Archive for the ‘DDTC’ Category

DDTC New Advisory Opinions Application is Live

2019/02/20

Earlier this month the Directorate of Defense Trade Controls (DDTC) released the new Advisory Opinions Application which is supposed to offer users faster, more convenient submission and status tracking. The application can be found in the Defense Export Control and Compliance System (DECCS).

All current DTrade Super Users with valid email addresses will be automatically enrolled in DECCS in the coming weeks and receive an email to activate their DECCS accounts in order to use the new application. If you are not a Super User, or do not want to wait to receive your account activation you can enroll and create a new DECCS account at: https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=652e00b7db78d300d0a370131f961946.

More information about DECCS and the new application is available at: https://www.pmddtc.state.gov/?id=ddtc_public_portal_homepage


Export News: The Rules Are about to Change, What You Can Expect?

2019/01/31

By: Johanna Reeves, Esq., jreeves@reevesdola.com, +1 202-715-9941; and Katherine Heubert, Esq., kheubert@reevesdola.com, +1 202-715-9940. Both of Reeves & Dola, LLP. (Source: R/D Report)

Earlier this year, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) published a proposed rule in the Federal Register to amend the International Traffic in Arms Regulations (ITAR) and revise U.S. Munitions List (USML) Categories I, II, and III to better identify the articles the U.S. government believes warrants export and temporary import control on the USML. Those items deemed not to require control under the ITAR are proposed to be removed from the USML and would become subject to the U.S. Department of Commerce, Bureau of Industry and Security’s (BIS) Export Administration Regulations (EAR). BIS published a companion proposed rule at the same time to identify where those items removed from the USML will be controlled on the Commerce Control List (CCL). We covered the proposed transition rules in our alerts, dated May 23, June 1, June 8, and June 13, 2018, all of which can be accessed at reevesdola.com.

Soon the highly anticipated rules containing the final rewrites of U.S. Munitions List Categories I, II, and III should be published. In advance of their publication, companies should begin to prepare now in order to be best positioned to take advantage of the change in regulations as soon as they become effective. In this alert we seek to answer some basic questions about the transition and walk through the review process that companies will need to undertake to determine which set of controls will now apply to their goods and services.

What Will the Rewrites Do?

As many of you already know, USML Categories I, II, and III are the last USML categories to go through the revision process. All other USML Categories have been revised, some multiple times already as part of the previous Administration’s Export Control Reform (ECR) effort. What the upcoming final rules will do is to remove from the USML those items the U.S. government has determined to be of less military significance or of a more commercial nature. As explained in the proposed rule, DDTC’s intent is to revise these categories so that the scope of the respective USML Category is limited to those defense articles that provide the United States with a “critical military or intelligence advantage or are inherently for military end use.” (83 FR 24198). DDTC further explains in the proposed rule that the articles that would be removed from the USML do not meet this standard, and notes that many items are widely available in retail outlets in the United States and abroad. Those items removed from the USML will be subject to the EAR in new Export Control Classification Numbers (ECCNs) on the CCL.

Despite what many have claimed, this is not a decontrol of the items identified for removal from the USML. Rather, it is a right-sizing of U.S. export controls. Items that have historically required a license from DDTC will now be subject to the export licensing requirements of the EAR. However, this does not mean that companies will be able to ship firearms and ammunition throughout the world without a license. To the contrary, many items moving to the CCL will require an export license from BIS, even to Canada. It is also important to remember that the revisions to the USML have no impact on how the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) controls firearms and ammunition for permanent import into the United States under its regulations at 27 C.F.R. Part 447.

Has the Transition Already Taken Effect?

No! As of today, the revisions have not yet been published as a final rule and the USML currently remains unchanged for Categories I, II, and III. When the final rules are published in the Federal Register, they will provide an effective date for the implementation of the changes. If the previous USML Category rewrites are any indication, the rules will likely become effective 180 days after the final rule publishes, though the agencies could decide to provide a shorter implementation period. A delayed effective date, which has been provided in all the previous USML Category revisions, is intended to give impacted industry members the time to implement the revisions by reclassifying their inventory, making changes to internal processes and procedures, train employees on the new controls, update databases, notify customers, and other necessary compliance actions.

Is There Anything to do to Prepare for this?

