State Department Export Controls
Today and Tomorrow
Terry L. Davis
Deputy Director of Licensing
February 2011
TOPICS FOR CONSIDERATION
2
 Introduction/Overview
 Legal/Regulatory Foundation
 License Preparation & Adjudication
 Licensing Defense Services: the World of
Electronic Agreements
 Exemptions
 Interagency Review Process
 Special Topics of Concern

Defense Trade Reform
3
Licensing & Compliance
Responsible U.S. Agencies
4
 Department of State
 Department of Commerce
 Department of the Treasury
 Department of Justice (ATF)
 Department of Homeland Security

CBP/ICE
 Department of Energy
 Department of Defense

DTSA, Armed Services, DSS, DSCA
Purpose of Controls
5
• Foreign Policy
• National Security
• Human Rights
• Regional Stability
• Proliferation
Laws & Regulations
6
 Arms Export Control Act (AECA)
 International Traffic in Arms Regulations (ITAR)

22 CFR Parts 120-130
Arms Export Control Act (AECA)
7
• 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 (Part 130)
Arms Export Control Act
(AECA) (continued)
8
• 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
International Traffic in Arms
Regulations (ITAR)
9
• 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
22 CFR 120-130- ITAR
10
 Part 120 Definitions
 Part 121 USML
 Part 122 Registration
 Part 123 Licensing
 Part 124 Agreements/Offshore Procurement
 Part 125 Technical Data
 Part 126 Prohibited Exports
 Part 127 Compliance Enforcement
 Part 129 Brokers
 Part 130 Political Contributions, Fees, and Commissions
Delegation of Authority
11
• 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
Directorate of Defense Trade
Controls (DDTC)
12
Our Mission:
Advance U.S. 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.
Foreign Policy Objectives
13
 Support allies in mutual foreign policy and national
security goals
 Promote interoperability with allies
 Keep defense technology out of the hands of our
adversaries!
DDTC Organization
14
Beth McCormick
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)
Managing Director’s Staff
Office of Defense Trade
Controls Policy
(PM/DTCP)
NSPD-56
Defense Trade Reform
15
 Signed by the President on January 22, 2008
 Mandates specific process and resource
requirements to support an export control system
that is predictable, efficient, and transparent.
 60-day deadline for license adjudication
NSPD-56 Carve Outs from
60 Day Threshold
16
 DOD National Security review not completed
 Congressional notification
 Compliance/enforcement/Blue Lantern
 Arms Embargo/126.1 waivers required
 Policy review
Process Improvements
17
 Weekly 45-day and 60-day license reviews
 Weekly 5% Quality Assurance reviews
 Standardized Operating Procedures
 Updated guidelines on web site, e.g. agreements,
mergers, congressional matrix
 More management oversight of RWAs
 Right answer as soon as possible!
License Processing Times
18
Month and Year
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
'10 '10 '10 '10 '10 '10 '10 '10 '10 '10 '10 '10 '11
Cases Received
6,155 6,495 8,3966,859 6,923 7,297 6,707 7,254 6,733 6,768 6,462 6,424 6,476
Cases Closed
6,234 5,927 8,114 6,989 6,951 7,229 6,801 7,075 6,872 6,790 6,493 6,626 5,965
Cases Open at End of Month
2,80
3,369 3,674 3,583 3,575 3,658 3,552 3,735 3,591 3,549 3,517 3,384 3,787
6
Average Processing Time
(in Calendar Days)
18
15
15
15
16
16
17
17
16
16
16
17
18
Application Process
19
 DDTC’s Automated Export Licensing System
 DSP 5, 61, 73
 Amendments 6, 62, 74
 TA/MA/DA
 Commodity Jurisdiction
 Eventually to include GCs
 Cases assigned/screened by DDTC’s computer system
Export Control Reform
20
The Administration has determined that
fundamental reform of the U.S. export control
system is required in each of its four components
areas, with consolidation into a:
 Single Control List;
 Single Primary Enforcement Coordination Agency;
 Single Information Technology (IT) System; and
 Single Licensing Agency
Export Control Reform
21
Additional information on the White House website:
 http://www.whitehouse.gov/the-press-office/fact-
sheet-presidents-export-control-reform-initiative
Regulation Updates
22
 Final Rules

