Archive for the ‘Defense Trade Controls’ Category

State/DDTC Reminder: DTrade Super Users Need to Update their Email Address in the System

2018/04/04

(Source: State/DDTC)

DTrade Super users should ensure their email address in DTrade is accurate and correct. Please log in to DTrade and verify your email address. To change or update your DTrade email address, follow these instructions: Update Your DTrade Email Address Instruction Form.


Seiler Instrument to Pay $1.5 Million in Forfeiture to the United States

2018/02/08

Source: Department of Justice

Seiler Instrument & Manufacturing Company, Inc., a Kirkwood-based defense contractor, admits fault to the company’s use of optical materials imported from China in the weapons sights which the company improperly certified as compliant with the Buy American Act and will pay the United States $1,500,000.00 in forfeiture. The company manufactured the parts under a series of contracts with the Department of Defense. Pursuant to a pretrial diversion agreement Seiler Instrument has made an initial payment of $500,000.00 and will make additional payments of $500,000.00 in each of the next two years. The company also agrees to enter a plea of guilty to a false statement charge in the event that the company does not meet the full terms of the agreement.

Seiler Instrument is a long-time defense contractor which specializes in the production of fire control systems, including sighting devices for weapons, which are used on all United States Military Howitzer and mortar systems.  The pretrial agreement concluded after an investigation into the company’s business practices and how its proceedings reflect import and export regulations governing the procurement of materials used to manufacture defense systems. Two of these provisions include the Buy American Act and the International Traffic in Arms Regulations which place limitations on the export of restricted technical data used in the procurement and manufacturing process to countries such as China. The agreement states that Seiler Instrument took actions to correct problems and has further agreed to have its compliance program monitored by the Department of Defense.

This case was investigated by the Defense Criminal Investigative Service (Department of Defense, Office of Inspector General), the U.S. Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HSI), the Army CID Major Procurement Fraud Unit and the U.S. Department of Commerce, Bureau of Industry and Security – Office of Export Enforcement, Chicago Field Office. The Defense Contract Management Agency also provided substantial assistance in this investigation.

More Details: https://www.justice.gov/usao-edmo/pr/seiler-instrument-pay-15-million-forfeiture-united-states


Failing to Keep Current with Classifications Leads to Civil Penalty for NJ-based Company

2017/10/16

By: Ashleigh Foor

During the second week of September, Bright Lights USA, a Barrington, NJ-based company, received a $400,000 civil penalty from the State Department’s Directorate of Defense Trade Controls (DDTC) for exporting unauthorized defense components and technical data, which violates the International Traffic in Arms Regulations (ITAR).

Bright Lights notified DDTC of two ITAR violations in voluntary self-disclosures filed with the agency in April 2013 and June 2016.

Bright Lights failed to stay current with the former Obama administration’s Export Control Reform (ECR) regarding  the transition of ITAR-related commodities/technology from the State Department’s US Munitions List to the Commerce Control List. The wrong commodity jurisdiction was selected and resulted in export violations for both the physical export of the items and the illegal transfer of technology made by the company.

Want to make sure your company is staying compliant? We have an upcoming webinar on classifications:

EAR Hardware and Materials Classifications: Learning By Doing

Practice Makes Perfect—A Two-Part Webinar that Combines Hands-On Exercises, Discussions, and Instruction. October 25, 2017 & November 8, 2017


Repeal of Pratt & Whitney Canada Corporation’s Statutory Debarment

2017/10/16

By: Ashleigh Foor

As of July 12, 2017, the statutory debarment of Pratt & Whitney Canada Corporation has been lifted and the company reinstated, according to the Department’s authorities under the Arms Export Control Act and the International Traffic in Arms Regulations.

In June 2012, Pratt & Whitney Canada Corporation plead guilty to violating the AECA (US District Court, District of Connecticut, 12-CR-146-WWE), making the company statutorily debarred in accordance with section 120.1 of the ITAR with certain exceptions, pursuant to section 127.7(b). Section 38(g)(4) of the AECA, 22 U.S.C. 2778(g)(4) prohibits any party that has violated the AECA from issuing export licenses or other approvals for the export of defense articles or services. The notice debarring Pratt & Whitney Canada Corporation in all its locations was published in the Federal Register July 6, 2012.

