-related materials. Sentencing in that case in still pending.
Roth testified last week that he didn’t break the law because the prosecution had not proved that the research was successful, reports the Associated Press. "My understanding was that it only applied to things that worked, and we had not shown that. We had a lot of work to do," Roth testified.
Roth was also accused of taking reports and related studies in his laptop to China during a lecture tour in 2006, and having one report e-mailed to him there through a Chinese professor's Internet connection.
The government seized materials from Roth's office and took his laptop from him at the airport when he returned from the trip. Prosecutors claimed he violated the export control act simply by taking the laptop with sensitive materials outside the country even if, as forensic evidence showed, he didn't open all of those files while he was in China.
"Today's guilty verdict should serve as a warning to anyone who knowingly discloses restricted U.S. military data to foreign nationals," said Patrick Rowan, Acting Assistant Attorney General for National Security. United States Attorney Russ Dedrick said, "Our scientific and educational communities must take precautions to insure that technology and research are protected, when required, from disclosure to foreign governments."
The maximum punishment for the conspiracy to violate AECA is five years imprisonment and a fine of $250,000. The maximum penalty for each of the AECA offenses is 10 years imprisonment, a criminal fine of $1,000,000, and a mandatory special assessment of $100 for each offense. Dr. Roth's sentencing has been set for January 7, 2009, in United States District Court in Knoxville.
The AECA prohibits transfer of defense-related materials, including technical data, to a foreign national without permission. Dr. Roth was convicted of conspiring with Atmospheric Glow Technology, Inc. (AGT), a Knoxville, Tennessee, technology company, with unlawfully transferring fifteen different "defense articles" to a graduate student, a national of China, in violation of the AECA. As part of a plea agreement, AGT recently pleaded guilty to 10 counts of exporting defense-related materials. Sentencing in that case in still pending.
Roth testified last week that he didn’t break the law because the prosecution had not proved that the research was successful, reports the Associated Press. "My understanding was that it only applied to things that worked, and we had not shown that. We had a lot of work to do," Roth testified.
Roth was also accused of taking reports and related studies in his laptop to China during a lecture tour in 2006, and having one report e-mailed to him there through a Chinese professor's Internet connection.
The government seized materials from Roth's office and took his laptop from him at the airport when he returned from the trip. Prosecutors claimed he violated the export control act simply by taking the laptop with sensitive materials outside the country even if, as forensic evidence showed, he didn't open all of those files while he was in China.
"Today's guilty verdict should serve as a warning to anyone who knowingly discloses restricted U.S. military data to foreign nationals," said Patrick Rowan, Acting Assistant Attorney General for National Security. United States Attorney Russ Dedrick said, "Our scientific and educational communities must take precautions to insure that technology and research are protected, when required, from disclosure to foreign governments."
The maximum punishment for the conspiracy to violate AECA is five years imprisonment and a fine of $250,000. The maximum penalty for each of the AECA offenses is 10 years imprisonment, a criminal fine of $1,000,000, and a mandatory special assessment of $100 for each offense. Dr. Roth's sentencing has been set for January 7, 2009, in United States District Court in Knoxville.
Trial Begins for Retired Professor Charged with ITAR Violations
08/25/08 10:26 PM
On
August 25, 2008, J. Reece Roth, a retired
University of Tennessee (UT) physics professor went
on trial charged with violating the Arms Export
Control Act (AECA). As reported by
USA
Today, prosecutors
allege Roth violated AECA by allowing two UT
students, one from China and another from Iran,
unrestricted access to information about the
technology used in an U.S. Air Force project.
The professor is also said to have taken
documents relating to that project on his trip
to China in 2006.
The Air Force contract involved developing lightweight flight control system technology for use in unmanned air vehicles, otherwise known as drones. According to USA Today, Atmospheric Glow Technologies (AGT), with Roth as a consultant and subcontractor, promised a control system that would use plasma, rather than mechanical flaps, to lift the aircraft. Roth, an expert in plasma technology, was one of the founders of AGT, but later the company went public. The company specialized in use of plasma technology that was developed by UT.
AECA bars the transfer of sensitive information to foreign nationals without permission. Roth came under investigation in 2006 when UT export-control officials discovered his use of foreign nationals in his UT lab on the military contract. Government agents searched his office and seized his laptop computer when he returned from a lecture trip to China in May of 2006.
