International Trade Law News

While there have been many export control reform proposals issued in the past few months, very few of them have focused on the legal aspects of the U.S. export control regime.

Neena Shenai, an adjunct scholar at the American Enterprise Institute for Public Policy Research, has added an interesting perspective to the export control reform debate in her working paper entitled Export Control Reform 2010: Transforming the Legal Architecture of Dual-Use and Defense Trade Controls (available here in PDF format). Ms. Shenai, an attorney, is well-suited to provide this perspective given her experience in the private sector and in government, which includes serving as a law clerk to a judge at the U.S. Court of International Trade, practicing international trade law at a leading law firm and serving as an advisor to the Assistant Secretary for Export Administration at the Commerce Department's Bureau of Industry and Security.

The paper offers the thesis that improvements in the export control system’s legal architecture, including administrative procedural safeguards and limited judicial review while also protecting classified information and national security determinations, will improve the workings of the system in general.

Ms. Shenai reaches that conclusion by discussing the existing legal framework of dual-use and defense-related export controls, examining the various shortcomings of the existing export controls legal regime and discussing what can be learned from other U.S. international-related legal regimes that could serve as useful models for reform of the U.S. export control system. The regimes examined include the licensing of nuclear products by the Nuclear Regulatory Commission, the administration of trade remedy laws, the administration of U.S. customs laws and the treatment of national security information protected from disclosure under the Freedom of Information Act.

The paper then provides a number of general and specific recommendations to improve the legal framework of the export control system, including improvements to the commodity jurisdiction (CJ), commodity classification and licensing processes. For example, the paper advocates having agency decisions provide applicants with detailed information on why licenses were granted or denied, the grounds on how CJ determinations are made and allowing applicants the ability to appeal such decisions to a federal court, preferably the Court of International Trade, given its longstanding history of hearing cases under the U.S. trade laws.

Ms. Shenai concludes by noting that "the recommendations made in this paper, if implemented, would serve to ensure that the U.S. export control laws are administered in a fair, transparent, predictable, and accountable fashion, while simultaneously maintaining national security protections."

It should be noted that this working paper has not yet been finalized and Ms. Shenai welcomes comments and corrections. Information on how to contact Ms. Shenai can be found in the document.

Labels: BIS, Export Controls, ITAR

The State Department's Directorate of Defense Trade Controls (DDTC) announced today that it entered into a consent agreement this week with Kaltenkirchen, Germany-based Interturbine Aviation Logistics GmbH, and its Grand Prairie Texas branch office, Interturbine Aviation Logistics GmbH, LLC, to resolve violations of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) allegedly committed in 2004. The Interturbine companies are distributors of a wide range of products for the international commercial aviation sector.

This case marks the first penalty action taken by DDTC in 2010. It is widely expected that DDTC this year will conclude many more than the consent agreements that were finalized in 2009.

According to the Proposed Charging Letter, DDTC alleged that Interturbine committed seven violations of the ITAR associated with the unlicensed export to Germany of  400 kilograms of a heat resistant protective coating classified in USML Category IV(f) that can be used on missiles to protect high heat areas. The Proposed Charging Letter notes that even though the product was indicated in the company's inventory system as export controlled, some senior members of the company in Germany bypassed the company's normal procedures to order the product from its U.S. affiliate for shipment to a customer in Germany. After the product was shipped from Texas to Germany as NLR, the German customer later contacted Interturbine about the lack of an export license, suspended payment and quarantined the shipment. The material was subsequently returned to the U.S. and seized by U.S. Customs and Border Protection. A criminal investigation was then initiated by U.S. Immigration and Customs Enforcement.

Although the criminal case was later dropped as a result of the company's remedial measures, DDTC charged the company with one count of exporting the ITAR-controlled material to Germany without the proper license, one count of misrepresentation and omission of facts, two counts of willfully causing an unauthorized export, one count of exporting a defense article without being registered with DDTC, one count of failing to obtain a non-transfer and use certificate (DS-83) and one count of an unauthorized retransfer.

Under the consent agreement, Interturbine agreed to pay a civil penalty of $1,000,000, of which $900,000 will be suspended. DDTC agreed to suspend $500,000 of the penalty on the condition that Interturbine has already applied that amount to self-initiated, pre-consent agreement remedial compliance measures. In addition, $400,000 will be suspended on the condition that Interturbine maintains its self-initiated exclusion from all ITAR regulated activities.

If within the two-year term of this Consent Agreement Interturbine decides to become involved in ITAR regulated activities, Interturbine agreed to use this $400,000 for additional remedial compliance measures agreed to by the Department.  Interturbine will also be subject to an independent audit to ensure that its company-wide Automated Export Control system prevents its involvement in all ITAR regulated activities and agreed to on-site reviews by DDTC. 

Labels: ITAR

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.

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

In a letter sent yesterday to President Obama signed by more than 100 companies, members of the Aerospace Industries Association (AIA) praised the Obama Administration for undertaking the review of U.S. export controls and urged the administration to take action on a number of initiatives to modernize the export control system.

The letter identified the following five areas of reform to improve the export control system that do not require new legislation:

1. Establishment of transparent and specific criteria to identify those militarily critical and sensitive defense and space technologies that must be subject to the most rigorous controls.

2. Facilitation of timely technology flows between the U.S. and our closest allies and partners, particularly in support of defense and national security programs important to the U.S. Government.

3. Adoption of procedures to ensure any required Defense Department reviews associated with a proposed release of U.S. technology properly balance both policy and technical considerations, and are completed in a timely and consistent manner.

4. Update of the treatment of the next-generation of aerospace and defense technologies, such as Unmanned Aircraft Systems (UAS), under U.S. and multilateral export control regimes.

5. Review of export control compliance requirements to improve comprehension and implementation, particularly among small and medium-sized firms, as well as a review of resource requirements to raise confidence in the effectiveness of U.S. enforcement efforts.

The letter also reiterated the need to ratify the defense trade cooperation treaties with the United Kingdom and Australia that are currently pending in the Senate. 

The full text of the AIA's letter can be found here.

Labels: Export Controls, ITAR

The U.S. Attorney for the District of Delaware announced today that an Iranian arms procurement agent who was extradited to the United States in 2008 has pled guilty to negotiating the purchase and illegal export of a number of military components to Iran and will be sentenced on December 14, 2009.

According to the indictments, Amir Hossein Ardebili was charged with multiple violations of the Arms Export Control Act, International Emergency Economic Powers Act, smuggling, conspiracy, and money laundering. The charges resulted from a three year international undercover investigation regarding Ardebili’s role as an arms acquisitions agent for the government of Iran. Some of the items that Ardebeli allegedly attempted to procure included:

• QRS-11 Gyro Chip Sensors which are solid-state gyro chips that are used in aircraft, missile, space and commercial applications. The BEI GyroChip Model QRS11 Quartz Rate Sensor, Model No. QRS-11-00300-100, is listed on the United States Munitions List in Category XII(d), and therefore requires a license from the Department of State for export. [Note: certain types of QRS-11 chips are subject to the jurisdiction of the Commerce Department.]

• MAPCGM0003 Phase Shifters. Phase shifters perform a key function in the active radiating elements of electronically steered antennae. They enable an antenna to point a radiated beam in specific directions. Phase shifters have many applications including phased array radar, which is used in military target acquisition and missile guidance.

• Digital Air Data Computer (DADC-107). The DADC-107 is a fully computerized Form/Fit/Function (FFF) replacement for the Central Air Data Computer installed on F-4 fighter aircraft. It calculates flight parameters including altitude, air speed, static pressure, mach number, and true angle of attack. Its high accuracy enhances weapons delivery system performance. The DADC-107 is a United States Munitions List Article under category VIII(h) and therefore requires a United States State Department license for export.