According to section 127.7 of the ITAR, a statutory debarment may be repealed once appropriate US agencies concur that the violating company has taken appropriate steps to alleviate any law enforcement concerns. The Department of State consulted with other US agencies and concluded that Pratt & Whitney Canada Corporation has appropriately addressed the causes of violations and mitigated any law enforcement concerns.

Effective July 12, 2017, the statutory debarment is removed and Pratt & Whitney Canada Corporation may now participate in any activities subject to the ITAR , in accordance with section 38(g)(4) of the AECA and sections 127.7(b) and 127.11(b) of the ITAR.


House Budget Committee Proposes Moving BIS to State

2017/08/03

(Source: U.S. House Budget Committee Report)

The following is an excerpt (pages 49-50) from the U.S. House Budget Committee, Building a Better America: A Plan for Fiscal Responsibility.

Building a Better America recommends a different path for the Department of Commerce.

Our budget supports the recent Presidential directives established by the Trump Administration to combat the regulatory burden placed on manufacturers and streamline the permitting review and approval processes. The Memorandum on Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing (“Memorandum on Manufacturing”) provides for stakeholder engagement and feedback from the nation’s domestic manufacturers, in an effort to highlight unnecessary regulatory burdens and other administrative policies, practices, and procedures that inhibit economic growth and job creation. Our budget makes the following recommendations:

* Eliminate Corporate Welfare Programs in the Department of Commerce. Subsidies to businesses distort the economy, impose unfair burdens on taxpayers, and are especially problematic given the federal government’s fiscal situation. Programs under consideration for elimination could include the following:

  • The Hollings Manufacturing Extension Program. This program subsidizes a network of nonprofit extension centers that provide technical, financial, and marketing services for small and medium-size businesses. The private market generally provides these services. The program, which was supposed to be self-supporting, derives two-thirds of its funding from non-Federal sources.
  • The International Trade Administration [ITA]. This Department of Commerce agency provides trade-promotion services for U.S. companies. The fees it charges for its services do not cover the costs. Businesses can obtain similar services from state and local governments and the private market. Congress should eliminate the ITA or require it to charge for the full cost of these “Trade Promotion Authority” services.
  • The National Network for Manufacturing Innovation. This program, previously known as the Advanced Manufacturing Technology Consortia, provides federal grants to support research for commercial technology and manufacturing. As stated in the Heritage Foundation’s The Budget Book: “Businesses should not receive taxpayer subsidies; these long-lived and unnecessary subsidies increase federal spending and distort the marketplace. Corporate welfare to politically connected corporations should end.”

 

* Eliminate Overlap and Consolidate Necessary Department of Commerce Functions Into Other Departments. Since its establishment in 1903, the Commerce Department has expanded in size and scope to include many activities better suited at other agencies. The Department of Commerce and its various agencies and programs are rife with waste, abuse, and duplication. This budget recommends the following dissolution, delegation of authority, and consolidation measures:

  • Consolidate National Oceanic and Atmospheric Administration functions into the Department of the Interior;
  • Establish the U.S. Patent and Trademark Office as an independent agency;
  • Eliminate the International Trade Administration; o Delegate trade enforcement activities to the International Trade Commission;
  • Consolidate the Bureau of Industry and Security into the Department of State;
  • Eliminate the Economic Development Administration;
  • Consolidate trade adjustment activities within the Department of Labor, which has a duplicate program;
  • Consolidate the Minority Business Development Agency into the Small Business Administration;
  • Consolidate the National Institute of Standards and Technology and the National Technical Information Services within the National Science Foundation; o Consolidate the National Telecommunication and Information Administration into the Federal Communications Commission as an independent agency; and
  • Consolidate the United States Census Bureau and the Bureau of Economic Analysis into the Department of Labor’s Bureau of Labor Statistics.

State/DDTC Posts Policy FAQ Update

2017/08/03

(Source: State/DDTC)

DDTC has posted a Policy FAQ Update (June 2017). The content of the document is included below.

Update to Policy FAQs

Q: Does saving ITAR controlled technical data on the cloud constitute an export per ITAR § 120.17?

A: A cloud service provider’s receipt of effectively encrypted technical data uploaded by the U.S. owner, stored and managed on a cloud service network consisting of only U.S.-based servers, administered only by U.S. persons, and appropriately configured to enable the U.S. technical data owner to control access to such data does not constitute an export under the ITAR.

Post Location: here – Under “Technical Data”

 

Q: Are public universities eligible to use the ITAR § 125.4(b)(9) exemption?