On August 20, 2008, AGT pleaded guilty to 10 counts of AECA violations from late 2004 to May 2006, reports the Knoxville News Sentinel. AGT, which is in bankruptcy, still faces probation and a maximum fine of $1 million for each AECA violation. Knoxville News Sentinel reports that, as part of the plea agreement, AGT’s board of directors now admits company officials knew Roth had allowed the China national access to information on the Air Force project without notifying the Department of Defense.
Daily updates on the trial can be found at www.knoxnews.com.
The Air Force contract involved developing lightweight flight control system technology for use in unmanned air vehicles, otherwise known as drones. According to USA Today, Atmospheric Glow Technologies (AGT), with Roth as a consultant and subcontractor, promised a control system that would use plasma, rather than mechanical flaps, to lift the aircraft. Roth, an expert in plasma technology, was one of the founders of AGT, but later the company went public. The company specialized in use of plasma technology that was developed by UT.
AECA bars the transfer of sensitive information to foreign nationals without permission. Roth came under investigation in 2006 when UT export-control officials discovered his use of foreign nationals in his UT lab on the military contract. Government agents searched his office and seized his laptop computer when he returned from a lecture trip to China in May of 2006.
On August 20, 2008, AGT pleaded guilty to 10 counts of AECA violations from late 2004 to May 2006, reports the Knoxville News Sentinel. AGT, which is in bankruptcy, still faces probation and a maximum fine of $1 million for each AECA violation. Knoxville News Sentinel reports that, as part of the plea agreement, AGT’s board of directors now admits company officials knew Roth had allowed the China national access to information on the Air Force project without notifying the Department of Defense.
Daily updates on the trial can be found at www.knoxnews.com.
DDTC Publishes Notice & FAQs on License Support Documentation
08/13/08 01:22 PM
On
August 7, 2008, the State Department's Directorate
of Defense Trade Controls (DDTC) published
an updated
notice on license
support documentation. In the notice, DDTC
states:
The FAQ questions can be found here.The purpose of this requirement is to confirm the legitimacy of the transaction, including the roles and responsibilities of all the parties. DTCL has received with increasing frequency supporting documentation that calls into question whether the applicants are in a position to fulfill their responsibilities as registered exporters and, in fact, whether anyone at the companies could meet the obligations as empowered officials under Section 120.25. In these instances, the applications have been Returned Without Action advising the applicants of the ITAR requirements. At this time, DTCL finds it prudent to iterate to exporters of defense articles the fundamental ITAR requirement for supporting documentation.
State Department Limits ITAR Registration to 1 Year
07/18/08 09:22 PM
On
July 18, 2008, the U.S. Department of State
published a final rule in the
Federal Register which amends
the International Traffic in Arms Regulations
(ITAR). The final rule is effective on July 18,
2008 and revises the validity period for
registration to one year (from up to 2 years)
and limits the time frame in which a
registration may be renewed. A registrant must
now submit its request for renewal of its
registration at least 30 days prior to the
expiration of the registration, but no earlier
than 60 days prior to the expiration date.
The amended regulation follows:
Sec. 122.3 Registration fees.
(a) A person who is required to register may do so for a period of 1 year upon submission of a completed Form DS-2032, transmittal letter and payment of $1,750.
(b) Expiration of registration. A registrant must submit its request for registration renewal at least 30 days but no earlier than 60 days prior to the expiration date.
The amended regulation follows:
Sec. 122.3 Registration fees.
(a) A person who is required to register may do so for a period of 1 year upon submission of a completed Form DS-2032, transmittal letter and payment of $1,750.
(b) Expiration of registration. A registrant must submit its request for registration renewal at least 30 days but no earlier than 60 days prior to the expiration date.
State/DDTC Updates Guidance Documents
07/07/08 11:45 AM
On
July 1 - 3, 2008, the State Department's
Directorate of Defense Trade Controls (DDTC)
updated its website with new
guidance documents. Specifically, the DDTC
posted updated Agreements
Guidelines on July 1,
2008; a listing of countries by
DoS regional bureaus,
licensing
review checklists, and
updated licensing
FAQs on July 2,
2008; and updated its DDTC Outreach
page on July 3,
2008.
