How to Prepare ITAR Licenses and Agreements · Tony Dearth Director of Licensing Directorate of Defense Trade Controls (DDTC) ... (Non Transfer and Use Certificate) •Must be consistent

How to Prepare ITAR Licenses and Agreements

Tony Dearth Director of Licensing

Directorate of Defense Trade Controls (DDTC) Bureau of Political Military Affairs (PM)

1

AGENDA

• Licensing Considerations

• Agreements Overview

• The Review Process

• Common RWA Reasons

2

DSP-5 PERMANENT EXPORT SCENARIOS/PURPOSE

• Defense Articles (hardware)

• Only one ultimate foreign end-user

• Must be supported by documentation from a foreign party to the transaction

• Purpose and commodity blocks must be consistent with supporting documentation

• Part 130 statement

DSP-5 PERMANENT EXPORT SCENARIOS/PURPOSE

• Technical Data

• Marketing/bid and proposal • Plant Visit • Offshore procurement

• Defense Services – Exceptional circumstances!

• Short-term training • Foreign Person Employment

• Can be multiple ultimate foreign end-users for technical data and defense services

DSP-5 PERMANENT EXPORT SCENARIOS/PURPOSE

• Foreign Person Employment by US Person

• Requires a DSP-5 from DDTC regardless of physical location, U.S. or abroad

• Does cover interaction with other parties, U.S. or foreign with notification by employing person

• No longer require a TAA in addition to DSP-5

DSP-5 SUPPORTING DOCUMENTATION

• Purchase order, letter of intent or other appropriate documentation • Commodity • Quantity • Price • End-use • End-user

• DSP-83 (Non Transfer and Use Certificate)

• Must be consistent with information on license application

• Must be addressed to the U.S. applicant applying for

the export license

• Subsidiary must be identified in Block 5

• Must be provided by a foreign party to the transaction

• In English or provide translation

• Must be issued within 1 year of license application

• Must have U.S. dollar value identified

• Cannot use “classified” terms or phrases

DSP-5 SUPPORTING DOCUMENTATION

• Technical Data

• Copies of technical data OR sufficient information for DOD to conduct a technical review

• Defense Services

• Letter requesting exception per 22 CFR 124.1(a) – DDTC discretion on approval

• Description of services to be provided

DSP-5 SUPPORTING DOCUMENTATION

• Foreign Person Employment

• Resume

• Copy of Passport Photo Page

• Work Authorization, if applicable

• Job Description

• Description/copies of technical data

• Kept by applicant: • Non-disclosure Agreement (NDA)

• DSP-83, as applicable

DSP-5 SUPPORTING DOCUMENTATION

PREPARING YOUR DSP-5 UNDER ECR

• Applicant is responsible for choosing correct alphanumeric category

• Support documents remain the same

• Can only include paragraph (x) when used “in or with” ITAR controlled items

• Specificity: demonstrate clearly that your item meets the USML control parameters

• RWA rate for revised categories has doubled

RENEWAL/REPLACEMENT LICENSES

• Renewals submitted for review 60 days prior to expiration of current authorization

• Copy of current authorization

• Cover letter explaining need for continued activity and shipment summary for unshipped balances

• Replacement package submitted as needed

• Requires same information as renewal package with emphasis on need for replacement

• Current authorization is revoked

AMENDMENTS

• 22 CFR 123.25(b) changes considered:

• Addition/change of U.S. freight forwarder/consignor

• Addition/change of source/manufacturer

• Change due to obvious typographical error

• Addition/change of foreign intermediate consignee if party is only transporting equipment and will not process (integrate, modify, etc.)

AMENDMENTS

• All other changes require a new license per 22 CFR 123.25(c):

• Additional quantity

• Changes in commodity (includes USML)

• Country of ultimate destination, end-use or end-user

• Add foreign consignee and foreign intermediate consignee (if more than transporting equipment)

• Extension of duration

• 22 CFR 123.23 permits Customs to authorize a 10% increase in value (not quantity) as long Congressional thresholds are not triggered

RETRANSFER/RE-EXPORT

• 22 CFR 123.9(a) prior written approval of DDTC for any changes

• Applies to shipment under license or exemption

• Request submitted by U.S. or foreign person

• Must meet the requirements of 22 CFR 123.9(c)

• If SME must include a DSP-83

• Exception for NATO (governments and agencies), Australia, New Zealand, Japan, South Korea at 22 CFR 123.9(e)

15

AGREEMENTS OVERVIEW

THE MILLION-DOLLAR QUESTION

• When is an agreement necessary?