Yes! Companies now can begin reviewing their inventory and internal procedures to identify those items and functions that may be impacted. While the proposed rules aren’t set in stone, they do provide a good roadmap of what is likely going to move off the USML and onto the CCL. Companies can use that to redline processes and procedures and identify any necessary changes to databases and systems that house jurisdictional determinations for products. The proposed rules can also help companies start walking through the jurisdictional review analysis to determine what export control regime will likely apply to their products after the revisions become effective. For a refresher on the proposed rules, please review our previous alerts.

The process for walking through this jurisdictional review is called the Order of Review. The Order of Review is the process by which one makes a jurisdiction and classification decision with respect to the export control regulation applicable to any piece of hardware, software, technology, or service. The Order of Review is completed by first reviewing the USML, followed by the CCL, and essentially asking a series of yes/no questions. The following outline is designed to walk you through the basic decision process for an Order of Review analysis.

Step 1: Review the ITAR

* If your item is enumerated by name or capability in a USML control paragraph, your review has ended. The item is ITAR controlled.

* If your item is described in a control paragraph that contains the “specially designed” modifier, you must perform the specially designed analysis in 22 C.F.R. §120.41 to determine whether your item is captured.

– If after performing the “specially designed” analysis the item is determined to be “specially designed,” then the item is controlled in that subparagraph of the USML. Your review has ended.

– If after performing the “specially designed” analysis the item is released (i.e., determined not to meet the “specially designed” criteria), then the item is not controlled on the USML and a review of the EAR is required. Proceed to Step 2 below.

* If the item is not described in any control paragraph on the USML, then the item is not captured by the ITAR and a review of the EAR is required. Proceed to Step 2 below.

Note: if an item appears to be listed in multiple paragraphs, any paragraph that is designated Significant Military Equipment (SME) takes precedence over a non-SME paragraph. In other words, always follow the highest applicable level of control.

Step 2: Review the EAR

Note: the EAR does not have a “see through” rule like the ITAR, so do not consider the individual parts inside of an item when classifying it. Instead, consider overall functions and characteristics to classify the item under review. Compare the characteristics of the item to the 10 CCL categories and then determine the applicable product group A-E.

* Start your CCL review with the “500-series” and “600-series” ECCNs. If your item is enumerated by name or capability in a “500-series” or “600-series” ECCN on the CCL, your review has ended. The item is controlled in that control paragraph of the CCL.

* If your item is described in a control paragraph that contain the “specially designed” modifier, then perform the “specially designed” analysis, described in Part 772 of the EAR.

– If after performing the “specially designed” analysis the item is determined to be “specially designed” then the item is controlled in that control paragraph of the CCL. Your review has ended.

– If after performing the “specially designed” analysis the item is released, then a review of the rest of the CCL is required.

* If you have reviewed the “500-series” and “600-series” ECCNs and your item is not captured, then proceed to review the rest of the CCL. If your item is enumerated by name or capability in a “non-600/500 series” ECCN on the CCL, then your item is controlled in that paragraph of the CCL. Your review has ended.

* If your item is described in a control paragraph that contains the “specially designed” modifier, then perform the “specially designed” analysis, described in Part 772 of the EAR.

– If after performing the “specially designed” analysis the item is determined to be “specially designed” then the item is controlled by the that paragraph of the CCL. Your review has ended.

– If after performing the “specially designed” analysis the item is released, proceed to Step 3.

* If your item is not described in any ECCN on the CCL, then proceed to Step 3 below.

Step 3: Item Not Captured by Specific ECCN

If the Order of Review is performed and the item is not captured by the USML and is not captured by any ECCN on the CCL, then the item is classified as ECCN EAR99. The Order of Review analysis has ended.

If, after performing the Order of Review, questions remain as to the proper jurisdiction and classification of an item, consider submitting a Commodity Jurisdiction (CJ) request to DDTC for an official jurisdictional determination for a product. When submitting a CJ request to DDTC, it is recommended to include a description of the Order of Review analysis that was conducted and a clear explanation as to why confusion remains. Also, indicate the USML Category(ies) or ECCN(s) that you believe is/are most likely applicable to the item under review. DDTC provides step-by-step instructions for preparing and submitting Commodity Jurisdiction requests on its website.

Additionally, both DDTC and BIS have developed Order of Review tools to aid industry in making a jurisdiction and classification analysis.

DDTC’s web-based decision tools:

* Order of Review: Use this tool to help you figure out where your item(s) is controlled on the USML.