Retired Professor Indicted on 16 Counts for ITAR Violations
05/21/08 04:18 PM
On May
20, 2008, the Department of Justice
announced
that
a federal grand jury returned an 18 count
indictment charging J. Reece Roth, a professor
emeritus who headed University of Tennessee's
Plasma Sciences Lab, and Atmospheric Glow
Technologies, Inc. (AGT), a Knoxville-based
company Roth helped found, of conspiring to
defraud the U.S. Air Force and disclose
restricted U.S. military data about unmanned
aerial vehicles (UAV) or "drones" to foreign
nationals without first obtaining the required
U.S. government license or approval. (The
indictment is available here on
Clif Burns' Export Law Blog.) Graduate students
from China and Iran are alleged to have been
given unfettered access to controlled
technology.
Roth, who is 70 and now retired, was charged with one count of conspiracy to defraud the U.S. Air Force and violate the Arms Export Control Act (AECA); 15 counts of violating the AECA; and one count of wire fraud for defrauding the University of Tennessee. AGT is charged in the indictment with one count of conspiracy to defraud the U.S. Air Force and violate the AECA and 10 counts of violating the AECA.
The DOJ announcement states that:
Violations of the AECA carry a maximum possibly penalty of 10 years imprisonment and a $1 million fine. Wire fraud carries a maximum penalty of 20 years imprisonment and a $250,000 fine and conspiracy carries a maximum penalty of 5 years imprisonment and a $250,000 fine.
Roth, who is 70 and now retired, was charged with one count of conspiracy to defraud the U.S. Air Force and violate the Arms Export Control Act (AECA); 15 counts of violating the AECA; and one count of wire fraud for defrauding the University of Tennessee. AGT is charged in the indictment with one count of conspiracy to defraud the U.S. Air Force and violate the AECA and 10 counts of violating the AECA.
The DOJ announcement states that:
United States Attorney Russ Dedrick said, “The protection of United States technology is a continuing priority of the Department of Justice and this District. Whenever restricted U.S. military data is illegally disclosed to foreign nationals, America’s security is put at risk. Today’s indictment demonstrates just how seriously we view such violations.”According to the indictment, between January 2004 and May 2006, Roth and AGT engaged in a conspiracy to defraud the U.S. Air Force and transmit export-controlled technical data related to a restricted U.S. Air Force contract to develop plasma actuators for a munitions-type UAV, or “drone,” to one or more foreign nationals, including a citizen from the People’s Republic of China. The Chinese national was a graduate research assistant at the University of Tennessee. The University of Tennessee was victimized by the conspirators and cooperated throughout with the Federal Bureau of Investigation (FBI) led federal investigation.
Violations of the AECA carry a maximum possibly penalty of 10 years imprisonment and a $1 million fine. Wire fraud carries a maximum penalty of 20 years imprisonment and a $250,000 fine and conspiracy carries a maximum penalty of 5 years imprisonment and a $250,000 fine.
State Department Website Updates
04/30/08 12:40 AM
On
April 28, 2008 and April 22, 2008, the State
Department published several updates to its
website.
On April 28, 2008, the following updates were published:
On April 22, 2008, the following updates were published:
On April 28, 2008, the following updates were published:
- Updated DSP-73 and DSP-61 License Applications - Supporting Documentation Requirements
- Updated DSP-73 and DSP-61 Support Documentation FAQs
- Updated Notice on License Support Documentation
- FAQs Notice on License Support Documentation
On April 22, 2008, the following updates were published:
Chinese Grad Student Involvement Leads to Criminal Case: Physicist Pleads Guilty to ITAR Violation
04/16/08 01:08 AM
On
April 15, 2008, the Department of Justice
announced that Daniel Max
Sherman, a physicist who formerly worked as the
director of plasma research at Atmospheric Glow
Technologies, Inc., a Knoxville, Tennessee based
company. According the to plea agreement,
between January 2004 and May 2006, Sherman and
J. Reece Roth, a Professor Emeritus at the
University of Tennessee, engaged in a conspiracy
to transmit export controlled technical data
related to a restricted U.S. Air Force contract
to develop plasma actuators for munitions-type
Unmanned Aerial Vehicle (UAV) or "drones", to a
foreign national from the People's Republic of
China.
The Chinese national was a graduate research assistant at the University of Tennessee. The DOJ reported that the University of Tennessee was victimized by the conspirators and cooperated throughout the FBI-led investigation.
