Director of Defense Trade Controls Presntation

1. 1
Directorate of Defense
Trade Controls Overview

2. Licensing and Compliance
Responsible U.S. Agencies
• Department of State
• Department of Commerce
• Department of the Treasury
• Department of Justice
• Department of Homeland
Security
• Department of Energy
• Department of Defense
– DTSA, Armed Services, DSS, DSCA

3. Directorate of Defense
Trade Controls (DDTC)
Our Mission:
Advance US 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.

4. DDTC Organization
Robert S. Kovac, Acting
Deputy Assistant Secretary
Defense Trade
Robert S. Kovac
Managing 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

5. • 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
Arms Export Control Act
(AECA)

6. • 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
Arms Export Control Act
(AECA)

7. • 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
International Traffic in Arms
Regulations (ITAR)

8. • 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 of Defense Trade Controls
Delegation of Authority

9. • Foreign Policy
• National Security
• Human Rights
• Regional Stability
• Proliferation
Purpose of Controls

10. New Initiatives
• Training Program
• Documenting Procedures
• Auditing/Case Review
• Electronic Submissions
• NSPD-56 Defense Trade Reform
– Resources and manning
– Processing Time-lines
– ITAR Review

11. Processing Time-lines
• All applications must be processed within
60 days
• Exceptions:
– Congressional notification required
– DOD review still pending
– Blue Lantern pending
– Government Assurances required
– Waiver required

12. • U.S. Person
• Foreign Person
• Defense Article
• Technical Data
• Public Domain
• Defense Service
• Significant Military Equipment
• Export
• Retransfer/Re-export
Definitions

13. • A lawful permanent resident of the U.S.
• Any corporation, business association,
partnership, trust, society or any other
entity that is incorporated to do business
in the United States
• Governmental entity (federal, state, local)
and U.S. military
U.S. Person
22 CFR 120.15

14. • NOT a lawful permanent resident of the
U.S.
• Any corporation, business association,
partnership, trust, society or any other
entity that is NOT incorporated to do
business in the United States
• International organizations (e.g., NATO,
UN), foreign governments, diplomatic
missions and embassies
Foreign Person
22 CFR 120.16

15. • Any item or technical data designated on
the U.S. Munitions List (USML)
• Includes technical data recorded or stored
in any physical form, models, mock-ups or
other items that reveal technical data
Defense Article
22 CFR 120.6

16. • Information required for the design, development,
production, manufacture, assembly, operation,
repair, testing, maintenance or modification of
defense articles
• Blueprints, drawings, photographs, plans,
instructions and documentation
• Software consisting of application programs,
operating systems and support software for the
design, testing, diagnosis and repair of defense
articles
Technical Data
22 CFR 120.10

17. • Does not include information concerning
general scientific, mathematical or
engineering principles commonly taught in
schools, colleges and universities or in the
public domain
• Does not include basic marketing
information on function or purpose or
general system descriptions
Technical Data
22 CFR 120.10

18. • Includes but is not limited to information
which is published and generally
accessible or available to the public:
• Sales at newsstands and bookstores
• Subscriptions which are available without
restriction to any individual
• Public libraries
• Unlimited distribution at conferences,
seminars, trade shows or exhibitions which
are open to the public
Public Domain
22 CFR 120.11

19. • Furnishing of assistance, including training,
to foreign persons in the U.S. or abroad
• Encompasses the design, development,
engineering, manufacture, production, assembly,
testing, repair, maintenance, modification,
operation, demilitarization, destruction,
processing or use of defense articles
• Military training of foreign units and forces
• NOTE: May involve public domain data or
commercial hardware
Defense Service
22 CFR 120.9

20. • Defense articles for which special export
controls are warranted because of their
capacity for substantial military utility or
capability
• Items designated by an asterisk
• All classified articles enumerated on the
USML
• Requires a DSP-83
Significant Military Equipment
22 CFR 120.7

21. • Sending or taking a defense article or
technical data out of the United States
• Disclosing, by any means, or transferring a
defense article or technical data to a
foreign person in the United States or
abroad
• Performing a defense service on behalf
of or for the benefit of a foreign person in
the United States or abroad
Export
22 CFR 120.17

