Dec
18

Blackwater Order Not As Bad As It Sounds

Posted by Clif Burns at 6:35 pm on December 18, 2008
Category: General

Blackwater BearLooking at the title of today’s notice from the State Department’s Directorate of Defense Trade Controls (“DDTC”), which reads “Policy of Denial Regarding ITAR Regulated Activities of EP Investments, LLC (a/k/a Blackwater),” one might think it’s “Bye, Bye, Blackwater.” But the actual content of the notice isn’t quite so bad since it provides significant exceptions to this policy of denial, exceptions which seem designed to allow Blackwater’s contracts with the United States Government to proceed unimpeded as long as Blackwater files some additional paperwork for its new license applications.

In fact, the policy of denial doesn’t apply to applications that are in “direct support to the U.S. Government” and where certain conditions are met. Those conditions are the following:

  • The license application is accompanied by a letter from Blackwater’s celebrity export compliance committee (the “ECC”) certifying the accuracy of the information in the license application and certifying that necessary training and internal controls are in place
  • The ECC submits, for each application, follow-up letters thirty and sixty days later certifying that the necessary training and internal controls are still in place

Applications that are not in direct support of the U.S. government are subject to a policy of denial unless the license request “is based on overriding U.S. national security, foreign policy or law enforcement grounds or present other compelling reasons.” In cases found to meet that criteria, the ECC must submit the same certification letters, including the 30- and 60-day followups, as described above.

Finally, Blackwater isn’t allowed to use any ITAR exemptions from licensing, such as the spare parts exemption in section 123.16(b)(2). Instead, license applications must be filed for each exemption and those applications will be considered on a case-by-case basis.

Outside of requiring a bundle of additional paperwork for each Blackwater license, the biggest effect of the new policy is probably that Blackwater won’t be able to follow through on its proposed pirate-chasing gig.

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3 Comments:

  • Under traditional maritime law, any ship could assist another ship under attack by pirates (as opposed to ships under attack by a flagged naval vessel of a sovereign state). Blackwater’s founders were mostly SEALs, so they may be uniquely qualified to assist ships under pirate attack, especially given the present operational tempo in both theaters for the special operations community that keeps all US spec ops troops fully utilized. It is sad to see DDTC taking this measure against a company that performs so many necessary services that NATO can’t or won’t perform with uniformed armed forces. Couldn’t DDTC just fine them and let them go under a Consent Agreement like they do with so many big aerospace contractors that violate ITAR?

    Comment by Mike Deal on December 19th, 2008 @ 1:39 pm

  • I view DDTC enforcement interventions in any form as messages to industry–like painful Aesop’s Fables complete with a “moral.” And a strong message I take from this is that if you play fast and loose with regulatory requirements, DDTC will show you just how burdensome the paperwork and procedures really can be. By the way, I’m not aware of any specific incident(s) underlying this matter, but some press accounts and coverage of the company–including coverage on this blog–suggest a somewhat cavalier attitude about regulatory requirements.

    Jumping through additional hoops will undoubtedly add significant time and expense to the company’s operations, and serve as a whack across the nose, as well as an example for others.

    At the end of the day, it’s DDTC’s world…we just live in it….

    On the plus side, I know one of the company’s relatively recent hires — a former ODTC agreement officer. So I imagine they’ll do just fine in the long run.

    Finally, it seems to me that DDTC is mixing it up a little and signaling its willingness to try other tools in its enforcement arsenal.

    Just a few cent’s worth….

    Comment by John P. on December 19th, 2008 @ 9:06 pm

  • I see another message to industry also. Some defense companies trick themselves into believing that they are “too important” to lose their exporting privileges (they also trick themselves into believing that exporting is a “right”). Since they are “too important” to lose exporting privileges they keep playing fast and loose. This case shows that DDTC can spoil your day in a multitude of ways, and in varying degrees if you violate the ITAR. DDTC can take away a lot, or take away bits. It is better to comply and then you get to keep all of your options.

    Comment by Another Humble Supplicant on December 22nd, 2008 @ 2:57 pm

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