Archive for the ‘ITAR’ Category

Jet Sale to Egypt Is Being Blocked By a U.S. Regulation, And France Is Over It

2018/08/30

(Source: Defense News, 1 Aug 2018.) [Excerpts.]

The U.S. is currently withholding clearance of an American component on the French Scalp cruise missile, which prevents the sale of additional Rafale fighter jets to Egypt. France is looking for ways to reduce its dependence on U.S. approval, but lacks the means to be completely autonomous.

“It is true that we depend on this [U.S. International Traffic in Arms Regulations] mechanism: We are at the mercy of the Americans when our equipment is concerned,” French Armed Forces Minister Florence Parly told the Committee for National Defense and Armed Forces of the lower-house National Assembly, according to recently released transcripts from July 4.

Parly said that the ministry needs “to analyze” French dependence on the U.S. and should be discussing with industry as well as the Economy and Finance Ministry ways for France to protect itself from American legislation.

When French President Emmanuel Macron attempted to convince President Donald Trump to provide clearance for the cruise missile component Trump recommended French experts talk to their American counterparts to work out the clearance, but the issue was not resolved according to a French defense source.

The U.S. has been the world leader in arms exports for more than 70 years, accounting for more than a third of total foreign military sales, Parly told parliamentarians. She added that European nations need to buy less American equipment to help reduce U.S. supremacy and take actions to promote European defense.

Macron has requested a French equivalent of the U.S. Foreign Military Sales program, which handles government-to-government deals, she said. Client nations prefer this approach rather than dealing with companies. The French Armed Forces and Economics and Finance ministries have created a framework agreement that will likely be adopted as the model for an intergovernmental arms contract, backed by a public tender and observing national and European law, she said.

The U.S. has been relaxing its rules on arms exports, with the State Department adopting the Conventional Arms Transfer policy, which eases the way for companies to directly pitch some types of weapons and drones without having to go to Washington for official approval.

Source: https://www.defensenews.com/global/europe/2018/08/01/a-jet-sale-to-egypt-is-being-blocked-by-a-us-regulation-and-france-is-over-it/


Analysis of Settlement Agreement Reached In 3D Gun Printing Case

2018/07/30

By:  Johanna Reeves, Esq., jreeves@reevesdola.com, 202-715-994; and Katherine Heubert, Esq., 202-715-9940, kheubert@reevesdola.com. Both of Reeves & Dola LLP.

(Source: Reeves & Dola LLP Alert, 18 Jul 2018. Available via jreeves@reevesdola.com.)

Last week, news broke that a settlement agreement had been reached in the Defense Distributed v. United States Department of State case. Several news articles reported the outcome as a major victory to First and Second Amendment advocates, as well as a “stunning shift” in State Department policy in how it applies export controls to information available on the Internet. This is an important case, and we examine the potential implications of the Settlement Agreement, especially in how the State Department treats certain information made openly available on the Internet.

Background

In December 2012, Defense Distributed posted certain three-dimensional (“3D”) printing files on its website, DEFCAD.org, for a number of firearm-related items, including “Ghost Gunner” files, and certain CAD files (the “Published Files”). Some of the Published Files included downloadable instructions to produce a fully functional firearm on a 3D printer. In May 2013, Defense Distributed received a letter from the U.S. Department of State, Directorate of Defense Trade Controls (DDTC), directing the company remove the Published Files from its website. DDTC is the federal agency responsible for compliance and enforcement of the Arms Export Control Act (22 USC 2778) and the implementing regulations known as the International Traffic in Arms Regulations (ITAR), published in 22 C.F.R. Pts. 120-130. In its letter, DDTC explained the Published Files may constitute ITAR-controlled “technical data” related to firearms and if so, the act of making the Published Files widely available on the Internet constituted an export of technical data without the required prior authorization from DDTC.

For those unfamiliar with the ITAR, controlled “technical data” includes information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of “defense articles,” and includes information in the form of blueprints, drawings, photographs, plans, instructions or documentation (ITAR section 120.10). Currently, almost all firearms up to and including .50, as well as parts, components, attachments and accessories for said firearms are captured by the ITAR’s U.S. Munitions List (USML) under Category I. The only exceptions to this broad coverage are so-called “noncombat shotguns” with barrels 18 inches or longer, BB, pellet, and muzzle loading firearms, as well as attachments or accessories that do not enhance the usefulness, effectiveness, or capabilities of the firearm, component and parts. Such items are controlled under the Department of Commerce export controls, known as the Export Administration Regulations (EAR).