22. • The transfer of defense articles or
defense services to an end-use,
end user or destination not
previously authorized
Re-export/Retransfer
22 CFR 120.19

23. 23
Commodity Jurisdiction

24. Discussion Topics
• Designation of Defense Articles
and Defense Services
• Commodity Jurisdiction Process

25. • 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
Designating Defense Articles and
Defense Services

26. • 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
Policy for Designating Defense
Articles and Defense Services

27. • 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
Policy for Designating
Defense Articles and Defense
Services

28. • Interagency review governed by National
Security Council (NSC):
• Department of Commerce
• Department of Defense
• As necessary
• NASA
• Department of Energy
• Other U.S. Government agencies
Commodity Jurisdiction
Process

29. CY 2008 CJ Statistics
• Median processing time – 76 days
• 547 CJ requests received
– Increase of 49% from 2006
• 574 CJ determinations made
– 70% not USML

30. Registration & Eligibility

31. Discussion Topics
• Registration Requirements
• Eligibility
• Registration Changes

32. Who Has To Register & Why
• Manufacture / Exporter
– Any Person (Other than USG Officer or Employee in Official
Capacity) who Engages in the United States in the Business of
Either Manufacturing or Exporting Defense Articles or Furnishing
Defense Services is Required to Register with DDTC
– Required by Law (AECA Section 38 (b)(1)(A)(i) & ITAR Part 122)
• Broker
– Any Person (Other than USG Officer or Employee in Official
Capacity or Employees of Foreign Governments or International
Organizations Acting in Official Capacity) Subject to U.S.
Jurisdiction who Engages in the Business of Brokering Defense
Articles and Defense Services is Required to Register with DDTC

33. Registration Requirements
(ITAR Part 122 & 129)
• U.S. manufactures & exporters of defense articles and entities
providing defense services (“M” code)
• U.S. brokers (“K” code)
• Foreign brokers subject to U.S. law (“K” code)
• Complete DS-2032 form, transmittal letter, authorization to business in
the U.S. (or equivalent for foreign brokers) and fee payment
• Maintain registration and notify of changes (material change,
acquisition, merger of sale)
• Broker Annual Reporting
• Guidance and forms available at: www.pmddtc.state.gov

34. Exporters Must Be Eligible
(ITAR Part 120.1(c))
• U.S. person* - ITAR 120.15
• Registered with DDTC – ITAR 122
• Directly employed by registrant
• Meet the definition of empowered official – ITAR 120.25
• Trained and knowledgeable in defense trade controls at a level
commensurate with responsibilities
• Commit the company to AECA/ITAR adherence
*Foreign governments are permitted to submit license applications

35. Exporters Must Not Be
Ineligible (ITAR Part 120.1(c))
• Foreign persons* - ITAR 120.16
• Administrative debarment for civil violation of AECA or ITAR – ITAR
127.7
• Statutory debarment for criminal conviction for violating AECA or ITAR
– ITAR 127.7
• Indictment or conviction of violating “enumerated statutes – ITAR
120.27
• Ineligible to contract with U.S. Government (USG)
• Ineligible to receive licenses from any USG agency
• Policy of denial, revocation, suspension – ITAR 126.7
*Foreign governments are permitted to submit license applications

36. Registration Changes
• Two Federal Register Notices
– Validity period set at one year (July 2008)
– New fee structure (September 2008)
• New fees to meet the President’s National
Security Directive
– 75% self-financing
– Improvements to licensing function, timeliness and
predictability, IT upgrades
• Total registrants near 7500, increase nearly
50% since 2004
• Electronic Registration in the future