* Specially Designed: Use this tool to help you determine if a particular item is “specially designed” or meets one of the five carve-outs. This tool applies ONLY to commodities and software related to USML Categories that have been revised in accordance with the President’s Export Control Reform initiative. DO NOT USE if your USML category has not yet been revised.

BIS web-based decision tools:

* CCL Order of Review: This tool will assist in understanding the steps to follow in reviewing the Commerce Control List when determining the classification of their item. (See Supplement No. 4 to part 774 of the EAR).

* Specially Designed: This tool will assist users in determining if an item is “specially designed” under the Export Administration Regulations. (See § 772.1 of the EAR).

Closing Thoughts

Of course, each jurisdictional determination is unique, with some being more complex than others. Additionally, the “specially designed” review is its own separate catch-and-release analysis. We will address the “specially designed” review in an upcoming alert. Please note that the “specially designed” analysis is slightly different between the two regulations, so do not assume that if an item is released from the ITAR, it is automatically classified as EAR99.

Even though the transition is not a decontrol of firearms and ammunition exports, the process will be radically different from what many are already accustomed. The rules of the game are about to change, and so it is vitally important that companies get ready. Many will need to learn a new set of export controls regulations (the EAR) that may never have applied to their products before. Whether it’s reclassifying products or retooling corporate policies and procedures, businesses must be prepared to adapt to the new rules to ensure export transactions remain compliant.


Exporters and the Shutdown

2019/01/31

The US Government was shutdown for 35 days and it affected approximately 800,000 federal workers, nine departments and several agencies. As many export compliance professionals may have noticed, The US Department of Treasury’s Office of Foreign Assets Control (OFAC), the US Department of Commerce’s Bureau of Industry and Security (BIS) and The US Department of State’s Directorate of Defense Trade Controls (DDTC) were all affected by the shutdown.

All guidance from these departments was very limited, meaning questions went unanswered as most compliance officers received out of office replies citing the shutdown. The Department of Commerce’s free Consolidated Screening List tool was even shutdown for a few days, leaving exporters to find alternate ways to screen their customers. The BIS licensing portal, Simplified Application Process-Redesign (SNAP-R) was also unavailable. DDTC’s DTrade portal which is used for requesting and receiving license requests, was automatically rejecting new submissions, and the DDTC’s daily pick-up and drop-off service was cancelled.

With the government now funded for a short period of time (3 weeks to be exact), OFAC, BIS and DDTC will resume operations as usual.

DDTC issued the following statement: Priority will be placed on issuance of licenses in the system at the time of implementation of lapse of funding operations on December 22, 2019. New licenses will be accepted; however, industry is advised of the likelihood of longer than normal processing times due to the high volume of licenses DDTC expects to receive. The “Emergency License” process described in DDTC’s December 22, 2019 announcement below is hereby suspended.

DDTC Full Notice: https://www.pmddtc.state.gov/?id=ddtc_public_portal_news_and_events


DDTC Offering Industry Testing for New Registration and Advisory Opinion Applications

2018/11/26

DDTC’s test versions for their new Registration and Advisory Opinion applications, which are housed on the cloud-based Defense Export Control and Compliance System (DECCS), are available for industry and testing and feedback. DDTC is encouraging testing and there will be additional applications for testing in the coming weeks. You must have a test account and a complete test registration in order to access any of the applications.

If you are interested in participating in the testing contact the DDTC Test Support Team below:

DDTC Test Support Team:

Email: PM-DDTC-DECCS@state.gov

Phone: (202) 663-1282 / (202) 663-2838

The DDTC Test Support Team will be available during the week from 10am to 4pm EST.

Full Details: https://www.pmddtc.state.gov/?id=ddtc_public_portal_news_and_events


Export Controls & ECR Report

2018/10/30

The Congressional Research Service (CRS) released “The U.S. Export Control System and the Export Control Reform Initiative” providing a full report on several aspects of the US export control system. The report provides background on policies and the possible future systems but with very few details (Congress will debate on whether the regulations should eventually have only one licensing agency).

Full Report: https://crsreports.congress.gov/product/pdf/R/R41916


The Rise of ITAR-free procurement in Europe

2018/10/30

By: Roland Stein, BLOMSTEIN

In this article, Roland Stein of Blomstein discusses International Traffic in Arms Regulations (ITAR), a US regulatory framework intended to control the manufacturing, export and proliferation of arms, related goods, services and technologies.