DDTC explained in its letter to Defense Distributed, “[p]ursuant to 127.1 of the ITAR, it is unlawful to export any defense article or technical data for which a license or written approval is required without first obtaining the required authorization from the DDTC. Please note that disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad, is considered an export under 120.17 of the ITAR.”  To resolve the matter “officially,” DDTC requested Defense Distributed submit a Commodity Jurisdiction (CJ) request for the following data files:

  • Defense Distributed Liberator pistol
  • .22 electric
  • 125mm BK-14M high-explosive anti-tank warhead
  • 56/.223 muzzle brake
  • Springfield XD-40 tactical slide assembly
  • Sound Moderator – slip on
  • “The Dirty Diane” 1/2-28 to 3/4-16 STP S3600 oil filter silencer adapter
  • 12 gauge to .22 CB sub-caliber insert
  • Voltlock electronic black powder system
  • VZ-58 sight

A copy of the DDTC letter is available in a  2013 Forbes article (last visited on Jul. 18, 2018).

In compliance with the DDTC letter, Defense Distributed removed the Published Files from its website and in June 2013, submitted a CJ request. Almost two years later, with no response to the CJ request and an unsuccessful attempt to obtain public release approval from the Department of Defense Office of Prepublication Review and Security for the subject files, Defense Distributed along with the Second Amendment Foundation (“SAF”), sued DDTC in the Western District of Texas, alleging the ITAR prior approval requirement for posting technical data on the Internet was an unconstitutional prior restraint on protected First Amendment speech, along with other constitutional violations under the Second and Fifth Amendments.

While the case was pending, the Plaintiffs filed a motion with the court seeking a preliminary injunction against DDTC, wherein the court would suspend enforcement of the ITAR prepublication approval requirement pending final resolution of the underlying case. The District Court denied the motion, holding the national security interests of the United States outweighed the potential harm to Defense Distributed. Defense Distributed and SAF appealed the decision to the U.S. Court of Appeals for the Fifth Circuit, which affirmed the District Court decision, noting, however, that its decision was limited and did not address the merits:

This case presents a number of novel legal questions, including whether the 3D printing and/or CNC milling files at issue here may constitute protected speech under the First Amendment, the level of scrutiny applicable to the statutory and regulatory scheme here, whether posting files online for unrestricted download may constitute “export,” and whether ITAR regulations establish an impermissible prior restraint scheme. These are difficult questions, and we take no position on the ultimate outcome other than to agree with the district court that it is not yet time to address the merits. On remand, the district court will eventually have to address the merits, and it will be able to do so with the benefit of a more fully developed record.” Defense Distributed v. U.S. Department of State, 838 F.3d 451, 464 (5th Cir. 2016).

Defense Distributed then petitioned the U.S. Supreme Court for writ of certiorari, which the Court denied on January 8, 2018. On June 29, 2018, the parties executed the Settlement Agreement, resolving all claims in the case. We reviewed the text of the Settlement Agreement circulated in The Daily Bugle, a free export/import daily newsletter from Full Circle Compliance, on July 12, 2018.

The Settlement Agreement 

In the Settlement Agreement, the parties agree to resolve all issues, including any issues “that could have been asserted” by Defense Distributed without further litigation, and without any admission of liability on either side. The Settlement Agreement goes on to stipulate in Paragraph 4 that it shall not be construed as an admission by DDTC of the veracity or validity of any of Defense Distributed’s allegations. Further, the Settlement Agreement does not hold any precedent, as the parties are explicitly prohibited from using it as evidence and from referring to the Settlement Agreement in any way in proceedings that may be needed to enforce it.

In consideration of Plaintiffs’ agreement to dismiss its claims against DDTC with prejudice, DDTC agreed to five requirements:

(1) DDTC’s commitment to draft and fully pursue, to the extent authorized by law, a proposed and final rule revising U.S. Munitions List (USML) Category I to exclude “the technical data that is the subject of the Action.” (Settlement Ag., para. 1(a)).

It should be noted that by the time the Settlement Agreement was signed on June 29, 2018, DDTC had already published more than a month prior in 83 Fed. Reg. 24198 (May 24, 2018) its proposed rule to transition most firearms and ammunition, along with certain parts, components, attachments, and accessories, away from ITAR controls over to EAR controls. For more information on the State and Commerce companion proposed rules, please refer to our alerts of June 1, 8, and 13.

