state department export controls today and tomorrow terry l. davis deputy director of licensing...

State Department Export Controls

Today and Tomorrow

Terry L. DavisDeputy Director of Licensing

February 2011

TOPICS FOR CONSIDERATION

Introduction/OverviewLegal/Regulatory FoundationLicense Preparation & AdjudicationLicensing Defense Services: the World of

Electronic Agreements ExemptionsInteragency Review ProcessSpecial Topics of Concern

Defense Trade Reform

2

Licensing & ComplianceResponsible U.S. Agencies

Department of StateDepartment of CommerceDepartment of the TreasuryDepartment of Justice (ATF)Department of Homeland Security

CBP/ICE

Department of EnergyDepartment of Defense

DTSA, Armed Services, DSS, DSCA

4

Purpose of Controls

• Foreign Policy• National Security• Human Rights• Regional Stability• Proliferation

5

Laws & Regulations

Arms Export Control Act (AECA)International Traffic in Arms Regulations (ITAR)

22 CFR Parts 120-130

6

• Governs arms sales – Foreign Military Sales and direct commercial sales

• Mandates registration and licensing of any person who engages in manufacturing, exporting, and brokering of defense articles and services

• Requires monitoring/reporting fees, contributions and commissions (Part 130)

Arms Export Control Act (AECA)7

Arms Export Control Act (AECA) (continued)

• Broad authority of the Directorate to approve, deny, suspend, revoke and halt shipments at U.S. ports

• Congressional oversight – 36(c), 36(d), and 36(f)

• End use and retransfer assurances

• Establishes fines and penalties

8

International Traffic in Arms Regulations (ITAR)

• Implementing regulations of AECA

• U.S. Munitions List (USML)• Designates Defense Articles/Services subject to State

export jurisdiction

• Licensing policy and procedures

• Compliance and enforcement• Fines and penalties

9

22 CFR 120-130- ITAR

Part 120 DefinitionsPart 121 USMLPart 122 RegistrationPart 123 LicensingPart 124 Agreements/Offshore ProcurementPart 125 Technical DataPart 126 Prohibited ExportsPart 127 Compliance EnforcementPart 129 BrokersPart 130 Political Contributions, Fees, and Commissions

10

Delegation of Authority

• President of the United States• Secretary of State• Undersecretary for Arms Control and International

Security• Assistant Secretary for Political Military Affairs• Deputy Assistant Secretary for Defense Trade• Managing Director

11

Directorate of Defense Trade Controls (DDTC)

Our Mission: Advance U.S. national security and

foreign policy through licensing of direct commercial sales in defense articles and the development and enforcement of defense trade export control laws, regulations, and policies.

12

Foreign Policy Objectives

Support allies in mutual foreign policy and national security goals

Promote interoperability with alliesKeep defense technology out of the hands of our

adversaries!

13

DDTC Organization

Beth McCormickDeputy Assistant Secretary

Defense Trade

Robert S. KovacManaging Director

Directorate of Defense Trade Controls

Office of Defense Trade Controls Compliance

(PM/DTCC)

Office of Defense Trade Controls Licensing

(PM/DTCL)

Office of Defense Trade Controls Policy

(PM/DTCP)

Managing Director’s Staff

14

NSPD-56 Defense Trade Reform

Signed by the President on January 22, 2008Mandates specific process and resource

requirements to support an export control system that is predictable, efficient, and transparent.

60-day deadline for license adjudication

15

NSPD-56 Carve Outs from 60 Day Threshold

DOD National Security review not completedCongressional notificationCompliance/enforcement/Blue LanternArms Embargo/126.1 waivers requiredPolicy review

16

Process Improvements

Weekly 45-day and 60-day license reviewsWeekly 5% Quality Assurance reviewsStandardized Operating ProceduresUpdated guidelines on web site, e.g. agreements,

mergers, congressional matrixMore management oversight of RWAsRight answer as soon as possible!

17

License Processing Times

Month and Year Jan '10

Feb '10

Mar '10

Apr '10

May '10

Jun '10

Jul '10

Aug '10

Sep '10

Oct '10

Nov '10

Dec '10

Jan '11

Cases Received6,15

56,49

58,39

66,85

96,92

37,29

76,70

77,25

46,73

36,76

86,46

26,42

46,47

6

Cases Closed6,23

45,92

78,11

46,98

96,95

17,22

96,80

17,07

56,87

26,79

06,49

36,62

65,96

5

Cases Open at End of Month2,80

63,36

93,67

43,58

33,57

53,65

83,55

23,73

53,59

13,54

93,51

73,38

43,78

7

Average Processing Time (in Calendar Days)