• Indictment of Amir Hossein Ardebili, a/k/a Amir Akhami, a/k/a Alex Dave
• Government's Sentencing Memorandum 
• Defendant's Motion for Variance From Sentencing Guidelines
  

Labels: Export Controls, ITAR

Labels: ITAR

A U.S. citizen who served as a director of a Singapore-based importer and exporter of aircraft parts was sentenced today in federal court in Brooklyn to 46 months in prison for conspiring to export aircraft parts to Iran. The defendant was also ordered to forfeit $500,000 to the U.S. Treasury Department.

Laura Wang-Woodford, who served as a director of Singapore-based Monarch Aviation Pte., Ltd. and Jungda International Pte. Ltd., was arrested in December 2007, at San Francisco International Airport, pleaded guilty earlier this year to conspiring to export aircraft parts to Iran via Singapore and Malaysia. Wang-Woodford's co-conspirator, her husband Brian Woodford, remains a fugitive.

Ms. Wang-Woodford and her husband, who were originally indicted in 2003, were subsequently charged with:

• 1 count of conspiring to export aircraft parts to Iran;
  
• 15 counts of exporting aircraft parts to Iran in violation of the International Emergency Economic Powers Act;
  
• 1 count of conspiring to export defense articles without a license;
• 2 counts of exporting and attempting to export defense articles without a license, in violation of the Arms Export Control Act and the International Traffic in Arms Regulations; and
  
• 1 count of conspiring to launder the proceeds of the unlawful export of defense articles.

Labels: Export Controls, ITAR, Sanctions; Iran

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 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:

• 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.

Labels: DDTC, Export Controls, ITAR

The Justice Department announced today that a Belgian national and resident of France suspected of international arms dealing for decades, has been arrested in New York on charges alleging that he conspired to illegally export F-5 fighter jet engines and parts from the United States to Iran.

According to the Justice Department, a six-count indictment was returned on August 27, 2009, in the Southern District of Alabama charging Jacques Monsieur, and co-defendant Dara Fotouhi, an Iranian national currently living in France, with conspiracy, money laundering, smuggling, as well as violations of the Arms Export Control Act (AECA) and the International Emergency Economic Powers Act (IEEPA).

The indictment alleges that in 2009, Mr. Monsieur contacted an undercover agent seeking engines for the F-5 fighter jet or the C-130 military transport aircraft for export to Iran. Monsieur began having regular e-mail contact with the undercover agent regarding requested F-5 engines and parts that ultimately led to a purchase order being issued from a front company in Kyrgyzstan. The purchase order requested that the parts be exported to the United Arab Emirates for transshipment to Iran. Subsequently, $110,000 was sent by wire transfer from Dubai to a bank account in Alabama as payment for the parts.

Labels: ITAR, Sanctions; Iran

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

After nearly ten months following his conviction of numerous export control violations, retired University of Tennessee professor John Reece Roth will be sentenced tomorrow, July 1, 2009, at 10 a.m. EDT by U.S. District Judge Thomas Varlan in Knoxville, Tennessee.

Information on Dr. Roth's sentence will be posted here as soon as it is available.

As we have previously reported, on September 3, 2008 Dr. Roth was convicted by a federal jury of one count of conspiring with Atmospheric Glow Technology, Inc. to unlawfully export in 2005 and 2006 "defense articles" to a citizen of the People’s Republic of China in violation of the Arms Export Control Act.

Dr. Roth was also convicted of 15 counts of violating the Arms Export Control Act and one count of wire fraud relating to defrauding the University of Tennessee of the honest services by illegally exporting controlled technical data relating to a U.S. Air Force contract.

Dr. Roth faces a maximum prison sentence of 175 years and more than $15,500,000 in fines. While the maximum prison sentence for each of the 15 Arms Export Control Act violations (22 USC § 2278) is 120 months in prison, the Federal Sentencing Guidelines provide for a prison sentence in the range of 63-78 months. The Federal Sentencing Guidelines note that in determining the sentence within the applicable guideline range, the judge may consider the "degree to which the violation threatened a security or foreign policy interest of the United States, the volume of commerce involved, the extent of planning or sophistication, and whether there were multiple occurrences." Where such factors are present in an extreme form, the judge may depart from the guidelines.

The sentencing date of Atmospheric Glow Technology, Inc. has not yet been set.

Labels: Export Controls, ITAR

After numerous delays, the sentencing of convicted University of Tennessee professor Emeritus J. Reece Roth for violating the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) has been rescheduled for Wednesday, July 1st at 10 a.m. before U.S. District Judge Tom Varlan in Knoxville, Tennessee.

In a sentencing hearing held on May 13, 2009, Judge Varlan heard testimony from the U.S. Government and defense counsel about the nature of the controlled technical data that was provided to foreign nationals by Professor Roth. During that hearing Judge Varlan said he would decide on a sentence after considering the evidence and hearing from Professor Roth in court.

Labels: 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

The Knoxville News Sentinel reports that no decision was made today during the sentencing hearing of University of Tennessee professor Emeritus J. Reece Roth who was convicted in September of various export control violations.

The article states that U.S. District Judge Tom Varlan spent the afternoon hearing testimony from the prosecutors and defense about the nature of the controlled technical data that was provided to foreign nationals. The article notes that Judge Varlan "said he'll decide on a sentence after considering the evidence and letting Roth speak for himself if he wants to." The date of the next sentencing hearing is likely to be set tomorrow.

Today's sentencing of Atmospheric Glow Technologies Inc., who was alleged to be Dr. Roth's coconspirator and which plead guilty to violating U.S. export control laws, has been rescheduled to a future date.

Labels: Export Controls, ITAR

U.S. Customs and Border Protection at the Port of Chicago today issued an updated Pipeline (09-12) containing detailed and information on the port's procedures for processing imports and exports of defense articles subject to the jurisdiction of the International Traffic in Arms Regulations (ITAR), including hand-carried and cargo shipments.

The pipeline contains useful information on lodging permanent licenses, license decrementation, handling license amendments and the proper procedures for the use of various license exemptions set forth in the ITAR.

While exporters and importers should check with their local ports to verify the local procedures applicable to the import and export of ITAR shipments, the Port of Chicago's Pipeline contains a good summary of the relevant requirements.

Labels: ITAR

In anticipation of tomorrow's House International Relations Subcommittee hearing on possible reforms to export controls on commercial satellites, today's New York Times contained a good article entitled "For U.S. Satellite Makers, a Bid for a Bailout That Wouldn’t Cost Billions". The article, which examines the history of and debate over export controls on commercial satellites, notes that:

Proponents of change are optimistic, pointing to a campaign pledge by President Obama and the support of respected figures like Brent Scowcroft, national security adviser to Presidents Gerald R. Ford and George Bush.

But the export revision is by no means a sure thing. The national security arguments cited in imposing the limits still resonate with conservatives who believe strict regulation is needed to keep China and other countries from stealing secret technology.

Labels: Export Controls, ITAR

Representative Brad Sherman (D-CA), Chairman of the House Foreign Affair's Committee's Subcommittee on Terrorism, Nonproliferation and Trade Brad Sherman (D-CA) has announced that the subcommittee will hold a hearing next week on U.S. export controls on satellite technology.

The hearing, which will be held at 1 p.m. on April 2, 2009 in the room 2175 of the Rayburn House Office Building, will feature the following witnesses:

Labels: China, Export Controls, ITAR

Some new details have emerged in the recent story regarding Joseph Piquet's conviction on seven counts of attempting to export ITAR-controlled power amplifiers to China. Piquet faces a maximum penalty of 30 years in prison and more than $4 million in fines when he is sentenced in May.

• The defendant is the owner of Alphatronx, whose website says the company is "leading, stocking distributor of military, industrial and commercial electronic components."
• The Palm Beach Post reports that Piquet's attorney said he is "a great guy who got caught up in this really technical stuff nobody can figure out"and that "the one guy who could have exonerated" him died in 2005.
• The U.S. Attorney for the Southern District of Florida commended Northrop Grumman Corporation for its outstanding cooperation from the inception of this investigation through the conclusion of the trial. Piquet bought the controlled products from Northrop Grumman's subsidiary, Velocium Products.
  