22 CFR 125.4(b)(9): laptops

22 CFR 126.8 deleted

Electronic Commodity Jurisdiction
 Proposed Rules

Dual/Third Country Nationals: comments received - Final
Rule next step
Regulation Updates
23
 Future Actions
 Brokering regulations
 “Specifically Designed and Modified”
 Spare Parts Exemption 123.28
 Defense Service Definition
 “See Through” rule clarification
 Part 124 re-write
 Dual/Third Party Nationals
 Category re-writes: VII, I and XI based on tiers and
“Bright Lines”
Complying with ITAR Controls
DDTC Definitions
DEFINITIONS
25
•
•
•
•
•
•
•
•
•
•
U.S. Person (120.14)
Foreign Person (120.16)
Defense Article (120.6)
Technical Data (120.10)
Defense Service (120.9)
Public Domain (120.11)
Significant Military Equipment
Export (120.17)
Re-transfer/Re-export (120.19)
Significant Military Equipment (120.7)
Complying with ITAR
Controls
Commodity Jurisdiction
ORGANIZATION
27
 Commodity Jurisdiction (CJ) function part of Policy
Office
 Policy headed by Charles Shotwell
 CJ team comprised of six people
 Team Leader and Presenter – Di Bounds
Designating Defense Articles &
Defense Services
28
• 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!
Policy for Designating Defense
Articles & Defense Services
29
• 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 & Defense Services
30
• 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!
U.S. MUNITIONS LIST (USML)
31
 Remember to take USML into account when
considering jurisdiction.
 Items specifically enumerated are controlled.
U.S. MUNITIONS LIST (USML)
32
• Self-determination versus DDTC determination

Document decision making process
• Registration is not required to submit a CJ request.
• Preferable for the manufacturer to submit CJ

If you are not the manufacturer, coordinate with the
manufacturer to obtain necessary information.

Letter of authorization from manufacturer
Commodity Jurisdiction Submission
33
• Self-determination versus DDTC determination

Document decision making process
• Registration is not required to submit a CJ
request.
• Preferable for the manufacturer to submit CJ

If you are not the manufacturer, coordinate with the
manufacturer to obtain necessary information.

Letter of authorization from manufacturer
Commodity Jurisdiction Submission
34
 DDTC is now processing CJ requests using an
automated system. The automated system allows
on-line CJ requests using the DS-4076 Commodity
Jurisdiction (CJ) request form with attachments.
Commodity Jurisdiction Submission
35
 Applicant may reference the DDTC website for
submission instructions at
www.pmddtc.state.gov/commodity_jurisdiction for
this automated system.
Commodity Jurisdiction Submission
36
• More information is usually better than less.
• Remember two audiences – subject matter experts
and generalists
Commodity Jurisdiction Submission
37
• DS-4076 must be accompanied by a cover letter



Subject line – product name
Anything you want us to know about your product that
was not clear from DS-4076
For instance, any of the following: description; origin of
commodity; current use.
Commodity Jurisdiction Submission
38
 Supporting Documentation:
 Product data sheets
 Letter of authorization from manufacturer
 Sales data
 Studies/other pertinent info
 Assigned a CJ case number
 Email or letter acknowledging receipt and identifying case
number
Commodity Jurisdiction Submission
39
• Interagency review governed by National Security
Council (NSC):



