Defense Trade Cooperation Treaties & Resource
How does the UK exemption work?
The Defense Trade Cooperation Treaty between the U.S. and UK is implemented through the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). Specifically, the Treaty is the basis for a new exemption to the ITAR (in §126.17- the UK Exemption). The Treaty, as implemented through the exemption, seeks to simplify the movement of equipment and information between and within the U.S. and the UK by creating an Approved Community of government and private sector entities and facilities. Approved Community Members may receive certain defense articles (including technical data) and defense services solely for an end-use that is within the Treaty scope (combined operations identified on the DDTC website, http://www.pmddtc.state.gov, cooperative government programs identified on the DDTC website, U.S. government contracts or solicitations that specifically identify Treaty eligibility, or HMG Projects listed on the DDTC website), without the need for ITAR export licenses or other written authorizations so long as all of the requirements outlined in the ITAR are followed. Similarly, the UK has created a corresponding Open General Export License (OGEL), so there is no need to receive an individual export license from the UK Government, if the transaction falls under the terms of the ITAR/OGEL.
The U.S. Community consists of departments and agencies of the U.S. Government and non-governmental U.S. persons registered with DDTC and not ineligible to export, according to the requirements and prohibitions of the Arms Export Control Act, the ITAR, and other provisions of U.S. law. This is the same as the community of U.S. exporters that can export pursuant to any ITAR exemption now.
The UK Community’s (UKC) membership comprises certain U.K Government entities and facilities, as well as non-governmental facilities that have been vetted and approved by both Treaty partners. All UKC members will be assigned an Approved Community Identification Number (ACID) once in the community. Each private sector facility in the UK will have its own ACID; membership is granted a particular private sector entity at a specified address, not to a company writ large. U.K Governmental entities are provided one ACID for all facilities that fall within their purview and are in the territory of the United Kingdom. U.S. exporters will need to ask for the ACID from their UK trading partner (for both private sector and governmental entities). U.S. exporters will be able to confirm UKC membership prior to export by searching the ACID in the Treaty Reference System (TRS) currently available under the Treaty tab on DDTC’s website. The Approved Community is subject to change; from the U.S. exporter’s perspective, UKC members can be added or removed from the community at any time, therefore, we encourage you to check the status of an entity prior to making a shipment.
For UK industry, specific facilities, not companies, can join the UKC. This is a voluntary decision. The criteria against which a facility’s application will be considered is outlined in the Treaty Implementing Arrangement (IA) and includes undergoing clearance to “List X” status; review of foreign ownership control or influence; review of previous convictions or indictments under UK or U.S. export laws and regulations; review of U.S. export licensing history of the entity or facility; and review of any potential national security issues (e.g., contact with proscribed countries). To qualify for UKC membership, UK facilities must have approval for inclusion from both the U.S. and UK governments.
Under the UK exemption, it will be possible for movement of defense articles within the Approved Community as long as the transactions are in support of pre-approved:
- combined military and counter-terrorism operations;
- cooperative security and defense research, development, production, and support programs;
- security and defense projects where the end-user is the Government of the United Kingdom; or
- U.S. Government end-use.
The U.S. and the UK governments will agree jointly on which projects, programs and operations qualify for processing under the terms of the UK exemption. A list of those programs is available on DDTC’s website. The UK exemption is not for commercial sales or transfers to third parties not in the Approved Community.
UK retransfer or re-export of items originally exported under the UK exemption to a person or facility outside of the Approved Community will require U.S. approval and UK authorization.
The UK exemption does not apply to transfers, exports, re-transfers, and re-exports to Australia, which has a similar treaty with the United States. Movements of Defense Articles originally exported in accordance with the UK exemption from the UK to Australia (or any other third country) are bound by normal UK export rules and the standard re-export provisions under the ITAR.
U.S. entities will also still be subject to licensing requirements related to permanent exports and all other requirements not explicitly removed by the language of the UK exemption.
Can a company decide unilaterally to use the UK exemption for a particular project or component?
A company may self-determine whether a particular transaction is UK exemption-eligible. To do so, a company must determine whether:
- the transaction is in support of a UK exemption eligible end-use (combined operations identified on the DDTC website, cooperative government programs identified on the DDTC website, U.S. government contracts or solicitations that specifically identify Treaty eligibility, or HMG Projects listed on the DDTC website);
- the defense article (including technical data) or defense service to be exported is eligible for export under the UK exemption (i.e., review of Supplement No. 1 to Part 126); and
- the facility to which the company is shipping is a member of the Approved Community.
I have a key supplier outside the UK and U.S. May I use the UK exemption?
Transactions with suppliers outside the UK and U.S. Approved Communities are not covered by the UK exemption. Transactions involving non-Approved Community members will require an ITAR license or other approval.
I am in a cooperative program with UK/U.S. and a third party; can I use the UK exemption?
Transactions with partners outside the UK and U.S. Approved Communities are not covered by the UK exemption. However, the UK exemption maybe utilized in the context of a multilateral program when the Treaty eligible elements are defined and managed separately, and are covered by a separate U.S.-UK agreement, MoU or other arrangement. Section 2(2)(c) of the Implementing Arrangement sets out the criteria for Treaty eligible programs.
How will UK exemption articles be protected when in the UK?
All U.S. defense articles, including technical data, and defense services provided under the UK exemption are required to have protective markings and be managed in accordance with the terms of the UK exemption, Implementing Arrangement, UK security regulations, and the UK Official Secrets Act.
What are the marking requirements under the UK exemption?
For defense articles, including technical data, and defense services classified for reasons other than solely the UK exemption (e.g., items unclassified in the U.S.), the standard marking or identification will read CLASSIFICATION LEVEL USML//REL USA and GBR Treaty Community//. For all other defense articles, including technical data, and defense services, the standard marking or identification will read RESTRICTED USML //REL USA and GBR Treaty Community// and will be handled while in the UK as “UK RESTRICTED” items.
Defense articles (other than technical data) shall be individually labeled with the appropriate identification detailed above; or, where such labeling is impracticable (e.g., propellants or chemicals), shall be accompanied by documentation (such as contracts or invoices) clearly associating the defense articles with the appropriate markings.
Technical data (including data packages, technical papers, manuals, presentations, specifications, guides and reports), regardless of media or means of transmission (physical, oral, or electronic), shall be individually labeled with the appropriate identification detailed above; or, where such labeling is impracticable shall be accompanied by documentation (such as contracts or invoices) or verbal notification clearly associating the technical data with the appropriate markings.
Defense services shall be accompanied by documentation (contracts, invoices, shipping bills, or bills of lading) clearly labeled with the appropriate identification detailed above.
Marking requirements are further outlined in §126.17(j) of the ITAR.
