International Trade Law News

Published by Jacobson Burton Kelley PLLC

Labels: DDTC, Export Controls, ITAR

This is a reminder that February 20, 2011 is the effective date for completion of the new "Certification Pertaining to the Release of Controlled Technology or Technical Data to Foreign Persons in the United States" contained in the new I-129 Petition for Non-Immigrant Worker forms submitted to the U.S. Citizenship and Immigration Service (USCIS).

Part 6 of the new I-129 form requires employers submitting certain visa petitions for foreign workers to certify as follows:

With respect to the technology or technical data the [employer] will release or otherwise provide access to the [foreign employee], the [employer] certifies that it has reviewed the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) and has determined that:

(1) A license is not required from either the U.S. Department of Commerce or the U.S. Department of State to release such technology or technical data to the foreign person;

         or

(2) A license is required from the U.S. Department of Commerce and/or the U.S. Department of State to release such technology or technical data to the beneficiary and the petitioner will prevent access to the controlled technology or technical data by the beneficiary until and unless the petitioner has received the required license or other authorization to release it to the beneficiary.

Because of concerns and other inquiries raised by immigration attorneys and the business community about this new export certification requirement, USCIS announced that they would delay the original effective date of December 22, 2010 to February 20, 2011.

Labels: BIS, DDTC, Export Controls

As a follow-up to our previous post on the U.S. Senate's ratification of the U.S.-United Kingdom and U.S.-Australia Defense Trade Cooperation Treaties, the U.K.'s Export Control Organisation issued the following notice to U.K. exporters reminding them that ". . . the ratification of the Treaty by Congress has no immediate impact on controls of exports from the UK to the US. If you needed an export licence before, you still need one now."

In addition, the notice indicates that the "UK will . . . proceed to implement the Treaty over the course of the coming year."

UK Export Control Organisation Notice re US-UK Defence Trade Cooperation Treaty

Labels: DDTC, Export Controls, ITAR, United Kingdom

Below is a detailed summary of the recent $42 million settlement entered into between the State Department's Directorate of Defense Trade Controls and Xe Service LLC, formerly known as Blackwater Worldwide, for numerous alleged violations of the ITAR and the Arms Export Control Act. This document, prepared and provided by John Priecko, summarizes the 288 counts contained in DDTC's Proposed Charging Letter and Consent Agreement.Xe Services 081810 Settlement Summary 090610



Mr. Priecko is the President of Trade Compliance Solutions, a network of experienced compliance-related professionals. He is a trade compliance veteran with more than 15 years of experience in government and in the private sector.

The Proposed Charging Letter, Consent Agreement and Order in this case can be found here.

Labels: DDTC

The U.S. Department of State announced today that on August 18, 2010, Xe Services LLC (formerly Blackwater Worldwide) entered into a civil penalty agreement with the State Department's Directorate of Defense Trade Controls (DDTC) to settle numerous alleged violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR).
The 41 page Proposed Charging Letter issued by DDTC indicates that Xe allegedly committed 288 violations of the ITAR involving the unauthorized export of defense articles and provision of defense services to foreign end-users in multiple countries between 2003 and 2009.

While the charging letter noted that Xe had taken efforts to implement compliance measures and to cooperate with DDTC during the "latter part of the investigation", the Proposed Charging Letter stated:

At the same time, the Department considered aggravating factors in determining what charges to pursue, including that Respondent's historic inability to comply with ITAR controls were system failings; the frequency and nature of Respondent's violations; that Respondent did not fully cooperate with the Department during the initial 18 months of this multi-year investigation; Respondent failed to comply with record-keeping requirements, further impeding the investigation; many of the violations by Respondent were disclosed only after the Department issued a directed disclosure; several of the Respondent's statements were false and some disclosures contained misrepresentations or omissions of material fact that had to be revised as prior reports were determined to be inaccurate or incomplete; and implications for national security.