18 15 15 15 16 16 17 17 16 16 16 17 18

18

Application Process

DDTC’s Automated Export Licensing System DSP 5, 61, 73 Amendments 6, 62, 74 TA/MA/DA Commodity Jurisdiction Eventually to include GCs Cases assigned/screened by DDTC’s computer system

19

Export Control Reform

The Administration has determined that fundamental reform of the U.S. export control system is required in each of its four components areas, with consolidation into a:Single Control List;Single Primary Enforcement Coordination Agency;Single Information Technology (IT) System; andSingle Licensing Agency

20

Export Control Reform

Additional information on the White House website:http://www.whitehouse.gov/the-press-office/fact-

sheet-presidents-export-control-reform-initiative

21

Regulation Updates

Final Rules 22 CFR 125.4(b)(9): laptops 22 CFR 126.8 deleted Electronic Commodity Jurisdiction

Proposed Rules Dual/Third Country Nationals: comments received - Final

Rule next step

22

Regulation Updates

Future Actions Brokering regulations “Specifically Designed and Modified” Spare Parts Exemption 123.28 Defense Service Definition “See Through” rule clarification Part 124 re-write Dual/Third Party Nationals Category re-writes: VII, I and XI based on tiers and

“Bright Lines”

23

Complying with ITAR Controls

DDTC Definitions

DEFINITIONS

• U.S. Person (120.14)• Foreign Person (120.16)• Defense Article (120.6)• Technical Data (120.10)• Defense Service (120.9)• Public Domain (120.11)• Significant Military Equipment• Export (120.17)• Re-transfer/Re-export (120.19)• Significant Military Equipment (120.7)

25


Commodity Jurisdiction

ORGANIZATION

Commodity Jurisdiction (CJ) function part of Policy Office

Policy headed by Charles ShotwellCJ team comprised of six peopleTeam Leader and Presenter – Di Bounds

27

Designating Defense Articles & Defense Services

• The AECA provides that the President shall designate the articles and services deemed to be defense articles and defense services for purposes of this subchapter.

• Policy is at 22 CFR 120.3

• Guidance for a Commodity Jurisdiction (CJ) determination is at 22 CFR 120.4

• A CJ issued by DDTC is the only legally-binding determination of jurisdiction!

28

Policy for Designating Defense Articles & Defense Services

• 120.3(a) is specifically designed, developed, configured, adapted, or modified for a military application, and (i) Does not have predominant civil applications, and

(ii) Does not have performance equivalent (defined by form, fit, and function) to those of an article or service used for civil application; or

29

Policy for Designating Defense Articles & Defense Services

• 120.3(b) is specifically designed, developed, configured, adapted, or modified for a military application, and has significant military or intelligence applicability such that control under this subchapter is necessary.

End-Use is not a factor in determining jurisdiction!

30

U.S. MUNITIONS LIST (USML)

Remember to take USML into account when considering jurisdiction.

Items specifically enumerated are controlled.

31

U.S. MUNITIONS LIST (USML)

• Self-determination versus DDTC determination Document decision making process

• Registration is not required to submit a CJ request. • Preferable for the manufacturer to submit CJ

If you are not the manufacturer, coordinate with the manufacturer to obtain necessary information.

Letter of authorization from manufacturer

32

Commodity Jurisdiction Submission

• Self-determination versus DDTC determination Document decision making process

• Registration is not required to submit a CJ request.

• Preferable for the manufacturer to submit CJ If you are not the manufacturer, coordinate with the

manufacturer to obtain necessary information. Letter of authorization from manufacturer

33

DDTC is now processing CJ requests using an automated system. The automated system allows on-line CJ requests using the DS-4076 Commodity Jurisdiction (CJ) request form with attachments.


34

Applicant may reference the DDTC website for submission instructions at www.pmddtc.state.gov/commodity_jurisdiction for this automated system.


35

• More information is usually better than less.

• Remember two audiences – subject matter experts and generalists


36

• DS-4076 must be accompanied by a cover letter Subject line – product name Anything you want us to know about your product that

was not clear from DS-4076 For instance, any of the following: description; origin of

commodity; current use.