Labels: Export Controls, ITAR

The Directorate of Defense Trade Controls (DDTC) today issued an updated version of its "Guidelines/Instructions for Licensing of Foreign Persons Employed by a U.S. Person."

DDTC requires all requests for the licensing of a foreign person employed by a U.S. person to be made through the use of a DSP-5 to cover all levels of requested technical data and defense services.

The new version of the Guidelines/Instructions can be found here.

Labels: ITAR

NASA is preparing for the retirement of the Space Shuttle program in late 2010 and has issued a Request for Information (RFI) to obtain input from educational institutions, science museums, and other organizations interested in acquiring and displaying the Space Shuttle Orbiters and Space Shuttle Main Engines.

NASA estimates the total cost to be incurred by a recipient organization for one Space Shuttle Orbiter is $42 million, which includes the $6 million delivery fee for the flight to the closest airport with an 8,000 to 10,000 foot long runway.

The RFI states that that organizations that ultimately receive a Space Shuttle Orbiter or shuttle engines must abide by the following International Traffic in Arms Regulations (ITAR) restrictions placed on the items:

The Orbiters and SSMEs fall under the purview of the U.S. Munitions List (USML), as defined in the ITAR (22 CFR120-130) and are export controlled. The Space Shuttle Orbiters and SSMEs shall not be transferred to foreign persons (ITAR 120.16), in the U.S. or abroad, or exported out of the U.S., without notification to NASA and the specific approval/export license from the Department of State Directorate for Defense Trade Controls (http://www.pmddtc.state.gov/). Violations of these regulations are punishable by fine, imprisonment, or both.

Labels: ITAR

The Directorate of Defense Trade Controls (DDTC) has issued a new and improved Statement of Registration Form (Form DS-2032) for use by manufacturers, exporters and brokers of defense articles, defense services and technical data required to be registered under the ITAR.

The new form, which should be used for all new registrations and renewals, is in PDF format and allows registrants to fill in and save the information directly on the form.

Two different form options are offered:

• Option 1 includes the individual DS-2032 form and the option to select each attachment separately. This is useful to registrants who may require multiple attachment pages to provide the additional information needed to complete blocks 7, 8, 9, 10, or 11 of the DS-2032.

• Option 2 offers the DS-2032 form and the attachments as a single package and is best utilized by registrants who do not require multiple attachment pages.
  

Attachment - Block 7 - Additional Directors, Officers, Partners, and Owners
Attachment - Block 8 - Additional USML Categories
Attachment - Block 9 - Additional U.S. Subsidiaries
Attachment - Block 10 - Additional Foreign Subsidiaries
Attachment - Block 11 - Additional Parent Companies

Option 2 - All Forms - DS-2032 including all Attachments

Labels: DDTC, ITAR

The Directorate of Defense Trade Controls (DDTC) recently issued notifications describing how two recent mergers and acquisitions involving companies subject to DDTC jurisdiction will impact license applications and agreements:

1. Sirius/XM Satellite Radio Merger -- Effective immediately, Sirius Radio Inc. has acquired XM Satellite Radio Inc. As a result of the acquisition, XM Satellite Radio will be known as Sirius XM Radio Inc. All currently approved authorizations identifying XM Satellite Radio Inc. will not require an amendment to reflect the name change to Sirius XM Radio Inc. A copy of this website notice must be attached to the currently approved license by the license holder.

Pending authorizations received by DDTC identifying XM Satellite Radio Inc. as a party to the license will be adjudicated without prejudice. A copy of this website notice must be attached to the approved license by the license holder.

New license applications received after December 15, 2008, identifying XM Satellite Radio Inc. as a party to the license will be considered for return without action for correction to the new name.

A copy of this website notice must be maintained by the license holder and presented with the relevant license to Customs at time of shipment.

All currently approved agreements will require an amendment to be executed to reflect these name changes. The agreement holder will be responsible for amending their agreement. The executed amendment will be treated as a minor amendment per 22 CFR 124.1(d) and must be submitted as such.

Pending agreements applications that require amending must be brought to the attention of the assigned Agreements Officer by the agreement holder. The necessary changes will be made prior to issuance when the Agreements Officer has been notified.

2. Acquisition of SAAB Space AB of Sweden and Austrian Aerospace GmbH of Austria by RUAG Holding of Switzerland -- Effective immediately, RUAG Holding of Switzerland has acquired SAAB Space AB of Sweden and Austrian Aerospace GmbH of Austria. As a result of the acquisition, the entities have been re-named as follows: SAAB Space AB will be known as RUAG Aerospace Sweden AB and Austrian Aerospace GmbH will be known as RUAG Aerospace Austria GmbH. Due to the volume of authorizations requiring amendments to reflect this name change, DDTC is exercising its authority at 22 CFR 126.3 to waive the requirement for amendments to change currently approved authorizations.

All currently approved DSP authorizations identifying SAAB Space AB and/or Austrian Aerospace GmbH will not require an amendment to reflect the name changes to RUAG Aerospace Sweden AB and/or RUAG Aerospace Austria GmbH. A copy of this website notice must be attached to the currently approved license by the license holder.

Pending authorizations received by DDTC identifying SAAB Space AB and/or Austrian Aerospace GmbH as a party to the license will be adjudicated without prejudice. A copy of this website notice must be attached to the approved license by the license holder.

New license applications received after December 15, 2008, identifying either SAAB Space AB and/or Austrian Aerospace GmbH as a party to the license will be considered for return without action for correction to the new name.

A copy of this website notice must be maintained by the license holder and presented with the relevant license to Customs at time of shipment.

All currently approved agreements will require an amendment to be executed to reflect these name changes. The agreement holder will be responsible for amending their agreement. The executed amendment will be treated as a minor amendment per 22 CFR 124.1(d) and must be submitted as such.

Pending agreements applications that require amending must be brought to the attention of the assigned Agreements Officer by the agreement holder. The necessary changes will be made prior to issuance when the Agreements Officer has been notified.

Labels: DDTC, ITAR

Below is a one of the more interesting and unusual ITAR registration-related press releases I have seen. Be sure to see the next to last sentence regarding the "dirty secret":

HighRely Achieves ITAR Compliance & Registration: one of just several U.S. avionics services companies with ITAR compliance

PHOENIX, ARIZONA November 26, 2008 (PRLEAP.COM) -- HighRely is pleased to announce that the United States Department of State has awarded HighRely Incorporated full and complete ITAR registration via Registrant Code MXXXX00 valid through 2009 and beyond via HighRely’s compliance with all aspects of the International Traffic in Arms Regulations, Part 122.

This ITAR Registration means that HighRely is in the unique position of being able to fully support all military projects in the U.S. Unlike other companies who are based in the U.S. but owned by foreign companies or non-Americans and with restrictions making them ineligible for ITAR compliance, HighRely is fully owned and operated 100% by U.S. citizens as denoted by HighRely’s ITAR registration.

Says Mr. Reza Madjidi "As a U.S. citizen myself, I appreciate the significance of being a principal owner of one of the few ITAR compliant avionics services companies in the world. When Vance Hilderman and I founded HighRely and then were later joined by Tony Baghai (also a U.S. citizen), we were fully aware of the need to address both the commercial and military avionics market. Having worked for a foreign company that had resources in the U.S. but was not ITAR compliant, we simply wanted to be honest and open about our ownership. At our old company we were not able to do that as they were 100% foreign owned and not able to be ITAR compliant, even though they operated offices in Phoenix and hired U.S. citizens as managers. Hence we were unable to engage in much of the work they wanted us to do. At HighRely that is not an issue because all the owners are 100% U.S. citizens. And HighRely has been awarded this high status of full ITAR compliance which validates that rational. It is a good day for HighRely, and the U.S."