Department of Commerce
Department of Defense
As necessary:
 NASA
 Department of
Energy
 Department of Homeland Security
 Other U.S. Government agencies
Commodity Jurisdiction Submission
40
 State responsible for working out agreement
between agencies
 Defense and Commerce have right to escalate State’s
proposed decision
 Final decision goes out in letter to applicant
Complying with ITAR Controls
License Preparation
and Exemptions
Agenda
42
 DSP License Types
 Scenarios/purpose
 Transaction flow
 Supporting documentation
 Licenses in furtherance of Agreements
 Renewal/replacement licenses
 Unshipped balance licenses
 Amendments
 Re-transfer/re-export
 Proviso re-consideration
 Exemptions
DSP License Types
43
• DSP-5
Permanent Export**
• DSP-6 Amendment**
• DSP-73
Temporary Export**
• DSP-74 Amendment**
• DSP-61
Temporary Import**
• DSP-62 Amendment**
• DSP-85
Classified Transactions
•
DSP-119 Amendment
**D-TRADE only**
Validity Period
44
• 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; or
Total authorized value exhausted; or
Expiration date reached
DSP-5 Permanent Export
Scenarios/Purpose
45
• Defense Articles (hardware)
•
Only one ultimate foreign end-user
•
Must be supported by documentation from foreign
party to the transaction
•
Purpose and commodity blocks must be consistent
with supporting documentation
•
Part 130 statement
DSP-5 Permanent Export
Scenarios/Purpose
46
• Technical Data
• Marketing/bid and proposal
• Plant visit
• Offshore procurement (124.13)
• Defense Services – Exceptional circumstances!
•
•
Short-term training/limited scope and technology
transfer (124.1)
Foreign person employment
• Can be multiple ultimate foreign end-users for
technical data and defense services
DSP-5 Permanent Export
Transaction Flow
47
• Block 15 – Manufacturer of Commodity
• Block 17 – Source of Commodity
• Block 19 – U.S. Seller
• Block 21 – U.S. Consignor/Freight Forwarder
• Block 18 – Foreign Intermediate Consignee
• Block 16 – Foreign Consignee
• Block 14 – Foreign End-User
DSP-5 Permanent Export
Supporting Documentation
48
• Purchase order, letter of intent, or other
appropriate documentation
•
•
•
•
•
Commodity
Quantity
Price
End-use
End-user
• DSP-83/import certificate
• Must be consistent with information on license
application
DSP-5 Permanent Export
Supporting Documentation
49
• Must be addressed to the U.S. applicant applying
for the export license
•
Subsidiary must be identified in Block 5
• Must be provided by a foreign party to the
transaction
•
In English or provide translation
• Must be issued within 1 year of license
application
• Must have U.S. dollar value identified
• Limitations on LOIs
DSP-5 Permanent Export
Supporting Documentation
50
• Technical Data
•
Copies of technical data OR sufficient information
for DOD to conduct a technical review
• Defense Services
•
Letter requesting exception per 22 CFR 124.1(a) –
DDTC discretion on approval
•
Description of services to be provided
DSP-5 Permanent Export
Scenarios/Purpose
51
• Foreign Person Employment
•
Employment by a U.S. Person
•
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 September 30, 2009
DSP-5 Permanent Export
Supporting Documentation
52
• Foreign Person Employment
•
•
•
•
•
Resume
Copy of passport/work authorization
Job description
Description/copies of technical data
Kept by applicant:
• Non-Disclosure Agreement (NDA)
• DSP-83, as applicable
Licenses “in Furtherance”
of Agreements
53
• “in Furtherance” of an agreement:
•
•
•
Exported by the agreement holder or another U.S.
signatory
Must be included (described/identified) in the
agreement scope
Will be counted against the value of hardware exports
authorized under the agreement
• “in Support” of an agreement:
•
•
Exported by another U.S. company indirectly relating to
the agreement
Frames the purpose/end-use of articles being exported
so the license adjudicators better understand the
overall effort
Licenses “in Furtherance”
of Agreements
54
• Supporting documentation
•
•
•
Purchase documentation must identify the relevant
agreement
DSP-83, if applicable
Section 15.1 certification letter:
• Agreement history
• Hardware authorization and identification
• Value matrix
• DSP-73s for repair/replacement do not require
Section 15.1 letter but must reference the
agreement
Licenses “in Furtherance”
of Agreements
55
• Agreement/amendment authorizing the requested
defense articles MUST be approved by DDTC prior to
submission of license application
• MUST be submitted by agreement holder or another U.S.
signatory
• End-user identified on license application MUST be a
foreign licensee or end-user in agreement
• First foreign consignee to receive hardware MUST be a
foreign licensee or end-user
• Purpose block MUST include the words “In Furtherance of
TA/MA/DA/AG XXXX-XX” on the first line
Renewal/Replacement Licenses
56
• Renewals submitted for review 60 days prior to
expiration of current authorization
•
•
Copy of current authorization