37. • A Broker means Any Person who Acts as an AgentA Broker means Any Person who Acts as an Agent
for others in Negotiating or Arranging Contracts,for others in Negotiating or Arranging Contracts,
Purchases, Sales or Transfers of Defense Articles orPurchases, Sales or Transfers of Defense Articles or
Defense Services in Return for a Fee, Commission,Defense Services in Return for a Fee, Commission,
or other Consideration (ITAR Part 129.2(a))or other Consideration (ITAR Part 129.2(a))
• Brokering Activity Means Acting as a Broker asBrokering Activity Means Acting as a Broker as
defined in ITAR Part 129.2, and Includes thedefined in ITAR Part 129.2, and Includes the
Financing, Transportation, Freight Forwarding, orFinancing, Transportation, Freight Forwarding, or
Taking of any Other Action That Facilitates theTaking of any Other Action That Facilitates the
Manufacture, Export, or Import of a Defense Article orManufacture, Export, or Import of a Defense Article or
Defense Service, Irrespective of its Origin (ITAR PartDefense Service, Irrespective of its Origin (ITAR Part
129.2(b))129.2(b))
Brokering DefinitionBrokering Definition
(ITAR Part 129)(ITAR Part 129)

38. • All Defense ArticlesAll Defense Articles
• Applied to All Persons Subject to US JurisdictionApplied to All Persons Subject to US Jurisdiction
• US or Foreign Persons / US Origin Defense ArticlesUS or Foreign Persons / US Origin Defense Articles
• US Persons / Foreign Defense Articles & Defense ServicesUS Persons / Foreign Defense Articles & Defense Services
(ITAR Part 129.2)(ITAR Part 129.2)
• Does Not Include Activities by US Persons that are LimitedDoes Not Include Activities by US Persons that are Limited
Exclusively to US/Domestic Sales or Transfers to US PersonExclusively to US/Domestic Sales or Transfers to US Person
• ((e.g., Not for Export or Re-transfer in the US or to a Foreign Person)e.g., Not for Export or Re-transfer in the US or to a Foreign Person)
• Does Not Include Persons Exclusively in the Business ofDoes Not Include Persons Exclusively in the Business of
Financing, Transporting, or Freight Forwarding, whenFinancing, Transporting, or Freight Forwarding, when
Business Activities do not Include Brokering DefenseBusiness Activities do not Include Brokering Defense
Articles or Defense ServicesArticles or Defense Services
Brokering ScopeBrokering Scope
(ITAR Part 129)(ITAR Part 129)

39. 39
License Types

40. • DSP License Types
– Scenarios/Purpose
• Amendments
• Retransfer/Re-export
• Proviso Reconsideration
Discussion Topics

41. • DSP-5 Permanent Export**
• DSP-73 Temporary Export**
• DSP-61 Temporary Import**
• DSP-85 Classified Transactions
• Amendments
• DSP-119 – D-TRADE1/legacy cases
• DSP-6/74/62/84 – DTRADE2
**D-TRADE only**
DSP License Types

42. • 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;
• Total authorized value exhausted;
• Expiration date reached
Validity Period

43. • Defense Articles (hardware)
• Only one ultimate foreign end-user
• Must be supported by documentation from
a foreign party to the transaction
• Purpose and commodity blocks must be
consistent with supporting documentation
• Part 130 statement
DSP-5 Permanent Export
Scenarios/Purpose

44. • Technical Data
• Marketing/bid and proposal
• Plant Visit
• Offshore procurement
• Defense Services – Exceptional circumstances!
• Short-term training
• Foreign Person Employment
• Can be multiple ultimate foreign end-users for
technical data and defense services
DSP-5 Permanent Export
Scenarios/Purpose

45. • Foreign Person Employment
• Employment by a U.S. Company
• 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 February 2009
DSP-5 Permanent Export
Scenarios/Purpose

46. Temporary export of defense articles only. Export of
technical data is a permanent export. Exception:
software loaded on a computer or manuals/operating
instructions for trade show/demonstration
• Repair and/or replacement
• Enhancement by foreign entity of U.S.-origin defense
article
• Test equipment/testing and “fit-checks”
• Demonstration/marketing
• Trade show
DSP-73 Temporary Export
Scenarios/Purpose

47. • Series versus single departure
• Quantity restored upon return to U.S.
• Can be multiple temporary foreign end-users
• Encourage limiting transactions to one geographic
region (Europe, Middle East, South America)
• Purpose and commodity blocks must be consistent
with request
DSP-73 Temporary Export
Scenarios/Purpose