Mr. Roth has not been charged in the case. The investigation of Mr. Roth has been watched closely by those in academics since May 2006 when it was reported that Customs agents copied his laptop as he returned from a trip to China and that search warrants were executed at his office and laboratory. University officials who monitor export control compliance believe that the Tennessee case may have arisen due to the involvement of a for-profit company. The International Traffic in Arms Regulations (ITAR) exempts fundamental research done by universities that is ordinarily published and shared broadly within the scientific community. However, when a private company is involved and the research is proprietary or restricted from publication or disclosure, no exemption applies.
A report on the matter in the New York Sun contained these insights from university officials:
The Chinese national was a graduate research assistant at the University of Tennessee. The DOJ reported that the University of Tennessee was victimized by the conspirators and cooperated throughout the FBI-led investigation.
Mr. Roth has not been charged in the case. The investigation of Mr. Roth has been watched closely by those in academics since May 2006 when it was reported that Customs agents copied his laptop as he returned from a trip to China and that search warrants were executed at his office and laboratory. University officials who monitor export control compliance believe that the Tennessee case may have arisen due to the involvement of a for-profit company. The International Traffic in Arms Regulations (ITAR) exempts fundamental research done by universities that is ordinarily published and shared broadly within the scientific community. However, when a private company is involved and the research is proprietary or restricted from publication or disclosure, no exemption applies.
A report on the matter in the New York Sun contained these insights from university officials:
"If you're blurring the lines between the work you do at one place and the work you do at another, you can quickly get into trouble," Patrick Schlesinger of the University of California said. Doing only publishable research also allows universities to avoid segregating foreigners, a task that may be impractical in physical science programs where American citizen students are often a minority. "If we want to preserve that safe harbor, we also need to be very vigilant," Steven Eisner of Stanford University said. "This particular case in Tennessee will wake up the university community to export controls if they weren't aware of it already."
Political Backstory Behind Recent Presidential Export Control Directives
01/31/08 09:35 AM
On January 31, 2008,
Politico.com reported on the political lobbying
that took place prior to President Bush's issuance
of directives meant to modernize the State
Department and Commerce Department's export control
activities. The report entitled, "High-Tech Lobby
Notches Victory," can be read here.
President Bush Issues Export Control Directives
01/23/08 12:54 AM
On January 22, 2008,
President Bush announced presidential directives
aimed at modernizing export controls under both the
ITAR and the EAR. In a brief statement, the White
House said the package of directives would promote
a "more efficient and transparent export licensing
process."
With regard to the State Department, President Bush directed:
More Effective U.S. Export Licensing
A More Efficient Dispute Resolution Mechanism
Enhanced Enforcement
With regard to the Commerce Department, the Presidential directive recommended:
• Maintaining a Validated End User program to ease exports to “reliable foreign companies,” while imposing additional scrutiny on exports to less favored foreign buyers.
• Conducting regular updates of the export controls on dual-use items.
• Revising rules on intra-company transfers of sensitive items.
• Revising rules restricting the export of encryption products.
• Reviewing re-export controls.
• Increasing transparency by publishing advisory opinions on the Internet and listing foreign parties that warrant higher scrutiny.
With regard to the State Department, President Bush directed:
More Effective U.S. Export Licensing
- Additional financial resources and intelligence support will be made available for the timely adjudication of defense trade licenses.
- Guidelines will be issued that require a decision by the U.S. Government on defense trade export license applications within 60 days, absent a strong reason for additional time, such as a requirement for Congressional notification. Initial efforts in this regard have resulted in a nearly 50 percent reduction since April 2007 in the number of export license applications pending with the Department of State.
- The electronic licensing system will be upgraded to permit the submission of all types of defense trade licenses and to enable all agencies to access the same electronic information.
- The Secretary of State will update U.S. controls on exports involving dual and third country nationals from NATO and other allied countries.
A More Efficient Dispute Resolution Mechanism
- A formal interagency dispute mechanism will be created to allow for timely resolution of licensing jurisdiction issues involving the Departments of State and Commerce under the Commodity Jurisdiction (CJ) process. The National Security Council will also undertake a review to make sure the CJ process is efficient and timely.
Enhanced Enforcement
- A multi-agency working group will be established to improve procedures for conducting export enforcement investigations.