The State Department noted that many of the alleged ITAR violations occurred while Xe was providing services in support of U.S. Government programs and military operations abroad between 2003 and 2009 and they did not involve sensitive technologies or cause a known harm to national security.
Under the four-year term Consent Agreement, Xe will pay in fines and in remedial compliance measures an aggregate civil penalty of $42 million to complete settlement of civil violations. $12 million of this amount will be suspended for pre-and post-Consent Agreement remedial compliance measures.

In announcing the settlement agreement, the State Department stated that it will not impose an administrative debarment of Xe in this case. The State Department is also rescinding the general policy of denial on export license applications with respect to Xe because the Department is satisfied that the company has taken the necessary steps to address the causes of its ITAR violations, identify compliance problems, and resolve these violations.

The remedial measures included:

• Replacement of senior management; 
• Established an independent Export Compliance Committee to oversee its remedial compliance efforts;
• Improved ITAR compliance procedures; 
• Conducted various ITAR training; and 
• Conducted a targeted ITAR audit to confirm the effectiveness of its compliance measures. 

DDTC stated that:

. . . had the Department not taken into consideration Respondent's Voluntary Disclosures, remedial compliance measures, cooperation in the latter part of the investigation, change in management, support of U.S. Government programs, and the absence of disclosure of sensitive technologies or actual harm to national security as significant mitigating factors, the proposed charges against and penalties imposed upon Respondent would likely have been more significant. 

The Consent Agreement also provides that Xe will take a number of additional compliance steps, including external compliance oversight and to continue and improve compliance measures.

The Proposed Charging Letter, Consent Agreement and Order can be found here.

Labels: DDTC, ITAR

The State Department's Directorate of Defense Trade Controls (DDTC) published a final rule in today's Federal Register amending the International Traffic in Arms Regulation (ITAR) that will require commodity jurisdiction (CJ) determinations to be submitted electronically using the DS-4076 CJ Determination Request Form that was introduced by DDTC last year.

The regulation specifies that paper CJs may be submitted for 29 days after the effective date, which means that  September 2, 2010 will be the last day to submit CJs the old fashioned way. Starting on September 3, however, CJs will have to be submitted electronically via DTrade2, DDTC's defense export electronic licensing system.

DDTC has yet to make any changes to the DS-4076 CJ form to incorporate the suggestions submitted by industry during the public comment period.

Determining the proper government agency that has jurisdiction over products, technology or software to be exported is an important first step in the U.S. export controls system.

The purpose of submitting a CJ to DDTC is to obtain a determination whether a product, technical data or service is covered by the U.S. Munitions List (USML) and is subject to the ITAR's export licensing requirements or not.
 A commodity classification (commonly known as a CCATS) can be obtained from the Commerce Department's Bureau of Industry and Security (BIS) to determine the proper Export Control Classification Number (ECCN) if the CJ determination states that the article is subject to the Commerce Department's jurisdiction. 

Labels: BIS, DDTC, Export Controls, ITAR

The Bureau of Industry and Security published an interim final rule in today's Federal Register intended to clarify the purpose of the commodity classifications (commonly known as CCATS) and advisory opinions that it issues. Unfortunately, the purpose of this interim rule, which was to help educate exporters with export compliance, has been widely misinterpreted.

The interim final rule amends sections 734.3 and  748.3 of the Export Administration Regulations (EAR) by adding language noting that: 

• Commodity classifications and advisory opinions may not be relied upon as determinations that the items in question are "subject to the EAR" as described in section 748.3 of the EAR.
• Those who request commodity classifications and advisory opinions should have determined that the items at issue are not subject to the exclusive export control jurisdiction of one of the other U.S. Government export control agencies, such as the Directorate of Defense Trade Controls, OFAC, and Nuclear Regulatory Commission.
• Advisory opinions are limited to BIS's interpretation of EAR provisions and may not be relied upon or cited as evidence that the items in question are not subject to the to the export control jurisdiction of another U.S. Government agency.