A: If a public university is incorporated under applicable U.S. or state laws, such public universities are eligible to use the ITAR § 125.4(b)(9) exemption.

Post Location: here – Under “Exemptions”

 

Q: Which office (DDTC or RSAT) should a foreign end user contact if they are not certain of the original procurement method of a defense article (FMS or DCS) and is seeking a third party transfer or reexport/retransfer authorization?

A: Where a foreign end user is not certain of the original procurement method, RSAT is the appropriate office for the foreign end user to submit a request (PM_RSAT-TPT@state.gov). In such cases, RSAT will process the request and coordinate with DDTC. Information on RSAT and the third party transfer process can be found here. Whether for RSAT or DDTC, to facilitate adjudication of the request, we ask that the foreign end user provide a best-faith statement as to what it believes to be the original acquisition method (i.e., via DCS or FMS), a summary of steps taken to investigate the acquisition of the article(s), and any other information that may be helpful.

Post Location: here– Under “Retransfer”

 

Q: Is the term “at the company’s facilities” in ITAR § 120.39(a)(2) include only a company’s headquarters, or also includes travel to other facilities?

A: If a contracted employee is employed ordinarily at their company’s facilities, they may also provide services for the company’s clients outside the company’s facilities. Such activities are within the definition of a regular employee in ITAR § 120.39(a)(2).

Post Location: here – Under “Terminology”

 

Q: What is meant by “commercial invoice” in ITAR § 123.9(b)(1)?

A: The term “commercial invoice” references the document that moves with the freight.

Post Location: here – Under “Automated Export System”

 

Update References to ITAR § 124.16 (Either Remove or Change Reference Instead to § 126.18(d)) here.

(1) Remove FAQ Entirely: Can a foreign party choose to use § 126.18 for an individual that qualifies for § 124.16? (weblink)

(2) Update References Instead to § 126.18(d)): Can § 124.16 [change to “§ 126.18(d)”] be used to authorize dual/third country nationals of § 124.16 [change to “§ 126.18(d)(2)”] countries employed by the applicant or other US Signatories to the Agreement? (weblink)

(3) Update Reference Instead to § 126.18(d)): When an agreement involves the transfer of classified defense articles, can § 124.16 [change to “§ 126.18(d)”] still be used to authorize dual/third country nationals access to only unclassified defense articles associated with the agreement? (weblink)

(4) Remove FAQ Entirely: 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? (weblink)

 

New Blue Lantern FAQs

Post Location: New Subheading “Blue Lantern Program” here.

 

Q: What is the Blue Lantern program?

A: Established in 1990, the Blue Lantern program monitors the end-use of defense articles, technical data, services, and brokering activities exported through commercial channels and subject to Department of State licenses or other approvals under section 38 of the Arms Export Control Act (AECA) (22 U.S.C. 2778) and the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120-130).

 

Q: Is end-use monitoring mandated by U.S. law?

A: Yes. The Blue Lantern program fulfills those requirements stipulated in section 40A of the AECA (22 U.S.C. 2785) and delegated to the Department of State in Executive Order 13637.

 

Q: What does the Blue Lantern program entail?

A: Blue Lantern end-use monitoring includes pre-license, post-license, and post-shipment checks to verify the bona fides of foreign consignees and end-users, confirm the legitimacy of proposed transactions, and provide reasonable assurance that 1) the recipient is complying with the requirements imposed by the United States Government with respect to use, transfers, and security of defense articles and defense services; and 2) such articles and services are being used for the purposes for which they are provided.

 

Q: Who manages the Blue Lantern program?

A: The Blue Lantern program is managed by the Regional Affairs and Analysis Division (RAA), Office of Defense Trade Controls Policy (DTCP), Directorate of Defense Trade Controls (DDTC), Bureau of Political- Military Affairs (PM) at the U.S. Department of State. Generally, checks are conducted by Department of State personnel working from U.S. embassies and consulates worldwide.


U.S. Administration Exempts DDTC from Limit on New Regulations

2017/05/11

Mr. Brian Nilsson, Deputy Assistant Secretary of State for Defense Trade Controls, stated at the public meeting of the Defense Trade Advisory Group (DTAG) today in Washington, DC, that DDTC is exempt from the Administration’s limit on new regulations, so plans are continuing to issue new or revised regulations this year for the following subjects:

  • Defense services
  • Public domain
  • Technical data
  • Fundamental research
  • ITAR 126.4 exemption
  • US persons abroad – registration and licensing requirements

DDTC welcomes public suggestions for amendments of the International Traffic in Arms Regulations, and for DDTC operations such as the website format, and agency training and outreach. Submit them to DDTCResponseTeam@state.gov.