Will there be less paperwork associated with the UK exemption than existing ITAR licenses?
The UK exemption removes the requirement for submission of an export authorization request to the U.S. Department of State. You will not have to prepare, submit and wait for your authorization; however, the exemption does not remove requirements for maintaining records on the movement of defense articles. In most cases, record-keeping is the same as under the other parts of the ITAR. The UK exemption requires entities using the UK exemption to export, transfer, re-transfer, re-export, or receive defense articles maintain detailed records of all such movements. The detailed record keeping requirements are in ITAR §126.17(l).
Why don’t we wait for export control reform to go into effect instead of using the UK exemption?
The UK Treaty predates President Obama’s reform initiative, but the UK exemption is consistent with it while reflecting the close and enduring relationship the U.S. shares with one of its closest allies. The UK exemption streamlines trade exclusively with the UK, while the President’s proposed export control reform effort will make broader changes across the entire system. The UK exemption is available for use today and will be available in the future for eligible items that are on the USML. The UK exemption simplifies export controls for the movement of defense articles and services in support of coalition operations, cooperative defense programs, and U.S. and partner defense procurements from each other.
Given the improvements in export licensing timelines, how will the UK exemption make any difference?
Companies choosing to utilize the UK exemption will see a decrease in the time burden of preparing a license application, submitting it and waiting for its adjudication. Through procedural mechanisms such as an “Approved Community” of exporters and importers and identified projects and programs the UK exemption removes the need for individual licenses and the associated administrative burden of preparing them, as well as the uncertainty of when a license may be issued.
Will there be changes to UK laws?
Amendments to UK laws are not required to implement the Treaty although changes have been made to UK security and export regulations to reflect the Treaty’s requirements.
What criteria will be used as the basis for U.S. decisions on what Defense Articles to exempt from the scope of the UK exemption?
If a specific technology meets any one of the following criteria, it is included on the Exempted Technologies List and identified in Supplement No. 1 to part 126 of the ITAR. The technologies are those that:
- Are controlled according to U.S. Presidential Directive;
- Are controlled subject to applicable international agreements or arrangements (e.g., the MTCR, or Chemical or Biological Warfare regimes);
- Are not controlled for export as defense articles by the UK; and/or,
- Are targeted, sensitive technologies that should not be freely Transferred within an “Approved Community,” but only to specifically identified recipients pursuant to an export license.
No defense articles controlled for compliance with the Nuclear Suppliers Group (NSG), or the Missile Technology Control Regime may be exported under the UK exemption, and are included in Supplement No. 1 to part 126 of the ITAR, which supplement also includes “Defense Articles listed in the Missile Technology Control Regime (MTCR) Annex, the Chemical Weapons Convention (CWC) Annex on Chemicals, the Convention on Biological and Toxin Weapons, and the Australia Group (AG) Common Control Lists (CCL).”
These items are identified in Supplement No. 1 to Part 126 of the ITAR.
How do I export or obtain U.S. classified defense articles under the UK exemption?
You must obtain a written request, directive or contract from the U.S. Department of Defense prior to the initial export from the United States. After that, U.S. classified materiel (Confidential and above) eligible for transfer under the Treaty will be moved in accordance with the Treaty’s detailed arrangements and other applicable security requirements.
How do I submit a request for authorization to retransfer, reexport, change end-use, or transition of an item exported under the UK exemption?
You must submit a General Correspondence (GC) request to DDTC and request such authorization. Requests for authorization to retransfer, reexport, or change the end-use of an item exported under the UK exemption to one outside the scope of the exemption should be made pursuant to current practices under §123.9 (See §126.17(h)). Requests to transition from a current export license or other authorization following the initial export to UK exemption coverage should also be made via a GC to DDTC. The requirements for making such a request are outlined in §126.17(i).
I am unclear about the meaning, and the impact, of “marketing purposes” in §126.17(g)(1) and A1 of the List of Defense Articles Exempted from Treaty Coverage.
Item A1 of the List of Defense Articles Exempted from Treaty Coverage (reference Article 3(2) of the U.S./UK Defense Trade Cooperation Treaty) was developed to preclude marketing of items for which no prior USG determination has been made regarding export policy. Section 126.17(g)(1) reiterates the requirements of A1. The impact should be rather limited, because articles (including responses to solicitations) exported based strictly on compliance with the documented requirements, specifications and descriptions associated with the approved operation, joint program, or project would not be considered marketing.
What is the impact of C1 of the List of Defense Articles Exempted from Treaty Coverage exempting developmental systems which have not obtained written Milestone B approval from the Department of Defense?
C1 of the List of Defense Articles Exempted from Treaty Coverage requires an export license for the export of developmental U.S. technologies that have not previously been approved for an export license or have not received Milestone B approval from the Department of Defense. Section 126.17(g)(4) of the ITAR reiterates the requirements of C1. However, an export will be permitted under the UK exemption if that export is made pursuant to a written solicitation or contract issued by the DoD and if the developmental system export is consistent with parts A and B of the U.S. exempted technologies list (i.e., not otherwise exempted from UK exemption coverage by the exempted technologies list (Supplement No. 1 to part 126)). It is U.S. policy that export of systems prior to Milestone B requires case-by-case review and the UK exemption does not reverse this policy.
What criteria were used by the UK to decide which technologies would be exempt from the scope of the UK exemption?
The exempt technologies are drawn from the UK’s Strategic Exports Control List which includes items controlled by both the UK Government and the European Union. Technologies will be generally exempt if they:
- Are controlled subject to applicable international agreements or arrangements (e.g., the MTCR, or Chemical or Biological Warfare regimes);
- Are items which could be used for internal repression or violations of human rights;
- Are targeted, sensitive technologies that should not be freely transferred within an “Approved Community,” but only to specifically identified recipients pursuant to an export license;
- Are EU dual use items (as the EU has competence over this area of UK export control); or
- Certain categories of goods covered by the U.S. Munitions List but which the UK does not control (as there is no mechanism to control re-export).
These items are identified in Supplement No. 1 to Part 126 of the ITAR.
How will the exempted technologies lists be maintained?
The U.S. and UK exempted technologies lists will be updated on an as-needed basis. The U.S. and the UK will work together on any future additions or removals to the exempted technologies lists. Any resulting updates to Supplement No. 1 to Part 126 of the ITAR will be made and published in a Federal Register Notice.
What is the intent of Section 2(2)(e) of the Implementing Arrangements?