1. When defense services are involved (TAA)

or

2. For foreign manufacturing of defense articles that involves the export of tech data, defense articles, or defense services (MLA)

• The agreement covers the full scope of the effort

AGREEMENTS OVERVIEW: LICENSES VS. AGREEMENTS

• License: “…permits the export or temporary import of a specific defense article

or defense service controlled by this subchapter” (i.e. DSP-5, DSP-61, DSP-73)

(22 CFR 120.20)

– Involves an exchange of hardware or tech data between two parties

– Defense service via license only “in exceptional cases” (22 CFR 124.1(a))

• Agreement: Generally involves multiple transactions of hardware and/or tech

data between two or more parties involving performance of defense services

– TAA – “An agreement for the performance of a defense service(s) or the

disclosure of technical data…assembly of defense articles is included under

this section, provided production rights or manufacturing know-how are not

conveyed” (22 CFR 120.22)

– MLA – “An agreement whereby a U.S. person grants a foreign person an

authorization to manufacture defense articles abroad and which

involves…[tech data, defense articles, or defense services]” (22 CFR

120.21)

AGREEMENTS OVERVIEW: LICENSES VS. AGREEMENTS

Defense Service (ref: 22 CFR 120.9)

• The furnishing of assistance (including training) to foreign persons in the…

- Design - Manufacture - Testing

- Development - Production - Repair

- Engineering - Assembly - Maintenance

- Modification - Operation - Demilitarization

- Destruction - Processing - Use

…of defense articles

• The furnishing to foreign persons of any technical data (as defined by 22 CFR 120.10) controlled under this subchapter (exception: tech data licenses)

• Military training of foreign units and forces, regular and irregular

BEFORE YOU BEGIN YOUR APPLICATION…

• Export Control Reform is here

• Is your commodity controlled by USML or CCL? How do you know?

• Will your commodity transfer to from USML to CCL in the future? If so, when?

• Tools to keep you abreast:

– Guidelines for Preparing Electronic Agreements (10/10/13 version)

– Federal Registry Notices

– Order of Review Tool

– Specially Designed Tool

– Part 130 Tool

– http://www.pmddtc.state.gov/ECR/index.html

• Three Main Components

– Transmittal Letter

– Proposed Agreement

– Empowered Official Certification*

* If not certified in Block 22 (a) or (c) of DSP-5 Vehicle

• Amplifying Data (35 MB initial limit)

– Attachments, Agreement Annexes or Exhibits

• Tech data, hardware descriptions

• SOWs

• Product brochures

• RFPs, contract/awards, etc.

– Supporting Material (Transmittal Letter)

• Part 130 Statement (if applicable)

• Executive Summary (Congressional)

• Signed Contract (Congressional)

Attachments Appendices

Annexes

Transmittal Letter 124.12

Supporting Material

Empowered Official

Certification Letter

126.13

Proposed Agreement 124.7 - 9

Main Components

Amplifying Data

ELECTRONIC APPLICATION PACKAGE

ELECTRONIC SUBMISSION OF AGREEMENTS

• Utilizes the D-Trade 2 System

• DSP-5

– Serves as a vehicle for transitioning the proposal throughout the process

– Issuance of the DSP-5 license is simply the mechanism for providing DDTC’s position – it does NOT serve as the authorization to export hardware, tech. data, or services – these are tied to the execution of the agreement

– Cannot be altered once submitted

• Upon submission will receive a DSP-5 number (e.g. 050412345)

• DDTC will assign an agreement number (e.g. TA-1234-12)

• Appendix D of the Agreement Guidelines provides step-by-step instructions on filling out the DSP-5 vehicle

MAJOR AMENDMENTS

• Once an agreement is approved by DDTC, any changes to the agreement must be made via an amendment

• Major amendments always require DDTC approval

• Typical major amendments – Addition of new hardware or value

– Expansion of Statement of Work

– Transfer of additional technical data or defense services

– New End Users – Add foreign licensees or sublicensees – Add Dual/Third Country Nationals – Addition of new programs

• Major amendments often require additional staffing

MINOR AMENDMENTS

• Changes NOT requiring prior DDTC approval

- Alter Delivery and Performance Schedules

- Minor Administrative Changes

• Address Changes

• Typo Correction (Not Affecting Scope)

• Party removal prior to execution

• Sublicensee removal from the agreement

• Export Control Reform-related changes to the agreement

– Still requires execution of conformed agreement by all parties

• Upload minor amendment to most recent DSP-5 vehicle within 30 days

24

THE REVIEW PROCESS

DDTC LICENSING DIVISIONS

Division 2 – Land and Ship Ruth Jackson, Chief

VI, XII, XIII, XVI, XVIII, XX, XXI

Division 3 – Missile and Space Catherine Hamilton, Chief

IV, V, IX, XIV, XV

Division 4 – Electronics Angela Brown, Chief

XI

Division 5 – Aircraft Bob Warren, Chief

VIII, XIX, VII

Division 6 – Small Weapons Chuck Schwingler, Chief

I, II, III, X

CASE ASSIGNMENT

• D-TRADE automatically assigns to a Division based on USML category

• Division Chief assigns to Licensing Officer for adjudication • Administrative Review • Regulatory Review

REFERRAL PROCESS

• Department of State • Foreign Policy – Country Desk (e.g., EAP, NEA) • Regional Stability – PM/RSAT • Human Rights Policy – DRL

• Department of Defense (DoD) • National Security • Technical Review

• Other • Interagency (e.g., MTEC) • NASA, Department of Energy, etc.