Are European contracting authorities turning the tables on strict US arms control regulations? ITAR, short for “International Traffic in Arms Regulations”, is a US regulatory framework intended to control the manufacturing, export and proliferation of arms, related goods, services and technologies. Its primary aims are twofold: protecting the interests of U.S. national security and serving the objectives of U.S. foreign policy. ITAR is based on the Arms Export Control Act (AECA) (22 U. S. C. 2778-2780) and available in the Code of Federal Regulations under 22 CFR Parts 120-130. An ITAR-listing effectively permits U.S. authorities to control the export and whereabouts of regulated products. Generally, ITAR regulations do not only specify reporting obligations for contractors, but also contain strict restrictions on use, import, export and end-use of regulated products.

As an effective instrument of US state control, many market observers have long considered ITAR provisions to be a vital tool of US power projection abroad. However, an evolving opposing trend is becoming apparent: Fuelled by current shifts in the landscape of European defence procurement, ITAR restrictions are increasingly exploited as an instrument by European contracting authorities. While no state can afford to essentially “blacklist” US products or arms manufacturers altogether, European nations appear to leverage ITAR restrictions to favour European contractors over those with US involvement in specific cases.

At a time when there are indications that European defence spending is set to rise significantly in the near future due to a variety of initiatives for joint European procurement of military equipment such as the EU Permanent Structured Cooperation (PESCO) and the European Defence Fund, as well as established projects such and the Organisation for Joint Armament Co-operation (OCCAR), contractors with ties to the US will likely encounter legal and strategic challenges when attempting to obtain European defence contracts. The increasing use of ITAR-free restrictions will thus likely contribute to an already challenging market environment for non-European contractors.

Exclusion of products with ITAR restrictions

Lately, government agencies of various EU member states have attempted to exclude products with ITAR restrictions from defence procurements. A notable current case in which such a restriction was employed is the ongoing tender for around 120.000 new standard assault rifles for the German armed forces. The new design is supposed to succeed the current “G36” standard rifle produced by German manufacturer Heckler & Koch. The new rifle must meet a comprehensive catalogue of performance requirements and is intended for use in all branches of the armed forces. The contract for the acquisition of 120.000 firearms and “accessories in different quantities” has an estimated net value of approximately EUR 250 million. Its conclusion is scheduled for 2019, with a planned delivery of the rifles starting 2020. While the Europe-wide call for competition issued on 21 April 2017 did not specify any requirements in this respect, the subsequent invitation to tender by the German Ministry of Defence stipulated that any proposal for a successor rifle may not rely on components subject to ITAR regulations. In the case of the German rifle procurement, the ITAR-free exclusion criterion even applied to supplies and weapons produced entirely in Germany. A related tender regarding the manufacture and supply of a main battle sight and reflex visor for the new assault rifle includes a similar clause: according to the contract notice, both items may not be subject to the ITAR regulations.

According to press reports, SIG Sauer, a German-American bidding consortium, initially took part in the preceding competition with its existing MCX rifle. Besides SIG Sauer and the incumbent Heckler & Koch, the German Rheinmetall group participated in the competition in a joint venture with Austrian manufacturer Steyr Mannlicher. Whereas Heckler & Koch presented a newly developed rifle design, the HK433, Rheinmetall and Steyr Mannlicher proposed an existing design, the RS556 assault rifle. Surprising many observers, both SIG Sauer and Rheinmetall/Steyr Mannlicher eventually decided not to submit an offer before the close of the bidding period on 8 February. While the reasons for the eventual non-participation of Rheinmetall and Steyr Mannlicher remain unclear, SIG Sauer was very vocal about its decision to pull out of the procurement process, publically naming discriminatory design requirements as a motivation for its pull out of the competition. The company cited “blanket discrimination against U.S. products and bidders” and a disadvantageous wording of the invitation to tender as the main reasons for revoking its initial offer.

So far, the German Ministry of Defence has not specifically addressed the allegations, as it did not want to comment on the issue due to the ongoing tendering phase. SIG Sauer’s offer included a production based in Germany and a design lacking U.S. patent reservations. However, this was apparently insufficient to fully comply with tender requirements. The manufacturer’s proposal was still subject to ITAR restrictions, as SIG Sauer’s proposed design employed US technology, in particular the design of the magazine and several interfaces for accessories. According to SIG Sauer, an ITAR-free requirement was neither imposed in the earlier invitation to tender for an assault rifle for the German Army’s special forces, nor stipulated in the preceding call for competition. Therefore, contractors were not aware of any ITAR restrictions before participating in the preliminary competition.