(2) While the above-referenced final rule is in development, DDTC will publish on its website an announcement by July 27, 2018, of a temporary modification, consistent with ITAR section 126.2, to exclude “the technical data that is the subject of the Action.” (Settlement Ag., para. 1(b)).

Section 126.2 permits the Deputy Assistant Secretary for Defense Trade Controls to order the temporary suspension or modification of any or all regulations in the ITAR in the interest of the security and foreign policy of the United States.

(3) DDTC will issue a letter a letter to Defense Distributed by July 27, 2018, advising that the Published Files are approved for public release in any form and are exempt from export licensing requirements of the ITAR because the files satisfy the criteria of ITAR section 125.4(b)(13). (Settlement Ag., para. 1(c)).

Section 125.4 in the ITAR lists various exports of technical data that do not require approval from DDTC. Paragraph (b)(13), cited in this particular consideration, covers “[t]echnical data approved for public release (i.e. unlimited distribution) by the cognizant U.S. Government department or agency or Office of Freedom of Information and Security Review. This exemption is applicable to information approved by the cognizant U.S. Government department or agency for public release in any form. It does not require that the information be published in order to qualify for the exemption.”

(4) DDTC acknowledges and agrees that the temporary modification of USML Category I [per Consideration #2 above] permits any U.S. person, including Defense Distributed customers and SAF members, to access, discuss, use, reproduce, or otherwise benefit from the “technical data that is the subject of the Action.”… (Settlement Ag., para. 1(d)).

(5) Payment of $39,581.00 to Plaintiffs. “This figure is inclusive of any interest and is the only payment that will be made to Plaintiffs or their counsel by Defendants under this Settlement Agreement.” (Settlement Ag., para. 1(e)).

Analysis of Settlement

What impact will the Settlement Agreement have on industry, if any? Strikingly, the Settlement Agreement does very little to advance the argument that the ITAR’s prior restraints on publication are a violation of the First Amendment or any other constitutional rights. Indeed, as the Settlement Agreement makes very clear, the parties stipulate that DDTC’s entering into the agreement is in no way an acknowledgment of the validity or veracity of those arguments. Further, all conditions are silent on the constitutional rights issues raised in the case – the Settlement Agreement addresses only the manner in which DDTC will authorize Defense Distributed to release just the Published Files, nothing more.

While DDTC agreed to “draft and fully pursue” the proposed rulemaking to revise USML Category I, in the interim, the temporary amendment to USML Category I will exclude ONLY the “technical data that is subject of the Action.” The “technical data that is subject of the Action” is not a limitless bucket containing all ITAR-controlled technical data pertaining to firearms. Rather, the Settlement Agreement defines the words, “technical data that is subject of the Action” specifically to mean only the following: “(1) the Published Files; (2) the Ghost Gunner files; (3) the CAD Files; and (4) the Other Files insofar as those files regard items exclusively: (a) in Category I(a) of the [USML], as well as barrels and receivers covered by Category I(g) of the USML that are components of such items, or (b) items covered by Category I(h) of the USML solely by reference to Category I(a), excluding Military Equipment [as defined in the Settlement Agreement].”

DDTC did not agree to amend the USML to exclude all similar technical data or related hardware, or make any other revisions to Category I, much less any other USML Category. In fact, DDTC agreed to revise the USML Category I “to the extent authorized by law (including the Administrative procedures Act)” to exclude only “technical data that is subject of the action.” A cynic could say that’s quite a caveat.

It is also important to note that nowhere in the Settlement Agreement does DDTC indicate the Published Files are not considered ITAR-controlled technical data. In fact, the agreement to utilize the powers of § 126.2 to exclude the Published Files from the ITAR by using the §125.4(b)(13) public release process clearly supports the argument that DDTC still considers the files to be technical data. If the information was not technical data, then there would be no need to go through these regulatory hoops to authorize its release. Simply put, DDTC did not ever move from its position that the Published Files were technical data, and the Settlement Agreement does more to underscore this position than to prove otherwise.

