ExportLawBlog

Archive for the ‘DDTC’ Category

Mar

7

DDTC Poised to Impose Export Ban on BAE

Posted by Clif Burns at 6:46 pm on March 7, 2011

BAE Almost one year ago, on March 4, 2010, this blog reported that the Directorate of Defense Trade Controls (“DDTC”) had posted a website notice that all BAE export licenses were on temporary hold. This came several days after BAE had pleaded guilty to charges that it had paid bribes in violation of the Foreign Corrupt Practices Act and failed to report them as commissions in violation of the Arms Export Control Act. DDTC said the hold was to allow the agency to consider the impact of BAE’s guilty plea. And then, almost as quickly as the notice appeared — poof! — it was gone.

Well, the DDTC has apparently meditated on the fate of BAE long enough. An article in today’s Financial Times reported that BAE is bracing itself to have DDTC impose additional fines on the company and to suspend BAE’s privilege to export defense articles. Given BAE’s participation in such multilateral defense projects as the Joint Strike Fighter, it seems unlikely that the DDTC will impose a total export ban on BAE, but some version of an export ban is, apparently, both likely and imminent.

According to the Financial Times, the State Department was keeping mum on the matter but a BAE spokesperson had this to say: â€œDialogue continues and is progressing with the Department of State in order to address its concerns regarding matters arising from the [Department of Justice] settlement.â€

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Feb

14

More APO/FPO Export Confusion

Posted by Clif Burns at 9:34 pm on February 14, 2011

Category: AES • DDTC

APO Postmark If there is anything that qualifies as a true urban legend in the export areas, it’s the surprisingly widespread belief that shipments to overseas APO and FPO addresses aren’t exports. Of course, that’s no more true than the belief that the fate of a rider on an equestrian statute can be determined by the position of the horse’s hooves. (Not.)

The International Traffic in Arms Regulations (“ITAR”) aren’t uniformly clear in all aspects, but the definition of export is pretty clear in this respect. Section 120.17(a) defines export as “sending or taking a defense article out of the United States in any manner.” It doesn’t say “in any manner except by mail to an APO or FPO address.” And if you ask DDTC this question, they will tell you that an APO address outside the U.S. requires an export authorization by license or exemption like any other shipment that leaves the United States.

This urban legend is sufficiently widespread that even one government agency has propagated this bogus notion. And not just any agency but an agency itself intimately involved in dealing with exports — the U.S. Census Bureau — has said that APO and FPO shipments aren’t exports. As recently as December 22, 2010, Census said on its own blog, in a post that has now been flushed down the memory hole, that the “State Department does not license shipments to APO or FPO addresses.”

But we’ve heard from another exporter that it gets worse. According to that exporter, the mandatory Automated Export System does not allow you to enter an ITAR license number when shipping an item to an APO address. Part 523 of the USPS’s International Mail Manual says this:

Goods mailed to APO/FPO/DPO addresses are not subject to the Foreign Trade Regulations. Accordingly, customers are not required to file electronic export information via the U.S. Census Bureauâ€™s Automated Export System or AESDirect Web site for such mailings, and they do not need to present a Proof of Filing Citation, AES Downtime Citation, or Exemption and Exclusion Legend.

The same exporter says that DDTC is saying in such a case that the exporter must provide its own notification of the export to DDTC when it can’t be done through AES. Although this is a nice courtesy to DDTC, there is nothing in the ITAR that requires the exporter to provide this notice to ITAR in these cases.

But there’s a larger point here: if the government can’t figure out its own export regulations, why should it expect anyone else to figure them out?

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Feb

2

DDTC Changes Requirements for Certain Electronic Agreement Filings

Posted by Clif Burns at 9:16 pm on February 2, 2011

Category: DDTC

State Department One of the jobs of this blog is to inform our faithful readers about changes that DDTC makes in its rules and guidelines but, for whatever reason, decides that it should keep secret. Currently Section 13.2(a)(3) of the Guidelines for Preparing Electronic Agreements (7 Oct 2009), requires applicants to attach to proviso reconsideration requests a separate scanned pdf copy of the DSP-5 Agreement approval. It also requires that the 9-digit DSP-5 number be referenced in blocks A and C of the continuation to Block 8.

Notwithstanding Section 13.2(a)(3), DDTC has not been requiring scanned copies of the approved DSP-5 be submitted with the proviso request, presumably because the 9-digit DSP-5 number permits licensing officers to access the agreement approvals in the D-Trade system itself. In a recent email to an exporter, the DDTC recently confirmed that the scanned copy is no longer necessary in proviso reconsideration requests. It also noted that amendment requests did not require the inclusion of a scanned copy of the license approving the agreement in question. Apparently, this change in processing requirements will be made public when DDTC gets around to issuing a new version of these guidelines.

The change of procedure with respect to agreement amendments poses a bit of a problem, which the DDTC email acknowledged. Under the guidelines, if the last amendment/basic agreement was submitted electronically, the exporter must use the 9-digit DSP-5 number to identify the case. Otherwise, the exporter must use the 6-digit DA/MA/TA number to identify previous paper cases. But if the DA/MA/TA number is used, the people at the Defense Technology Security Administration (“DTSA”), which uses the electronic U.S. Export System, can’t get access to those prior agreements. Whether this has slowed down DTSA’s approval of these requests is not known.