37

Supporting Documentation: Product data sheets Letter of authorization from manufacturer Sales data Studies/other pertinent info

Assigned a CJ case number Email or letter acknowledging receipt and identifying case

number


38

• Interagency review governed by National Security Council (NSC):

Department of Commerce Department of Defense As necessary: NASA Department of Energy Department of Homeland Security Other U.S. Government agencies


39

State responsible for working out agreement between agencies

Defense and Commerce have right to escalate State’s proposed decision

Final decision goes out in letter to applicant


40


License Preparationand Exemptions

Agenda

DSP License Types Scenarios/purpose Transaction flow Supporting documentation

Licenses in furtherance of AgreementsRenewal/replacement licenses

Unshipped balance licensesAmendmentsRe-transfer/re-exportProviso re-considerationExemptions

42

• DSP-5 Permanent Export**• DSP-6 Amendment**

• DSP-73 Temporary Export**• DSP-74 Amendment**

• DSP-61 Temporary Import**• DSP-62 Amendment**

• DSP-85 Classified Transactions• DSP-119 Amendment

**D-TRADE only**

DSP License Types43

• Valid for maximum of 48 months/4 years• Exceptions:

• Firearms authorization will be limited in duration based on foreign import certificate

• Foreign person employment limited by work authorization

• A license expires whenever:• Total authorized quantity exhausted; or• Total authorized value exhausted; or• Expiration date reached

Validity Period 44

• Defense Articles (hardware)• Only one ultimate foreign end-user

• Must be supported by documentation from foreign party to the transaction

• Purpose and commodity blocks must be consistent with supporting documentation

• Part 130 statement

DSP-5 Permanent ExportScenarios/Purpose

45

• Technical Data• Marketing/bid and proposal• Plant visit• Offshore procurement (124.13)

• Defense Services – Exceptional circumstances! • Short-term training/limited scope and technology

transfer (124.1)• Foreign person employment

• Can be multiple ultimate foreign end-users for technical data and defense services


46

• Block 15 – Manufacturer of Commodity

• Block 17 – Source of Commodity

• Block 19 – U.S. Seller

• Block 21 – U.S. Consignor/Freight Forwarder

• Block 18 – Foreign Intermediate Consignee

• Block 16 – Foreign Consignee

• Block 14 – Foreign End-User

DSP-5 Permanent ExportTransaction Flow

47

• Purchase order, letter of intent, or other appropriate documentation

• Commodity• Quantity• Price• End-use• End-user

• DSP-83/import certificate• Must be consistent with information on license

application

DSP-5 Permanent ExportSupporting Documentation

48

• Must be addressed to the U.S. applicant applying for the export license

• Subsidiary must be identified in Block 5• Must be provided by a foreign party to the

transaction• In English or provide translation

• Must be issued within 1 year of license application

• Must have U.S. dollar value identified• Limitations on LOIs


49

• Technical Data• Copies of technical data OR sufficient information

for DOD to conduct a technical review

• Defense Services • Letter requesting exception per 22 CFR 124.1(a) –

DDTC discretion on approval

• Description of services to be provided


50

• Foreign Person Employment

• Employment by a U.S. Person• Requires a DSP-5 from DDTC regardless of physical

location, U.S. or abroad

• Does cover interaction with other parties, U.S. or foreign with notification by employing person

• No longer require a TAA in addition to DSP-5

• NEW web guidance as of September 30, 2009


51

• Foreign Person Employment• Resume• Copy of passport/work authorization• Job description• Description/copies of technical data• Kept by applicant:

• Non-Disclosure Agreement (NDA)• DSP-83, as applicable


52

• “in Furtherance” of an agreement:• Exported by the agreement holder or another U.S.

signatory• Must be included (described/identified) in the

agreement scope• Will be counted against the value of hardware exports

authorized under the agreement• “in Support” of an agreement:

• Exported by another U.S. company indirectly relating to the agreement

• Frames the purpose/end-use of articles being exported so the license adjudicators better understand the overall effort

Licenses “in Furtherance” of Agreements

53

• Supporting documentation• Purchase documentation must identify the relevant

agreement• DSP-83, if applicable• Section 15.1 certification letter:

• Agreement history• Hardware authorization and identification• Value matrix

• DSP-73s for repair/replacement do not require Section 15.1 letter but must reference the agreement


54

• Agreement/amendment authorizing the requested defense articles MUST be approved by DDTC prior to submission of license application

• MUST be submitted by agreement holder or another U.S. signatory

• End-user identified on license application MUST be a foreign licensee or end-user in agreement

• First foreign consignee to receive hardware MUST be a foreign licensee or end-user

• Purpose block MUST include the words “In Furtherance of TA/MA/DA/AG XXXX-XX” on the first line


55

• Renewals submitted for review 60 days prior to expiration of current authorization

• Copy of current authorization• Cover letter explaining need for continued activity and

shipment summary for unshipped balances

• Replacement package submitted as needed• Requires same information as renewal package with

emphasis on need for replacement

• Current authorization is revoked

Renewal/Replacement Licenses

56

• 22 CFR 123.25(b) changes considered:• Addition/change of U.S. freight forwarder/consignor• Addition/change of source/manufacturer• Change due to obvious typographical error• Addition/change of foreign intermediate consignee if

party is only transporting equipment and will not process (integrate, modify, etc.)