DHS/CBP Posts Clarification on DDTC Implementation Guide V1.5

2017/03/30

(Source: CSMS# 17-000091, 22 February 2017.)

New ACE Programming

[Reference CSMS# 16-000993 Updated DDTC Implementation Guide V1.6, October 2016]

“Updated DDTC Implementation Guide V1.6, October 2016” was issued on December 5, 2016 announcing the posting of DDTC Implementation Guide V1.6, dated October 2016. However, V1.6 included the PG25 line value which was determined to be Post Core work and is not yet implemented. The schedule for this implementation has not yet been determined. Therefore the current and accurate version of the DDTC Implementation Guide is V1.5, dated May 2016. It can be found at here.

Related CSMS No. 16-000993


Department of State Import and Export Electronic Filings for Licenses and License Exemptions

2017/03/30

Source: Robert C. Rawls (robert.c.rawls@cbp.dhs.gov)

This pipeline is to provide guidance based on the Department of State, Directorate of Defense Trade Controls Federal Register Notice dated January 3, 2017.  Persons not familiar with the Directorate of Defense Trade Controls (DDTC) import and export regulations are encouraged to read the International Traffic in Arms Regulations (ITAR), 22 CFR Parts 120-130.  DDTC is the controlling and ultimate authority for international movements of United States Munitions List (USML) defense articles, technical data and defense services.

DDTC published a Federal Register Notice (FRN) amending the ITAR.  The amendment requires that importers and exporters electronically submit the data, via their agent/filer or direct,at the time of entry and export via Customs Systems (Automated Commercial Environment and the Automated Export System) for the decrementation of permanent export licenses (DSP-5), temporary import licenses (DSP-61), temporary export licenses (DSP-73), licenses for classified materials (DSP-85), and goods controlled under the Foreign Military Sales (FMS) program (DSP-94), along with the submission of license exemption claims.

The regulatory changes became effective December 31, 2016.

For imports against DSP-61, DSP-73, DSP-85, FMS shipments and shipments under a license exemption, the electronic submission is the DDTC Partnership Government Agency (PGA) message set, and will be submitted at the time of entry.  The PGA message set can only accept the data for one DDTC license or license exemption per one commodity line on the entry.  That commodity line’s entered value will be used as the DDTC endorsement value.  So, filers are required to “split the commodity entry line” to associate a single entry line with a single license whose entered value will represent the DDTC value.

Filing Examples:

<!–[if !supportLists]–>•        <!–[endif]–>9808 – Certified Emergency War Materials – The primary and secondary classification must be included in your BEI. Expeditors will assign the license to the 9808 line item only and transmit to CBP.  Upon receipt, CBP will increment the value associated with the 9808 classification only.

7501 line 1 – 9808.00.3000 – Hardware/DDTC value- *PGA transmission is required and includes license number*

9013.90.9000 – No value (associated HTS)

7501 line 2 –         9808.00.3000 – Repair value

9013.90.9000 – No value (associated HTS)

<!–[if !supportLists]–>•        <!–[endif]–>Any free & dutiable classifications – Any other HTS

7501 line 1 –         9013.90.9000- Hardware/DDTC value- *PGA transmission is required and includes license number 1*

7501 line 2 –         9013.90.9000- Repair value

7501 line 3 –         9013.90.9000- Hardware/DDTC value- *PGA transmission is required and includes license number 2*

7501 line 4 –         9013.90.9000- Repair value

 

Import Valuation Examples:

There are times when the import and export values of a commodity are not the same due to changes in the condition of the commodity, for example repaired items.  The importer/broker has three options regarding how the entry and PGA message set can be filed.

Example:  The item is valued at $750 and it has been sent out of the country for repairs.  The value of the repairs is $350.

Option 1

At the time of export the value declared via the Electronic Export Information is $750.  Upon entry the commodity line value is declared at $1100.  The license will be decremented for $750 for the export and $1100 for the import.