This, coupled with the clear language of the Settlement Agreement that this document cannot be used as precedent in further cases, means the release from ITAR controls applies only to the “technical data that is subject of the Action,” as defined in the Settlement Agreement. Other individuals or companies with similar Technical Data should not rely on the fact that Defense Distributed was authorized to release the Published Files as a blanket permission to do the same. To be sure, it seems one must still seek authorization from DDTC or public release approval from another cognizant U.S. Government agency before publishing similar Technical Data to the Internet.

As for the arguable coincidence of this Settlement Agreement and the timing of the publication of the proposed revisions to USML Category I, II, and III, one could speculate the Settlement Agreement was the catalyst for DDTC finally publishing the revisions – the case forced DDTC’s hand as it were. However, one could also argue that DDTC simply agreed to do what it was already planning to do as the revisions were, by then, drafted and through the internal review process, thereby losing nothing yet gaining a great deal by settling a lawsuit that could have ultimately decided the interplay between the First Amendment and the ITAR. And, as a result, the ITAR prior approval requirements remain in place and intact, and persons seeking to publish technical data to the Internet must first obtain DDTC approval to do so.

Closing Thoughts

The only guaranty in court is that there are no guarantees. There was a lot riding on this case, for both sides. This was apparent in the number of amicus (“friend of the court”) briefs weighing in on the potential implications for the constitutional freedoms guaranteed under the First and Second Amendments, gun rights, gun control, world peace and national security interests. Arguably, neither side could afford a negative court decision on the merits of the case. However, with the Settlement Agreement, it appears that both sides won. Defense Distributed is able to reinstate its DEFCAD.org website at the end of this month without having to wait until 2019 when the proposed transition rules will become final, presumably, and DDTC has not done anything to change its approach to ITAR licensing controls over technical data, including the requirement for approval for public release prior to posting such information on the Internet.


U.S. Department of Justice (DOJ) – Enhanced Security Plan Sets Best Practices for Use of Cloud Services for Sensitive Data

2018/04/04

By:  Pablo LeCour, Partner, plecour@deloitte.co.uk; Tina Carlile, Senior Manager, ticarlile@deloitte.co.uk; and Ziyu Chin, Senior Consultant, ziyu.chin@deloitte.co.uk. All of Deloitte.

In December 2017 a global software company serving the telecommunications industry settled charges with the U.S. Department of Justice for violating U.S. controls on foreign access to sensitive data, including export controlled information. As part of the settlement, the company agreed to implement an Enhanced Security Plan designed to increase information security by regulating remote access to company networks and transfers of sensitive data.

The Enhanced Security Plan is a helpful benchmark for network providers seeking to protect sensitive information about U.S. telecommunications networks and other critical infrastructure.

Many tech companies develop software using foreign technical personnel both inside and outside of the U.S. The use of a global technical workforce increases the risk of unauthorized access to U.S. controlled information, including sensitive network data and data critical to the U.S. domestic communications infrastructure. Unauthorized access has consequences from an export controls perspective – under the U.S. Export Administration Regulations (EAR) and U.S. International Traffic in Arms Regulations (ITAR) licenses might be required to store U.S. sensitive data in overseas servers or for non-U.S. persons to handle, transmit or access controlled software, technology or technical data that is subject to U.S. jurisdiction. The Enhanced Security Plan provides an example of how these information security requirements can be met by:

  • Requiring authentication and tracking of changes to systems software through code-signing and other means;
  • Restricting access, transmission and storage of certain sensitive data to U.S.-based servers and U.S.-based network infrastructure; and
  • Controlling access by non-U.S. persons and implementing procedures for the proper vetting and licensing of non-U.S. employees and agents.
  • Additionally, the Enhanced Security Plan recommends an effective compliance program that includes the following:
  • Appointing a Security Director with appropriate authority, reporting lines, independence, skills, and resources to ensure compliance;
  • Implementing a Security Policy that describes the management of user identity and access, and building systems that monitor unauthorized attempts to access and screen personnel;
  • Conducting periodic third-party audits of the security procedures and their implementation; and
  • Engaging a third-party auditor to ensure compliance.

Companies doing business with the U.S. government or in connection with critical U.S. infrastructure, as well as companies that handle or use export-controlled technology, software, technical data, and cloud or network services, should review the DOJ Enhanced Security Plan requirements and consider including them within their own compliance programs.


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.


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.


ITAR Corrected and Additions to Parts 120, 121, 122, 124, 126 and 127

2017/01/31

Effective December 5, 2016, the Department of State has amended the International Traffic in Arms Regulations (ITAR) to clarify recent revisions due to Export Control Reform (ECR), the scope of disclosure of information submitted to the Directorate of Defense Trade Controls (DDTC), the policies and procedures regarding statutory debarments, as well as correcting administration and typographical errors.