Adds Mr. Mike Smith of HighRely "Many of our customers require ITAR compliance for DO-178B and DO-254 defense avionics projects. Everyone knows that outsourcing software to Asia, India or Costa Rica sounds like a good idea but the success stories are rare. The "dirty secret" of this industry is that many companies masquerade as compliant U.S. companies or feign ITAR compliance when in fact they are unable to be ITAR compliant. HighRely’s avionics solutions are fully ITAR compliant as is HighRely."

Labels: ITAR

Mr. Shu Quan-Sheng, president of Newport News, Virgina-based AMAC International, today pleaded guilty in federal court in Norfolk, Virginia to two counts of violating the Arms Export Control Act (AECA) and one count of attempting to bribe Chinese government officials, in violation of the Foreign Corrupt Practices Act (FCPA).

Count one of the criminal information alleged that Shu violated the AECA by willfully exporting a defense service from the United States to the PRC without first obtaining the required export license or written approval from the State Department. Shu is alleged to have provided the PRC with assistance in the design and development of a cryogenic fueling system for space launch vehicles to be used at the heavy payload launch facility located in the southern Chinese island province of Hainan.

Count two alleged that Shu violated the AECA by willfully exporting a defense article to the PRC without first obtaining the required export license or written approval from the State Department. Shu is alleged to have illegally exported to the PRC controlled military technical data contained in a document entitled "Commercial Information, Technical Proposal and Budgetary Officer -Design, Supply, Engineering, Fabrication, Testing & Commissioning of 100m3 Liquid Hydrogen Tank and Various Special Cryogenic Pumps, Valves, Filters and Instruments."

Count three alleged that Shu offered to pay money to foreign officials of the PRC’s 101 Institute to obtain a contract for a French company he represented to develop of a liquid hydrogen tank system. Shu is alleged to have received more than $386,000 in commissions for securing the contract and has agreed to forfeit those funds.

Shu is schedule to be sentenced on April 6, 2009. Shu faces a possible maximum sentence of 10 years in prison and a fine of $1,000,000 for each violation of the Arms Export Control Act, and a possible maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain for violating the Foreign Corrupt Practices Act.

Labels: FCPA, ITAR

The Ottawa Business Journal reports that Canada's leading aerospace and defense trade associations will ask the Canadian government to request the U.S. to expand the May 2007 arrangement between the Canadian Department of National Defence (DND) and U.S. Department of State that permits DND employees holding secret-level security clearances, including dual nationals, to work on certain defense-related projects in Canada that are subject to the ITAR. The trade associations want the arrangement to be expanded to cover employees of private companies in Canada that hold secret-level security clearances.

The article notes that the "the dual-nationality issue has hampered Canadian defence and security firms for years because American International Traffic in Arms Regulations (ITAR) prohibit secure data from being exported to Canadian companies who employ certain workers – in particular, employees holding citizenship from countries the United States deems sponsors of terrorism or in non-compliance with nuclear or biological weapon treaties."

Labels: Canada, ITAR

The non-profit Space Foundation recently published a white paper entitled "ITAR and the U.S. Space Industry" that examines the effect of the International Traffic in Arms Regulations (ITAR) on the export of space-related products and technology.

The White Paper is based on a survey conducted by the Space Foundation in 2007 to determine if the ITAR had affected the business practices and the cost structures of the space industry in a significant way. The survey contained quantitative and qualitative questions and the results showed that most responding U.S. companies are aware of the need for protecting certain technologies but they do not believe that ITAR is working the way it should. The results also indicated that smaller respondent companies are more likely to feel adverse effects from ITAR than large companies, which is a matter of concern since lower-tier contractors are a significant source of new technology and innovation. The Space Foundation concluded its report by noting that "by continuing to operate an export control regime designed during the Cold War, the United States reduces the competitiveness of its space industry in the global market and potentially harms the domestic innovation processes that enable U.S. space leadership."

The White Paper proposes specific steps to modernize the ITAR, enabling the regulations to accomplish their original purpose of protecting important security technologies while allowing more U.S. space companies to compete successfully in the global economy.

The Space Foundation's White Paper can be found here (pdf).

Labels: ITAR

The Department of State has published a final rule in today's Federal Register amending section 126.1 of the International Traffic in Arms regulations to add Eritrea to the list of countries not cooperating fully with antiterrorism efforts. As a result, defense articles and services can no longer be exported to Eritrea.

Labels: ITAR

The Financial Times newspaper reports that the Aerospace Industries Association (AIA) recently sent a letter to Senate Foreign Relations Chairman Joe Biden criticizing the Senate's decision to delay consideration of the bilateral defense trade cooperation treaty between the U.S. and the U.K.

According to the story, the AIA's letter indicated that failure to approve the treaty this year "would be an unfortunate setback in ongoing efforts to shape an export control regime that will serve America's interests in the 21st century".

The leadership of the Senate Foreign Relations Committee has claimed that their decision to delay approval of the U.K. and Australia bilateral defense trade cooperation treaties stemmed from their belief that they lacked the necessary time to evaluate the Directorate of Defense Trade Controls' proposed amendments to the ITAR that are necessary to put the treaties into effect.

Labels: Export Controls, ITAR, United Kingdom

The latest edition of the Hartford Business Journal contains an article entitled "Industry Applauds New Dual-Use Rule", which discusses how Connecticut's many aerospace companies will benefit from the State Department's recently issued final rule clarifying the jurisdiction of parts and components used on both civil and military aircraft.

By way of background, on August 14, 2008, the State Department's Directorate of Defense Trade Controls published in the Federal Register a long-awaited final rule amending Category VIII of the U.S. Munitions List to clarify how the criteria of section 17(c) of the Export Administration Act should be applied in determining whether certain basic parts and components having a history of use on both civil and military aircraft should be under the jurisdiction of the International Traffic in Arms Regulations or the Export Administration Regulations.

The new rule amends USML Categories VIII(b) and (h) and adds an important new "Note" after Category VIII(h) which clarifies that any part or component that (a) is standard equipment; (b) is covered by a civil aircraft type certificate (including amended type certificates and supplemental type certificates) issued by the Federal Aviation Administration for civil, non-military aircraft (this expressly excludes military aircraft certified as restricted and any type certification of Military Commercial Derivative Aircraft); and (c) is an integral part of such civil aircraft, is subject to the Export Administration Regulations.

Labels: BIS; EAR, Export Controls, ITAR

The State Department's Directorate of Defense Controls published in the Federal Register last week a final rule amending the ITAR to increase registration fees and change the registration renewal period for manufacturers and exporters of defense articles and services. This new fee structure will significantly increase the annual registration fee for all manufacturers and exporters of defense articles and services.

The new 3-tier fee structure is as follows:

• Tier 1: A set fee $2,250 per year is required for new registrants or registrants who have not submitted any applications during a 12-month period ending 90 days prior to expiration of the current registration.

• Tier 2: A set fee of $2,750 per year is required for registrants who have submitted ten or fewer applications during a 12-month period ending 90 days prior to expiration of the current registration.

• Tier 3: The third tier is for registrants who have submitted more than ten applications during a 12-month period ending 90 days prior to expiration of the current registration. For this tier, registrants will pay a fee of $2,750 plus an additional fee based on the number of applications submitted. The additional fee will be determined by multiplying $250 times the number of applications over ten submitted during a 12-month period ending 90 days prior to expiration of the current registration.

Labels: FAST, ITAR

The Directorate of Defense Trade Controls has published a final rule in today's Federal Register clarifying that certain drugs containing nitrogen mustards that are used in chemotherapy are not within the definition of "chemical agents'' in USML Category XIV of the U.S. Munitions List (USML). As a result, these types of products are subject to the jurisdiction of the Export Administration Regulations.

Because nitrogen mustards can be used for chemical warfare purposes, the final rule states that the know-how for production of nitrogen mustards or their salts is specifically retained on the USML and subject to the ITAR.

Labels: DDTC, ITAR

The Knoxville News Sentinel reports that the prosecution wrapped up the fourth day of the Roth trial yesterday by calling FBI Agent Kevin E. Gounaud to the stand.