The intent of this paragraph is to provide the U.S. and UK flexibility in designating a cooperative program as UK exemption eligible. For example, if a cooperative program involves a system consisting of components that are both exempt and non-exempt, this paragraph allows the U.S. and UK to agree to use the UK exemption for transactions involving the non-exempt technologies. This paragraph is supported by the U.S. Senate’s Resolution of Advice and Consent to Ratification of the Treaty, which provides in Section 3(3) “Cooperative programs with exempt and non-exempt defense articles. It is the understanding of the United States that if a cooperative program is mutually determined, consistent with Section 2(2)(e) of the Implementing Arrangements, to be within the Scope of the Treaty pursuant to Article 3(1)(b) of the Treaty despite involving Defense Articles that are exempt from the Scope of the Treaty pursuant to Article 3(2) of the Treaty, the exempt Defense Articles shall remain exempt from the Scope of the Treaty and the Treaty shall apply only to non-exempt Defense Articles required for the program.”
If I incorporate UK exemption defense articles into a non-UK exemption article, will the “conjoined” item be subject to two regimes?
Determining UK exemption eligibility is done on a transaction-by-transaction basis. If an article exported under the UK exemption is incorporated into an article that is not UK exemption eligible (e.g., is identified in Supplement No. 1 to part 126 or is for an end-use not approved under the UK exemption), this would be considered a change in end-use of the article and would require authorization from DDTC. Upon receiving authorization for such change in end-use, the new “conjoined” item would be subject to the authorization under which the non-UK exemption article was received.
If I incorporate items not eligible for the UK exemption into a UK exemption eligible item, does that incorporated article become subject to the UK exemption?
How will the authorized end-uses be identified?
DDTC will post on its website lists of eligible combined military operations and exercises, combined counter-terrorism operations, cooperative programs, and HMG projects. These lists will be mutually determined by the UK MOD and the U.S. DOD, subject to mutual approval by the Department of State and the UK MOD. The U.S. and UK will work together to keep these lists current.
Eligible U.S. government end-uses will be identified in the solicitation or contract. The DFARS describes the conditions under which the contracting officer should include provisions in solicitations to offerors and include clauses in contracts requiring contractors to comply with the provisions of the treaty as implemented in the ITAR and DFARS. The DFARS also requires contractors to flow down these requirements in their contracts with sub-contractors at any tier. The DFARS also requires the offeror to sign a representation that export(s) or transfer(s) of qualifying defense complied with the requirements of this provision.
What about FMS? Will Defense Articles exported under the FMS Program be eligible for license-free Transfers to Approved Community members pursuant to the UK exemption?
Under the Arms Export Control Act, sales of defense articles and defense services to foreign countries under the Foreign Military Sales (FMS) program are made by the U.S. Government and executed by the Department of Defense. All FMS sales require the approval of the U.S. Secretary of State but do not otherwise require licenses that the AECA requires for exports for direct commercial sales where U.S. companies export defense articles or defense services to foreign countries.
Generally, the FMS process will remain unchanged. However, transfers following the initial sale, that is when the items have been delivered, may come within the UK exemption’s scope if all the exemption requirements are met for eligibility. The intent is to allow the transfer of defense articles and defense services, without the need for individual approvals from the Department of State, or from the Armed Forces of the UK to Approved Community members to achieve certain purposes, such as for maintenance, overhaul, or repair.
Terms of the FMS LOA unrelated to the provisions of the UK exemption will continue to apply.
The UK government will maintain a register of items that are transitioned to UK exemption eligibility. This will create a documented record that is available to the U.S. government for review or tracking of any FMS item transitioned to UK exemption coverage that is transferred within the Approved Community. The United States does not require a notification of each movement; however, records must to be kept and made available for review upon request.
What are the “cooperative program legislative authorities” referenced in Section 2(2)(a) of the Implementing Arrangements?
The legislative authorities referenced in Section 2(2)(a) are the following:10 USC 2350a, 10 USC 2350b, 10 USC 2350f, 10 USC 2350i, 10 USC 2350l, 10 USC 2358, 22 USC 2767 (Section 27 of the AECA), and 22 USC 2796d (Section 65 of the AECA). A “valid cooperative program international agreement or arrangement” is an agreement or arrangement which is based on the legal authorities cited in the answer to the question above, where the agreement or arrangement (1) has entered into force or effect; and (2) has not expired or been terminated.
What are the criteria for UK Community (UKC) membership? How does a facility join the UKC?
To be in the UKC, a nongovernmental facility must be within UK territory, must undergo clearance to “List X” status and will be considered against the following criteria: foreign ownership control or influence, previous convictions or indictments under UK or US export laws and regulations, the U.S. export licensing history of the entity or facility and national security issues such as contact with proscribed countries. Application should be made through the UK. The UK element will be managed by DE&S Infrastructure Security which runs the “List X” process. Following the UK review and approval, U.S. Government approval is required for the facility to join the UKC.
Once a facility is granted membership into the UKC, it will be assigned an Approved Community Identification Number (ACID). Each facility that is a member of the UKC will have its own unique ACID. Both UK governmental entities with facilities and non-governmental facilities will be assigned an ACID. U.S. exporters will need to request the ACID from their UK trading partners. U.S. exporters will be able to confirm UKC membership through a search function available in the DDTC Treaty Reference System (TRS), which will be available on the Treaty Tab on DDTC’s website.
Articles 4 and 5 of the Treaty use the phrase “security accreditation and a need-to-know” in reference to personnel and employees. Does “security accreditation” mean the same thing as “security clearance”?
Typically, the UK uses the term, “security accreditation” to refer to the facility security and information technology system vetting process, and the term “security clearance” when referring to the personnel security vetting process. For the purposes of the Treaty, the term “security accreditation” may be used interchangeably when discussing the vetting process for both personnel and Approved Community facilities. As with current security practices, the “need to know” requirement will generally be managed by Approved Community members rather than centrally managed or controlled by the respective government.
How will the U.S. Government vet all eligible UK facilities for inclusion in the UK Community (UKC)? Which U.S. agencies will participate in such vetting?
The UK government will review and vet requests by entities seeking membership in the UK Community, and then submit them to DDTC for review and vetting. In making its determination, DDTC will consult with the Department of Defense and evaluate each non-governmental entity proposed for the UKC on an individual basis, assessing for national security and foreign policy concerns.
Is access to Defense Articles exported pursuant to the UK exemption limited to nationals of the United States and the UK? Will some third-country nationals also have such access, by virtue of having a UK security clearances and a need to know?
A limited number of third country nationals may have access to Defense Articles exported pursuant to the UK exemption. Serving members of Her Majesty’s Armed Forces may have access to Defense Articles Exported under the Treaty, and some of those individuals may be third country nationals. The provisions of §126.18 may apply, provided all elements of the exemption are met.
Will the UK Community (UKC) include any distributors of parts and components, or only end-users of parts and components?
The UK exemption does not preclude distributors from being members of the UKC. However, it is unlikely that this would happen as such distributors would have to be cleared to handle classified information or material by the UK government.