The following changes have been made following this final rule:

  • A definition of ‘‘classified’’ is moved from § 121.1(e) to § 120.46;
  • The structure of § 121.1(a)–(e) is realigned, with paragraphs (a) and (b) revised to clarify the existing requirements for United States Munitions List (USML) controls, and paragraphs (c), (d) and (e) removed;
  • Thirteen USML categories are amended to clarify that commodities, software, and technology subject to the Export Administration Regulations (EAR) and related to defense articles in a USML category may be exported or temporarily imported on the same license with defense articles from any category, provided they are to be used in or with that defense article;
  • In three places within the USML, the word ‘‘enumerated’’ is replaced with the word ‘‘described’’ to make the language consistent with changes directed in the Final Rule published at 79 FR 61226, Oct. 10, 2014;
  • Section 122.4(c)(4) is revised to permit the Directorate of Defense Trade Controls (DDTC) to approve an alternative timeframe, not less than 60 days, to the current 60-day requirement for registrants to provide a signed amended agreement;
  • Section 124.2(c)(5)(v) is revised to correct errors to the USML category references for gas turbine engine hot sections, from VI(f) and VIII(b) to Category XIX;
  • Section 124.12 is amended in paragraph (a)(9) to update the name of the Defense Investigative Service to Defense Security Service;
  • Section 126.9 on Advisory Opinions and Related Authorizations is amended to correct paragraph (a);
  • Paragraph (b) of § 126.10 is amended to clarify the scope of control and disclosure of information, however, notwithstanding the changes to paragraph (b) it is the Department’s policy not to publicly release information relating to activities regulated by the ITAR except as required by law or when doing so is otherwise in the interest of the United States Government; and;
  • Section 127.7(b) is amended to clarify the policies and procedures regarding statutory debarments (addressing inadvertent omissions resulting from a prior amendment to that section), and § 127.11 is amended to make conforming revisions to paragraph (c) omitted from prior amendment to that section.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-12-05/pdf/2016-28406.pdf


New Portal for Declaring Imports and Exports to CBP

2017/01/31

The Department of State issued a final rule which has amended the International Traffic in Arms Regulations (ITAR) to enable US Customs and Border Protection (CBP) to implement the International Trade Data System (ITDS). This system will allow importers and exporters to create only a single set of data for each import and export and they will have access the system thru an integrated web portal that will be hosted by CBP. Users may visit https:// www.cbp.gov/trade/automated for more information on the single portal. The final rule was published January 3, 2017, but was effective on December 31, 2016.

The rule makes the following changes to the ITAR (22 CRF parts 120-130):