University of Professor Emeritus J. Reece Roth is accused of conspiracy to violate the Arms Export Control Act (AECA) and violating the AECA by providing controlled technical data to a Chinese national in the U.S. and by exporting such data to China.

Here is a summary of Agent Gounaud's testimony according to the reporter covering the trial:

Although handwritten notes seized from Roth's office at UT suggested the retired professor was well aware that the drone project fell under the auspices of a federal law barring foreign nationals from access to technical data on military munitions systems, Gounaud testified that Roth insisted he was ignorant of that law.

* * *

Gounaud testified Thursday that Roth insisted he had developed a system to keep from Xin information about the device being designed for use on the drone and denied that Xin received regular reports of the work on that device being performed at AGT by UT graduate assistant Truman Bonds, an American citizen.

"He indicated to his knowledge there was no sharing of reports," the agent testified.

However, e-mail messages entered as evidence in the case indicated that Roth was routinely notified that Bonds was sending reports to Xin about his work.

In a later interview, Gounaud said Roth complained that the federal export law at issue in the case was unnecessary and believed the federal government was wrong in its "bad guy" view of Iran.

"His opinion was, in essence, perhaps we should not have export controls," Gounaud testified.

Defense counsel has indicated that they plan to call Professor Roth to the stand today to answer the charges against him. Should be an interesting day.

Labels: Export Controls, ITAR

The Knoxville News Sentinel continues their coverage of the trial of University of Tennessee Professor J. Reece Roth who is accused of violating the Arms Export Control Act by providing technical data to a Chinese national in the United States. Yesterday's main witness for the prosecution was Mr. Xin Dai, the Chinese graduate student at the center of the controversy. An Iranian graduate student also took the stand.

According to the indictment, Mr. Dai was a citizen of China who held a F-1 visa while living in Knoxville, Tennessee and was enrolled as a graduate student studying for a Ph.D. in Electrical Engineering with the University of Tennessee College of Engineering. Mr. Dai was also employed by the University of Tennessee College of Engineering as a Graduate Research Assistant and Graduate Teaching Assistant from August 2002 to August 2006, during which time he worked under the supervision of Professor Roth, Director of the University of Tennessee Plasma Sciences Laboratory . In May 2005, Roth assigned Dai to work on the government contract for the development of an unmanned aerial vehicle.

The article reports:

"At the time, I had no idea what export control data was," he told jurors in U.S. District Judge Tom Varlan's courtroom.

Xin said Roth was considered a plasma-researching rock star in China.

"In China, he has a very prestigious reputation," Xin said. "It was a dream for me coming here. … I came here primarily because of Dr. Roth."

Xin testified that he knew there were supposed to be limitations on his involvement in the military project, including being barred from conducting tests on the drone itself.

"Were you allowed to go to AGT?" Theodore asked Xin.

"No, I don't think so," he said.

Roth took him to AGT anyway to meet with employees about a "breakthrough" in the work, Xin said. Roth also instructed Xin to send a report to a Chinese professor via e-mail, a report that the government contends contained information about the project while Roth was himself at Fudan University in Shanghai. Roth cited e-mail problems as the cause for having the document sent to the Fudan professor, Xin testified.

* * *

But Xin still praised Roth from the witness stand Wednesday.

"I admire him," Xin said. "This is what Dr. Roth told me to do - tell the truth. He said the purpose of scientific research is truth."

Iranian graduate student Sirous Nourgostar, who prosecutors also allege Roth illegally allowed access to project information, testified that Roth offered him similar advice.

"He told me to tell the truth or they would send me back to Iran," Nourgostar testified.

Labels: China, ITAR

On October 22, 2008, the U.S. Export Assistance Center in San Antonio, Texas will host a full day trade compliance seminar entitled "Complying with the International Traffic in Arms Regulations (ITAR) in the Invigorated Enforcement Environment."

The program, which is being jointly sponsored and presented by J.P. Morgan Trade Services and the law firm of Strasburger & Price, LLP's international trade compliance group, will provide participants with the following information:

• An Overview of the Players, Policies, and Processes of US Export Controls & Compliance
• Insight into Minimizing Exposure, Liability, and Risk for You and Your Organization
• A Hands-on Understanding of Jurisdiction and the Critical Importance of Getting it Right
• Hot Topics including recent State Department Changes & Trends, Brokering, Voluntary Disclosures, Directed Audits, Mandated Measures, Third-Country/Dual Nationals, D-Trade, Merger & Acquisition Due Diligence, and much more…
• An Industry Panel on Best Practices and How to Successfully Navigate the ITAR Minefield
• An Enforcement Update and the Consequences of Non-Compliance with Recent Lessons Learned
• Texas Continuing Legal Education (CLE) Credits for Attorneys

You should attend this seminar if:

• You think your company’s exports and imports aren’t regulated by the ITAR
• You’re uncertain your company’s exports and imports are regulated by the ITAR
• You’re certain your company’s exports and imports are regulated by the ITAR

Labels: Export Controls, ITAR

Atmospheric Glow Technologies Inc. (AGT), a privately-held atmospheric plasma technology company located in Knoxville, Tennesee, pleaded guilty yesterday to ten counts of unlawfully exporting in 2005 and 2006 ten different "defense articles" to a citizen of the People's Republic of China in violation of the Arms Export Control Act.

The illegal exports by AGT charged in the indictment related to technical data and test results relating to a U.S. Air Force research contract associated with the development of an unmanned flight vehicle munitions system.

AGT admitted to unlawfully exporting to a Chinese national technical information concerning the test results of this research project. The Chinese national was a research assistant to former University of Tennessee electrical engineering professor Dr. J. Reece Roth who was working on the project with AGT. Dr. Roth, one of AGT's founders, was also indicted by the Justice Department but pleaded not guilty. Dr. Roth's trial is expected to commence next week.

Another former AGT employee, Daniel Sherman, pleaded guilty in April to charges of conspiring with Roth to export the data to China.

When the company is sentenced in December, AGT faces a maximum penalty for each offense of a $1,000,000 fine, a maximum term of five years of probation and a mandatory special assessment of $400.

Labels: Export Controls, ITAR

The State Department's Directorate of Defense Trade Controls (DDTC) today published in the Federal Register the long-awaited final rule amending Category VIII of the U.S. Munitions List (USML) to clarify how the criteria of section 17(c) of the Export Administration Act should be applied in determining whether certain basic parts and components having a long history of use on both civil and military aircraft should be under the jurisdiction of the International Traffic in Arms Regulations (ITAR) or the Export Administration Regulations.

The new rule amends USML Categories VIII(b) and (h) and adds an important new "Note" after Category VIII(h) which clarifies that any part or component that (a) is standard equipment; (b) is covered by a civil aircraft type certificate (including amended type certificates and supplemental type certificates) issued by the Federal Aviation Administration for civil, non-military aircraft (this expressly excludes military aircraft certified as restricted and any type certification of Military Commercial Derivative Aircraft); and (c) is an integral part of such civil aircraft, is subject to the Export Administration Regulations.

The public comments submitted to DDTC on the proposed rule can be found DDTC's website.

Update: In a press release, Marion Blakey, President and CEO of the Aerospace Industries Association American said today that this rule "will be a shot in the arm for the aerospace industry and American exports."

Labels: DDTC, EAA, Export Controls, ITAR

The Directorate of Defense Trade Controls today posted documents on its website indicating that it has imposed a $4 million civil penalty on Lockheed Martin Company as a result of eight violations violations of the Arms Export Control Act and International Traffic in Arms Regulations.

The alleged violations included exporting classified and unclassified missile-related technical data to the United Arab Emirates Air Force and to persons from a major non-NATO ally without the required export licenses. Lockheed Martin voluntarily disclosed these violations to DDTC.

The Proposed Charging Letter, Consent Agreement and Order relating to this case can be found here. Be sure to review the Annex of Compliance Measures starting on page 9 of the Consent Agreement.