48. • 22 CFR 123.3(a)(1) – Temporary imports of
unclassified defense articles that are to be
returned directly to the country from which they
were shipped to the United States. Corresponds
to Block 23(b) option 1:
• Overhaul/repair
• Modification/upgrade
• Demonstration/Trade shows (foreign-
manufactured goods)
• Military exercises at U.S. bases/ranges
DSP-61 Temporary Import
Scenarios/Purpose

49. • 22 CFR 123.3(a)(2) – Temporary import of
unclassified defense articles in transit to a third
country. Corresponds to Block 23(b) option 2:
• Transshipment
• Single entry and exit authorized
• Block 23(a) option “other” includes
transshipment, trade shows, demonstration and
military exercises
DSP-61 Temporary Import
Scenarios/Purpose

50. • 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.)
• NEW GC requests for name/address and/or
registration code changes – see web notice
• DSP-119 for DTRADE and legacy
• DSP-6/74/62/84 for DTRADE2
Amendments

51. • 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
• 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
Congressional thresholds are not tripped
Amendments

52. • 22 CFR 120.19 “…transfer of defense articles or
defense services to an end-use, end-user or
destination not previously authorized”
• 22 CFR 123.9(a) prior written approval of 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
• Exception for NATO (governments and agencies),
Australia, Japan at 22 CFR 123.9(e)
Retransfer/Re-export

53. • 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:
• General Correspondence (GC) format
• Assigned a GC case number for DSP licenses
• Assigned as an amendment for agreements
Proviso Reconsiderations

54. 54
Agreements Overview

55. 55
Purpose
Provide attendees an overview of
Technical Assistance Agreements
(TAAs) and Manufacturing License
Agreements (MLAs) adjudication
process

56. 56
Discussion Topics
• Understanding Agreements
• The Major Players
• Special Considerations
– Amendments
– File Maintenance

57. 57
The Million-Dollar Question
• When is an agreement necessary?
• Answer:
1. When Defense Services are involved and/or
2. When Tech Data will be imported/exported
3. May or may not involve hardware
4. And for Foreign Manufacturing of defense
articles that involves items 1, 2, or 3 above
• The Agreement covers the full scope of the
effort

58. 58
TAA or MLA?
• When effort involves the transfer of
Manufacturing Know-How use an
MLA…otherwise use a TAA

59. 59
DSP Licenses vs. Agreements
• Generally speaking…
Involve a single transaction of hardware or tech data between two parties
Note: may be split into multiple shipments over a specified period of time
Point B
Point A

60. 60
DSP Licenses vs. Agreements
• Generally speaking…
Involve multiple transactions of hardware and/or tech data between two or more
parties involving performance of defense services
Defense
DefenseServices
Services
Tech daTa
Tech daTa
Tech daTa
Tech daTa

61. 61
Who Are These “Parties”?
• Two Major Categories
– U.S. Person (ref: 22 C.F.R. Part 120.15)
• U.S. Applicant (Signatory)
• Other U.S. Signatories
• End User
– Foreign Person (ref: 22 C.F.R. Part 120.16)
• Foreign Licensees (Signatory)
• Sublicensees
• Subcontractors
• Third Country/Dual Nationals
• End Users
The Major Players

62. 62
Sublicensees vs. Subcontractors
• Sublicensees
– Transfer of ITAR controlled Tech Data
– Do not have direct communication with US parties
• There are no US sublicensees
– Included in Agreement
• Subcontractors
– Do not have access to Tech Data or communications with
US Parties
– Usually providing a commercial off-the-shelf type product
to foreign party
– Not Included in Agreement
Major Players

63. 63
Third Country Nationals (TCN) and Dual Nationals (DN)
• Definitions:
– TCN – An individual from a country other than the country
which is the foreign signatory to the agreement
– DN – A TCN may also be a dual national if he holds
nationality from more than one country
– Foreign Nat’l Employee – A foreign person employed by
a U.S. Party
• Agreements must specifically list the countries of all
TCN/DNs who may participate in related activities
Major Players

64. 64
Think Big Picture
• Who are all the Parties that you will be working with?
• Who is Your Customer?
• Is there a different end-user of the product?
• Does your Customer have any technical
consultants who will be attending your
meetings?
• Does your customer have any Subcontractors
or team partners that you may need to work
with?
• Does your customer want to have access to or
have meetings with your subcontractors?