  • Section 120.28—Listing of Forms Referred to in This Subchapter
    • Section 120.28 is revised to strike the reference to the Automated Export System and add, in its place, ‘‘U.S. Customs and Border Protection’s electronic system(s)’’.
  • Section 120.30—The Automated Export System (AES)
    • Section 120.30 is removed and reserved.
  • Section 123.4—Temporary Import License Exemptions
    • Section 123.4(d)(2) is revised to strike the reference to the Automated Export System (AES) and add, in its place, instructions to electronically file information with CBP.
  • Section 123.5—Temporary Export Licenses
    • Section 123.5(b) is revised to update certain reporting procedures and to clarify that license information will be submitted to CBP electronically.
  • Section 123.16—Exemptions of General Applicability
    • Sections 123.16(b)(4) and (5) are revised to clarify that certifications will be sent to CBP electronically and not via hard copy.
  • Section 123.17—Exports of Firearms, Ammunition, and Personal Protective Gear
    • All references to AES in § 123.17 are struck and, in their place, instructions to electronically file with CBP are inserted. Additionally, § 123.17(g)(2) and (h) are revised to update certain documentation procedures.
  • Section 123.22—Filing, Retention, and Return of Export Licenses and Filing of Export Information
    • Section 123.22 of the ITAR is revised by making certain grammatical changes and to clarify procedures for the electronic reporting of exports and temporary imports of defense articles, services, and technical data pursuant to a license or other approval. All references to AES in § 123.22 are struck and, in their place, instructions to electronically file with CBP are inserted.
    • Section 123.22(a) is revised to clarify electronic reporting procedures for exports. Paragraphs (a)(1) and (a)(2) are also revised for clarification of certain procedures.
    • Section 123.22(b)(2) is revised to clarify that emergency shipment data shall no longer be required to be sent directly to DDTC, but rather be electronically declared to CBP, which will make the data available to DDTC via an electronic data exchange.
    • Section 123.22(b)(3)(iii) is revised to update electronic reporting procedures for technical data and defense service exemptions.
    • Section 123.22(c) is revised to strike a provision relating to the return of licenses and to reorder the sub- paragraphs.
  • Section 123.24—Shipments by U.S. Postal Service
    • Section 123.24 is revised to strike references to AES and insert, in their place, instructions to electronically file with CBP. The underlying content of this section is not affected by this change.
  • Section 126.4—Shipments by or for United States Government Agencies
    • Section 126.4(d) is amended by revising the first sentence to account for electronic reporting, and by striking the second sentence.
  • Section 126.6—Foreign-Owned Military Aircraft and Naval Vessels, and the Foreign Military Sales Program
    • Section 126.6(c) is revised to clarify certain procedures relating to the declaration of information to CBP, and to remove references to form DSP–94.
    • Section 126.6(c)(5)(iii) is revised to require that the exporter provide CBP with a copy of the transportation plan under the Department of Defense National Industrial Security Program Operating Manual for shipments of classified defense articles exported pursuant to a Foreign Military Sale Letter of Offer and Acceptance. Section 126.6(c)(6)(iii) is revised to correct a punctuation error made in a previous rulemaking.
  • Section 126.16—Exemption Pursuant to the Defense Trade Cooperation Treaty Between the United States and Australia
    • Section 126.16(l) is revised to strike references to the Automated Export System and insert, in their place, instructions to electronically file with CBP. The underlying content of this section will not be affected by this change.
  • Section 126.17—Exemption Pursuant to the Defense Trade Cooperation Treaty Between the United States and the United Kingdom
    • Section 126.17(l) is revised to strike references to the Automated Export System and insert, in their place, instructions to electronically file with CBP. The underlying content of this section will not be affected by this change.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-03/pdf/2016-31655.pdf


New Changes to EAR and ITAR Related to Military Aircraft and Gas Turbine Engines

2016/12/20

On November 21, 2016, DDTC published a final rule revising USML paragraphs VII(h)(29) and XIX (f) (12). This rule mainly affects a narrow range of articles related to next-generation platforms that were previously subject to the Export Administration Regulations (EAR) and will soon become subject to the International Traffic in Arms Regulations (ITAR) as of December 31, 2016.

It’s important to remember the following related to this rule beginning December 31, 2016:

  • Articles subject previously to the EAR but now subject to the ITAR under this rule, any unshipped balance under a Department of Commerce authorization will be null and void
  • The ITAR will regulate the reexport or retransfer of articles subject previously to the EAR but now subject to the ITAR under this rule

ITAR regulation Changes:

  • VIII(h)(29) Any of the following equipment if specially designed for a defense article described in paragraph (h)(1): (i) Scale test models; (ii) Full scale iron bird ground rigs used to test major aircraft systems; or (iii) Jigs, locating fixtures, templates, gauges, molds, dies, or caul plates.
    (i) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (h) of this category and classified technical data directly related to items controlled in ECCNs 9A610, 9B610, 9C610, and 9D610 and defense services using classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)
  • XIX (f)(12) Any of the following equipment if specially designed for a defense article described in paragraph (f)(1): Jigs, locating fixtures, templates, gauges, molds, dies, caul plates, or bellmouths.
    (g) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (f) of this category and classified technical data directly related to items controlled in ECCNs 9A619, 9B619, 9C619, and 9D619 and defense services using the classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)

The Bureau of Industry and Security (BIS) simultaneously published a rule related to this rule that adds clarifying text to the descriptions of the types of military aircraft controlled by the CCL (items subject only to the anti-terrorism reason for control).