With regard to the Commerce Department, the Presidential directive recommended:
• Maintaining a Validated End User program to ease exports to “reliable foreign companies,” while imposing additional scrutiny on exports to less favored foreign buyers.
• Conducting regular updates of the export controls on dual-use items.
• Revising rules on intra-company transfers of sensitive items.
• Revising rules restricting the export of encryption products.
• Reviewing re-export controls.
• Increasing transparency by publishing advisory opinions on the Internet and listing foreign parties that warrant higher scrutiny.
GAO Report Criticizes Delays in State Department Export Licensing Process
01/04/08 12:31 AM
On January 3, 2008,
the U.S. Government Accounting Office (GAO)
released a report (dated November 2007) entitled,
"State Department Needs to Conduct Assessments
to Identify and Address Inefficiencies and
Challenges in the Arms Export Process." In 2005,
GAO reported that processing times for arms
export cases had increased despite State
Department efforts to streamline its process.
GAO was asked to (1) describe recent trends in
the processing of arms export cases and (2)
identify factors that have contributed to these
trends. A summary of the report can be
found here and highlights of the report
can be found here.
For this report, GAO analyzed State arms export case data for fiscal year 2003 through April 30, 2007; reviewed relevant laws, regulations, and guidelines, Directorate of Defense Trade Controls (DDTC) funding and staffing information, and interviewed State and Department of Defense officials and selected arms exporters.
GAO found three key trends that indicate that DDTC's licensing process is under stress. First, the number of cases processed by DDTC increased 20% between fiscal years 2003 and 2006. Second, during the same period, median processing times almost doubled. Third, the number of open arms export cases increased 50% from about 5,000 in October 2002 to about 7,500 in April 2007, with a high of more than 10,000 cases in September 2006.
GAO is recommending that State conduct systematic analyses to help achieve efficiencies in the processing of arms export cases. State concurred with GAO's recommendations.
For this report, GAO analyzed State arms export case data for fiscal year 2003 through April 30, 2007; reviewed relevant laws, regulations, and guidelines, Directorate of Defense Trade Controls (DDTC) funding and staffing information, and interviewed State and Department of Defense officials and selected arms exporters.
GAO found three key trends that indicate that DDTC's licensing process is under stress. First, the number of cases processed by DDTC increased 20% between fiscal years 2003 and 2006. Second, during the same period, median processing times almost doubled. Third, the number of open arms export cases increased 50% from about 5,000 in October 2002 to about 7,500 in April 2007, with a high of more than 10,000 cases in September 2006.
GAO is recommending that State conduct systematic analyses to help achieve efficiencies in the processing of arms export cases. State concurred with GAO's recommendations.
ATF Annouces Final Rule to Conform with Revised ITAR
12/27/07 10:38 AM
The
Bureau of Alcohol, Tobacco,
Firearms, and Explosives (ATF)
announced
on December 26, 2007 a final rule
conforming
the regulations in 27 C.F.R. Part 447
to
the revised International Traffic in Arms
Regulations (ITAR) by
amending the list of countries from which the
importation of defense articles into the United
States is proscribed by adding Afghanistan and
removing South Africa and some of the sates
composing the former Soviet Union (Armenia,
Azerbaijan and Tajikistan. The rule also removes
the arms embargo against the countries of Serbia
and Montenegro. It also clarifies an outdated
reference to Zaire, currently known as the
"Democratic Republic of the Congo," and makes a
miscellaneous technical amendment to the
regulations.
As background, the Arms Export Control Act of 1976 (AECA), 22 U.S.C. § 2778, gives the President of the United States the authority to control the import and export of defense articles and defense services. The ATF is responsible for administering the import provisions of the AECA. (The Department of State's Directorate of Defense Trade Controls is responsible for administering the export provisions of the AECA with the ITAR). Import regulations issued under this law are in 27 CFR Part 447.
As background, the Arms Export Control Act of 1976 (AECA), 22 U.S.C. § 2778, gives the President of the United States the authority to control the import and export of defense articles and defense services. The ATF is responsible for administering the import provisions of the AECA. (The Department of State's Directorate of Defense Trade Controls is responsible for administering the export provisions of the AECA with the ITAR). Import regulations issued under this law are in 27 CFR Part 447.