Cover letter explaining need for continued activity and
shipment summary for unshipped balances
• Replacement package submitted as needed
•
Requires same information as renewal package with
emphasis on need for replacement
• Current authorization is revoked
Amendments
57
• 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.)
• DDTC practice to authorize registration code
changes as a result of merger/acquisition
Amendments
58
• 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
Add 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 as
Congressional thresholds
Retransfer/Re-export
59
• 22 CFR 123.9(a) prior written approval from 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
• 22 CFR 123.9(e) exception for NATO (governments
and agencies); the government of Australia, New
Zealand, Japan, or South Korea.
Proviso Reconsiderations
60
• 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:
•
•
•
Replacement authorization
Letter from applicant with justification or rationale
Re-submittal vs. GC
What Is An Exemption?
61
 An exception to the requirements for a Validated
License that applicant must ensure is properly
claimed
 One of the tools in the toolbox which should be
utilized
 Covers technologies/circumstances which are low
risk/minimize diversion
 Most exemptions have significant exclusions, e.g.
SME
Issues In Utilizing Exemptions
62
• Only registered/eligible exporter can claim
• Cannot use for 126.1 countries
• Monitor use and ensure compliance
• Beware: no legal/regulatory basis for USG agencies
to “Certify Exemptions”
• Technical Data vs. Services Exemptions
Categories of Exemptions
63
• Country Exemptions
• Hardware Exemptions
• Technical Data Exemptions
• Defense Service Exemptions
• Exemption Reform/Revision
Requirements for Exemption Use
64
• U.S. person eligible per 22 CFR 120.1(c)
• Must be registered with DDTC
• Generally not eligible under exemption
•
•
•
•
•
Proscribed Destination
Congressional Notification Thresholds
Offshore Procurement
Missile Technology Control Regime (121.16)
SME
Recordkeeping and Reporting
Requirements
65
• 22 CFR 122.5 – Maintenance of records
• 22 CFR 123.22(b)(3)(iii) – Filing of export
information
• 22 CFR 123.26 – Recordkeeping requirement for
exemptions
• 22 CFR 125.6 – Certification requirements for
exemptions
Canadian Exemption (126.5)
66
• Currently only country exemption until Defense
Trade Treaties with Australia/UK implemented
• Beware: End-use in Canada by Canadians!
• Licenses in furtherance of agreements
• Large number of exclusions/limited services
Temporary Import 22 CFR 123.4
67
• (a) (1) Repair/overhaul/replacement of US origin.
No upgrades!
• (b) Enhanced/Incorporated /Upgraded. US or
foreign origin: needs separate license for reexport
• (c) (2) Consignee on AES submission or SED same
as foreign end-user at time of import
• USG Approval: License/MLA/Offshore Procurement
Issues With 123.4
68
• Exemption not claimed at the time of import, see
web notice:
http://www.pmddtc.state.gov/licensing/documents/WebNotice_Temp
oraryImportViolations.pdf
• Inform foreign customers of return/repair
exemption procedures
• Attempt to claim (b) before upgrade approved
• 123.4(a) not for foreign origin and will not be
revised.
Trade Show Exemption
123.16(b)(5)
69
• If article has been licensed and license is still valid
• No SME/Missile Technology Regime controlled
items
• Related event - trade shows
• Demonstrations vs. trade shows
• See 123.22(a)(2) for multiple destinations and
multiple decrementing of license
Defense Service Exemptions
Part 124
70
• 124.2(a) Basic O&M to same recipient: no
depot/intermediate
• 124.2 (c) Expanded maintenance for NATO/
Australia/Japan/Sweden
• 124.2 (c) US Origin: no design engineering
analysis manufacturing know how
Technical Data Exemptions:
Part 125
71
• Do Not Involve provision of Defense Services which
would require a TAA/MLA
• 125.4(b)(4) - copies of same data to same recipient
• Software revision to correct anomalies is not an
Editorial Change
• If name changed, must have ITAR authorization
Retransfer Provisions Under
123.9(e)
72
• One of few instances when a foreign party can
come in
• Components incorporated into foreign defense
articles: must be directly to Governments!
• Limitations: No SME, MDE, below congressional
thresholds
• Revised to include NATO (governments and
agencies); the government of Australia, New
Zealand, Japan, or South Korea.
“USG Exemptions”
73
• 126.4, 125.4(b)(1), 125.4(b)(3), 125.4 (b)(11)
Principal USG Exemptions
• No catch all exemption for USG
• Memorandum of Understanding Government to
Government Agreements are not export authority
• Beware of DOD guidelines/certifications
• 126.4 Revision
Complying with ITAR
Controls
Agreements Overview
Purpose
75
Provide attendees an overview of
Technical Assistance Agreements (TAAs) and
Manufacturing License Agreements (MLAs)
and the application process.
Briefing Topics
76
 Understanding Agreements
 The Major Players
 Application Preparation

