Mar
4
Now You See It, Now You Don’t
Posted by Clif Burns at 10:11 pm on March 4, 2010
Category: DDTC
I thought I was seeing things. First, I read a notice on the website of the Directorate of Defense Trade Controls (“DDTC”) saying that DDTC was putting a temporary hold on export licenses where BAE Systems was an applicant or manufacturer while the agency studied BAE’s recent guilty plea to charges that it paid bribes in violation of the Foreign Corrupt Practices Act and violated the Arms Export Controls Act by failing to report these bribes as “commissions” in export license applications.” Then the notice was gone.
According to this article in Defense News Daily, I wasn’t hallucinating:
In an Internet notice posted after BAE pleaded guilty on March 1, the State Department said the hold applied to license applications where BAE Systems PLC “or any of its subsidiaries is an applicant, consignee, end user, manufacturer or source.”
In the notice, the department advised export license applicants to determine whether they could modify their applications to remove BAE products. If they could, the notice instructed license applicants to withdraw their applications and amend them. That notice was withdrawn within a day and replaced by one that did not offer advice to license applicants hoping to export BAE products.
And that notice, in turn, was withdrawn and not replaced.
Notwithstanding the confusing impressions left by these disappearing web notices, a State Department spokesman, according to the article, asserted that DDTC was considering whether to debar BAE from exports. Meanwhile a BAE spokesman said that the company interpreted the removal of the web notices to indicate that no hold was currently in place.
Whatever is going on here, DDTC’s continually shifting public position doesn’t permit much confidence in its decision-making process on this issue.
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5 Comments:
At some point in the near future, I think we’ll find that the BAE spokesman has to be largely correct for practical reasons.
DDTC’s now-you-see-it-now-you-don’t published reaction to BAE’s bribery plea purported to freeze all applications for exports/reexports/brokering of BAE-origin hardware, services, and technology. This would be a Very Big Deal–not just for BAE, but also for other contractors and US and allied warfighters. BAE and its subsidiaries provide whole platforms or components for countless applications used by allied forces–armored vehicles, artillery, fighter planes, naval vessels, rockets, radars, protective vests, etc. Putting all BAE-related ITAR applications “on hold” for an indeterminate period of time would have seismic effects on the logistics network supporting military operations in Iraq and Afghanistan.
To be sure, DDTC is having to deal with a world-class compliance mess. There are serious Part 130 misstatement issues and potentially statutory debarment for BAE. And I’ll admit that the notion of BAE’s being “too big to fail” doesn’t necessarily sit well with my inner Robin Hood. But there’s just got to be a lawful way–some creative architecture of waivers, exemptions, and compromises (see Blackwater, ITT)–to handle this episode without threatening to freeze elements of the allied military logistics chain in the middle of two wars.
I can only imagine the stress this case has imposed on DDTC, to say nothing of BAE. It’s never easy to figure out the level and duration of discipline to impose on a major player in the industry.
@Pat: I agree. I’m sure that any debarment would require a transaction exception procedure as was done for ITT and Electro-Glass but that in this case the exceptions would have to be much broader to avoid negatively impacting some critical defense programs.
These types of rulings could and should force companies like BAE to divest themselves of IP or other exclusive authorities to utilize proprietary data involved in current ITAR applications, otherwise they will remain in a “too big to fail” position. The situation also is good example of why many are thinking that a Commodity Jurisdiction repository is needed so the impact of losing a major source like BAE can be better measured. We also must remind ourselves that companies like BAE are normally represented by U.S. allies.
The BAE case, once again, demonstrates DDTC’s and DoD’s favoratism toward big business while flaunting its statutory obligations under the Small Business Regulatory Enforcement Flexibility Act (onthe false and fraudulent premise that DDTC rulemaking is exempt from the Administrative Procedures Act and therefore not subject to the SBREFA). If a small business had been involved in such activities, is there any doubt that debarment by DDTC and BIS woulod follow? Of course, small businesses don’t hunt in PACs.