Option 2

At the time of export the value declared via the EEI is $750.  Upon entry the broker files two Harmonized Tariff Schedule (HTS) lines, one for $750 with a DDTC PGA message set and the second HTS line using HTS 9802.00.50 for $350.  The license would be decremented for $750 for both the import and export.  Note, there may be additional documentary requirements is association with using HTS 9802.00.50.

Option 3

At the time of export the value declared via the EEI is $750.  Upon entry the broker files two HTS commodity lines, one for $750 with a DDTC PGA message set and the second HTS commodity for that commodity classification.  The license would be decremented for $750 for both the entry and export.

For Exports related to a DSP5s, DSP-61s, DSP-73s, DSP-85s, FMS shipments, and license exemptions will continue to be filed via the Customs system (Automated Export System (AES)) for each commodity filing.

Per DDTC’s FRN, paper DSP-61 and DSP-73 licenses will no longer be required to be presented for incrementation or decrementation since the import and export transactions against the shipment will be captured in Customs systems.  In order to ensure accurate license balances in Customs systems, for those DSP-61s and DSP-73s issued prior to January 3, 2017, license holders are requested to provide the following information to CBP (insert POC and address) in the form of a letter: the license number, the total value of all prior import shipments incremented against the license, and the date when this information was recorded.  The historic import values are required since the data was not collected on the PGA record set.  .

The license registrant is reminded of its temporary license requirements under 22 CFR 123.3 and 123.5 which will continue to be evidenced using the registrant’s business records.  Given the automation, these business records may be subject to review by CBP in order to meet its requirements under 22 CFR 123.23 to “permit the shipment of defense articles identified on a license when the total value of the export does not exceed the aggregate monetary value (not quantity) stated on the license by more than ten percent…”

For the FMS program, the DSP-94 and the Letters of Offer and Acceptance, along with any amendments or modifications still have to be lodged with CBP.  CBP is working on automation of this process and it is projected that the automation process will be completed in summer/fall 2017.  CBP will provide updated guidance when that automation has been completed.

For the DSP-85 classified program, endorsements continue to be managed by the Defense Security Service.

Corrections related to the electronic import (PGA record set) transmissions can be made within 10 days of entry.  Import corrections needed after 10 days or corrections for exports should be referred to Robert Rawls at Robert.Rawls@dhs.gov.

Any questions about this pipeline should be referred to Mr. Robert Rawls, Outbound Enforcement and Policy Branch Chief via email at Robert.Rawls@dhs.gov or phone at (202) 344-2847.


Man Pleads Guilty to Stealing Sensitive Military Documents from United Technologies and Exporting Them to China

2017/01/31

By: Danielle McClellan

Yu Long, 38, a citizen of China and permanent resident of the US, plead guilty on December 19, 2016 to one count of conspiracy to engage in the theft of trade secrets as well as one count of unlawful export and attempted export of defense articles from the US. Long worked as a Senior Engineer/Scientist at United Technologies Research Center (UTRC) from May 2008 to May 2014 where he worked on F119 and F135 engines. During this time Long always intended to return to China to work on research projects at state-run universities in China using the knowledge and materials he was acquiring at UTRC. During 2013 and 2014, Long was recruited by Shenyang Institute of automation (SIA), of China, where he substantiated claims that he could provide documents from his work at UTRC and examples of projects on which he worked.

On May 30, 2014, Long left URTC and began travelling back and forth between the US and China with a UTRC external hard drive that he unlawfully retained after his employment ended. On November 7, 2014, Long was arrested, two days after he attempted to board a plane to China with sensitive, proprietary and export controlled documents from Rolls Royce, not URTC. His checked baggage was inspected by CBP officer in Newark, NJ, where the hard drive was found with all of the proprietary, export controlled information.

After his digital media was seized it was found that he had voluminous files protected by the ITAR and EAR, as well as files proprietary to UTRC, Pratt, and Rolls Royce. UTRC confirmed that the hard drive that he stole and accessed in China contained not only documents and data from projects long worked on, but also from projects that he did not work on. It was found that he obtained Pratt and Rolls Royce proprietary information from a project that the US Air Force had convened a consortium of major defense contractors to work together to see if they could collectively lower the costs of specific metals used.

A sentencing date has not been set but Long faces a maximum term of imprisonment for 15 years for the theft of trade secrets charge and 20 years of imprisonment for violated the Arms Export Act.

More Information: https://www.justice.gov/opa/pr/chinese-national-admits-stealing-sensitive-military-program-documents-united-technologies