• DDTC practice to authorize registration code changes as a result of merger/acquisition

Amendments57

• All other changes require a new license per 22 CFR 123.25(c):

• Additional quantity• Changes in commodity• Country of ultimate destination, end-use, or end-user• Add foreign consignee and foreign intermediate

consignee (if more than transporting equipment)• Extension of duration

• 22 CFR 123.23 permits Customs to authorize a 10% increase in value (not quantity) as long as Congressional thresholds

Amendments58

• 22 CFR 123.9(a) prior written approval from DDTC for any changes

• Applies to shipment under license or exemption

• Request submitted by U.S. or foreign person

• Must meet the requirements of 22 CFR 123.9(c)• If SME must include a DSP-83

• 22 CFR 123.9(e) exception for NATO (governments and agencies); the government of Australia, New Zealand, Japan, or South Korea.

Retransfer/Re-export59

• Provisos must be satisfied prior to export• Apply to all parties to the transaction• Provisos are imposed to:

• Permit exports that might otherwise be denied• Establish level technology release• Protect against diversion and unauthorized use

• Request for clarification, revision, or deletion of a proviso imposed on an authorization:

• Replacement authorization• Letter from applicant with justification or rationale• Re-submittal vs. GC

Proviso Reconsiderations60

What Is An Exemption?

An exception to the requirements for a Validated License that applicant must ensure is properly claimed

One of the tools in the toolbox which should be utilized

Covers technologies/circumstances which are low risk/minimize diversion

Most exemptions have significant exclusions, e.g. SME

61

• Only registered/eligible exporter can claim• Cannot use for 126.1 countries• Monitor use and ensure compliance• Beware: no legal/regulatory basis for USG agencies

to “Certify Exemptions”• Technical Data vs. Services Exemptions

Issues In Utilizing Exemptions

62

• Country Exemptions

• Hardware Exemptions

• Technical Data Exemptions

• Defense Service Exemptions

• Exemption Reform/Revision

Categories of Exemptions63

• U.S. person eligible per 22 CFR 120.1(c)

• Must be registered with DDTC

• Generally not eligible under exemption• Proscribed Destination• Congressional Notification Thresholds• Offshore Procurement• Missile Technology Control Regime (121.16)• SME

Requirements for Exemption Use

64

• 22 CFR 122.5 – Maintenance of records

• 22 CFR 123.22(b)(3)(iii) – Filing of export information

• 22 CFR 123.26 – Recordkeeping requirement for exemptions

• 22 CFR 125.6 – Certification requirements for exemptions

Recordkeeping and Reporting Requirements

65

• Currently only country exemption until Defense Trade Treaties with Australia/UK implemented

• Beware: End-use in Canada by Canadians!• Licenses in furtherance of agreements• Large number of exclusions/limited services

Canadian Exemption (126.5) 66

• (a) (1) Repair/overhaul/replacement of US origin. No upgrades!

• (b) Enhanced/Incorporated /Upgraded. US or foreign origin: needs separate license for reexport

• (c) (2) Consignee on AES submission or SED same as foreign end-user at time of import

• USG Approval: License/MLA/Offshore Procurement

Temporary Import 22 CFR 123.4 67

• Exemption not claimed at the time of import, see web notice: http://www.pmddtc.state.gov/licensing/documents/WebNotice_TemporaryImportViolations.pdf

• Inform foreign customers of return/repair exemption procedures

• Attempt to claim (b) before upgrade approved• 123.4(a) not for foreign origin and will not be

revised.

Issues With 123.4 68

• If article has been licensed and license is still valid • No SME/Missile Technology Regime controlled

items • Related event - trade shows• Demonstrations vs. trade shows• See 123.22(a)(2) for multiple destinations and

multiple decrementing of license

Trade Show Exemption 123.16(b)(5)

69

• 124.2(a) Basic O&M to same recipient: no depot/intermediate

• 124.2 (c) Expanded maintenance for NATO/ Australia/Japan/Sweden

• 124.2 (c) US Origin: no design engineering analysis manufacturing know how

Defense Service Exemptions Part 124

70

Technical Data Exemptions: Part 125

• Do Not Involve provision of Defense Services which would require a TAA/MLA

• 125.4(b)(4) - copies of same data to same recipient• Software revision to correct anomalies is not an

Editorial Change• If name changed, must have ITAR authorization

71

• One of few instances when a foreign party can come in

• Components incorporated into foreign defense articles: must be directly to Governments!

• Limitations: No SME, MDE, below congressional thresholds

• Revised to include NATO (governments and agencies); the government of Australia, New Zealand, Japan, or South Korea.