Labels: DDTC, ITAR

Canada's Globe and Mail newspaper contains a front page story today on the adverse impact of the U.S. International Traffic in Arms Regulations (ITAR) on Canada's acquisition of new military equipment. Below are some excerpts of the story. The complete story can be found here:

Ottawa is facing an uphill battle to carry out a promised purchase of $17-billion in new military equipment because of stringent U.S. security rules and ballooning costs caused by a series of delays, newly released documents show.

According to Foreign Affairs briefing notes, the government is blaming U.S. security measures that limit the export of military technology to Canada, as American authorities fear some Canadian workers will engage in espionage.

* * *

In addition, documents released by the Department of Foreign Affairs reveal government fears that the purchase of military equipment "is in jeopardy" because of U.S. regulations called the International Traffic in Arms Regulations.

* * *

The Canadian government argues that ITAR is discriminatory and goes against the Charter of Rights. However, Ottawa has so far been unable to persuade the U.S. government to ease the restrictions for private-sector workers.

The Foreign Affairs documents show that U.S. firms are tired of ITAR, which hamper their sales to the Canadian government and cause delays.

"U.S. industry is becoming increasingly frustrated with the status quo as it impeded its own defence trade," a document said.

Labels: Canada, Export Controls, ITAR

The Directorate of Defense Trade Controls published in Monday's Federal Register the anticipated and controversial proposed rule to amend the International Traffic in Arms Regulations (ITAR) to significantly increase registration fees.

This proposal is intended to implement part of President Bush's January 2008 Export Control Directive that requires the State Department to initiate a self-financing mechanism so that up to 75% of the Directorate of Defense Trade Controls' (DDTC) will be self-financed.

The notice states that to "better align registration fees with the cost of licensing, compliance and other related activities", the following three-tier registration fee schedule is proposed:

Tier 1: A set fee of $2,250 per year is required for new registrants or registrants who have not submitted any applications during a 12-month period ending 90 days prior to expiration of the current registration.

Tier 2: A set fee of $2,750 per year is required for registrants who have submitted ten or fewer applications during a 12-month period ending 90 days prior to expiration of the current registration.

Tier 3: The third tier is for registrants who have submitted more than ten applications during a 12-month period ending 90 days prior to expiration of the current registration. For this tier, registrants will pay a fee of $2,750 plus an additional fee based on the number of applications submitted. The additional fee will be determined by multiplying $250 times the number of applications over ten submitted during a 12-month period ending 90 days prior to expiration of the current registration.

The current DDTC registration fee is $1750 per year for all registrants, regardless of the number of licenses submitted. While all companies will face increased fees under this proposal, companies submitting numerous license applications per year and falling in Tier 3 will have to pay significant registration fees to DDTC. For example, a company submitting 50 applications (although the term "application" is not defined) per year will have to pay an annual registration fee of $12,750 ($2750 + (40 x $250)).

The proposed rule provides that universities and non-profit organizations will be included in Tier 1.

The Department of State will accept comments on this proposed rule until August 27, 2008. Details on where to submit comments can be found in the Federal Register notice.

Labels: DDTC, ITAR

The Justice Department announced last week that Air Shunt Instruments Inc., an aircraft components company located near Los Angeles, California, has been sentenced to pay a criminal fine of $250,000 for "willfully and knowingly" making "a false statement in connection with a gyroscope used on military helicopters that was sent to a freight forwarder in San Diego for shipment to Thailand in 2003."

Meanwhile, it was also reported that John Nakkashian, Air Shunt's former Vice President who was responsible for international sales and for obtaining all required export licenses remains, has fled the U.S. and remains a fugitive.

Nakashian was previously indicted on four counts of violating the Arms Export Control Act for illegally exported military components without the required export licenses. The indictment alleges that Nakkashian illegally exported military components for the General Electric J85 engine, which is used on the F-5 fighter jet, from the United States to Dubai without obtaining the required export licenses from the State Department's Directorate of Defense Trade Controls. Nakkashian is also accused of illegally exporting a military gyroscope to Thailand and other military component to Dubai.

The Justice Department's press release indicates that:

Air Shunt took appropriate disciplinary action against Nakkashian for perpetrating the acts alleged. Furthermore, since August 2004, Air Shunt has adopted effective standards of conduct and internal control systems, including new and revised review and control procedures and ethics training programs designed to prevent or detect violations.

Labels: DDTC, ITAR, UAE

The Directorate of Defense Trade Controls (DDTC) published in Friday's Federal Register a final rule amending the International Traffic in Arms Regulations (ITAR) to limit the registration period to one year, instead of up to two years, for both new registrants and for those renewing their registration.

In addition, the regulation states that registrants will be required to submit renewal packages to DDTC no more than 60 days prior to their current expiration. This new regulation is effective immediately.

For the time being, the registration fee remains at $1750 per year, although there is a proposal pending that would modify DDTC's registration fee based on the number of export licenses obtained per year.

The text of the new regulation reads as follows:

Sec. 122.3 Registration fees.

(a) A person who is required to register may do so for a period of 1 year upon submission of a completed Form DS-2032, transmittal letter and payment of $1,750.

(b) Expiration of registration. A registrant must submit its request for registration renewal at least 30 days but no earlier than 60 days prior to the expiration date.

The ITAR requires any person who engages in the U.S. in the business of either manufacturing or exporting defense articles or furnishing defense services to register with DDTC.

Labels: DDTC, ITAR

USA Today has published an interesting, extensive and disturbing article entitled "Feds Knock; A Business is Lost" that focuses on the history and aftermath of the export enforcement case involving Alex Latifi, the owner of Huntsville, Alabama defense contractor Axion Corporation, who was acquitted last year of violating the Arms Export Control Act after being accused of exporting classified drawings for the U.S. Army's Black Hawk helicopter part to China.

After his acquittal, Mr. Latifi was subsequently awarded $360,000 under the Civil Asset Forfeiture Reform Act of 2000 (CAFRA) to cover the legal fees that he incurred in his defense.

Mr. Latifi is attempting to restart his business, which once employed 60 people and had annual revenues of $4 million. Meanwhile, "Mr. Latifi is seeking additional legal fees and access to the government's files through a legal channel called the Hyde Amendment, which provides for compensating exonerated defendants if 'the position of the United States was vexatious, frivolous, or in bad faith.'"

Labels: Export Controls, ITAR

This is a reminder that today is the effective date of the the final rule issued by the Census Bureau on June 2, 2008 requiring that all Electronic Export Information (formerly known as Shipper's Export Declarations or SEDs) be filed via the Automated Export System (AES) prior to the departure of the cargo from the U.S.

The Census Bureau has adopted a 120 day implementation period. During the 120-day implementation phase, the Census Bureau will use “informed compliance” to reach out to filers identified as violating provisions of the AES rule. Parties submitting paper SEDs after September 30, 2008 will be considered to be in violation of the Foreign Trade Regulations and can be subject to monetary penalties.

The new AES filing deadlines for non-USML shipments set forth in the final rule are:

Sea: 24 hours prior to departure
Truck: 1 hour prior to truck arriving at U.S. border
Air: 2 hours prior to scheduled departure time
Rail: 2 hours prior to train arriving at U.S. border
Mail: 2 hours prior to export

Pursuant to section 123.22(b) of the ITAR, the AES filing deadlines for USML shipments remain as follows:

Air: 8 hours prior to scheduled departure time
Truck: 8 hours prior to truck arriving at U.S. border
Rail: 24 hours prior to train arriving at U.S. border
Sea: 24 hours prior to departure

In addition, for those using AESDirect to file EEI should be aware that starting on October 1, 2008 AESDirect will have heightened security measures and user authentication practices. These changes include:

- Individual User Account Administration
- Stronger Password Requirements
- Shorter Password Expiration Time frames
- Automatic Inactive Account Deactivation
- Session Timeout/Concurrent Login Limit
- Account Lockout after 3 Unsuccessful Logins
- New Account Administration Functions

Labels: AES, Census, ITAR

USA Today has reported on efforts by terrorist and other groups to obtain advanced U.S. military night-vision equipment and the U.S. Government efforts to prevent and prosecute such efforts:

The government has prosecuted more than two dozen businesses and individuals over the past 18 months for stealing night-vision gear or skirting prohibitions on foreign sales, according to a USA TODAY review of federal documents and public records.