The interim final rule also indicates that BIS will begin inserting the following reminder language on all future commodity classifications (CCATS):

This commodity classification sets forth the classification of the above-listed items if they are subject to the EAR. This commodity classification is not a determination by BIS as to whether the above-listed items are ‘‘subject to the EAR.’’ As defined and  described in sections 734.2 through 734.4 of the EAR, the term ‘‘subject to the EAR’’ means, among other things, that the item(s) are not exclusively controlled for export or reexport by another agency of the U.S.
Government. See 15 CFR 734.3(b)(1). Thus, this document is not, and may not be relied upon as, a U.S. Government determination that the above-listed items are not, for example, subject to the export control jurisdiction of the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120– 130), which are administered by the U.S. Department of State.

BIS's interim final rule was intended to remind exporters that the purpose of a commodity classifications, which is to provide the Export Control Classification Number (ECCN) of products, technology or software as described on the Commerce Control List (CCL), is only one part of the export analysis. Prior to seeking a commodity classification from BIS, an exporter should first determine the proper government agency that has jurisdiction over their item, technology or software. For example, products that are included on the U.S. Munitions List or are considered to be "defense articles" under the International Traffic in Arms Regulations (ITAR) are subject to the export licensing jurisdiction of the State Department's Directorate of Defense Trade Controls (DDTC).

Under the current U.S. export control regime, DDTC is the only agency that can issue commodity jurisdictions, commonly known as CJs, to advise an exporter whether an item or service is subject to the ITAR or not. Because of the intended purpose of CJs and commodity classifications, the information submitted to BIS to obtain a commodity classification (product specifications, etc.) is very different than the information submitted to DDTC to obtain a CJ (design intent, application, military versus commercial sales, etc.).

The modifications made to the EAR, as well as the new language included on commodity classifications, is also intended to eliminate, to the extent possible, those cases where a person or company exporting a defense article can avoid criminal prosecution under the Arms Export Control Act by claiming that they had obtained a CCATS from BIS for an item when the item was actually subject to the jurisdiction of the ITAR.

The interim final rule also sought to educate those in law enforcement who prosecute export control violations by helping to distinguish commodity classifications from commodity jurisdictions.

Despite the clear purpose of this rule, there have been headlines in various publications indicating that this interim final rule is confusing as it seems to indicate that BIS will not accept responsibility for its decisions, that such classification are not dependable or that exporters can not rely on commodity classifications or advisory opinions issued by BIS.

These interpretations are incorrect. BIS classifications and advisory opinions can certainly be relied upon for issues relating to the EAR. However, under the current export control regime, which provides that different agencies have jurisdiction over dual-use and defense articles, exporters must be certain that their item is "subject to the EAR" before relying on a commodity classification or advisory opinion issued by BIS. While this confusion may be eventually eliminated by the creation of a single export control list and single licensing agency, the clarification in this interim final rule is useful and is long overdue.

October 1, 2010 is the deadline for submission of public comments to BIS on the interim final rule.

Labels: BIS, DDTC, Export Controls, ITAR

The next meeting of the National Council on International Trade Development (NCITD) will take place on Wednesday, February 10, 2010 in Washington, DC and will feature the following speakers:

• Bill Reinsch, President, National Foreign Trade Council
  Topic: Export Control Reform Update

• Charles B. Shotwell, Director, Office of Defense Trade Controls Policy, Directorate of Defense Trade Controls, U.S. Department of State                                                                                                   Topic: Commodity Jurisdiction: Trends and Statistics; Automation Update  

For information on how to join NCITD or to attend the meeting, see www.ncitd.org or contact the NCITD Secretariat at 202-872-9280.

Labels: DDTC, Export Controls

The Coalition for Security and Competitiveness (CSC) today released detailed recommendations on the specific steps the Obama Administration and Congress can take to reform and modernize the U.S. export control system.

The document, entitled "Recommendations for a 21st Century Technology Control Regime", which was included with a letter sent to to President Obama and other key members of the Obama Administration, states that:

United States export control system has not been significantly revised in more than twenty years. The result is a system that no longer fully protects our national security, has not kept up with accelerating technological change, and does not function with the efficiency and transparency needed to keep the United States competitive in the global marketplace.