65. 65
Amendments
Why Amend? What are the entering arguments?
• Extensions - Submit At Least 60 Days Before Expiration
• Company Name Changes (Reorganizations and
Acquisitions/Mergers)
• Additional Signatories Within Current Transfer Territory
– Describe complete role within amendment text
• Value Adjustment (Better Estimate, Export Change)
– Technical Data, Defense Services, Hardware
Generally Not Staffed

66. 66
• New U.S. Registrant/Acquisitions/Mergers
– Must provide list of surviving licenses and agreements
to DTCC’s registration division
– Within 60 days, must submit copy of signed
amendment executed by new U.S. entity, former U.S.
licensor, and foreign licensee(s) with complete
application package
• New Foreign Licensee
– Must submit amendment for execution by U.S. licensor
and new foreign licensee
Ensure amendment is signed by all
parties, new and old
Amendments (contd)

67. 67
• New Effort
– Hardware/Tech Data/Service NOT Previously Authorized
– SOW Changes
– New Signatory Outside Current Transfer Territory
– Manufacturing Rights or Sales/Marketing Territory
Increase
• Same Effort?
– More of Same in Largely Expanded Quantities
• MUST describe all changes within body of amendment
• May Require Re-Notification to Congress
Generally Staffed
Amendments (contd)
Scope Expansion

68. 68
License Review Process

69. • Division Structure
• Case Assignment
• Review Criteria
• Referral Process
• Final Review and Issuance
• Customs
• Common Reasons for RWA
Discussion Topics

70. DDTC Licensing Divisions
Division 2 – Land and Ship
Ruth Jackson, Chief
VI, VII, XII, XIII, XVI,
XVIII, XX, XXI
Division 3 – Missile and
Space
Tony Dearth, Chief
IV, V, IX, XIV, XV
Division 4 – Electronics
Angela Brown, Chief
XI
Division 5 – Aircraft
Mal Zerden, Chief
VIII
Division 6 – Small Weapons
Chuck Schwingler, Chief
I, II, III, X

71. • Division Chief
• Case Assignment
• Team Management
• Licensing Officers
• Case Adjudication
• Special Projects/Assignments
• Administrative Support
• License Amendments
• Referral Management
• Agreements Issuance
Division Structure

72. • 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
Case Assignment

73. • 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
Review Criteria

74. • 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
Review Criteria

75. • Regulatory Review cont’d
• Foreign Policy
• National Security
• Regional Stability
• Human Rights Policy
• Multilateral Regimes
Review Criteria

76. 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 status at http://elisa.osd.mil
Referral Process

77. Other U.S. Government and 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
Referral Process

78. • 22 CFR 123.15
• NATO + 4 (Japan, Australia, New Zealand, South
Korea)
• $25 million Major Defense Equipment (22 CFR 120.8)
• $100 million (any defense articles, technical data and
defense services)
• Non-NATO + 4
• $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
Congressional Notification
Thresholds

79. • 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
Congressional Notification
Process

80. • 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
Congressional Notification
Process

81. • Licensing Officer reviews case with
recommendation of other agencies and
determines final disposition of cases:
• Approve
• Approve with provisos
• Return Without Action (RWA) – does not meet
requirements but deemed fixable
• Deny – cannot be fixed, inconsistent with national
security or foreign policy
Final Review and Issuance

82. • Daily transfers to U.S. Customs are provided
on all approved applications
• A printed copy of the license must be
supplied to Customs (CBP) at the port of
exit
• Automated Export System (AES) information
is supplied to DDTC to track shipments
DDTC and Customs