Retransfer Provisions Under 123.9(e)

72

• 126.4, 125.4(b)(1), 125.4(b)(3), 125.4 (b)(11) Principal USG Exemptions

• No catch all exemption for USG• Memorandum of Understanding Government to

Government Agreements are not export authority• Beware of DOD guidelines/certifications• 126.4 Revision

“USG Exemptions” 73


Agreements Overview

Purpose

Provide attendees an overview of Technical Assistance Agreements (TAAs) and Manufacturing License Agreements (MLAs)

and the application process.

75

Briefing Topics

Understanding AgreementsThe Major PlayersApplication Preparation

Electronic Submission

AmendmentsAgreement Maintenance

76

The Million-Dollar Question

When is an agreement necessary? Answer:

When Defense Services are involved and/or When Tech Data will be imported/exported May or may not involve hardware And for foreign manufacturing of defense articles

that involves Items 1, 2, or 3 above.

The Agreement covers the full scope of the effort.

77

Agreements OverviewDSP Licenses vs.

Agreements

License – “…permits the export or temporary import of a specific defense article or defense service controlled by this subchapter.” (i.e. DSP 5, DSP 61, DSP 73) Involves a single transaction of hardware or tech data between

two parties.Agreement – Involves multiple transactions of

hardware and/or tech data between two or more parties involving performance of defense services. TAA – “An agreement for the performance of a defense

service(s) or the disclosure of technical data...” (22 C.F.R. §120.22)

MLA – “An agreement whereby a U.S. person grants a foreign person an authorization to manufacture defense articles abroad and which involves…(tech data, defense articles, or defense services) (22 C.F.R. §120.21)

78

Agreements OverviewDSP Licenses vs.

Agreements

Defense Service (22 C.F.R. §120.9):The furnishing of assistance (including training) to foreign

persons in the…- Design - Manufacture - Testing- Development - Production - Repair- Engineering - Assembly - Maintenance- Modification - Operation - Demilitarization- Destruction - Processing - Use

…of defense articlesThe furnishing to foreign persons of any technical data

controlled under this subchapterMilitary training of foreign units and forces, regular and

irregular

79

Two Major Categories U.S. Person (ref: 22 C.F.R. §120.15) Foreign Person (ref: 22 C.F.R. §120.16)

Agreements OverviewThe Major Players

AgreementsU.S. Applicant

U.S. SignatoriesForeign Licensees

Sub-licenseesEnd Users

80

Agreement Preparation

Application must meet ITAR requirementsEnsure application is complete and accurate – (Cannot

be processed in a timely manner if information is missing or incorrect)

Get the “right” information from the program managers and foreign parties

Conduct a thorough review prior to submission to DDTC

CLEARLY SPECIFY INTENT / PURPOSE!!!!

81

Agreement Preparation

Guidelines for preparing electronic agreements document http://www.pmddtc.state.gov/ag_guidelines.htm

Contains DDTC policies & procedures for implementing the Arms Export Control Act (AECA) and the ITAR for agreements

Notifications of changes will be posted on webpage

AECA and ITAR take precedence over the “Guidelines”

82

Electronic Application Package

• Three main components:– Transmittal Letter– Empowered Official Certification*– Proposed Agreement

* If not certified in Block 22 (a) or (c) of DSP-5 Vehicle

• Amplifying Data (35 MB initial)– Attachments, Annexes (Agreement)

• Tech Data, Hardware Descriptions• SOWs• Etc.

– Supporting Material (Transmittal Letter)• Executive Summary (Congressional)• Part 130 Statement• Etc.

Attachments Appendices

Annexes

TransmittalLetter124.12

SupportingMaterial

EmpoweredOfficial

CertificationLetter

126.13 ProposedAgreement124.7 - 9

Main Components

Amplifying Data

83

TAA / MLA Application Package (cont’d)

Three main components:1. Transmittal Letter Empowered Official Certification Proposed Agreement

Amplifying Data Attachments, Annexes

Tech Data, Hardware Descriptions SOWs Etc.

• Supporting Material Executive Summary (Congressional) Part 130 Statement Etc.

TransmittalLetter124.12

84


Three main components: Transmittal Letter

2. Empowered Official Certification Proposed Agreement



Supporting Material Executive Summary (Congressional) Part 130 Statement Etc.

EmpoweredOfficial

CertificationLetter126.13

85

DraftAgreement

124.7 - 9


Three main components: Transmittal Letter Empowered Official Certification

3.Proposed AgreementAmplifying Data

Attachments, Annexes Tech Data, Hardware Descriptions SOWs Etc.


86

Attachments, Annexes


Three main components:1. Transmittal Letter2. Empowered Official Certification3. Proposed Agreement



• Supporting Material Executive Summary (Congressional) Part 130 Statement Etc.