BIS Changes:

  • This rule updates the text of ECCN 9A610.w to reflect amendments made to that paragraph since the February 9 rule was published by adding references to ‘‘pneumatic’’ and ‘‘fly-by-light’’ flight control systems (see 81 FR 19026, April 4, 2016). These additions were made to align the descriptions in ECCN 9A610.w with the description of such systems in the current Equipment, Software And Technology Annex Technology Annex of the MTCR.
  • Section 770.2 is amended by adding paragraph (n)
  • ECCN 0A604—[Amended] 4. In in Supplement No. 1 to part 774, ECCN 0A604, remove Note 1 to 0A604.x and redesignate Note 2 to 0A604.x as Note to 0A604.x.
  • ECCN 0A614—[Amended]
  •  In ECCN 0A614, remove Note 3 to 0A614.
  • In ECCN 3A611, in the ‘‘List of Items Controlled’’ section, ‘‘Items’’ paragraph, revise paragraph .x and revise paragraph .y, introductory text
  • In ECCN 8A992, revised the related controls paragraph
  • Revise ECCN 9A115
  • In ECCN 9A604, remove Note 1 to 9A604.x and redesignate Note 2 to 9A604.x as Note to 9A604.x.
  • In ECCN 9A610, revise the ‘‘Control(s)’’ table in the ‘‘License Requirements’’ section and the ‘‘List of Items Controlled”
  • In ECCN 9A619, the List of Items Controlled section is amended by:
    • Revising the ‘‘Related Controls’’ paragraph;
    •  Revising the ‘‘Related Definitions’’ paragraph;
    • Removing the note that immediately follows paragraph .e in the ‘‘Items’’ paragraph;
    • Revising paragraph .x in the ‘‘Items’’ paragraph; and
    • Revising paragraph .y in the ‘‘Items’’ paragraph.
  • In ECCN 9A620, remove the note to 9A620.b that immediately follows paragraph .x.
  • In ECCN 9B610, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section
  • In ECCN 9B619, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section
  • In ECCN 9C610, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section
  • In ECCN 9C619, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section
  • In ECCN 9E610, in the ‘‘List of Items Controlled’’ section, the ‘‘Items’’ paragraph is amended by:
    • Removing the word ‘‘or’’ from the end of paragraph .b.13;
    • Removing the period from the end of paragraph .b.14 and adding in its place a semicolon followed by the word ‘‘or’’; and
    • Adding paragraph .b.15.
  • In ECCN 9E619, the ‘‘List of Items Controlled’’ section is amended by revising the ‘‘Related Controls’’ paragraph, and in the ‘‘Items’’ paragraph:
    • Revising the Note that immediately follows paragraph .a;
    • Removing the word ‘‘or’’ from the end of paragraph .b.8;
    • Removing the period from the end of paragraph .b.9 and adding in its place a semicolon followed by the word ‘‘or’’;  and
    • Adding paragraph b.10.

State Federal Register Notice: http://pmddtc.state.gov/documents/1400_AD89.pdf

BIS Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-11-21/pdf/2016-27777.pdf


USML Categories VIII, XII, and XV Amended and Some Items Shifting to CCL

2016/11/15

The Department of State has published a final rule that will be effective December 31, 2016 that will revise Category XII (fire control, laser, imaging, and guidance equipment) of the U.S. Munitions List (USML) to remove certain items from control on the USML and to describe more precisely the articles continuing to warrant control on the USML. The Department of State also amends USML Categories VIII, XIII, and XV to reflect that items previously described in those Categories are now controlled under the revised Category XII or Commerce Control List. Further, the Department revises USML Category XI to move items to the CCL as a result of changes to related control in USML Category XII. The Export Administration Regulations (EAR) amends Export Control Classification Number (ECCN) 7A611 and creates a new ‘‘600 series’’ ECCNs 7B611, 7D611, and 7E611. In addition, for certain dual-use infrared detection items, this final rule expands controls for certain software and technology, eliminates the use of some license exceptions, revises licensing policy, and expands license requirements for certain transactions involving military end users or foreign military commodities. This final rule also harmonizes provisions within the EAR by revising controls related to certain quartz rate sensors.

