The Directorate of Defense Trade Controls (“DDTC”), the State Department agency responsible for licensing exports of defense articles, has issued new guidance to scold export license applicants for not using precise names legal names in license applications. Like confusing “that” for “which” and vice versa, minor name inaccuracies begin the legendary slide down the even more legendary slippery slope that winds up in terrorists being able to mail nuclear bombs from Des Moines to Pakistan by simply dropping the bombs in the corner mailbox with the correct postage.

An applicant must ensure the correct spelling is used when entering the legal business name(s) of any involved party. … Failure to adhere to these guidelines may result in a delay in review of a license application or a return without action (RWA).

Because if the intermediate consignee is listed as FeddEx rather than FedEx, DDTC’s licensing staff will be completely confused and will have no choice but to return the application or to delay it a few weeks while figuring out whether there really is a FeddEx or not.

Even more importantly we have the national security threat of names without middle initials.

When completing any online license application and an individual’s name is required, the middle name or initial should be provided.

For those who are inclined to scoff at this school-marmishness, let me point out the unstated goal behind this emphasis on disclosing middle initials. While most American’s have middle names, that is quite uncommon in the case of Arabic names, so the absence of a middle initial can be a good marker that a potential terrorist might be involved in an export application.

Seriously, the new guidance might have been more helpful if it dealt with the middle-named-challenged in the same way as these tips from DDTC on filling out DDTC’s Form DS-2032 for registration of manufacturers and brokers:

If no middle initial, enter “N/A.”

So if you’re wondering how to get permission for America’s first president, who had no middle name, to export a defense article, just list the applicant as “George N/A Washington.” I like the sound of that, don’t you? And it has the added advantage of keeping us all safer.

If the potential benefits of a voluntary disclosure of export violations to the Directorate of Defense Trade Controls (“DDTC”) are not a sufficient motivation, exporters should remember that today’s happy employee can be tomorrow’s disgruntled former employee. The disgruntled former employee is then happy in only one respect: all too happy to blow the whistle on the exporter’s alleged violations of export laws.

Consider the case of a Tennessee-based company that provides security and related services to the United States Government in Iraq and elsewhere. A year ago the company fired an employee for allegedly falsifying time records and for an “appearance of impropriety.” The employee filed suit for wrongful termination, and his complaint cited acts of impropriety allegedly committed by other company employees without termination or other consequences.

The improprieties included the following alleged ITAR violations:

• The company allegedly asked employees to carry Gen III night vision in their checked baggage to avoid licensing requirement.
• The company allegedly shipped shotguns to Iraq without required licenses.
• The company allegedly made multiple shipments of ammunition under the 1000-cartridge exemption in ITAR § 123.17(c) in order to avoid licensing requirements.
• The company allegedly sent U.S. employees to Uganda and Nigeria to train troops without DDTC authorization

The company denies these allegations, providing the following statement to the Knoxville News when asked to comment on the litigation:

[The company] acknowledges the lawsuit filed by […], a former employee. Because of the ongoing legal process, [the company] cannot comment on the details of the proceedings, except to point out that claims similar to those raised in Loudon County were previously raised by [the employee] and others in lawsuits filed in Knox County and Blount County and both of those lawsuits have been dismissed. [The company] also registers its disappointment in the use of sensational, unsubstantiated, and untrue allegations as a tactic to obscure the real issues of the case.

Of course there’s no way to determine who is telling the truth here but, even so, exporters should never think that there’s no way anyone could ever find out about their potential export violations.

In a laudable moment of regulatory clarity, the Directorate of Defense Trade Controls (“DDTC”) has actually proposed eliminating a provision in the International Traffic in Arms Regulations. The provision in question is the troublesome, annoying and difficult to construe section 126.8 which requires prior approval by DDTC for certain proposals to sell significant military equipment (“SME”) to foreign persons or to enter into a manufacturing license agreement to permit the foreign persons to manufacture SME abroad.

The prior approval and notice requirements under section 126.8 apply to proposed sales of SME valued in excess of $14 million and destined for end use by a foreign military of a country other than a NATO member, Australia, New Zealand or Japan or a proposed manufacturing agreement for SME of any value to be used by any foreign military. The rule only applies to proposals which communicate sufficient information to permit the other party to make a decision. Needless to say, the interpretation of this requirement is a major headache.

Comments are due by May 28, 2010 and may be emailed to [email protected] with a subject line referencing “Public Notice 6931; FR Doc. 2010–6905”. You can take a moment to click the email link and tell DDTC that the proposed amendment is the best idea since wheels on luggage.

Of course, I don’t want to seem ungrateful, particularly since it seems certain that DDTC will ultimately adopt most of the proposed rule in one form or other, but I do have a minor quibble. DDTC has the right to adopt rules and make them effective immediately as final rules, and it often does this, even if it says it will still consider comments to revise the rules. It certainly would have been nice if DDTC had followed that procedure in this case so that we could have an immediate burial rather than a two-month wake.