Critical Elements – Required Information- Clearly labeled - Referenced in the text of the agreement

87


Three main components:1. Transmittal Letter2. Empowered Official Certification3. Proposed Agreement




Consists of additional information not part of the agreement but required as part of the submission

SupportingMaterial

88

Electronic Submission

Utilizes the D-Trade II SystemSubmission accomplished on a DSP-5 application

Serves only as a “vehicle” for transitioning the proposal throughout the process

Attached transmittal letter and agreement is still the primary focus of review

Issuance of DSP-5 vehicle is simply the mechanism for providing the DDTC position on the agreement – not the authorization

89

Electronic Submission (cont’d)

• The following statement will be applied to all agreements adjudicated through the electronic process:

“The issuance of the subject DSP-5 does not grant any export rights or privileges, and its related DSP-5 case number may not be cited as an authorization or used as the basis for an exemption.”

“The Department of State approves the proposed agreement/ amendment as attached subject to the following limitations, provisos and requirements. The agreement or amendment may not enter into force until the agreement/amendment has been signed and the stated requirements have been satisfied.”

90


Key blocks for submission:Transaction Number

MUST be preceded by “AG-” followed by the applicant’s internal code – no spaces!

Block 10 Type in agreement type (TA, MA, DA), concise description of

commodities, SME status, classification level, all USML categoriesBlock 11

Identify primary USML categoryBlock 12

Total agreement value

91


Key blocks for submission (continued):Block 14

Name and address of foreign licenseesBlock 16

Name and address of sub-licenseesBlock 18

Identify sales, marketing or distribution territory Dual and third country nationals

Block 20 Provide a concise narrative describing the purpose of the

submission, agreement objectives If requesting 124.16 third country nationals state here – no need

to identify in Block 18

92


Upon submission will receive a DSP-5 number Upload additional documentation Track status

Final approval will identify agreement number E.g., 050123123 (TA 1234-10)

93

Amendments

Once an agreement is approved by DTCL, any changes to the agreement must be made via an amendment.

Why Amend?Expand scope to include:

Addition of new hardware Expansion of Statement of Work Transfer of additional technical data Expansion of sales or marketing territory (new countries) Add foreign licensees (new country) Add Dual/Third Country Nationals (new country) Addition of new programs

Generally Requires Additional Staffing

94

Amendment Submission

See Guidelines Section 6.0 & 9.0Transmittal Letter

Address all 124.12(a) information Note item as CHANGE or NO CHANGE

Include all 124.12(b) clauses Include prior approval summary For MLA, include summary table of sales reports

Conformed/re-baselined agreementAssigned a new DSP-5 number as well as amendment

number

Requires same basic elements as a new agreement application

95

Minor Amendment• Changes NOT requiring prior DDTC approval

–Alter delivery and performance schedules–Minor administrative changes

1.Address changes

2.Typo correction (not affecting scope)

Amendments

**Upload to most recent DSP-5 Vehicle**

96

Agreement Maintenance

Submit signed agreement (within 30 days) (§124.4)

DSP-83s (before Tech Data/Defense Service) (§124.10)

MUST be original ink signatures

Status of unsigned agreements (annually) (§124.4)

Decision to not conclude (within 60 days) (§124.5)

Termination/expiration (within 30 days) (§124.6)

Sales reports for MLAs (annually) (§124.9)

**Upload to most recent DSP-5 Vehicle**

97

Agreements POCs

Division 2: Lt. Commander Andre Givens - - - - (202) 663-2731Division 3: Major Kevin Hoppin - - - - - - - - - - - - (202) 663-3340Division 4: Lt. Commander Jeremy Clauze - - - - (202) 663-2722

Major Carmella Scott-Skillern - - - - - (202) 663-3843 Division 5: Major Kristofer Eggehorn - - - - - - - (202) 663-2840

98


License Review Process

AGENDA

Division StructureCase AssignmentReview CriteriaReferral ProcessCongressional NotificationFinal Review and IssuanceDDTC and Customs

100

DDTC Licensing Divisions

Division 2 – Land and ShipRuth Jackson, Chief

VI, VII, XII, XIII, XVI, XVIII, XX, XXI

Division 3 – Missile and SpaceTony Dearth, Chief

IV, V, IX, XIV, XV

Division 4 – ElectronicsAngela Brown, Chief

XI

Division 5 – AircraftMal Zerden, Chief

VIII

Division 6 – Small WeaponsChuck Schwingler, Chief

I, II, III, X

101

Division Structure

• Division Chief• Case assignment• Team management

• Licensing Officers• Case adjudication• Special projects/assignments

• Administrative Support• License amendments• Referral management• Paper issuance

102

CASE ASSIGNMENT

• D-TRADE automatically assigns to a division based on USML category• Be careful on USML category

• Division Chief assigns to Licensing Officer for adjudication• Administrative review• Regulatory review