SIG Sauer alleged that had it stayed in the competition, it would not have had a realistic chance of winning the tender, as the technical requirements were clearly and unambiguously tailored to the incumbent competitor Heckler & Koch. Furthermore, the company accuses the German Ministry of Defence of discriminating against U.S. bidders through excessive procurement requirements. The company criticises that the exclusion of ITAR controlled products constitutes a preliminary decision in favour of its EU-based competitors, as the criterion de facto renders most products by manufacturers with minor links to the U.S. ineligible.

Analysis

How does this case tie in with the current landscape of European defence procurement? Germany has previously exported up-to-date and used equipment to political and military allies if deemed appropriate and necessary, including assault rifles. For instance, the country has equipped Kurdish Peshmerga fighters in northern Iraq with approximately 16.000 assault rifles from 2014 onwards. ITAR restrictions might severely limit Germany’s ability to distribute weapons and equipment in such a way. Moreover, even the use of ITAR rifles by Germany’s own forces in countries such as Afghanistan might be complicated significantly by ITAR restrictions. Thus, political concerns may partly explain the exclusion of ITAR regulated offers in this case.

Still, this particular use of an ITAR-free clause is not an isolated case, but representative of a growing practice that is becoming more and more frequent in European procurement projects. ITAR-related exclusionary requirements signal a new trend, as the Ministry of Defence had in the past regularly accepted U.S. reservations and ITAR restrictions for various defence projects. As the delays resulting from U.S. approval and extensive disclosure requirements have been cause for criticism in the past, both timing and context of the depicted case suggest an inclination to ask for “ITAR-free” products in future procurements.

This practice is not just a German development, but indicative of a Europe-wide trend. ITAR-free clauses are becoming increasingly common as exclusion criteria in international invitations to tender. A corresponding widespread, albeit not concerted, effort to avoid the purchase of products subject to ITAR regulation is observable throughout the entire landscape of European defence procurement. For instance, large parts of the French arms industry tend to avoid using or sourcing ITAR-regulated items, provided an adequate substitute is available. Many manufacturers attempt to circumvent ITAR restrictions, as well. Products are regularly marketed as being “ITAR-free”. Notable French contractors and manufacturers such as Dassault Aviation avoid using key U.S. technologies altogether in order to strategically advertise and commercialise its fighter aircrafts as being exempt from ITAR restrictions.

The increased use of ITAR-free clauses in EU procurements is certainly not exclusively attributable to protectionist intentions. ITAR restrictions do in fact frequently tend to complicate and delay international procurements. In addition, the U.S. has shown a tendency to apply them strictly and strategically in the past. For instance, in 2014 a French contract for the sale of “Falcon Eye” reconnaissance satellites to the United Arab Emirates worth EUR 700 million was stalled for more than a year, as the satellites in question included ITAR-regulated electronic components. Even though these components were of no particular sensitivity, their inclusion still enabled the U.S. government to cause significant delays due to approval requirements.

Likewise, defence contractors may have a legitimate interest to protect confidential trade secrets, which they might be obliged to disclose under ITAR. ITAR-free clauses may thus in many cases reflect justified political and trade related concerns. The recent paradigm shift toward ITAR-free clauses may in part be explained by these and similar past negative experiences with ITAR-regulated items. However, the German depicted above case clearly demonstrates how ITAR-free clauses might be employed in the future to de facto exclude U.S. competitors and products from European procurements.

Outlook

While it is too soon to presume a concerted EU-wide effort to obstruct or even exclude U.S. defence contractors from EU government procurement procedures, two emerging trends are evident: On the one hand, systematic cooperation on procurement projects at the EU-level is increasing, accompanied by de jure benefits for EU-based companies. On the other hand, there has been a notable rise in national preferences of EU bidders through selective procurement requirements. These developments pose significant challenges for European and US contractors alike. It remains to be seen if this trend on the European defence sector continues and similar strategies are adopted towards other markets, in particular targeting dual use items. Legal challenges to such practices under European Procurement Law and International Trade Law are likely.

It should be added that the aforementioned developments do not appear to be temporary. The landscape of European defence procurement is adjusting rapidly, fuelled by significant recent geopolitical developments. On one hand, with the US shifting its strategic focus to other regions of the world and the UK set to leave the EU, continental European defence spending will presumably see a significant rise. Simultaneously, new mechanisms of EU defence procurement promise significant market changes. At a time when a variety of initiatives at the EU-level aim at promoting EU defence procurement, not least the recent introduction of a Permanent, Structured Cooperation (PESCO) in defence matters, the future effects of ITAR-free procurement on international trade and competition will need to be monitored closely.