What are the criteria for eligibility for the U.S. Community?
Eligibility is a key element of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). As with other ITAR exemptions, registration with DDTC is the first step, but an exporter must also not be ineligible as outlined in § 120.1(c) of the ITAR, or they cannot utilize the UK exemption.
What are the security accreditation requirements for employees in the U.S. Community?
Security accreditation will not be required of employees in the U.S. Community who do not handle classified exports or transfers. For the UK exemption, only those U.S. persons having access to exports or transfers classified at the CONFIDENTIAL level or higher will be required to obtain “security accreditation and a need-to-know.” The basis on which accreditation and need-to know decisions are made are based on E.O. 13526, “Classified National Security Information;” E.O. 12968, “Access to Classified Information;” and E.O. 12829, “National Industrial Security Program.” U.S. Community members are responsible for determining access based on a favorable adjudication of an appropriate investigation of the employee and resulting security clearance, and a determination of a need-to-know based on a lawful government purpose. Within the Department of Defense, the Defense Office of Hearings and Appeals handles hearings and appeals on negative security accreditation decisions. E.O. 12968 sets forth similar hearings and appeals proceedings for all other departments and agencies in the Executive Branch.
What Congressional notifications will occur?
Notifications will be made on exports that meet or exceed the notification thresholds of AECA Sec. 36(c) and (d). This information must be provided to DDTC 15 days prior to export. Congress will also be notified of any request to re-transfer or re-export to a person or entity outside of the UK Community a defense article or defense service where the value of such transaction meets or exceeds the thresholds identified in Section 3(d) of the AECA.
What impact, if any, will the UK exemption have on the operations and actions of various U.S. companies that are operating under consent agreements from past arms export cases?
U.S. companies or persons under Consent Agreements that have not been statutorily or administratively debarred by the Department may be members of the U.S. Community so long as they are otherwise eligible.
Will §123.4 be amended for repair/return?
No. There is no need to update or amend §123.4. The UK exemption provides for the movement of qualifying defense articles between the U.S. and the UK. Therefore, §126.17 can be used for items exported under the section that are shipped back to the U.S. for repair/return.
Will §121.16 Missile Technology Control Regime Annex (MTCR) be updated?
Section 121.16 will not be updated at this time. However, the MTCR Annex exclusions in the exemption are intended to reference the current MTCR. The current MTCR Annex is available at: http://www.mtcr.info/english/annex.html.
How do you use the UK exemption in the Automated Export System (AES)?
As outlined in §126.17(l)(2), all exporters of defense articles under the UK exemption must electronically file Electronic Export Information (EEI) using the AES citing one of the four referenced codes (126.17(e)(1); 126.17(e)(2); 126.17(e)(3); or 126.17(e)(4)) in the appropriate field in the EEI for each shipment. These codes refer to each of the approved end-uses under the UK exemption. These new codes will be added to the existing AES drop-down menu. Exporters will also be requested to enter the ACID of the intended end-user.
How does a UK non-governmental facility join the Approved Community?
UK non-governmental facilities wanting to join the Approved Community can contact the UK Ministry of Defence’s Security Advice Centre: firstname.lastname@example.org or use the website:www.gov.uk/government/publications/industry-security-notices-isns to begin the application process.
DUAL AND THIRD PARTY NATIONAL
To what types of export authorizations do the terms of § 126.18 apply?
The provisions of § 126.18 apply to ITAR agreements (Manufacturing License Agreements, Technical Assistance Agreements and Warehouse and Distribution Agreements), approved export licenses, other export authorizations, and license exemptions under which a defense article is received.
Is any level of security clearance acceptable to meet the requirements of § 126.18(c)(1)?
Yes. The security clearance requirement is not restricted to Secret or above. Section 126.18(c)(1) requires only that the security clearance be approved by the host nation government and does not specify a particular level of clearance.
May a foreign company seek confirmation from DDTC as to whether an identified activity would be considered a “substantive contact?”
The foreign company should first seek to work out whether something is a “substantive contact” and of concern in a specific instance as this is a discretionary standard. If a foreign company is still uncertain after exhausting all means of determining whether an identified activity is a “substantive contact,” the foreign company may, as a last resort, submit a General Correspondence (GC) request to DDTC. For details, please refer to Section 3.5.3 of the “Guidelines for Preparing Electronic Agreements.”
What obligation do U.S. exporters have to verify that foreign companies have technology security/clearance plans in place if a foreign company intends to utilize the provisions of § 126.18?
Section 126.18 does not impose on the U.S. exporter an obligation to request a written statement or certification from the foreign company that it will be invoking the provisions of § 126.18 and has met all the requirements outlined therein to prevent the diversion of defense articles to unauthorized end-users and end-uses. However, it is always good business practice to be sure that foreign companies that are receiving ITAR-controlled items understand the requirements and restrictions associated with the receipt and handling of such items.
If implementing § 126.18 and using the § 126.18(c)(2) screening process, must the applicant maintain the Non-Disclosure Agreement or is the foreign licensee responsible for doing so?
For § 126.18(c)(2), the foreign licensee or sublicensee is responsible for maintaining all records regarding the screening to include the NDA. The U.S. applicant is only required to maintain NDAs for dual or third country nationals requested pursuant to § 124.8(5).
Does every employee in a company need to be vetted and sign a NDA, even if they do not have access to USML-controlled technical data or defense articles?
No. Only the individuals who will require access to USML-controlled technical data and/or defense articles, and who do not hold a security clearance from the host government, will be required to be screened/vetted pursuant to §126.18.
Is the U.S. applicant required to identify the countries of DN/TCNs in Block 18 of the DSP-5 vehicle who are screened pursuant to § 126.18?
No. Only DN/TCN individuals requested pursuant to § 124.8(5) must be identified in Block 18 of the DSP-5 vehicle.
Can a foreign party choose to use § 126.18 for an individual that qualifies for § 124.16?
Yes. The foreign party may prefer to screen all their DN/TCNs pursuant to § 126.18 regardless of whether they would qualify for § 124.16.
Does the agreement need to identify which foreign party is using which DN/TCN option(s)?
No. There is no requirement to identify which foreign party will use which option. However, the applicant may choose to identify this information in the agreement for clarification between the parties of the agreement.
Is the U.S. applicant required to contact all the foreign parties to determine which DN/TCN option(s) will be used?
The U.S. applicant’s responsibility is to coordinate which DN/TCN option(s) will be used by the foreign parties to the agreement so that the appropriate language can be included in the body of the agreement for review and approval by DDTC. To accomplish this, the foreign parties must be contacted/polled. Applicants may choose to receive sublicensee DN/TCN information indirectly through the applicable foreign licensee.