The Administration’s export control review, as well as impending legislative proposals, provides an opportunity to strengthen our security and give business the clarity and guidance it needs to comply with the rules and remain competitive.

In order to accomplish these reforms, the CSC indicated that these goals can best be accomplished in the near term by structuring export control reform around the following five themes:

Labels: BIS, BIS; EAR, DDTC, Export Controls, ITAR

The State Department's Directorate of Defense Trade Controls (DDTC) has confirmed that Lisa Studtmann, Esq. is now the Director of the Office of Defense Trade Controls Compliance, succeeding former Director David Trimble and Acting Director Daniel Buzby.

Ms. Studtmann began work as a compliance specialist at DDTC in July 2007 and has served as a senior compliance specialist at DDTC's Enforcement Division since August 2008. Prior to joining DDTC, Ms. Studtmann worked as an attorney for approximately ten years, both in private practice and in the General Counsel’s office of the Central Intelligence Agency.  She has a J.D. and an M.A. in Clinical Psychology from the University of Tulsa.

Labels: DDTC

The Directorate of Defense Trade Controls (DDTC) has issued the following two notices on its website that should be reviewed by manufacturers and exporters of defense articles and services:

• Updated version of Licensing of Foreign Persons Employed by a U.S. Person (note that the new text added by DDTC in this notice is highlighted in yellow) (Click here to read).


• DSP Amendments for Value or Quantity Changes (this is an important notice since it states that effective immediately, DDTC will no longer process DSP amendments for value or quantity changes and a replacement license must be obtained) (Click here to read).

Labels: DDTC, ITAR

The Directorate of Defense Trade Controls (DDTC) published a Federal Register notice announcing that the 30 day comment period has begun for the revised DS-4076 Commodity Jurisdiction Determination Form. This form is in a fillable PDF format.

DDTC is encouraging manufacturers to review the form and to consider using it in connection with Commodity Jurisdiction requests.

Note that the estimate for completing this form is 10 hours per response, which includes time required for searching existing data sources, gathering the necessary data, providing the information required, and reviewing the final information to be submitted.

Comments on this form must be submitted to the Office of Management and Budget by October 28, 2009.

The purpose of a Commodity Jurisdiction request is to determine whether an item or service is covered by the U.S. Munitions List (USML) and therefore subject to the International Traffic in Arms Regulations (ITAR) or if the item or service is subject to the jurisdiction of the Commerce Department's Export Administration Regulations (EAR).

Labels: DDTC, Export Controls

The State Department's Directorate of Defense Trade Controls (DDTC) issued an announcement (doc) today that could impact many exporters of products and technical data subject to the International Traffic in Arms Regulations (ITAR).

As noted below, DDTC will all require all license submissions for exports of items identified as USML Category XXI, the category that covers "miscellaneous articles" (and related technical data), to include either a copy of a DDTC Commodity Jurisdiction (CJ) determination letter identifying the commodity as controlled under Category XXI or a letter from the Director of the Office of Defense Trade Controls Policy granting permission to use Category XXI.

DDTC made this change since there has been an "increase" in the improper use of Category XXI to describe defense articles that should be properly categorized under another USML category.

Exporters that are not sure about which USML Category covers their product, or whether their product is subject to the jurisdiction of the ITAR or Exprot Administration Regulations, should seek a CJ from DDTC.

The complete text of DDTC's announcement is as follows:

Effective immediately, all license submissions which identify USML Category XXI – Miscellaneous Articles must include an attached copy of one of the following two documents authorizing use of Cat XXI or the application will be subject to Return Without Action:

• A copy of a DDTC Commodity Jurisdiction determination letter identifying the commodity as controlled under the USML at Cat XXI;
• Or an official letter from the Director, Office of Defense Trade Controls Policy granting permission to use Cat XXI.

