The website for the Directorate of Defense Trade Controls (“DDTC”) recently posted the reports of three Working Groups for the Defense Trade Advisory Group (“DTAG”). DTAG is an industry-advisory group set up by DDTC to consult with the agency on regulatory issues important to the export sector of the defense industry.

The report of Working Group #2 details a proposed new exemption for export of spare parts to foreign government end users of defense articles previously approved for export. Under the current exemption for spare parts, found in section 123.16(b)(2) of the International Traffic in Arms Regulations, the exemption for spare parts is limited to individual shipments of less than $500 and a maximum of 24 such shipments per year, with a provision that orders cannot be split to avoid exceeding these limits. These shipments can be made to government and non-government end users provided that the parts are for a defense article previously approved for export.

Working Group #2’s proposed exemption, which would be inserted into the ITAR as section 123.28, would only apply to foreign-government end users and not to private end users. Although the proposed exemption would eliminate the value and shipment caps in the existing exemption, it includes a number of other significant restrictions

• The exemption is available only to the original exporter and the original government end-user.
• The parts will not provide an upgrade to the capabilities of the defense article as originally exported.
• The parts must be of a type and quantity consistent with normal logistical support.
• The exporter must use only the United States Postal Service, freight forwarders registered with DDTC and customs brokers licensed by the U.S. Customs Service.

I’m not sure what is meant by freight forwarders registered with DDTC. The current broker registration requirements under Part 129 of the ITAR exempt freight forwarders from registration requirements under that part. Perhaps the Working Group is hinting at some independent registration requirement for freight forwarders handling ITAR exports. Although that is not currently required, given the dismal ITAR compliance record of freight forwarders, there is much to commend some system of regulating freight forwarders that handled ITAR-controlled exports.

The larger question here is where all this would fit in the current export reform initiative. Will the new system adopt a uniform exception that looks like the RPL license exception of the Bureau of Industry and Security (“BIS”). That exception is limited to one-to-one exports. Or will the reforms lift the value limits imposed by DDTC on shipments to all users? Although DTAG’s work here is laudable, it might be rendered moot by the proposed export reforms.

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