In an announcement posted yesterday on its website, DDTC chides exporters for a recent increase in “low-quality” applications and says that it will no longer help exporters correct errors in applications but will simply return them without action. If true, this will be the final triumph of form over substance at the agency.

Many applications involve exports to our allies in Iraq and Afghanistan as well as to private contractors providing security services for our troops in both countries. These exports are crucial to the safety of our troops, the outcome of the conflicts in both countries, and the security of the nation. DDTC now says than an application will simply be “returned without action” if there is a discrepancy between “the value on the license application . . . [and] the value on the purchase order.” With the safety of our troops and national security at issue here, to do this without affording the applicant an opportunity to correct the minor discrepancy is nothing short of a scandal.

Further, when an agency finds a decrease in the quality of submissions, perhaps it should look inward to discern the cause rather than reflexively blaming the submitters. Has the agency provided adequate resources for the education of submitters? Are the agency’s rules and application forms clear? Are licensing officers available to assist applicants with respect to questions that they might have prior to submission of applications? We certainly know that, since the DDTC shut down the phone lines to its licensing officers, the answer to the last question is no.

Finally, DDTC singles out problems in “incomplete and deficient” registration applications. It is likely that many of these are now registration applications filed by foreign brokers as a result of DDTC’s widely criticized decision to expand the scope of its jurisdiction to include foreign sales representatives with no contacts with the U.S. other than their dealings with the exporter. For almost all of these brokers, English is not their first language. The registration form (DS-2032) and the instructions, and the accompanying guidance document and “Helpful Hints” are not models of clarity, particularly for someone whose grasp of English may be limited.

Question 7, for example, requires the broker to provide a social security number even though the overseas broker will not have one and will have no idea what is meant by this requirement. Question 8 asks for the foreign broker to list “U.S. Munitions Articles Manufactured and/or Exported and Defense Services Provided” along with requisite USML category numbers. The foreign broker will have no idea whether his brokering services are a “defense service” or what category they should be placed in. Question 12 refers the foreign broker to a complicated provision of the ITAR to determine if it is owned by a foreign person, a question which may be uniquely confusing to an individual (as opposed to corporate) foreign registrant. The Guidelines issued by the DDTC have a “Registration Checklist” which still requires the foreign broker to submit evidence of qualification to do business in the United States even though the regulations have been updated to permit the foreign broker to submit its foreign business license instead. The “Sample Transmittal Letter” in that same guidance document still requires the foreign broker to certify that it is not a foreign person, even though the registering foreign broker necessarily is foreign.

This is all a prescription for disaster that guarantees deficient registration applications from foreign registrants. It seems to me the fault here may well rest with the failure of DDTC to take the time to do its own job properly, not with a foreign broker who fails to understand this confusing morass.

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Copyright © 2006 Clif Burns. All Rights Reserved.
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