Check your case status at: http://elisa.dtsa.mil/

REVIEW BENCHMARKS

45 Days

• Open cases reviewed weekly with Deputy Director of Licensing

60 Days

• Open cases briefed to the Director of Defense Trade Controls Licensing

FINAL REVIEW AND ISSUANCE

• Licensing Officer reviews case with recommendation of other agencies and determines final disposition of cases:

• Approve

• Approve with Provisos

• Return Without Action (RWA)

• Deny

30

COMMON RWA REASONS

WHAT IS THE ISSUE?

• RWAs halt the adjudication process and require additional hours from DoS and Industry

• About 14% of the cases received are RWA’d for various reasons

• You can control/avoid some of the RWAs

• D-Trade submissions cannot be altered

DDTC RWA POLICY

• The applicant should ensure that the license application is submitted complete and correct

• Licensing Officers will make an effort to salvage a case when possible by contacting the applicant

• We have policies in place regarding who can RWA a case; most RWAs will be escalated to the Division Chief before being returned

• The Top 7 reasons follow, in no particular order…

RWA REASON #1

Failure to respond to a USG request for additional documentation in a timely manner

• Licensing Officers will allow an applicant time to respond to their request, normally up to 3 business days depending upon what is being requested

• RWA applications can be resubmitted as a new application once you receive support documents

RWA REASON #2

RWA Recommendation by DDTC or a Staffing Agency

• Additional information may be required (e.g., technical data, product brochures on the item to be exported)

– Requests for additional information are an emphasis item under the new, positive munitions list

– Be sure to address the performance levels, characteristics, or functions described in the relevant USML paragraph

• Split decision/partial approval – some of the request is denied (e.g., party or item) – particularly for hardware licenses

RWA REASON #3

Applicant Request

• U.S. Government inquiry (e.g., blue lantern or voluntary disclosure)

• Unable to upload supplemental documentation

• Due to additional information from the foreign customer changing the transaction as submitted (e.g., add additional parties or items

RWA REASON #4

License Quantity or Value is Incorrect

• Quantity absolutely must be supported by the purchase documentation; shipping less quantity than requested requires an explanation (e.g., split shipments)

• Value of individual items must be supported by the purchase documentation within reason – any difference requires an explanation

• Amendment forms cannot be used to correct these two areas because the information changed via the amendment is not conveyed to Customs

RWA REASON #5

License Party Issues

• All parties involved in the transaction identified in the support documentation must be identified on the license

• Required for electronic entity eligibility check and Customs/AES purposes

• A license cannot contain parties who are ineligible or otherwise restricted

– Review excluded parties list at www.epls.gov

RWA REASON #6

Wrong USML Subcategory

• Frequently ECR related (e.g., VIII(h)(1) is not a catch-all)

– Some USML items have enumerated P&C that remain ITAR controlled (items can be both enumerated and specially designed)

– Some items have “specially designed” P&C that remain ITAR controlled

– However, many ITAR items have P&C that are now on the CCL

• In some cases, the item may no longer be on the USML, however RWA does not equal CJ

• Use the order of review

RWA REASON #7

Improper Use of Paragraph (x)

• DDTC may license CCL items only if three conditions are met:

– The purchase documentation includes both the USML and CCL items;

– The CCL items are for end-use in or with the USML items; and

– The license application separately enumerates the CCL items

• Licenses may not contain exclusively paragraph (x)

• Jurisdiction of paragraph (x) items does not change

HOW TO AVOID AN RWA

• Use the checklists

• Respond quickly when called by LO for additional info/clarification; ask for additional time if required

• Use the correct USML category and subcategory

• Have another set of eyes review request prior to submission

• Use lessons learned from previous cases

• Explain all relevant details in the transmittal letter and license application: Leave no doubt!

CONTACT INFORMATION

– DDTC’s website: www.pmddtc.state.gov (lots of

resources)

– Generic Questions: DDTC Response Team, 202-663-1282 [email protected]

– DTC IT Issues: DDTC Help Desk, 202-663-2838 [email protected]

– Case status: http://elisa.dtsa.mil/

41