This policy is necessary to enforce the requirement of 22 CFR Part 121.1 Category XXI(a). DDTC has observed a recent increase in the use of Cat XXI for items which should be properly categorized under a well defined USML category. The incorrect use of Cat XXI results in the license application being directed to the incorrect licensing team at DDTC and DTSA, which significantly slows down the adjudication of the request. Additionally, if a properly categorized commodity is designated as SME, the incorrect use of Cat XXI also incorrectly identifies the commodity as non-SME.

If you are unsure if your commodity is controlled by the USML, you should seek a Commodity Jurisdiction determination (see 22 CFR 120.4). Please follow the guidelines at http://www.pmddtc.state.gov/commodity_jurisdiction/index.html. If you have determined your commodity is USML but are unsure of the correct category, contact the DDTC Response Team at 202-663-1282 or PM-DDTC-Response-Team-DL@state.gov.

Any other questions or concerns regarding the use of Category XXI should be directed to the DDTC Response Team at 202-663-1282 or PM-DDTC-Response-Team-DL@state.gov.

Labels: DDTC, Export Controls, ITAR

The sentencing of Atmospheric Glow Technologies, Inc. (AGT), the company alleged to be Professor John Reece Roth's co-conspirator in the criminal case involving unlawful exports of ITAR controlled technology, has been moved to 10 a.m. on October 28, 2009 in Knoxville, Tennessee.

AGT plead guilty in August 2008 to 10 counts of unlawfully exporting defense articles to a citizen of the People’s Republic of China in violation of the Arms Export Control Act.

AGT, which filed for bankruptcy in 2008, was a privately held plasma technology company located in Knoxville, Tennessee. Professor Roth, who was an original shareholder of AGT, was hired by AGT to work on the U.S. Air Force plasma technology contract that led to the violations of U.S. export control laws that resulted in criminal proceedings against AGT, Roth and Daniel Max Sherman, a physicist who formerly worked at AGT and was trained by Roth.

Labels: DDTC, Export Controls

The State Department's Directorate of Defense Trade Controls (DDTC) published a notice in today's Federal Register (pdf) listing the 53 companies and individuals that have been statutorily debarred from participating in ITAR-related transactions as a result of being convicted of violating or attempting to violate the Arms Export Control Act.

Persons subject to statutory debarment are prohibited from participating directly or indirectly in the export of defense articles, including technical data, or in the furnishing of defense services for which a license or other approval is required.

Exporters of defense articles, ITAR controlled technical data and defense services must check the statutory debarment list (and the other restricted party lists maintained by BIS and OFAC) to ensure that no person or company named on this list is involved in a proposed transaction.

Labels: DDTC, ITAR

Following yesterday's joint announcement that the U.S. and India signed a Technology Safeguards Agreement to permit civil or non-commercial satellites containing U.S. ITAR-controlled components on Indian space launch vehicles, the Directorate of Defense Trade Controls today issued the following clarification and guidance:

For the purposes of this policy, “civil or non-commercial satellites” does not include commercial satellites (communications or otherwise). Commercial satellites will continue to be subject to a presumption of denial; hybrid commercial satellites containing non-commercial payloads will be reviewed on a case-by-case basis.

Effective immediately as a result of this change in USG policy, the Directorate of Defense Trade Controls is implementing the following additional documentation requirements on requests for the export or retransfer of USML Category XV satellites or components for incorporation into satellites destined for launch from India. The following information must be contained in the purpose block of the application or in the Supplementary Letter of Explanation document attached as supporting material:

• Description of the satellite, to include satellite purpose, orbital inclination, and coverage area
• Purchaser of the satellite
• Manufacturer of the satellite
• Anticipated launch vehicle and schedule

Applicants are advised export licenses for satellite components destined for launch from India may be subject to monitoring in accordance with Section 1516 of Public Law 105-261. (See 22 CFR 123.27 for additional information.)