Electronic Submission
 Amendments
 Agreement Maintenance
The Million-Dollar Question
77
 When is an agreement necessary?
 Answer:
 When Defense Services are involved and/or
 When Tech Data will be imported/exported
 May or may not involve hardware
 And for foreign manufacturing of defense articles
that involves Items 1, 2, or 3 above.
 The Agreement covers the full scope of the effort.
Agreements Overview
DSP Licenses vs. Agreements
78
 License – “…permits the export or temporary import of
a specific defense article or defense service controlled
by this subchapter.” (i.e. DSP 5, DSP 61, DSP 73)

Involves a single transaction of hardware or tech data between
two parties.
 Agreement – Involves multiple transactions of
hardware and/or tech data between two or more
parties involving performance of defense services.
TAA – “An agreement for the performance of a defense
service(s) or the disclosure of technical data...” (22 C.F.R.
§120.22)
 MLA – “An agreement whereby a U.S. person grants a foreign
person an authorization to manufacture defense articles
abroad and which involves…(tech data, defense articles, or
defense services) (22 C.F.R. §120.21)

Agreements Overview
DSP Licenses vs. Agreements
79
Defense Service (22 C.F.R. §120.9):
 The furnishing of assistance (including training) to foreign
persons in the…
- Design
- Development
- Engineering
- Modification
- Destruction
- Manufacture
- Production
- Assembly
- Operation
- Processing
- Testing
- Repair
- Maintenance
- Demilitarization
- Use
…of defense articles
 The furnishing to foreign persons of any technical data
controlled under this subchapter
 Military training of foreign units and forces, regular and
irregular
Agreements Overview
The Major Players
80
 Two Major Categories
 U.S. Person (ref: 22 C.F.R. §120.15)
 Foreign Person (ref: 22 C.F.R. §120.16)
Agreements
U.S. Applicant
U.S. Signatories
Foreign Licensees
Sub-licensees
End Users
Agreement Preparation
81
 Application must meet ITAR requirements
 Ensure application is complete and accurate – (Cannot
be processed in a timely manner if information is missing or
incorrect)
 Get the “right” information from the program
managers and foreign parties
 Conduct a thorough review prior to submission to
DDTC
CLEARLY SPECIFY INTENT / PURPOSE!!!!
Agreement Preparation
82
 Guidelines for preparing electronic agreements
document
 http://www.pmddtc.state.gov/ag_guidelines.htm
 Contains DDTC policies & procedures for
implementing the Arms Export Control Act (AECA) and
the ITAR for agreements
 Notifications of changes will be posted on webpage
AECA and ITAR take precedence over the “Guidelines”
Electronic Application Package
83
• Three main components:
– Transmittal Letter
– Empowered Official Certification*
– Proposed Agreement
* If not certified in Block 22 (a) or (c) of
DSP-5 Vehicle
• Amplifying Data (35 MB initial)
– Attachments, Annexes (Agreement)
• Tech Data, Hardware Descriptions
• SOWs
• Etc.
– Supporting Material (Transmittal Letter)
• Executive Summary (Congressional)
• Part 130 Statement
• Etc.
Transmittal
Letter
124.12 Empowered
Official
Certification
Letter
126.13
Main
Components
Proposed
Agreement
124.7 - 9
Attachments
Appendices
Annexes
Amplifying
Data
Supporting
Material
TAA / MLA Application Package
(cont’d)
84
Three main components:
1.


Transmittal Letter
Empowered Official Certification
Proposed Agreement
 Amplifying Data

Attachments, Annexes
 Tech Data, Hardware Descriptions
 SOWs
 Etc.
• Supporting Material
 Executive Summary
 Part 130 Statement
 Etc.
(Congressional)
Transmittal
Letter
124.12
TAA / MLA Application Package
85
(cont’d)
Three main components:

Transmittal Letter
Empowered Official Certification
2.

Proposed Agreement
 Amplifying Data

Attachments, Annexes
 Tech Data, Hardware Descriptions
 SOWs
 Etc.
 Supporting Material
 Executive
Summary (Congressional)
 Part 130 Statement
 Etc.
Empowered
Official
Certification
Letter
126.13
TAA / MLA Application Package
86
(cont’d)
Three main components:
Transmittal Letter
 Empowered Official Certification

3.
Proposed
 Amplifying Data

Agreement
Attachments, Annexes



Tech Data, Hardware Descriptions
SOWs
Etc.
 Supporting Material
 Executive Summary (Congressional)
 Part 130 Statement
 Etc.
Draft
Agreement
124.7 - 9
TAA / MLA Application Package
87
(cont’d)
Three main components:
1.
2.
3.
Transmittal Letter
Empowered Official Certification
Proposed Agreement
 Amplifying Data

Attachments, Annexes



Tech Data, Hardware Descriptions
SOWs
Etc.
Attachments,
Annexes
• Supporting Material



Executive Summary (Congressional)
Part 130 Statement
Etc.
Critical Elements – Required Information
- Clearly labeled
- Referenced in the text of the agreement
TAA / MLA Application Package
88
(cont’d)
Three main components:
1.
2.
3.
Transmittal Letter
Empowered Official Certification
Proposed Agreement
 Amplifying Data

Attachments, Annexes
 Tech Data, Hardware Descriptions
 SOWs
 Etc.
Supporting
Material
 Supporting Material
Executive Summary (Congressional)
 Part 130 Statement
 Etc.