Can §124.16 be used to authorize dual/third country nationals of §124.16 countries employed by the applicant or other US Signatories to the Agreement?
No. All foreign nationals employed by a US Person must be authorized on a DSP-5 for foreign national employment or as a signatory to an agreement.
When an agreement involves the transfer of classified defense articles, can §124.16 still be used to authorize dual/third country nationals access to only unclassified defense articles associated with the agreement?
Yes, but the proposed amendment must specifically address that only unclassified defense articles apply. Failure to specify that the dual/third country nationals will only have access to unclassified defense articles will result in NO APPROVAL for dual/third country nationals.
Per §124.12 (a)(10) “This agreement (does/does not) request retransfer of defense articles and defense services pursuant to §124.16.” Should this statement include a reference to technical data?
No, Per §120.6, defense article means any item or technical data designated in §121.1 of this subchapter.
The purpose of a commodity jurisdiction request, or CJ, is to determine whether an item or service is covered by the U.S. Munitions List (USML) and therefore subject to export controls administered by the U.S. Department of State pursuant to the Arms Export Control Act (AECA) and the International Traffic in Arms regulations (ITAR). If after reviewing the USML and other relevant parts of the ITAR, in particular ITAR §120.3 and §120.4, you are unsure of the export jurisdiction of an item or service, you should request a CJ determination.
Licensing Jurisdiction: Is my item controlled on the U.S. Munitions List (Department of State) or the Commerce Control List (Department of Commerce)?
The Directorate of Defense Trade Controls (DDTC) cannot provide a definitive answer without undertaking a Commodity Jurisdiction (CJ) review of your item and making an official CJ determination. However, most manufacturers are able to self-classify their items by reviewing International Traffic in Arms Regulations (ITAR) §120.2, 120.3, and 120.4 (which relate to the CJ process) and ITAR §121.1 (the U.S. Munitions List or USML). It is important to review all of these sections since some items that could be considered civil (e.g., hunting rifles and commercial satellites) are captured on the USML for export purposes. If, after reviewing the pertinent sections of the ITAR, you still are not sure if your item is controlled on the USML, then submit a CJ request. Guidelines for submitting the CJ request can be found online at http://pmddtc.state.gov/commodity_jurisdiction/index.html.
Registration Requirements: Does our company need to register prior to the submission of a CJ request?
Registration with DDTC is NOT required prior to submission of a CJ request.
Person Submitting CJ: Who can submit a CJ request?
We prefer that the manufacturer submit the request because of the background and sales information required. However, a designated representative may submit a CJ request on the manufacturer’s behalf. In such cases, the CJ request package must include a letter of authorization from the manufacturer on company letterhead signed by a company official, a mailing address, and phone number.
Reconsideration of USML Item: I believe the jurisdiction for my product has changed. Can I use the CJ process to potentially move it to the Commerce list?
A CJ request may be used for consideration of the re-designation of an item or service currently covered by the USML, which could result in the item or service being moved to the licensing jurisdiction of the Department of Commerce.
Reconsidering of USML Category: I believe the USML category and/or sub category for my product has changed. Can I use the CJ process to obtain a new USML classification?
No, the CJ process will not be used for purpose of requesting clarification of existing USML category or subcategory. Such requests are submitted under a General Correspondence (GC) to the Directorate of Defense Trade Controls Licensing Directorate, not through the CJ process.
Licensing Requirements: Can I export my item during the CJ review process?
A response from DDTC to a CJ request determines the proper licensing authority for an item or service. It is not a license or approval to export. If you want to export your item or perform service while the CJ determination is in the review process, you must be registered and obtain the appropriate approval from DDTC prior to export. Please check the DDTC website for information on registration and licensing.
Classified Information: If my item contains classified information, may I use the CJ process?
Classified information must not be included, or referred to, in the form or attachments thereto. For issues that may pertain to classified information, contact the DDTC Response Team.
Submitting Request for Similar or Like Items: I have several items that are very similar. May I submit one CJ covering those items, or a catalog of like items?
The CJ form addresses single items, not a group, family or catalog of items.
Selling Civil Item to Foreign Military: I am selling my civil item to a foreign military. Does this make it USML and do I need an export license from State?
You do not need an export license from DDTC if your item is not controlled on the USML. That remains true even if you are selling the item to a foreign military. The end-user does not determine export jurisdiction.
L-100/C-130 Spares Parts Jurisdiction: Has there been a change regarding export jurisdiction for L-100/C-130 spare parts?
Please go to http://pmddtc.state.gov/licensing/aircraft_parts.html for an announcement on this subject. Included on this page is the relevant Federal Register notice and common Q’s and A’s on the topic.
Uploading Supplemental Documents to the DS-4076 Submission Package: Do I upload supporting documents and other attachments onto the DS-4076 form the same way as done with a DSP form for DTrade?
No, supporting documents are not uploaded into the D-4076 like what is done for a DTrade export license application. Each attachment is a separate document that will be uploaded with the DS-4076 into a submission package. All additional documentation file formats must be in the following types: BMP, CSV, GIF, JPEG, JPG, PDF, PNG, RTF, TIF, TXT and XML.
Submitting Supplemental Information: I have some additional information that may be helpful as a supplement to a CJ already submitted. The CJ was submitted electronically through EFS on the DDTC web portal. Is there a way to add to the supplements of an electronic CJ without retracting the CJ and starting over? Can I provide it directly to the agency that requested the information?
At this time, supplemental information in support of an electronically submitted CJ cannot be uploaded electronically. There are two methods for providing additional information.
- The information can be sent via open e-mail to DDTCResponseTeam@state.gov. Include in the Subject line the CJ case number. In the body of the e-mail indicate the DS-4076 Block number to which the information corresponds, and reason/s for supplemental submission such as another USG agency requested the information.
- If the information includes proprietary information that you would prefer not to send via open e-mail, the information must be delivered to DDTC Policy as a PDF on a CD, properly marked to include CJ case number, CJ Block number to which the information corresponds, and reason/s for supplemental submission such as another USG agency requested the information. The proper address is:
Directorate of Defense Trade Controls
PM/DDTC, SA-1, 13th Floor
2401 E Street, NW
U.S. Department of State
Washington, DC 20522-0113
In either case, the information will be downloaded into the official electronic CJ file and distributed to the interagency working groups. Only information formally submitted to DDTC can be considered in the CJ review process.
LICENSING FOREIGN PERSONS
When is a foreign person considered an employee?
A foreign person is considered an employee when the foreign person is a full time regular employee, directly paid, insured, hired/fired and/or promoted exclusively by the U.S. person. The employee, however, need not LIVE in the U.S. to be employed by the U.S. person. The U.S. person is liable to ensure all foreign person employees are compliant with U.S. export laws regardless of residence.