In at least five cases, prosecutors linked shipments to terrorist groups, such as al-Qaeda and Hezbollah. A few others were headed to Iran and Taliban forces in Afghanistan, court records show; several were destined for China and Japan.

"It's extremely serious — you're talking about adversaries of the United States getting equipment that we make to give our soldiers an advantage in the field," says Charles Beardall, the Pentagon's deputy inspector general for investigations.

The Pentagon joined the departments of Justice, Homeland Security, Commerce and State last year in a crackdown on illegal exports of combat-use military items and sensitive civilian goods with military uses. Night-vision goggles, scopes and cameras used by U.S. troops account for more cases than any other technology, says Steven Pelak, Justice's export enforcement coordinator.

Labels: Export Controls, ITAR

This evening the U.S. House of Representatives held 40 minutes of debate on H.R. 5916, the Security Assistance and Arms Export Control Reform Act of 2008. Following the debate, a vote on the bill was postponed until tomorrow.

If enacted, H.R. 5916, which was introduced by House Foreign Affairs Committee Chairman Howard Berman (D-CA) less than two weeks ago, would make a number of significant changes to arms export control procedures.

For example, Subtitle A of Title I of the bill, referred to as the Defense Trade Controls Performance Improvement Act of 2008, would require the Department of State's Directorate of Defense Trade Controls (DDTC) to institute specified performance goals to improve the review and processing of applications for export licenses (particularly for major allies such as Israel, South Korea, Japan, Australia, New Zealand, and members of NATO).

These performance goals include:

• The processing time for review of each application for a license to export items on the United States Munitions List shall be not more than 60 days from the date of receipt of the application.

• The processing time for review of each application for a commodity jurisdiction determination shall be not more than 60 days from the date of receipt of the application.

1. the name of the manufacturer of the item;
2. a brief general description of the item;
3. the model or part number of the item; and
4. the USML category under which the item has been designated.

Labels: Congress, DDTC, Export Controls, ITAR

Labels: ITAR

The long-term loan of these tires may be used to educate, inspire or inform the public about NASA’s scientific and technological achievements through art, sculpture, furniture, building structures, exhibits or other innovative uses of the artifacts. These items may not be used for the promotion of any organization or entity, or for commercial purposes.

The space shuttle landing gear tires shall not be transferred to foreign nationals, in the U.S. or abroad, or exported out of the United States, without specific approval of a knowledgeable NASA export control official, and/or unless an export license/license exemption is obtained/available from the United States Department of State. Violations of these regulations are punishable by fine, imprisonment, or both.

Labels: ITAR

The Associated Press reports that a federal jury in Madison, Wisconsin today convicted an Indonesian national of conspiracy to violate the Arms Export Control Act for attempting to export rifles scopes to Indonesia without the proper State Department licenses. The article states that the defendant attempted to export 100 Leupold Mark 4 Close Quarter/Tactical (CQ/T) that are "designed to attach to M-16 and AR-15 assault rifles".

According to the manufacturer's website:

The CQ/T riflescope, parts, and accessories fall under the jurisdiction of the U.S. Department of State. Unless required State Department license is obtained, this product is for sale in the U.S.A. only.

Labels: ITAR

The State Department's Directorate of Defense Trade Controls (DDTC) has released the license processing time statistics for April 2008:

Cases Received: 7,728
Cases Closed: 7,438
Cases Open At End of Month: 3,720
Average Processing Time: 15 Days

By contrast, in April 2007 DDTC received 6,290 cases and the average processing time was 32 days.

The good news for defense exporters is that during the past year DDTC's average license processing times have been cut in half even though nearly 23% more applications were submitted.

As for the average processing times, DDTC notes that for electronic cases (i.e., those being filed via D-Trade), the processing times are based on the date the case was signed by the applicant until the date of final action. DDTC also indicated that the methodology for calculating the average processing times for hardcopy cases has changed. The processing times for April 2008 were determined by the date the case entered DDTC until the time the case is signed out of DDTC. Previously, the processing time for hardcopy cases was based on the application date until the date of final action.

Labels: DDTC, ITAR

The National Council on International Trade Development's (NCITD) February 14, 2008 meeting in Washington, DC will feature the following speakers:

Labels: ITAR, OFAC, Sanctions

For those readers in Texas, or those who work for companies that have operations in Texas, we wanted to advise you of the following two upcoming export controls programs co-sponsored by Strasburger & Price, LLP and JPMorgan Chase Global Trade Services:

Dallas Conference (Presented by the Greater Dallas Chamber of Commerce):

Export Regulatory Compliance & ITAR Program
Tuesday, November 13, 2007
7:30 AM – 5:00 PM
Hotel Crescent Court
400 Crescent Court
Dallas, TX
Click here for the agenda and registration information.

Houston Conference (Presented by the International Transportation Management Association):

Export Controls Seminar: Compliance with the International Traffic In Arms Regulations, Export Administration Regulations and Related Requirements
Friday, November 16, 2007
7:45 am - 5:00 pm
The Greenspoint Club (in North Houston)
16925 Northchase Drive
Houston, TX
Click here for the agenda and registration information.

Both programs will cover the following topics:

• Overview of U.S. export controls (EAR and ITAR)
  
• Industry panel on Best Practices in export controls
  
• Insight into minimizing exposure, liability and risk for you and your organization
• Fresh perspective on ethics in trade compliance and why it is so important
• Hands-on understanding of commodity jurisdiction and critical importance of getting it right
• Enforcement update and the consequences of non-compliance with recent lessons learned

Labels: Export Controls, ITAR

Here's a story with interesting ITAR implications. Reuters has reported that during last week's Moscow Air Show (MAKS 2007) a wealthy Russian tried to buy a B-52 bomber from he U.S. delegation. According the report:

The unidentified Russian, wearing sunglasses and surrounded by bodyguards, approached the U.S. delegation and asked to buy the bomber . . . .

An astounded member of the U.S. delegation said the bomber was not for sale but that it would cost at least $500 million if it were to be sold on the spot.

"That [$500 million] is no problem. It is such a cool machine," the Russian was quoted as saying . . . . The bomber was not sold.

Labels: ITAR

The Justice Department announced today that Xiaodong Sheldon Meng pleaded guilty to violating the Foreign Economic Espionage Act and the Arms Export Control Act by possessing a trade secret belonging to his former employer and "knowingly and willfully" exporting ITAR-controlled source code to China.

According to the Justice Department, this is the first time that a person has been convicted for "illegal exports of military-related source code".

The defendant faces a maximum prison term of 24 months and could be subject to a fine of $500,000 for the Economic Espionage Act conviction and a maximum fine of $1,000,000 on the Arm Export Control Act conviction.

Labels: China, Export Controls, ITAR

The Government Accountability Office (GAO) today released to the public a report submitted to Congress last month indicating that the Department of Defense's Defense Reutilization and Marketing Service (DRMS) recently sold surplus aircraft parts to the public that could be used on F-14 fighter aircraft. The report states:

Although DRMS has clearly taken a proactive approach to identifying and removing sensitive items from its system, we determined that approximately 1,400 items newly designated as controlled property were sold to the public in February 2007. DRMS told us the parts were sold to the public because it did not successfully update its automated control list and remove these items prior to their being listed on the Web site. DRMS had identified these items as parts that could be used on the F-14 fighter aircraft.

Labels: Export Controls, ITAR

At a hearing held today by the House Science and Technology Committee’s Subcommittee on Space and Aeronautics on the status of NASA's Space Shuttle and International Space Station (ISS) programs, Tommy Holloway, Chairman, of the ISS Independent Safety Task Force said that the current International Traffic in Arms Regulation (ITAR) restrictions on NASA are a threat to the safe and successful integration and operations of the ISS.