Article: http://whoswholegal.com/news/analysis/article/34786/rise-itar-free-procurement-europe/


Regulatory Revisions to the ITAR

2018/10/29

The Department of State has removed some notification requirements from the International Traffic in Arms Regulations (ITAR) and has revised several entries on the Unites States Munitions List (USML). The goal was to remove items that do not warrant continued inclusion. The rule also adds notes to USML Categories IV and V, revises control text in USML Categories VIII, XI, and IV. This rule was effective October 4, 2018 but interested parties can submit comments by November 19, 2018 by:

  • Email: DDTCPublicComments@state.gov with the subject line, ‘Regulatory Reform Revisions’’
  • Internet: At www.regulations.gov,search for this notice using Docket DOS–2018–0020.

Changes:

PART 121—THE UNITED STATES MUNITIONS LIST

  • Section 121.1 is amended as follows:
    • In Category IV, redesignate Note to Paragraph (d) as Note 1 to Paragraph (d) and add Note 2 to paragraph (d): This paragraph does not control thrusters for spacecraft.
    • In Category V, add Note 3 to USML Category V: Items controlled in this Category, except for materials described in paragraph (c)(6), (h), or (i), are licensed by the Department of Commerce when incorporated into an item subject to the EAR and classified under ECCN 1C608.
    • In Category VIII, revise paragraph (h)(12): Unmanned aerial vehicle (UAV) flight control systems and vehicle management systems with swarming capability (i.e. UAVs that operate autonomously (without human input) to interact with each other to avoid collisions, fly in formations, and are capable of adapting in real-time to changes in operational/threat environment, or, if weaponized, coordinate targeting) (MT if for an aircraft, excluding manned aircraft, or missile that has a ‘‘range’’ equal to or greater than 300 km)
    • In Category XI, add Note to Paragraph (a)(3)(i), revise Note to Paragraph (a)(3)(xii), and revise paragraph (c)(4)
      • Note to Paragraph (a)(3)(i): This paragraph does not control radars that: (1) Are incapable of free space detection of 1 square meter Radar Cross Section (RCS) target beyond 8 nautical miles (nmi); (2) contain a radar update rate of not more than 1Hz; and (3) employ a design determined to be subject to the EAR via a commodity jurisdiction determination (see § 120.4 of this subchapter).
      • Note to Paragraph (a)(3)(xii): This paragraph does not control radars not otherwise controlled in this subchapter, operating with a peak transmit power less than or equal to 550 watts, and employing a design determined to be subject to the EAR via a commodity jurisdiction determination (see § 120.4 of this subchapter).

* * * * * * * *
(c) * * *
(4) Transmit/receive modules, transmit/receive monolithic microwave integrated circuits (MMICs), transmit modules, and transmit MMICs having all of the following:

(i) A peak saturated power output (in watts), Psat, greater than 505.62 divided by the maximum operating frequency (in GHz) squared [Psat > 505.62 W * GHz2/fGHz2] for any channel;

(ii) A fractional bandwidth of 5% or greater for any channel; (iii) Any planar side with length d (in cm) equal to or less than 15 divided by the lowest operating frequency in GHz [d ≤ 15cm * GHz/fGHz]; and

(iv) At least one electronically variable phase shifter per channel.