The U.S. Export System is supposed to become the unified electronic filing and processing system for all exports. Whether the new guideline permitting the exporter to omit a scanned copy of the license will survive when and if the unified system goes into place is also not known.

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Jan

5

Census Blog Miffs Export Rules

Posted by Clif Burns at 5:15 pm on January 5, 2011

Category: DDTC • ITAR

Census Jobs Available This may look like U.S. Government blog week on ExportLawBlog, but it’s purely a coincidence. Yesterday we highlighted the Treasury blog and today the subject is the U.S. Census blog with the somewhat enigmatic title of Global Reach. Because not much was popping in the Census world — something I imagine is more or less always the case — the industrious bloggers at Census thought that they would educate their readers about the mysteries of defense exports and the International Traffic in Arms Regulations with a post* titled “Understanding Basic Directorate of Defense Trade Controls (DDTC) License Requirements.”

As you continue to file shipments against your DDTC license, your license will become â€˜decrementedâ€™ with each additional filing. This simply means that your license balance will decrease by the value of each accepted shipment. When the license balance is fully exhausted, an informational message will be sent stating:

176 DDTC LIC NOW EXHAUSTED:

At this time, your company must apply for an amendment to add more value onto the license or apply for a new license.

Um, no. There is so much wrong with the statement quoted above, it’s hard to know where to start. But I’ll start with the statement that decrementing means decreasing the balance by the “value” of each accepted shipment. Decrementing reduces the remaining quantity and the remaining value, not just the remaining value. If you are entitled to export 5 widgets with a value of $50 and you export 5 with a value of $35, the quantity on your license is decremented to zero and the license is kaput. You can’t export $15 more of widgets. You’re done.

Second, you can’t amend a license to increase quantity or value. Section 123.25(c) of the ITAR makes that perfectly clear as to increases in licensed quantities. You need a new license for the additional quantities. This notice posted on the DDTC website indicates that a new license is needed to add additional value to the license.

Here’s an idea: in the unlikely event that DDTC ever starts a blog, it should agree that it won’t post anything on the procedures for challenging population estimates if Census agrees not to post anything ever again on the ITAR.

*The original post disappeared from the Census blog a little while ago, apparently after Census received one or more emails pointing out the howler in the post. Of course, thanks to the miracle of the Google cache, nothing ever really dies on the Internet, and the link to the Census post above is a link to it in the Google cache. In case that ever disappears, here is a pdf version of the post for posterity.

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Dec

15

Proposed Category XII Reforms Leaked — But Not By WikiLeaks

Posted by Clif Burns at 11:10 pm on December 15, 2010

Category: DDTC • Export Reform

laser WikiLeaks has gotten the State Department so flustered that it is leaking its own documents. Today DDTC posted a working document discussing proposed changes to Category XII of the United States Munitions List (“USML”). The document had emblazoned on each page “For DTAG Discussion only, not for release outside of the DTAG.” Fortunately, there was no discussion of voluptuous Ukrainian nurses traveling with a certain flamboyant dictator. Instead, the only things of even remotely prurient interest in the document are things that would only cause the most hard-core export geeks to break a sweat.

Category XII(b) currently controls:

Lasers specifically designed, modified or configured for military application including those used in military communication devices, target designators and range finders, target detection systems, and directed energy weapons.

The DTAG working document would substantially narrow this category. Naturally the “specifically designed, modified or configured for military application” language would go the way of VHS recorders and CRT televisions. Instead three specific classes of lasers would be called out and placed in Tier 2:

a. (ITAR T2) Lasers designed exclusively for directed energy weapons.

b. (ITAR T2) Lasers for target designators containing standard or encoded designator pulse formats

c. (ITAR T2) Lasers specifically designed for infrared countermeasures.

Under this formulation, military communications lasers and target detection systems would not be controlled by the USML and directed energy weapon lasers would only be covered if the laser was exclusively designed for directed energy weapons. And since these lasers would be in Tier 2, these lasers would be exempt from license requirements to countries that are allies and strategic partners.

Even more interesting is the language relating to the proposed new controls on Gen3 night vision:

5. (ITART2) Gen3 image intensification tubes with a FOM of XXXX or more.

6. (ITAR T3) Gen 3 image intensification tubes with a FOM of XXXX or less.

You can spend all day looking for “FOM” in the current controls for night vision set forth in the USML, so it’s interesting to see this concept, long a mainstay of provisos for night vision export licenses, take a step out of the closet and take a bow. “FOM” stands for Figure of Merit which is a performance-based measure calculated from the number of line pairs per millimeter multiplied by the signal-to-noise ratio of the image intensifier tube. Although the FOM number is left blank in the draft, it is likely to around 1600 FOM. This will eliminate most controls on night vision with an FOM under 1600 by placing it in Tier 3 where licenses will only be required for the most sensitive destinations

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