83. • No Support Documentation Provided
• Wrong Support Documentation Provided
• Documentation and License Application are
inconsistent
• E.g., varying quantities, conflicting end-use
• Wrong License Application for Transaction
• Missing End-Use/r Statement
• DSP-83 Not Included or Not Complete
Common Reasons for RWA

84. 84
ITAR Exemptions

85. • What is an Exemption?
• Considerations for Use
• Requirement for Exemption Use
• Recordkeeping and Reporting
Requirements
• Exemption Overview
Discussion Topics

86. • A specific authorization in the ITAR to
permit exports of defense articles/
defense services/technical data by U.S.
persons in lieu of a validated license
• Circumstances with low risk of
inadvertent technology transfer or
diversion
What is an Exemption?

87. • U.S. person assumes responsibility for
correct use and risk of violation
• You become a Licensing Officer
• Ensure responsible official has through
knowledge of the exemption
• Conditions
• Requirements
• Must be cited at time of use
Considerations for Use

88. • U.S. person eligible per 22 CFR 120.1(c)
• Must be registered with DDTC
• Not eligible under Exemption
• Proscribed Destination
• Congressional Notification Thresholds
• Offshore Procurement
• MTCR items
• SME
Requirements for
Exemption Use

89. • 22 CFR 122.5 – Maintenance of
Records
• 22 CFR 123.22(b) – Filing of Export
Information
• 22 CFR 123.26 – Recordkeeping
Requirement for Exemptions
• 22 CFR 125.6 – Certification
Requirements for Exemptions
Recordkeeping and Reporting
Requirements

90. 90
Compliance Overview

91. Compliance Overview
• Office of Defense Trade Controls Compliance (DTCC)
Organization
– Director & Deputy Director
– Three Divisions
• Compliance and Registration
• Enforcement
• Research and Analysis
– Immigration & Customs Enforcement (ICE) Liaison
– Federal Bureau of Investigation (FBI) Liaison

92. Office of Defense Trade Controls Compliance
Organizational Chart & Responsibilities
David Trimble, Director
Daniel Buzby, Deputy Director
Enforcement Division
Glenn Smith, Chief
• Voluntary & directed
disclosures
• Civil enforcement actions:
charging letters & consent
agreements, policies of denial,
debarments, transaction
exceptions and reinstatements
• Support to the law enforcement
community for criminal
enforcement
Compliance & Registration
Division
Deborah Carroll, Chief
• Registration of manufacturers,
exporters & brokers
• Company Mergers &
Acquisitions
• Company Visit Program
• Consent Agreement
Monitoring
• PM lead on CFIUS
Research & Analysis Division
Ed Peartree, Chief
• ‘Blue Lantern’ end-use
monitoring program
• Watch List screening &
maintenance
• Compliance Report
• Intelligence research projects
• AECA Section 3 reports to
Congress
Roger Osborn
ICE Liaison
Orlando Odom
FBI Liaison

93. Basic Warning Flags
• End-User/End-Use Indicators
– Unfamiliar end-user
– Reluctance or evasiveness by U.S. applicant or purchasing agent to provide information
– Payment in cash or at above-market rates
– Scanty, unavailable, or derogatory background information on end-user’s business
– Incomplete/suspect supporting documentation
– Unfamiliarity of end-users with the product or its use
– End-user declines usual follow-on service, installation, warranty, spares, repair, or overhaul contracts
• Commodity Indicators
– Commodities/services appear excessive or inconsistent with end-user’s or consignee’s inventory or
needs
– Commodities in demand by embargoed countries
– Especially sensitive commodities (e.g., night vision equipment, unmanned aerial vehicles, or cruise
missile technologies)
• Country/Shipment Indicators
– Unusual routing, trans-shipment through multiple countries or companies
– Location of end-user or consignee in a Free Trade Zone (FTZ)
– New/unfamiliar intermediary
– Vague or suspicious delivery dates, locations (such as P.O. boxes), shipping instructions, packaging
requirements, etc.
– Designation of freight forwarders as foreign consignees or foreign end-users
– Foreign intermediate consignees (trading companies, freight forwarders, export companies) with no
apparent connection to the end-user