103

Review Criteria

Administrative review• Hold/no hold

• May require additional documentation• 22 CFR 123.10

• Verify registration code – subsidiary• Verify USML category• Part 130 statement/eligibility• No P.O. boxes• Seller/applicant are the same• All required boxes are filled

104

Review Criteria

Regulatory review• Transaction flow

• Review supporting documentation• Match with application – possible RWA

• Commodity - quantity/price• Foreign parties• Destination country – 126.1, embargo.• Stated end-use and end-user

• Review purpose for explanation• Review precedent licenses

• Important for staffing purposes

105

Regulatory Review

Regulatory Review (continued)

• Foreign Policy• National Security• Regional Stability• Human Rights Policy• Multilateral Regimes

106

Referral Process

Department of State• Foreign Policy – Country Desk Office (e.g., EAP, NEA)• Regional Stability – PM/RSAT• Human Rights Policy – DRL

Department of Defense (DOD)• National Security• Technical Review• Regime Compliance (MTEC)

Check DOD status at http://elisa.osd.mil

107

Referral Process (Cont’d)

Other U.S. Government Agencies• NASA – Space-related applications

• Department of Energy – Nuclear-related applications• Referral points have 15 days to reply• DOD - has no time limit for review

108

Congressional Notification Thresholds

• Initial Staffing• DOD, DRL, PM/RSAT, Country Desk (even NATO+4)• Will staff without signed contract

• Draft Certification Package• Second Tier Staffing – 5 days to reply

• NSC, L/PM, PM/CPA, T Staff• Must have SIGNED contract to proceed

• Transmission to H Bureau

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Congressional Notification Thresholds

• 22 CFR 123.15• NATO + 4 (Japan, Australia, New Zealand, South Korea)

• $25 million Major Defense Equipment (MDE) (22 CFR 120.8)• $100 million (any defense articles, technical data and defense

services)• Non-NATO

• $14 million MDE• $50 million (any defense articles, technical data and defense

services)• USML Category I Firearms - $1 million

• 22 CFR 124.11• Manufacture abroad of SME regardless of value

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CongressionalNotification Thresholds

• Pre-clearance• Answer Questions from Congressional Committees

• Congress accepts formal notification

• Clock starts• 15 days for NATO+ 4• 30 days for rest of the world

• Publication in the Federal Register

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FINAL REVIEW AND ISSUANCE

• Licensing Officer reviews case with recommendation of other agencies and determines final disposition of cases:

• Approve

• Approve with provisos

• Return Without Action (RWA)

• Deny

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DDTC AND CUSTOMS

• Daily transfers to U.S. Customs are provided on all approved applications

• A printed copy of the license must be supplied to Customs & Border Protection (CBP) at the port of exit

• Automated Export System (AES) information is supplied to DDTC to track shipments

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COMMON REASONS FOR RWA

COMPLYING WITH ITAR CONTROLS

What is a RWA?

The Return Without Action (RWA) indicates the USG was unable to complete adjudication of the license request for the reasons indicated. In most instances, the application as submitted contained (or failed to contain) information which inhibited an effective national security or foreign policy review.

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DDTC RWA Policy

It is incumbent upon the applicant to submit a quality package meeting all the published requirements.

Licensing Officers (LOs) are expected to contact the applicant if the RWA can be salvaged by additional information provided by the applicant (via formal upload)

In most cases, the decision to RWA a case is approved by the Division Chief, so these are not arbitrary decisions made independently by LOs.

Don’t let familiarity breed contempt!

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The Top 10 RWA Reasons RWA Reason #1

Failure to respond to a USG request for additional documentation in a timely manner.

Licensing Officers must allow an applicant time to respond to their request. The standard is 2-3 business days, but can be discussed with LO if extenuating circumstances exist. If the applicant indicates during the initial contact they will be unable to meet the timeline, then the wait period is not required. The applicant may resubmit the application when all appropriate documentation is available.

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RWA Recommendation by a Staffing Agency.

The staffing agency is unable to conduct a national security or foreign policy review and they provide details of additional information necessary for the resubmission.

In rare circumstances, a staffing agency may provide a split decision, where they partially approve a license but request removal of specific commodities from a license. In these cases, the application is RWA’d with directions to the applicant on what to remove prior to resubmission.

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Applicant Request

This can be in response to the USG inquiry or totally at the discretion of the applicant. In either case, for electronic licenses the request for RWA must be uploaded as supplemental documentation against the specific case.

DDTC is looking at adding a “Withdraw” function to D-Trade so these will no longer fall under the RWA. If implemented, this will be several versions in the future.