Consists of additional information not part of the
agreement but required as part of the submission
Electronic Submission
89
 Utilizes the D-Trade II System
 Submission accomplished on a DSP-5 application
Serves only as a “vehicle” for transitioning the proposal
throughout the process
 Attached transmittal letter and agreement is still the
primary focus of review
 Issuance of DSP-5 vehicle is simply the mechanism for
providing the DDTC position on the agreement – not the
authorization

Electronic Submission (cont’d)
90
• The following statement will be applied to all agreements
adjudicated through the electronic process:
“The issuance of the subject DSP-5 does not grant any export
rights or privileges, and its related DSP-5 case number may
not be cited as an authorization or used as the basis for an
exemption.”
“The Department of State approves the proposed agreement/
amendment as attached subject to the following limitations,
provisos and requirements. The agreement or amendment
may not enter into force until the agreement/amendment has
been signed and the stated requirements have been satisfied.”
Electronic Submission (cont’d)
91
Key blocks for submission:
 Transaction Number

MUST be preceded by “AG-” followed by the applicant’s internal
code – no spaces!
 Block 10

Type in agreement type (TA, MA, DA), concise description of
commodities, SME status, classification level, all USML categories
 Block 11

Identify primary USML category
 Block 12

Total agreement value
Electronic Submission (cont’d)
92
Key blocks for submission (continued):
 Block 14

Name and address of foreign licensees
 Block 16

Name and address of sub-licensees
 Block 18


Identify sales, marketing or distribution territory
Dual and third country nationals
 Block 20


Provide a concise narrative describing the purpose of the
submission, agreement objectives
If requesting 124.16 third country nationals state here – no need
to identify in Block 18
Electronic Submission (cont’d)
93
 Upon submission will receive a DSP-5 number
 Upload additional documentation
 Track status
 Final approval will identify agreement number

E.g., 050123123 (TA 1234-10)
Amendments
94
 Once an agreement is approved by DTCL, any
changes to the agreement must be made via an
amendment.
 Why Amend?
 Expand scope to include:







Addition of new hardware
Expansion of Statement of Work
Transfer of additional technical data
Expansion of sales or marketing territory (new countries)
Add foreign licensees (new country)
Add Dual/Third Country Nationals (new country)
Addition of new programs
Generally Requires Additional Staffing
Amendment Submission
95
 See Guidelines Section 6.0 & 9.0
 Transmittal Letter
 Address all 124.12(a) information




Note item as CHANGE or NO CHANGE
Include all 124.12(b) clauses
Include prior approval summary
For MLA, include summary table of sales reports
 Conformed/re-baselined agreement
 Assigned a new DSP-5 number as well as amendment
number
Requires same basic elements as a new agreement application
Amendments
96
Minor Amendment
• Changes NOT requiring prior DDTC approval
–Alter delivery and performance schedules
–Minor administrative changes
1. Address changes
2. Typo correction (not affecting scope)
**Upload to most recent DSP-5 Vehicle**
Agreement Maintenance
97
 Submit signed agreement (within 30 days) (§124.4)
 DSP-83s (before Tech Data/Defense Service) (§124.10)