If residing overseas, is the foreign person employee considered a broker?
If truly employed by the U.S. person, the foreign person is NOT considered a broker when performing the U.S. person’s business (must be within the scope of the employment authorization) since he/she is a company employee.
Should current authorizations be replaced or amended to be consistent with current guidance?
Currently approved authorizations are still valid. As expiration dates are reached, industry will be expected to submit the appropriate authorization as delineated in the current guidance.
Can multiple employees be covered under one authorization?
Yes. Multiple foreign person employees can be covered under one authorization so long as they are all of the same nationality working on the same program/commodity, i.e., all French nationals working on the same radar program.
How is an employee providing marketing services overseas identified in a license application?
If the U.S. person desires for the foreign person employee to market their products to other countries and the product is within the scope of the DSP-5, the U.S. person should obtain a license to market a particular technology to a particular country identifying the foreign person employee as a foreign consignee. Once the marketing license is approved the foreign employee may perform his/her job duties. The case number of the employment DSP-5 should be identified in the marketing license application.
What if the foreign person’s place of birth is different from the country he/she now resides in and holds citizenship from?
This would bring into question the issue of dual nationality and whether the individual had ties to his country of birth which would indicate a degree of loyalty and allegiance to that country. The license would be considered on the basis that it could be an export to both countries. Normally, this does not present a problem unless the country of birth is proscribed under 22 CFR 126.1 in which case we have to secure additional information to confirm lack of significant ties to the country of birth.
What value should be entered on the license application?
DDTC suggests identifying the foreign person employee’s annual salary and/or value of the technical data/defense services transferred/received.
How should the foreign person employee of a U.S. person be identified in the TAA or MLA?
The agreement holder must amend the agreement to specifically identify the foreign person employees of all U.S. signatories. The statement should be made in 22 CFR 124.7(4) with other statements regarding transfer territory. If the foreign person employees are not already identified, this statement should be included in the next amendment submitted to DDTC for approval.
Who should sign the DSP-83 for the transfer of U.S. classified information?
The U.S. person and the foreign person employee must execute the DSP-83 when the transfer of U.S. classified information is required. DDTC may require the foreign government to execute the DSP-83 on a case-by-case basis.
COMPANY VISIT PROGRAM
What is the Company Visit Program?
The Company Visit Program (CVP) is administered by the Compliance and Registration Division (CRD) Office of Defense Trade Controls Compliance. The program involves visits by Department of State officials to U.S. companies that are registered with DDTC as manufacturers, exporters or brokers of defense articles and defense services.
What is the purpose of the Company Visit Program?
The purpose of the program is several-fold. First is to learn how companies establish an overall defense trade control program. Second, is to understand how those programs are implemented and comply with the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). Third, is to gather information for the Department to determine whether we are properly exercising our regulatory responsibility in licensing and compliance. Fourth, is to use the information gathered from visits to adjust or revise our regulations and practices accordingly. Fifth, is to provide direct feedback to companies that we visit, and to learn and disseminate industry best practices.
Is a visit considered an audit or inspection?
A visit is neither an audit nor an inspection. DDTC uses the program as a learning tool to provide information on how companies comply with the law and regulations and how DDTC can better do its job as regulator thereof. In visiting companies, DDTC is also exercising its responsibility under record-keeping requirements detailed in Section 122.5(b) of the ITAR.
How are companies selected for a visit?
Companies are selected for a variety of reasons, including: registration status, volume of licensed activity, experience conducting ITAR activities, nature of business, type and sensitivity of technology, geographic location, follow-up to a disclosure of an ITAR violation, or monitoring of a consent agreement.
How is a visit conducted and what should a company expect?
- The company is sent a visit notification letter approximately 6-8 weeks in advance of the visit.
- The visit letter outlines material that the company is to provide in advance of the team’s visit (e.g., export compliance manual, export compliance policies and procedures, organizational chart, and an overview of ITAR controlled programs at the facility).
- In consultation with the company, the CVP team establishes an agenda for the one or two day visit.
- The visit occurs on the company’s premises in offices, conference rooms and tours of business operations within the facility (e.g., business development, contracts, procurement, design, manufacture, security, IT, personnel, shipping, etc.).
- At the conclusion of the visit, the team conducts a post-visit briefing with senior management and export control staff sharing information the team has gathered.
- The team returns to the Department and will generate a report for DTCC management. The team will send a formal letter to the company, which records the matters raised in the post-visit briefing. The letter should address any recommendations for improvement and provide feedback on any company best practices.
How is the team staffed?
The visit team normally consists of two to four staff from the DTCC, depending upon the size of the company being visited, and number of companies/facilities visited per trip. The team includes civil servants and contract personnel. On some visits, staff members from the Office of Defense Trade Controls Licensing and Policy may participate.
How many companies have been visited?
More than 60 companies have been visited since the program’s inception in October 2005. The results overall have been positive for companies and for DDTC. Companies have benefited from meeting DDTC officials, explaining their defense trade control program, discussing best practices and identifying areas for improvement. DDTC has benefited from learning first-hand how companies control and comply and using the results to better inform our regulatory practices
Is electronic submission of the registration package required?
Effective January 1, 2014, registration submissions must be submitted electronically. All physical registration submissions received, post dated after December 31, 2013, will be returned without action with instruction to resubmit electronically. Registration fees will not be returned, unless company is not required to register.
What version of the DS-2032 can be used for electronic submission?
The current DS-2032 version posted on the DDTC website must be used for electronic submissions. Older versions of the DS-2032 are not able to be used.
Where do I submit my registration package?
Registration submissions must be submitted through the Electronic Form Submission (EFS) system up to a maximum of 60 days but no less than 30 days in advance of the renewal expiration. Intended registrants will receive an acknowledgement upon receipt of submission by DDTC. Click here to access the EFS Information Center Page.
What are the three-tiers for registration fees?
The first tier is a set fee of $2,250 per year. This applies to new registrants. It also applies to renewing registrants for whom the Department did not review, adjudicate, or issue a license or other authorization during the twelve month period ending 90 days prior to the expiration of the current registration.
The second tier is a set fee of $2,750 for registrants renewing their registrations who have submitted and had final action taken on ten or fewer licenses or other authorization during a twelve month period ending 90 days prior to the expiration of their current registration.
The third tier is a calculated fee for registrants who have submitted and had final action taken on more than ten licenses or other authorizations during the twelve month period ending 90 days prior to the expiration of the current registration. For these registrants, the fee calculation is $2,750 plus $250 times the total number of applications over ten. To insure fairness to those registrants in this third tier who may have many applications but all of a low value, there is a provision for a reduced fee if the fee calculated above is greater than 3 percent of the total value of all of their applications. In such cases, the fee will be 3 percent of the total value of all applications or $2,750, whichever is greater.