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D-Trade Limitations

Electronic applications submitted via D-Trade II cannot be changed in any way by DDTC. This is a legal requirement because the Empowered Official signed the license as complete and accurate. As a result, the remaining 7 Reasons for RWA include situations where the support documentation may be correct, but the license does not match. In all of these situations, the license will be RWA’d for repair and resubmission by the applicant.

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License Quantity or Value is Incorrect

Quantity absolutely must be supported by the purchase documentation. Shipping less quantity than requested requires an explanation (e.g., split shipments).

Value of individual items must be supported by the purchase documentation within reason. Any difference requires an explanation.

The electronic amendment forms CANNOT be used to correct typos in these two areas because the information changed via the amendment forms is not conveyed to Customs for AES filing purposes.

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License Party Issues

All parties involved in the transaction identified in the support documentation must be identified on license. Required for electronic entity eligibility check and Customs/AES purposes.

License cannot contain parties which are ineligible or otherwise restricted. If identified, RWA for removal.

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Electronic Submission of ClassifiedThe D-Trade II electronic licensing system is cleared for processing

of UNCLASSIFIED information only. Upload of documents containing classified information, whether marked or unmarked, not only compromises national security but requires significant IT resources to remove all remnants of the data from the electronic system.

All foreign classified is considered USG classified for control purposes.

The header “Confidential” means classified to the USG. Use “Business Proprietary” or “Business Confidential” as alternatives to avoid slowing down the review while we determine if it is classified.

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Part 130 Statement Incorrectly Marked “Does Not Apply”

The Empowered Official must correctly identify and certify the application with regards to Part 130.

If the application requires a positive Part 130 statement, selection of “Does Not Apply” option is not in accordance with ITAR requirements.

If the application does not require a Part 130 statement but the EO selected a positive 130 statement option, the license will not be RWA’d but will contain a license proviso indicating Part 130 does not apply and future licenses should be reviewed for correct selections.

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Inclusion of Non-USML Items

Examples: licensing or handling fees, items clearly controlled on CCL

This RWA reason is evaluated for severity of offence and impact to overall license request. In some cases, the offense may result in a proviso request to leave the items off of future license requests.

Although these items may be on the purchase order, the applicant should only be requesting a license for those items which require a USML license.

In the case of CCL items, issuance of a DDTC license does not relieve the applicant of any potential requirement to obtain a Department of Commerce license for the CCL items.

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Incorrect Country Identification

We have encountered licenses where the applicant inadvertently selected the wrong country in one of the dropdown boxes on the application form. This has occurred most frequently in Block 3 of the DSP-5 and in the address fields for entry of license party information.

This is not an error that can be corrected via an electronic amendment form so the license must be returned for correction for Customs/AES control purposes.

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License Purpose Block or Commodity Description Issues

Sufficient information must be provided to allow for review and must be consistent with the support documentation.

“See Attached” or similar on licenses in either block is a problem.Part numbers with no descriptions are also problematic. A noun

nomenclature description is required for adjudication purposes.Customs Officers do not have access to any of the additional

support documentation provided by the applicant. As a result, these blocks must have sufficient information for their review which is consistent with the application.

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Third Party/Dual Nationals

DDTC licenses to all countries of ultimate destination agreements/licenses

Third Party vs. Dual NationalNationality vs. Citizenship: Country of birth is

consideration for export purposes124.16 Retransfer Authorization for

NATO/Australia/NZ/Japan SwitzerlandAdditional review if COB is 126.1

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“Significant Ties Screen for 126.1”

How long a citizen of current countryPassport: from current country or bothFrequency/nature of travel back, e.g. personal or

businessMeasures to renounce former citizenshipCurrent/former country recognizes dual citizenshipSecurity clearance

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Changes to Third Party/Dual National

FR notice completed comment periodDual/Third Party Nationals bona fide regular

employees of the foreign business entity require no further authorization

Responsibilities of foreign partiesVetting procedures/security clearances Due diligence to ensure USML technology not

diverted

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Brokering (Part 1429)

Closed one of the largest loopholes in export licensingCarefully scrutinize your applications for brokers, e.g.

agents, consigneesRegistration requirement (129.3)Prior approval/notification (129.7/129.8)“Foreign persons subject to US jurisdiction”Brokering revisions

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IN SUMMARY

USG dependent upon DDTC quality of information/licenses you submit

Keep an eye on DDTC web for upcoming regulatory updates

Questions: Licensing Officer, Division Chief, or me (202) 663-2739. [email protected]

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MORE INFORMATION

Learn more about U.S. defense trade controls by visiting the Department of State’s Directorate of Defense Trade Controls on the Internet at:

www.pmddtc.state.gov Contact the DDTC Response Team at:

(202) 663-1282 [email protected]

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state department export controls today and tomorrow terry l. davis deputy director of licensing...

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