  • Note 1 to Paragraph (c)(4): A MMIC: (a) Is formed by means of diffusion processes, implantation processes, or deposition processes in or on a single semiconducting piece of material; (b) can be considered as indivisibly associated; (c) performs the function(s) of a circuit; and (d) operates at microwave frequencies (i.e., 300 MHz to 300 GHz).
  • Note 2 to Paragraph (c)(4): A transmit/ receive module is a multifunction electronic assembly that provides bi-directional amplitude and phase control for transmission and reception of signals.
  • Note 3 to Paragraph (c)(4): A transmit module is an electronic assembly that provides amplitude and phase control for transmission of signals.
  • Note 4 to Paragraph (c)(4): A transmit/ receive MMIC is a multifunction MMIC that provides bi-directional amplitude and phase control for transmission and reception of signals.
  • Note 5 to Paragraph (c)(4): A transmit MMIC is a MMIC that provides amplitude and phase control for transmission of signals.
  • Note 6 to Paragraph (c)(4): USML Category XI(c)(4) applies to transmit/receive modules and to transmit modules, with or without a heat sink. The value of length d in USML Category XI(c)(4)(iii) does not include any portion of the transmit/receive module or transmit module that functions as a heat sink.
  • Note 7 to Paragraph (c)(4): Transmit/ receive modules, transmit modules, transmit/ receive MMICs, and transmit MMICs may or may not have N integrated radiating antenna elements, where N is the number of transmit or transmit/receive channels.
  • Note 8 to Paragraph (c)(4): Fractional bandwidth is the bandwidth over which output power remains constant within 3 dB (without the adjustment of other operating parameters), divided by the center frequency, and multiplied by 100. Fractional bandwidth is expressed as a percentage.
  • In Category XV, revise the second and third sentences of paragraph (f).
    • (f) * * * Defense services include the furnishing of assistance (including training) to a foreign person in the integration of a satellite or spacecraft to a launch vehicle, including both planning and onsite support, regardless of the jurisdiction, ownership, or origin of the satellite or spacecraft, or whether technical data is used. It also includes the furnishing of assistance (including training) to a foreign person in the launch failure analysis of a satellite or spacecraft, regardless of the jurisdiction, ownership, or origin of the satellite of spacecraft, or whether technical data is used.

PART 123—LICENSES FOR THE EXPORT AND TEMPORARY IMPORT OF DEFENSE ARTICLES

  • Section 123.22 is amended by revising paragraphs (b)(3)(i) and (c)(2) to read as follows:
    • 123.22 Filing, retention, and return of export licenses and filing of export information. * * * * * (b) * * * (3) * * *
      (i) Technical data license. Prior to the permanent export of technical data licensed using a Form DSP–5, the applicant shall electronically provide export information using the system for direct electronic reporting to DDTC of export information and self-validate the original of the license. Exports of copies of the licensed technical data should be made in accordance with existing exemptions in this subchapter. Should an exemption not apply, the applicant may request a new license.
      * * * * *
      (c) * * *
      (2) Licenses issued by DDTC but not decremented by U.S. Customs and Border Protection through its electronic system(s) (e.g., oral or visual technical data releases) must be maintained by the applicant in accordance with § 122.5 of this subchapter.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2018-10-04/pdf/2018-21422.pdf


Owner of Defense Firm Charged with Defrauding DOD out of 7 Million in Contracts

2018/09/27

By: Danielle Hatch

Ferdi Murat Gul (Fred Gul), 42, of Turkey has been indicted by a grand jury on the following counts:

  • One count of conspiracy to commit wire fraud
  • Six counts of wire fraud
  • One count of conspiracy to violate the Arms Export Control Act (AECA)
  • Once substantive count of violating the Arms Export Control Act

Gul is the principal owner, chief executive office, and general manager of Bright Machinery Manufacturing Group Inc. (BMM), a defense contracting company in New Jersey and FMG Machinery Group (FMG), a purported manufacturing company in New York. He also has an ownership interest in HFMG Insaat (HFMG), a manufacturing company located in Turkey.

Between October 2010 and June 2015 Gul would submit bids for DoD contracts for BMM, he would submit quotes based on BMM providing military goods manufactured in the US. BMM actually relied on Gul’s Turkish company, HFMG for the goods. Over the course of 5 years BMM was awarded approximately $7 million in DoD contracts. BMM fraudulently won 346 contracts to manufacture torpedoes for the US Navy, bomb ejector racks, and armament utilized in US Air Force aircraft, and firearms and mine clearance systems used by US military abroad. Later testing by the DoD exposed the some parts had several design flaws and were unusable.

Gul and his conspirators hid the fraudulent activity from the government by submitting forged certifications and fabricated information by email to DoD. They also falsely claimed that they performed quality control on the procedures and parts sold to DoD. To have HFMG create the parts for BMM, Gul exported drawings and technical data to Turkey. Some of this information was subject to the International Traffic in Arms Regulations (ITAR) and required a license form the State Department.

The wire fraud counts carry a maximum penalty of 20 years in prison and a fine of $250,000. The Arms Export Control Act violations carry a maximum penalty of 20 years in prison and a $1 million fine.

Ferdi Murat Gul is currently at large and believed to be in Turkey. Also remember…The charges and allegations of this indictment are merely accusations, and the defendant is considered innocent until proven guilty (cue sound from Law & Order).