ITAR Changes Below:

Section 121.1 is amended by:

  • Removing and reserving paragraph (e) in U.S. Munitions List Category VIII;
  • Revising paragraphs (a)(3)(ii) and (a)(10) of U.S. Munitions List Category XI;
  • Revising U.S. Munitions List Category XII; Removing and reserving paragraph (a) in U.S. Munitions List Category XIII; and
  • Removing and reserving paragraph (c) in U.S. Munitions List Category XV

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-10-12/pdf/2016-24225.pdf

 

EAR Changes Below:

  • Part 734
    • Section 734.4 is amended by removing and reserving paragraph (a)(3) and revising paragraph (a)(5).
  • Part 740
    • Section 740.2 is amended by adding paragraph (a)(7) and removing and reserving paragraph (a)(9).
    • Section 740.16 is amended by revising paragraphs (a)(2) and (b)(1) through (3)
    • Section 740.20 is amended by revising paragraphs (b)(2)(ii) and (b)(2)(x)
  • Part 742
    • Section 742.6 is amended by revising paragraph (b)(1)
  • Part 744
    • Section 744.9 is amended by revising the section heading and paragraphs (a) and (b)
  • Part 772
    • Section 772.1 is amended by revising the last sentence in Note 1 to the definition of ‘‘specially designed’’
  • Part 774
    • In Supplement No. 1 to part 774, Category 0, ECCN 0A919 is amended by revising the Items paragraph of the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 0, ECCN 0A987 is amended by:
      • Revising the Related Controls paragraph in the List of Items Controlled section;
      • Revising paragraph f. in the Items paragraph in the List of Items Controlled section; and
      • Adding a note to 0A987.f
    • In Supplement No. 1 to part 774, Category 2, ECCN 2A984 is amended by revising the heading and Note 1 of the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A002 is amended by:
    • Removing the ‘‘Special Conditions for STA’’ section; and
    • Revising the Related Controls paragraph in the List of Items Controlled section.
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A003 is amended by:
      • Adding a License Requirement Note in the License Requirements section;
      • Revising notes 3 and 4 in the Related Controls paragraph in the List of Items Controlled section; and
      • Adding note 5 to the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A004 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A005 is amended by revising the last two sentences in the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A007 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A008 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A107 is amended by revising the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A611 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A990 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6A993 is amended by revising the Related Controls paragraph in the List of Items Controlled sectionn Supplement No. 1 to part 774, Category 6, ECCN 6D002 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6D003 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6D991 is revised
    • In Supplement No. 1 to part 774, Category 6, ECCN 6E001 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, ECCN 6E002 is amended by revising the TSR paragraph in the List Based License Exceptions section and the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 6, The following ECCNs will be amended by revising the Related Controls paragraph in the List of Items Controlled section
      • ECCN 6E990
      • ECCN 7A001
      • ECCN 7A002
      • ECCN 7A003
      • ECCN 7A005
      • ECCN 7A101
      • ECCN 7A102
    • In Supplement No. 1 to part 774, Category 7, ECCN 7A611 is revised
    • In Supplement No. 1 to part 774, Category 7, ECCN 7A994 is revised
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7B611 between ECCNs 7B103 and 7B994
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7D611 between ECCNs 7D103 and 7D994
    • In Supplement No. 1 to part 774, Category 7, add ECCN 7E611 between ECCNs 7E104 and 7E994
    • In Supplement No. 1 to part 774, Category 7, ECCN 7E994 is amended by revising the Related Controls paragraphin the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 8, ECCN 8A002 is amended by adding a sentence to the end of the Related Controls paragraph in the List of Items Controlled section
    • In Supplement No. 1 to part 774, Category 9, ECCN 9A991 is amended by:
      • Removing the License Requirement Notes paragraph in the License Requirements section, and
      • Revising the Related Controls paragraph in the List of Items Controlled section.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-10-12/pdf/2016-24220.pdf

Want a more detailed overview of these regulation changes? Our Export Control Reform for USML Category XII: Fire Control, Laser, Imaging, and Guidance Webinar will cover the following:

  • Significant changes to USML Category XII and corresponding revisions to Categories VIII, XI, XIII, and XV, which will result in some items moving off the USML
  • What the definition of “specially designed” really means for classification purposes, and how Category XII has introduced a new concept of “specially designed for a military end-user”
  • How to classify formerly ITAR-controlled items on the Commerce Control List, especially the new and revised “600 series” Export Control Classification Numbers (ECCNs) (7A611, 7B611, 7D611, and 7E611)
  • Adjustments to several related non-600 series ECCNs is CCL Categories 0, 2, 6, 7, 8, and 9
  • License exception eligibility for these items, including important changes to License Exceptions APR, GOV, and STA
  • Revisions to unique EAR military end use and end user controls
  • The actions exporters should take now to prepare for the rapidly approaching effective date of these changes

Learn More at: http://www.learnexportcompliance.com/Webinars/Export-Control-Reform-for-USML-Category-XII-Fire-C.aspx