Labels: DDTC, India, ITAR

To assist in the proper routing of license applications, the Directorate of Defense Trade Controls today issued the following notice regarding license applications submitted for USML Category VIII Unmanned Aerial Vehicles and Inertial Measurement Units:

Effective immediately, the Directorate of Defense Trade Controls is seeking assistance from the export community regarding the content of submissions for the export of USML Category VIII Unmanned Aerial Vehicles (UAVs) and Inertial Measurement Units (IMUs). For all such electronic license applications (DSP 5, 61, 73), please include the following statement as the first part of the purpose block:

· All Cat VIII(a, b, d, f, h) for Unmanned Vehicles - “UAV Related License”

· All Cat VIII(e) - “IMU Related License”

This change is necessary to ensure your license application is routed to the proper licensing division. Because the D-Trade 2 electronic application system makes the initial division assignment based on USML Category, these Cat VIII licenses are automatically assigned to the Aircraft Division. Due to Missile Technology Export Committee (MTEC) interest in reviewing all UAV and IMU licenses, the Director of Licensing assigned responsibility for these commodities to the Space and Missile Technology Division, which has a representative on the MTEC. The Directorate intends to institute an automated process for this assignment change on a future version of D-Trade 2. Until that time, industry assistance and cooperation is requested.

Labels: DDTC, ITAR

U.S. exporters and importers of defense articles subject to the jurisdiction of the International Traffic in Arms Regulations (ITAR) are reminded that starting on May 16, 2009, all new license submissions must be made using the DTrade 2 system. The Directorate of Defense Trade Controls (DDTC) has stated that it has "identified and addressed" the issues encountered in the unintended live “beta test” that began last month.

While DTrade 1 will be used to process any cases submitted via that system, all new license submissions to the DTrade1 system will be Returned Without Action.

DDTC has issued a document containing information and tips on using the DTrade2 system to "ensure optimal performance and a better end-user experience."

Labels: DDTC, ITAR

After numerous delays, the sentencing of University of Tennessee professor Emeritus J. Reece Roth for violating U.S. export control laws has been set for 10 a.m. on Wednesday, May 13, 2009 in federal court in Knoxville, Tennessee.

Atmospheric Glow Technologies Inc., who was alleged to be Dr. Roth's coconspirator and which plead guilty to violating U.S. export control laws, will be sentenced immediately before Dr. Roth.

By way of background, on September 3, 2008, professor Roth was convicted by a federal jury of one count of conspiring with Atmospheric Glow Technology to violate the Arms Export Control Act (AECA) and 15 counts of violating the AECA for exporting controlled technical data associated with an Air Force Research Laboratory contract to a Chinese national. Dr. Roth was also convicted of one count of wire fraud relating to defrauding the University of Tennessee of honest services by illegally exporting controlled technology associated with the Air Force contract.

Atmospheric Glow Technologies, a privately held plasma technology company located in Knoxville, Tennessee, plead guilty in August 2008 to 10 counts of a federal indictment charging the company with unlawfully exporting controlled technology to a Chinese citizen.

Dr. Roth faces a maximum penalty of five years in prison and a $250,000 fine for the conspiracy and fraud convictions. The 15 convictions for violating the AECA each carry a maximum penalty of 10 years in prison and a $1 million fine.

Atmospheric Glow Technologies faces a maximum criminal fine of $1,000,000 and a maximum term of five years of probation for each of the 10 counts.

This case has generated a great deal of interest and concern in the academic and research communities.

Labels: DDTC, Export Controls

U.S. exporters of defense articles and technical data should be aware that the Directorate of Defense Trade Controls will be launching DTrade2, its new electronic license submission and internal case management system, on April 16, 2009.

Starting on April 16, 2009, all new license submissions must be submitted DTrade2 and any new submissions to DTrade1 will be Returned Without Action with a request to resubmit using the DTrade2 application. While the DTrade1 application will no longer accept new cases, it will be available to track status and to attach additional data to pre-existing cases as required.

DTrade2 will require the use of new versions of all licensing forms, which can be found here on DDTC's D-Trade site. For more information on the changes that will be occurring in DTrade2, click here.

Labels: DDTC, Export Controls