DDTC Amends Rules on Transfer of Technical Data
12/19/07 05:41 PM
On
December 19, 2007, the State Department's
Directorate of Defense Trade Controls (DDTC) issued
a final rule
amending
the International Traffic in Arms Regulations
(ITAR) to allow access to defense articles and
services to certain dual and third country
nationals under technical assistance agreements
(TAAs) or manufacturing licensing agreements
(MLAs) without having to execute individual Non
Disclosure Agreements (NDAs).
Previously, section 124.8(5) of the ITAR precluded any retransfer of defense articles (hardware or technical data) or defense services pursuant to an approved TAA/MLA to third countries or nationals of third countries unless specifically authorized in the agreement or for which prior written approval has been granted by the DDTC. The DDTC considers a third country national to be an individual from a country other than the country which is the foreign signatory to the agreement. DDTC also considers a third country national to be a dual national if he holds nationality from more than one country. In addition to citizenship, DDTC considers country of birth a factor in determining nationality.
Moreover, prior to the amendment, third country/dual nationals authorized under a TAA/MLA were required to execute NDAs prior to receiving access to the defense articles or services.
Under the amended regulations, the U.S. applicant may request further release of technical data and defense services and access to defense articles exported pursuant to or produced as a result of the TAA/MLA to third country/dual national employees of the foreign signatory who are nationals of countries that are members of the North Atlantic Treaty Organization (NATO), the European Union (EU), Australia, Japan, New Zealand, and Switzerland. These procedural changes would also apply to employees of sub-licensees authorized under the agreement. Furthermore, the execution of a NDA would no longer be required for such third country/dual nationals.
The rule is effective on December 19, 2007.
Previously, section 124.8(5) of the ITAR precluded any retransfer of defense articles (hardware or technical data) or defense services pursuant to an approved TAA/MLA to third countries or nationals of third countries unless specifically authorized in the agreement or for which prior written approval has been granted by the DDTC. The DDTC considers a third country national to be an individual from a country other than the country which is the foreign signatory to the agreement. DDTC also considers a third country national to be a dual national if he holds nationality from more than one country. In addition to citizenship, DDTC considers country of birth a factor in determining nationality.
Moreover, prior to the amendment, third country/dual nationals authorized under a TAA/MLA were required to execute NDAs prior to receiving access to the defense articles or services.
Under the amended regulations, the U.S. applicant may request further release of technical data and defense services and access to defense articles exported pursuant to or produced as a result of the TAA/MLA to third country/dual national employees of the foreign signatory who are nationals of countries that are members of the North Atlantic Treaty Organization (NATO), the European Union (EU), Australia, Japan, New Zealand, and Switzerland. These procedural changes would also apply to employees of sub-licensees authorized under the agreement. Furthermore, the execution of a NDA would no longer be required for such third country/dual nationals.
The rule is effective on December 19, 2007.
DDTC Amends Voluntary Disclosure Rules
12/14/07 09:07 PM
On
December 13, 2007, the Department of State's
Directorate of Defense Trade Controls (DDTC)
published a final
rule amending
the Voluntary Disclosure provisions of the
International Traffic in Arms Regulations
(ITAR). Section
127.12 of
the ITAR governs Voluntary Disclosure. The new
rule amends section 127.12 in 4 major respects:
- The new rule imposes a 60-calendar day deadline after the initial notification to submit a full disclosure. Previously, there was no set time limit for a party to submit a full disclosure after an initial notification to DDTC. Under the new rule, a party may request an extension to the 60-calendar day extension, and, in certain cases, DDTC may require the requester to certify in writing that the full disclosure will be submitted within a specified time period. Failure to do any of the preceding may result in the DDTC deciding not to consider the initial notification as a mitigating factor in determining the appropriate disposition of the violation.
- The new rule requires the party making the disclosure to provide specific information including, but not limited to, names and addresses of individuals involved in the violation, and a precise description of the nature and extent of the violation.
- The new rules also require that the disclosing party describe corrective actions already undertaken that clearly identifies the new compliance initiatives implemented to address the causes of the violations set forth in the voluntary disclosure and any internal disciplinary action taken; and how these corrective actions are designed to deter those particular violations from occurring again.
- Finally, the new rules provide that, in cases of "a major violation, a systematic pattern of violations, or the absence of an effective compliance program," DDTC may require that the disclosure be signed by a "senior officer."