How will a new registrant know their fee?
The fee for new registrants is set at $2,250 (manufacturers/exporters and brokers). However, persons registering as a manufacturer/exporter may also simultaneously register as a broker with a consolidated DS-2032 Statement of Registration and not be charged a separate broker registration fee.
How will a registrant that is ready to renew their current registration know their fee?
DDTC will send an email notification of the fee to be paid at least 60 days prior to the expiration date of the current registration. This notification will be delivered using the email address provided under Electronic Correspondence on the current registration unless a material change has been submitted per ITAR 122.4. It is recommended that the registrant create a calendar reminder for the upcoming registration expiration date.
What if the registrant does not receive a notification?
If a renewal notification is not received, contact the DDTC Response Team at 202-663-1282 or by email at DDTCResponseTeam@state.gov. The registrant is responsible to ensure fees and renewal submissions are received at least 30 day prior to the registration expiration date. It is recommended that the registrant create a calendar reminder for the upcoming registration expiration date.
What is the registration fee for non-profit organizations?
Registrants who are wholly exempt from income taxation pursuant to 26 U.S.C. 501(c)(3) may pay the reduced first tier registration fee of $2,250. Registrants must provide proof of such status (i.e., IRS certification form) and submit with their registration package. The IRS certification must apply to all entities/affiliates listed in the registration submission.
Can the fee calculation be disputed?
If a registrant believes an error has been made in calculating its fee, the registrant may submit a written request explaining the basis for the challenge to the attention of the current Director of the Office of Defense Trade Controls Compliance. If the registrant’s registration is set to expire within 30 days or less, registrants should submit the challenge to DDTC with a completed renewal registration submission with a fee of $2,250 to ensure registration does not expire while their inquiry is being resolved.
Does a registrant’s fee calculation change if their registration package is determined to be incomplete and returned?
No. However, registrants should make every effort to submit a complete package.
If a registrant has questions on the registration fee, who should they call?
General questions should be addressed to the DDTC Response Team at 202-663-1282 or by email at DDTCResponseTeam@state.gov.
Will a registrant receive a refund if during the year the part of the company doing ITAR business is sold or closed?
Registration fees are not refunded.
How will back fees be calculated?
Back fees will be calculated using the fee structure in place during the period of the registrant’s expired registration.See Lapse Fee Guidelines for the Registration Fee Table.
What types of approved authorizations are used to calculate the registration fee?
Authorizations used to calculate the fee include DSP-5, -6, -73, -74, -61, -62, -85s, -53s, -119s, and agreements and their amendments. Cases returned without action and denied cases are not included in the fee calculation Submissions required under 22 CFR 123 through 126 which do not require response from the Department (e.g., sales reports) are not counted when determining the registration fee, nor are disclosures or requests for a commodity jurisdiction determination.
How can a registrant get a list of the licenses counted in determining the registration fee?
A list of those licenses DDTC counted may be requested from the Response Team. All requests for license lists must be submitted in writing (email or fax) and will be provided to the company within 2 business days.
Are there any special circumstances which the Department will consider to delay full payment of the registration fee?
Registrants whose fees are greater than $3,500 may appeal to the Department for consideration of an alternate payment schedule. To be considered, registrants must provide proof that the registration fee is greater than 1 percent of the total sales in the given year. “Total sales” includes domestic and international sales and is not limited to sales of items controlled on the USML. Applicants must submit a request for special consideration to DDTC not less than 30 days prior to registration expiration. Any request received within the 30 day window will be automatically disapproved.
When and why was the registration fee adjusted?
On September 25, 2008, the Department published a Federal Register Notice of Final Rule to increase the registration fee (see73 FR 55439). The fee was increased to better align registration fees with the cost of licensing, compliance, and other related activities; and to meet the requirements of the President’s National Security Directive on Export Control Reform. The fees were last adjusted in 2004 (see69 FR 70889 dated December 8, 2004 and70 FR 50959 dated August 29, 2005). Previous to that date they were adjusted in 1997 (see62 FR 27497 dated May 20 1997).
What is the President’s National Security Directive on Export Control Reform?
On January 22, 2008, the President signed Nation Security Presidential Directive (NSPD) 56. The directive mandated a series of reforms in the way defense trade is executed by the executive branch to enhance transparency, timeliness and predictability for industry. These reforms included the process and management improvements, as well as a requirement that DDTC be fully resourced to perform its mission. It also mandated that DDTCs mission be 75 percent self-funded.
If I am a registered broker may I apply for export licenses under my broker registration (K code)?
Brokers may not obtain export licenses. U.S. Brokers that need to obtain export licenses must submit an exporter registration and request export licenses using their exporter registration code.
What is the process for consolidating a manufacturer/exporter and a broker registration?
The current DS-2032 will allow a registrant to select additional fields to identify subsidiaries and affiliates that are in the business of manufacturing/exporting/brokering. You will continue to submit your manufacturer/exporter registration fee in advance and record the information on the new DS-2032, and attach a copy of the electronic payment confirmation with submission of your DS-2032 package. Registrants do not need to send a separate broker registration fee with the consolidated M and K registration. Your M and K codes will both continue to exist; however, your broker expiration date will be aligned to coincide with your manufacturer/exporter registration expiration date. Registrants will continue to receive two registration complete letters, one for the M code and one for the K code delivered by email at the same time. Consolidation of manufacturer/exporter/broker may only occur on a manufacturer/exporter registration. Registrants are not able to add a manufacture/exporter registration type to their existing broker registration.
How do I request to extend a broker registration expiration to align with my manufacturer/exporter expiration for registration consolidation purposes?
Consolidation of existing manufacturer/exporter/broker registrations must occur during renewal of the manufacturer/exporter registration. If your existing broker registration expires on or after November 30, 2013, and prior to your manufacturer/exporter registration and you intend to consolidate your broker registration, then you may request an extension of your broker registration. Registrants are not able to add manufacture/exporter registration type to their existing broker registration. To request an extension of registrant’s broker registration, registrant MUST submit a letter containing the following information: click here for template.
What are the Broker Report procedures?
Broker reports are due with broker renewal submissions (i.e., for persons already registered as brokers). The report must cover all brokering activity not the subject of a prior broker report. Broker reports must cover all brokering activity up to three months prior to the expiration of your broker registration. For example, if your registration expires at the end of November 30, 2013, then your broker report would cover the period from January 1st – August 31st. For subsequent years, your broker report would include a trailing 12 month period, e.g., September 1, 2013 – August 31, 2014.
Do foreign persons outside the United States that are not owned or controlled by U.S. persons continue to require registration as a broker under ITAR Part 129?