94. Compliance Areas of Concern
• DTCC Closely Reviews Cases Involving the
Following:
– Technical Data and Defense Services
– Foreign Person Employees
– Significant Military Equipment (SME) – Missile
Technology and Chemical & Biological related
articles
– Joint Strike Fighter (JSF)
– Night Vision
– 126.1 Countries

95. Violations
• Unlawful to import/export or to attempt to
import/export any defense articles/technical
data or furnish any defense service without a
license or written approval from the US Dept.
of State
• Unlawful to violate any of the terms and
conditions of the ITAR

96. Disclosures
– Self-Directed (Voluntary Disclosure - See Section
127.12(a))
• Initial notification
• Full review and reporting of any additional violations
• Requires certification by a senior corporate empowered
official (see Section 127.12(e) and Section 128)
– DDTC-Directed (Directed Disclosure)

97. Commonly Reported Violations
– Unauthorized export
of hardware and
technical
data/defense
services
– Unauthorized
retransfer
– Activities which
exceeded the scope
of existing
authorizations
– Foreign nationals
– Improper use of exemptions
– Electronic transmissions
(email, IT systems, &
Intranet)
– Failure to properly validate
license and/or SED
– Failure to register as a
broker
– Record keeping (license
expirations, amendments,
etc.)

98. Penalties
• Civil (AECA Section 38(e))
– Each violation a fine of not more than $500,000
– debarment
– extra-compliance measures
• Criminal (AECA Section 38(c))
– Each violation a fine of not more than
$1,000,000, or imprisonment not more than 10
years, or both
– debarment

99. Blue Lantern Program
• Mandated by the Arms Export Control Act (AECA)
and is dependent on Embassy support and
commitment
• Key program in assuring that our exports do not end
up in the Grey Market
• Pre-or post-check of end-users or intermediaries
• An important factor in developing and maintaining our
confidence in the recipients of U.S. defense exports.

100. Blue Lantern Program cont.
- Parties that cooperate with Blue
Lantern checks soon establish a track
record of reliability with the result that
they are less likely to be the target of
such checks in the future.

101. Elements of a Good Compliance
Program
• Registration
– Identify as manufacturer, exporter, and/or broker
– Determine and certify eligibility
– Identify USML categories
– Identify empowered official(s)
– Identify the subsidiaries and the parent company
– Keep registration file current with DTCC - report
changes promptly

102. Elements of a Good Compliance
Program
• Establish a formal Compliance Program
– Anticipate requirements and understand programs
– Identify ineligible parties
– Know your customers
– Maintain comprehensive and current records
– Ensure compliance by others acting on your
behalf, i.e. freight forwarders

103. Establish Compliance Program
– Conduct recurrent training
– Establish a training schedule
– Conduct audits
– Prevent, detect, and report violations

104. Conclusion
• Impact U.S. National Security and Foreign Policy
• Impact Your company’s bottom line and reputation
• Compliance is not a paper exercise
• Be proactive, not reactive!
• If violations occur they should be used to educate
workforce and adjust compliance plan
• Senior level management involvement and support is
crucial to success
• Integral part of a company’s ability to do business
and stay in business

105. Complying with ITAR Controls
Further Guidance

106. • General Questions – Response TeamGeneral Questions – Response Team
• (202) 663-1282(202) 663-1282
• DDTCResponseTeam@state.govDDTCResponseTeam@state.gov
• LearnLearn More About U.S. Defense Trade ControlsMore About U.S. Defense Trade Controls
Registration, Licensing, and Other ITAR RegulatoryRegistration, Licensing, and Other ITAR Regulatory
Matters by Visiting the Department of State’sMatters by Visiting the Department of State’s
Directorate of Defense Trade Controls on the Internet at:Directorate of Defense Trade Controls on the Internet at:
www.pmddtc.state.govwww.pmddtc.state.gov
How to Obtain Further GuidanceHow to Obtain Further Guidance

107. Candace GoforthCandace Goforth
202-663-2798202-663-2798
goforthcm@state.govgoforthcm@state.gov
Contact InformationContact Information