Mr. Holloway, who formerly served as Manager of NASA's Space Station and Space Shuttle programs, told the members of the Subcommittee that:

Currently the International Traffic in Arms Regulation (ITAR) restrictions and IP [International Partner] objections to signing what the IPs believe are redundant Technical Assistance Agreements are a threat to the safe and successful integration and operation of the Station. For example, a contractor workforce comprises a majority of the operations workforce and must be able to have a direct interface with the IP operations team to assure safe and successful operations. Their interactions and their ability to exchange and discuss technical data relevant to vehicle operations are severely hampered by the current ITAR restrictions. This is an issue across the ISS Program, but must be resolved soon to allow operations training for the first flight of the European Space Agency's Automated Transfer Vehicle (ATV) in the first part of 2008.

NASA depends heavily on U.S. contractors for technical support for Station integration and for operations. These contractors are the source of data and expertise that is critical in meeting schedules and performing mandatory work with the IPs. For example, the mission operations contractors comprise a majority of the operations workforce and must be able to have a direct interface with the IP operations teams to assure safe and successful operations. Currently the ITAR restrictions and the IPs' objections to signing technical assistance agreements are a threat to the safe and successful integration and operations of the Station.

Each U.S. contractor working with the European, Japanese, and Russian space agencies is required to apply for a Technical Assistance Agreement (TAA) from the State Department that governs their interactions with foreign entities for each specific relationship. U.S. aerospace and defense companies are accustomed to dealing with these TAA requirements in what has become a normal part of international business. However, when the Department of State approvals are too narrowly defined and come with many caveats, limitations, and provisos, they severely restrict Program management flexibility. The constraints imposed by the current processes result in lost time and opportunity to share critical data to enable a robust joint Program.

I would grant immediate relief in the form of an [ITAR] exemption to allow NASA contractors direct interaction with the IPs and their contractors to facilitate and accommodate all engineering and safety reviews, data exchanges pertaining to specific ATV/HTV hardware and software, Program management interactions, and flight operations including anomaly resolution.

Labels: ITAR, NASA

Space.com reports that China successfully launched an "ITAR-free" telecommunications satellite on July 5th. The Chinasat 6B telecommunication satellite, built by that was built by European-based Thales Alenia Space was launched from the Xichang Satellite Launch Center in southwest China's Sichuan Province by a Long March 3B launch vehicle.

The article notes that:

Thales Alenia Space officials say getting around U.S. State Department restrictions - generally referred to as ITAR, or International Traffic in Arms Regulations - with respect to China's rocket adds around six percent to the cost of a telecommunications satellite. That is because these satellites cannot take advantage of U.S. companies whose production lines are active and thus whose unit costs are reduced - in addition to the fact companies producing in U.S. dollars have an advantage over euro-based companies like Thales Alenia Space.

Even so, they said they have no intention of moving toward what they refer to as a fully "ITAR-free" product line. Such a move would help reduce the cost of ITAR-free satellites by increasing the production volume, but would run the risk of not being able to keep up with market demand because ITAR-free satellites rely on a supply chain that would have difficulty increasing throughput in the short term . . .

Labels: China, ITAR

The Directorate of Defense Trade Controls (DDTC) published in today's Federal Register a list of 11 persons that have been statutorily debarred since the beginning of 2006 as a result of violating or conspiring to violate the Arms Export Control Act.

Persons subject to statutory debarment are prohibited from participating directly or indirectly in activities regulated by the ITAR, including the exportation or importation of defense articles, related technical data or defense services. The debarment period runs for a period of at least three years, although the individual can apply to DDTC for reinstatement beginning one year after the date of the debarment.

A complete list of individuals and companies that are currently statutorily debarred can be found on DDTC's website at the following link: www.pmddtc.state.gov/debar059.htm (Note: At this writing the list has not been updated to reflect the 11 persons named in today's notice).

Labels: DDTC, ITAR

Labels: Canada, DDTC, ITAR

The U.S. and Canada today announced that they have completed an exchange of letters documenting an arrangement between the U.S. Department of State and the Canadian Department of National Defence (DND) permitting dual citizens in Canada to work on certain military projects that are subject to the U.S. International Traffic in Arms Regulations (ITAR).

Under the arrangement announced today, the State Department's Directorate of Defense Trade Controls (DDTC) will implement procedures to grant access to defense articles and services exported to Canada under the ITAR to DND personnel who are Canadian citizens holding a minimum secret-level security clearance, including dual nationals. DND personnel covered by this agreement include Canadian Forces members, civilian employees, embedded contractors and employees of other federal government departments and agencies working within DND. Canadian standards and procedures will continue to be used to process security clearances.

This agreement, which has been negotiated for more than one year, was necessary since the U.S. has been limiting access to ITAR-controlled defense articles and services to Canadian citizens, and denying access to Canadian citizens who possess dual nationality with a U.S. proscribed country. Canada objected to these restrictions claiming they would be inconsistent with the Canadian Charter of Rights and Freedoms and human rights legislation, which prohibit discriminatory treatment of Canadian citizens, regardless of their country of origin or other nationality. This arrangement will allow Canada to proceed with the purchase of U.S.-produced CH-47 helicopters, C-17 transport aircraft and C-130 aircraft.

The U.S. and Canada both indicated that they consider this arrangement as an important first step in resolving these ITAR-related issues. The State Department has offered to conclude similar arrangements with other Canadian government agencies provided they can assure the U.S. of their commitment to "vigorously implement and oversee similar procedures".

The press releases issued by the U.S. Department of State and Canada's Department of National Defence can be found here and here.

Labels: Canada, ITAR

Labels: DDTC, ITAR

Labels: Export Controls, ITAR

Canada's The Globe and Mail newspaper reported today that the U.S. and Canada have reached an agreement on how to handle the recent controversy involving dual citizens that work on military projects in Canada which are subject to the U.S. International Traffic in Arms Regulations (ITAR). The paper reports that:

The Harper government has come to terms with Washington on a deal exempting Department of National Defence employees from U.S. restrictions that prevent dual nationals from 17 countries from having access to data related to U.S. military technology.

Under the deal, the exemption could eventually be extended to other federal bureaucrats, and then, with the agreement of the U.S. government, to people in the private-sector industry.

"It's a step-by-step approach," a federal source said.

Labels: Canada, ITAR

While the ITT case is the largest criminal export controls case to date, ITT is not the only defense contractor to have recently run afoul of U.S. laws governing the export of defense articles.

Last Thursday, the U.S. Attorney for the Northern District of Alabama, indicted Huntsville, Alabama-based Axion Corporation on charges of illegally exporting sensitive military technology overseas, fraud involving aircraft parts and submitting false documents to the government.

According to the indictment, in September 2003 and continuing thereafter, Axion Corporation and its owner, Alexander Nooredin Latifi, "knowingly and willfully exported defense articles, specifically technical drawings of the bifilar weight assembly for the UH-60 Black Hawk helicopter, to overseas manufacturers without first obtaining a required license and authorization from the State Department."

In addition to criminal penalties, the indictment seeks the forfeiture of any assets and property derived from the offenses alleged in the indictment, including the company's headquarters and $659,280 in proceeds derived from alleged criminal activity.

Labels: Export Controls, ITAR

Canada's The Globe and Mail newspaper today reports that ITAR "restrictions on military purchases are causing so much paralysis in Ottawa" that the Canadian Government proposed "scrapping its project" to purchase Sikorsky Cyclone helicopters to replace its aging fleet of Sea Kings. The paper reports that "the Canadian government is refusing to sign documents containing ITAR restrictions -- such as technical assistance agreements and export licences -- that are crucial to the production of the Sikorsky Cyclones."

The article also indicates that "some federal officials feel that a solution to ITAR is close to being made public. However, senior officials in the defence industry fear the new rules will favour only government bureaucrats, and that employees in the private sector will continue facing the same discriminatory measures."

Labels: Canada, Export Controls, ITAR