MUST be original ink signatures
 Status of unsigned agreements (annually) (§124.4)
 Decision to not conclude (within 60 days) (§124.5)
 Termination/expiration (within 30 days) (§124.6)
 Sales reports for MLAs (annually) (§124.9)
**Upload to most recent DSP-5 Vehicle**
Agreements POCs
98
 Division 2: Lt. Commander Andre Givens - - - - (202) 663-2731
 Division 3: Major Kevin Hoppin - - - - - - - - - - - - (202) 663-3340
 Division 4: Lt. Commander Jeremy Clauze - - - - (202) 663-2722
Major Carmella Scott-Skillern - - - - - (202) 663-3843
 Division 5: Major Kristofer Eggehorn - - - - - - - (202) 663-2840
Complying with ITAR
Controls
License Review Process
AGENDA
100
 Division Structure
 Case Assignment
 Review Criteria
 Referral Process
 Congressional Notification
 Final Review and Issuance
 DDTC and Customs
DDTC Licensing Divisions
101
Division 2 – Land and Ship
Ruth Jackson, Chief
VI, VII, XII, XIII, XVI,
XVIII, XX, XXI
Division 3 – Missile and Space IV, V, IX, XIV, XV
Tony Dearth, Chief
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
Division Structure
102
• Division Chief
•
•
Case assignment
Team management
• Licensing Officers
•
•
Case adjudication
Special projects/assignments
• Administrative Support
•
•
•
License amendments
Referral management
Paper issuance
CASE ASSIGNMENT
103
• 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
Review Criteria
104
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
105
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
Regulatory Review
106
Regulatory Review (continued)
• Foreign Policy
• National Security
• Regional Stability
• Human Rights Policy
• Multilateral Regimes
Referral Process
107
 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 DOD status at http://elisa.osd.mil
Referral Process (Cont’d)
108
 Other U.S. Government 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
•
Congressional
Notification Thresholds
109
• 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 Thresholds
110
• 22 CFR 123.15
•
NATO + 4 (Japan, Australia, New Zealand, South Korea)
•
•
•
Non-NATO
•
•
•
$25 million Major Defense Equipment (MDE) (22 CFR 120.8)
$100 million (any defense articles, technical data and defense
services)
$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
111
• 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
FINAL REVIEW AND ISSUANCE
112
• Licensing Officer reviews case with recommendation
of other agencies and determines final disposition of
cases:
•
Approve
•
Approve with provisos
•
Return Without Action (RWA)
•
Deny
DDTC AND CUSTOMS
113
• Daily transfers to U.S. Customs are provided on all
approved applications
•
A printed copy of the license must be supplied to
Customs & Border Protection (CBP) at the port of
exit
• Automated Export System (AES) information is
supplied to DDTC to track shipments
COMPLYING WITH ITAR
CONTROLS
C OMMON R EASONS FOR RWA
What is a RWA?
115
The Return Without Action (RWA) indicates the USG
was unable to complete adjudication of the license
request for the reasons indicated.
In most instances, the application as submitted
contained (or failed to contain) information which
inhibited an effective national security or foreign
policy review.
DDTC RWA Policy
116
 It is incumbent upon the applicant to submit a quality
package meeting all the published requirements.
 Licensing Officers (LOs) are expected to contact the
applicant if the RWA can be salvaged by additional
information provided by the applicant (via formal
upload)
 In most cases, the decision to RWA a case is approved
by the Division Chief, so these are not arbitrary
decisions made independently by LOs.
 Don’t let familiarity breed contempt!
The Top 10 RWA Reasons
RWA Reason #1
117
Failure to respond to a USG request for additional
documentation in a timely manner.
 Licensing Officers must allow an applicant time to respond
to their request. The standard is 2-3 business days, but can
be discussed with LO if extenuating circumstances exist. If
the applicant indicates during the initial contact they will
be unable to meet the timeline, then the wait period is not
required. The applicant may resubmit the application
when all appropriate documentation is available.
The Top 10 RWA Reasons
RWA Reason #2
118
RWA Recommendation by a Staffing Agency.
 The staffing agency is unable to conduct a national security
or foreign policy review and they provide details of
additional information necessary for the resubmission.
 In rare circumstances, a staffing agency may provide a split
decision, where they partially approve a license but
request removal of specific commodities from a license. In
these cases, the application is RWA’d with directions to the
applicant on what to remove prior to resubmission.
The Top 10 RWA Reasons
RWA Reason #3
119
Applicant Request
 This can be in response to the USG inquiry or totally at the
discretion of the applicant. In either case, for electronic
licenses the request for RWA must be uploaded as
supplemental documentation against the specific case.
 DDTC is looking at adding a “Withdraw” function to D-Trade
so these will no longer fall under the RWA. If implemented,
this will be several versions in the future.
D-Trade Limitations
120
 Electronic applications submitted via D-Trade II cannot be
changed in any way by DDTC. This is a legal requirement
because the Empowered Official signed the license as
complete and accurate. As a result, the remaining 7
Reasons for RWA include situations where the support
documentation may be correct, but the license does not
match. In all of these situations, the license will be RWA’d
for repair and resubmission by the applicant.
The Top 10 RWA Reasons
RWA Reason #4
121