Effective October 25, 2013, a foreign person, as defined in ITAR Part 120.16, outside the United States that is not owned or controlled by a U.S. person will no longer need to be registered under ITAR Part 129, unless they perform ITAR regulated brokering activity while in the U.S. or U.S. protected territories. However, such foreign brokers should submit a certification and final broker report for activity not already reported (e.g., from January 1, 2013 through October 24, 2013) by December 31, 2013. Click here for the Foreign Broker Template.
When does the no broker fee provision apply?
The no broker fee provision only applies to U.S. persons (including companies) that are registered both as a manufacturer/exporter and a broker when they consolidate their broker registration with their manufacturer/exporter registration on one DS-2032 Statement of Registration. If any person (including companies) submits a broker registration as a standalone submission, then the $2,250 fee must be paid.
Does “any person” engaged in brokering activities, as stated in ITAR Section 129.3(a) mean all persons, foreign and U.S. require registration?
In order to determine whether the brokering provisions enumerated in ITAR Part 129 apply, you have to read the regulation in sequence. ITAR Section 129.3 only applies to those persons subject to U.S. jurisdiction, as identified under ITAR Section 129.2(a), who are conducting brokering activities as defined under ITAR Section 129.2(b), who are not specifically exempted.
What is the scope of affiliate-to-affiliate provisions?
Per ITAR Part 120.40, an affiliate of a registrant is a person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such registrant. Activity between and among registrant and its affiliates regarding their own defense articles and services is not considered brokering activity as the activity is being done within the family umbrella of owned or otherwise controlled entities and not on behalf of another unaffiliated third party. Affiliate may also be an entity that a U.S. person controls the day to day activities/policies of, even if the U.S. person does not own any portion of the foreign company and/or there is no parent/subsidiary legal relationship between the two parties. The affiliate-to-affiliate provision does not include affiliates performing a brokering activity on behalf of an unaffiliated third party.
Which affiliates and subsidiaries may remain or be added to a registration?
The new rule adds a definition of affiliate in 120.40, and states in 122.2(a) and 129.8(a) that the registration “statement may include subsidiaries and affiliates when more than 50 percent of the voting securities are owned by the registrant or the subsidiaries and affiliates are otherwise controlled by the registrant.” This means domestic (block 9) and foreign (block 10) affiliates and subsidiaries should only remain on (or be added to) a registration when the registrant has ownership or management control. In such instances where the entity is equally owned and has equal management control by more than one company (e.g., 50% or 33.33% or 25% each) then the subject entity should be listed on each of the subject registrations. However, management control trumps ownership, so even if two companies each own 50%, but only one company has management control then the subject entity is to be listed only on the registration with management control.
What does “owned” or “controlled” by a U.S. person mean?
In accordance with ITAR Section 129.2(a)(3) and Note to paragraph (a)(3), “owned by a U.S. person” means more than 50% of the outstanding voting securities are owned by a U.S. person, and “controlled by a U.S. person” means one or more U.S. persons have the authority or ability to establish or direct the general policies or day-to-day operations of the firm. U.S. person control is generally presumed to exist where U.S. persons own 25% or more of the outstanding voting securities unless one foreign person controls an equal or larger percentage. However, control can be established below the 25% threshold if a U.S. person holds a position (e.g., president/owner/director/senior officer, etc.) where that U.S. person has the authority or ability to establish or direct the general policies or day-to-day operations of the firm, regardless of percentage of voting securities.
If I am a lawyer or consultant providing legal and compliance advice on export transactions is that activity considered brokering?
Activities conducted by an attorney, consultant, or any other professional that do not extend beyond the provision of legal or consulting advice to clients on ITAR compliance is not within the definition of brokering activities. For example, advising on the legality of a transaction, such as advising whether a transaction is ITAR compliant, tax rates or other laws may be preferential, drafting of contract terms where parties to the transaction have already been identified by the client, representing your client to a client-identified foreign party, conducting ITAR audits, and/or providing training or assistance with ITAR compliance procedures, are outside the scope of brokering activities. However, this does not mean that there are no circumstances where an attorney, consultant, or any other professional would be a broker. If these persons engage in activities that go beyond providing consulting or legal advice, including being a third party to the transaction, or are engaged in soliciting, locating a buyer or seller, introducing or recommending specific parties, structuring the transaction, marketing, promoting, and/or negotiating ITAR-controlled defense articles and services on behalf of their clients beyond contract terms of already identified foreign parties by your client, then such activities may constitute brokering activities under ITAR Part 129.2(b).
If a consultant, who is registered as a broker, hires another consultant (independent contractor), do both entities need to be separately registered?
The consultant’s business, which is registered as a broker subject to U.S. jurisdiction, who subsequently hires an independent contractor, would be able to have the contractor covered under the consultant’s broker registration to the extent the contractor meets the regular employee definition under ITAR Section 120.39. This would mean that the contractor is in a long-term contractual relationship (one year or more), the contractor works at the U.S. company’s facility and under the direction and control of the consultant, works full-time exclusively for the consultant, and executes a non-disclosure certification, etc. If the contractor does not meet the regular employee definition, is subject to U.S. jurisdiction, and will be performing brokering activity, then the contractor would need to have its own separate broker registration. If the contractor is not subject to U.S. jurisdiction per ITAR Section 129.2(a), the contractor would not have to register as a broker under the ITAR.
Can exemption in 129.5(b) be used for foreign defense articles/services that fall into ITAR categories referenced in 129.4(a)(2)?
No. The exemption in 129.5(b) from the requirement for approval is not available when the subject foreign defense articles/services fall into the ITAR categories referenced in 129.4(a)(2).
What are the changes to ITAR Section 122.4 – Notification of changes in information furnished by registrants?
Effective October 25, 2013, the Department revised ITAR Section 122.4(a) and 129.8(d) to add provisions instructing registrants to notify the Department of the following material changes as part of the registration renewal process: 1) consolidation of a broker registration with a manufacturer/exporter registration; 2) removal of entities not owned or otherwise controlled from registration; and 3) deletions or additions of U.S. Munitions List categories. However, if notification of change is the subject of an internal reorganization, merger, acquisition, or divestiture registrants must notify the Department of all changes in information within five days of the event, including where applicable, the three changes specified above.
Where can one read the full text of the changes in the broker regulations?
You can read the full text of the changes in the broker regulations at http://pmddtc.state.gov/FR/2013/78FR52680.pdf
Are pre-contract activities undertaken in support of potential foreign assistance or sales program conducted by a company that owns the defense article considered brokering activity?
No. The company is taking action on its own behalf. Ultimately the potential foreign assistance or sales program would potentially result in a secondary sales contract between the USG and one or more companies and when ITAR 129.5(2)(i) and (ii) exemption from requirement for approval provisions are met such activity would be exempt from broker approval.