Department of Justice: https://www.justice.gov/usao-nj/pr/owner-defense-firm-charged-conspiracy-defraud-department-defense-7-million-violate-arms


America’s Largest Business Lobby Endorses Trump’s Arms Export Plan

2018/08/30

(Source: Defense News, 21 Jul 2018.)

The U.S. State Department recently announced its plan to put into effect the Conventional Arms Transfer policy, which adds economic security as a factor when the government considers whether to approve arms exports.

The goal of the plan is to boost American weapons exports. Council President Keith Webster, President Obama’s last director of international cooperation at the Pentagon, called the policy “a major first step toward improving government decision processes and policies.” Aerospace and defense firms rely on innovation and U.S. government support to compete on a global scale, he added.

The export council offered around 30 recommendations on how to hardwire economic security and defense-industrial base considerations into the government’s international arms sale decisions.

Despite the positive feedback, there have been concerns from arms control advocates who say the policy could fuel conflicts around the world and aid regimes that do not respect human rights.

“If the administration is serious about claims that these changes make for responsible policy, it should add much greater transparency into the arms transfer and monitoring process,” Forum on the Arms Trade’s founder and coordinator, Jeff Abramson, wrote.

Leading the world in arms transfers, the U.S. is expected to reach $47 billion government-to-government sales this year, whereas $42 billion sales were approved by the State Department for all of 2017.

Lt. Gen. Charles Hooper, head of the Defense Security Cooperation Agency, said during the Farnborough International Airshow on July 18, “Defense exports are good for our national security, they’re good for our foreign policy. And they’re good for our economic security. And as the administration and our leadership has said, economic security is national security.”

Source: https://www.defensenews.com/industry/2018/07/20/business-org-hails-trump-arms-export-plan/


Sanctions in Name Only Imposed on Russia for Nerve Gas Attack

2018/08/30

(Source: Export Law Blog, 8 Aug 2018. Reprinted by permission.)

By: R. Clifton Burns, Esq., Bryan Cave LLP, Washington DC, Clif.Burns@bryancave.com, 202-508-6067.

Clif Burns, Bryan Cave Leighton Paisner, Washington, DC. Copyright Clif Burns 2018

According to a State Department press release released today, the United States has made a determination that Russia used novichok, a chemical warfare agent, in an attack on British soil and, as a result, the US will impose sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBWC Act”), 22 U.S.C. § 5601 et seq.  The text of these sanctions was not released.  Instead, the text will be in a Federal Register notice expected to be published on or around August 22.  The sanctions will be effective as of the date of the publication of that notice.

Because these sanctions are being imposed under the CBWC Act, we can already get a good idea of what these sanctions will be.   The Act contemplates sanctions being imposed in two stages.  The first stage, described in section 5605(a), sets forth the following sanctions, all of which are required to be imposed upon the offending country:

  • Termination of all foreign assistance
  • Termination of all arms sales
  • Termination of all foreign military financing
  • Denial of U.S. government credit or assistance
  • Termination of all exports of items controlled on the Commerce Control List for NS reasons

To be honest, none of these sanctions will have any significant impact on Russia.  Arms sales to Russia have been prohibited for some time now.   The country chart already has Russia controlled for both columns of NS controls.  Of course, you could say that the new sanctions will mean that NS items will not be considered for licenses under any circumstances.  But I don’t think licenses to export NS items to Russia are being readily granted now.

The second stage, if it happens, would take place on November 8 of this year unless the President determines that Russia is no longer using chemical or biological weapons.  If that determination is not made, the President is required to impose three sanctions from a set of six possible sanctions.  Those six possible sanctions are:

  • Opposing multilateral bank financial assistance to Russia
  • Prohibition of U.S. bank loans to the government of Russia
  • Prohibition of all exports of all U.S. goods and technology to Russia
  • Downgrading or suspending diplomatic relations with Russia
  • Termination of all service to and from the United States by Russian airlines

Whether the President will make the findings necessary to impose this second stage and which three of the six will be imposed is anyone’s guess, although I suspect that most people likely have a pretty good guess.   The upcoming Federal Register notice will probably not even address the second stage sanctions.   If the United States does in fact impose the three second stage sanctions, the best guess is probably that he will impose the least restrictive of those, i.e., opposing multilateral bank loans, prohibiting U.S. bank loans, and expelling a few more diplomats.