License Quantity or Value is Incorrect
 Quantity absolutely must be supported by the purchase
documentation. Shipping less quantity than requested
requires an explanation (e.g., split shipments).
 Value of individual items must be supported by the purchase
documentation within reason. Any difference requires an
explanation.
 The electronic amendment forms CANNOT be used to correct
typos in these two areas because the information changed via
the amendment forms is not conveyed to Customs for AES
filing purposes.
The Top 10 RWA Reasons
RWA Reason #5
122
License Party Issues
 All parties involved in the transaction identified in the support
documentation must be identified on license. Required for
electronic entity eligibility check and Customs/AES purposes.
 License cannot contain parties which are ineligible or
otherwise restricted. If identified, RWA for removal.
The Top 10 RWA Reasons
RWA Reason #6
123
Electronic Submission of Classified
 The D-Trade II electronic licensing system is cleared for processing
of UNCLASSIFIED information only. Upload of documents
containing classified information, whether marked or unmarked,
not only compromises national security but requires significant IT
resources to remove all remnants of the data from the electronic
system.
 All foreign classified is considered USG classified for control
purposes.
 The header “Confidential” means classified to the USG. Use
“Business Proprietary” or “Business Confidential” as alternatives to
avoid slowing down the review while we determine if it is
classified.
The Top 10 RWA Reasons
RWA Reason #7
124
Part 130 Statement Incorrectly Marked
“Does Not Apply”
 The Empowered Official must correctly identify and certify
the application with regards to Part 130.
 If the application requires a positive Part 130 statement,
selection of “Does Not Apply” option is not in accordance
with ITAR requirements.
 If the application does not require a Part 130 statement but
the EO selected a positive 130 statement option, the license
will not be RWA’d but will contain a license proviso indicating
Part 130 does not apply and future licenses should be
reviewed for correct selections.
The Top 10 RWA Reasons
RWA Reason #8
125
Inclusion of Non-USML Items
 Examples: licensing or handling fees, items clearly controlled on CCL
 This RWA reason is evaluated for severity of offence and impact to
overall license request. In some cases, the offense may result in a
proviso request to leave the items off of future license requests.
 Although these items may be on the purchase order, the applicant
should only be requesting a license for those items which require a
USML license.
 In the case of CCL items, issuance of a DDTC license does not relieve
the applicant of any potential requirement to obtain a Department
of Commerce license for the CCL items.
The Top 10 RWA Reasons
RWA Reason #9
126
Incorrect Country Identification
 We have encountered licenses where the applicant
inadvertently selected the wrong country in one of the
dropdown boxes on the application form. This has occurred
most frequently in Block 3 of the DSP-5 and in the address
fields for entry of license party information.
 This is not an error that can be corrected via an electronic
amendment form so the license must be returned for
correction for Customs/AES control purposes.
The Top 10 RWA Reasons
RWA Reason #10
127
License Purpose Block or
Commodity Description Issues
 Sufficient information must be provided to allow for review and
must be consistent with the support documentation.
 “See Attached” or similar on licenses in either block is a problem.
 Part numbers with no descriptions are also problematic. A noun
nomenclature description is required for adjudication purposes.
 Customs Officers do not have access to any of the additional
support documentation provided by the applicant. As a result,
these blocks must have sufficient information for their review
which is consistent with the application.
Third Party/Dual Nationals
128
 DDTC licenses to all countries of ultimate destination
agreements/licenses
 Third Party vs. Dual National
 Nationality vs. Citizenship: Country of birth is
consideration for export purposes
 124.16 Retransfer Authorization for
NATO/Australia/NZ/Japan Switzerland
 Additional review if COB is 126.1
“Significant Ties Screen for 126.1”
129
 How long a citizen of current country
 Passport: from current country or both
 Frequency/nature of travel back, e.g. personal or
business
 Measures to renounce former citizenship
 Current/former country recognizes dual citizenship
 Security clearance
Changes to Third Party/
Dual National
130
 FR notice completed comment period
 Dual/Third Party Nationals bona fide regular
employees of the foreign business entity require no
further authorization
 Responsibilities of foreign parties
 Vetting procedures/security clearances
 Due diligence to ensure USML technology not
diverted
Brokering (Part 1429)
131
 Closed one of the largest loopholes in export licensing
 Carefully scrutinize your applications for brokers, e.g.
agents, consignees
 Registration requirement (129.3)
 Prior approval/notification (129.7/129.8)
 “Foreign persons subject to US jurisdiction”
 Brokering revisions
IN SUMMARY
132
 USG dependent upon DDTC quality of
information/licenses you submit
 Keep an eye on DDTC web for upcoming regulatory
updates
 Questions: Licensing Officer, Division Chief, or me (202)
663-2739. davistl@state.gov
MORE INFORMATION
133
 Learn more about U.S. defense trade controls by
visiting the Department of State’s Directorate of
Defense Trade Controls on the Internet at:
www.pmddtc.state.gov
 Contact the DDTC Response Team at:
 (202) 663-1282
 DDTCResponseTeam@state.gov