ExportLawBlog

Archive for the ‘DDTC’ Category

Oct

28

A Tip To Remember

Posted by Clif Burns at 7:51 pm on October 28, 2009

Military Contractor in Iraq An article in Defense Industry Daily today highlighted a previous report by a watchdog group on Triple Canopy’s activities in Iraq. Triple Canopy is one of the major private military contractors in Iraq and has taken over many of the security contracts once held there by Blackwater (now Xe). One of the issues highlighted was the purchase by Triple Canopy and other private military contractors of arms from black market dealers in Iraq, which has led to more than a little tsk-tsking from some fronts.

But as both articles point out, there’s a relatively simple explanation for what military contractors were buying AK-47s on the streets of Baghdad:

The U.S. awarded Triple Canopy a contract to protect more than a dozen sites across Iraq. At the time, the company had only a handful of employees. More serious, it didn’t have licenses to import the hundreds of weapons needed to guard sites across Iraq.

The company immediately applied for licenses after winning the contract, according to documents provided by Triple Canopy. Yet the government took months to approve the deal, not authorizing the company to collect the weapons until June 2004. In essence, the U.S. had awarded the company a lucrative contract, but then provided it little ability to arm for the job.

To get the firepower it needed in the meantime, the company turned to the unregulated and unlicensed Iraqi market, purchasing AK-47s and other weapons from local dealers, according to company officials and court records.

There was, however, another obstacle thrown in the way of export licenses for arms need by privately-contracted security forces in Iraq that wasn’t mentioned by the articles. This obstacle was thrown by Congress in the Iraq and Afghanistan Supplemental Appropriations Act of 2004. Section 2205 of that Act required that any shipment of small arms, even a shipment of one rifle, to U.S. private contractors in Iraq be notified by DDTC to Congress with all the delays that this would entail. And if Congress was in recess, add even more time, since notifications to the House can only be made when it’s in session. What did Congress expect American contractors on the streets of Baghdad in 2004 to defend themselves with while waiting? Spitballs?

Another unintended consequence of the delays imposed by Congress and the State Department on allowing exports of small arms to private contractors in Iraq can be seen in an anecdote that was related to me at the time. An employee of a security company needed to visit his company’s operations in Iraq on an expedited basis. On arrival in Iraq, he naturally acquired a weapon in country. (You would have too at the time.) So far, so good. But when he left Iraq, what to do with the weapon? Since it hadn’t been lawfully exported from the United States he would need an ATF permit, which he didn’t have and had no way to get, to bring it back into the United States. Â So, he left the weapon in his hotel room — as a tip of sorts, I suppose, for the housekeeping staff.

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Oct

23

ITAR? What’s An ITAR? Is It Like an iPod?

Posted by Clif Burns at 1:33 pm on October 23, 2009

Category: DDTC • ITAR • Part 129

Military Hovercraft

Psst. Have I got a deal for you. For only $65 million you can be the owner of a military landing hovercraft — complete with guns, compartments for three tanks, space for 170 troops and nuclear and CBW shelters. It can be yours in just 4-5 months and will ship from Eastern Europe. And it’s for sale on the website of Portland Yacht Sales, which bills itself on the site as engaged in “International Yacht and Ship Brokerage.”

To be clear, of course, I’m not really trying to promote the sale of this landing vehicle to any of my readers. In fact, you’ve probably guessed that my reason for bringing up this unusual web offer would be to wonder whether the State Department’s Directorate of Defense Trade Controls (“DDTC”) has thrown the book — or rather thrown Part 129 of the International Traffic in Arms Regulations (“ITAR”) — at Portland Yacht yet.

Part 129 requires that companies acting as brokers of defense articles — and this is pretty clearly a defense article under USML Category VI(a) — must register with DDTC, and I have a sneaking suspicion that Portland might not have done that. But there’s more. There is that pesky requirement that you have to obtain a license from DDTC before you can broker “significant military equipment” (“SME”) valued at more than $1 million. Category VI(a) naval vessels are clearly defined as SME and $65 million is more than a few dollars north of $1 million. And I’m guessing that Portland doesn’t have the brokerage license either.

I’m sure that Portland Yacht will say it never even heard of this ITAR-thingy and never dreamed in its wildest dreams that selling a $65 million dollar vessel with anti-aircraft artillery, nuclear shelters, and room for 3 tanks and 170 troops to foreign governments would be, er, subject to some silly regulations. I mean, really, it’s not that different from selling an SUV to the French Embassy, right?

[Hat tip to reader Garrett Steele for pointing this sale out to me.]

UPDATE: Portland Yacht took down the webpage offering the military hovercraft for sale. We took a pdf snapshot of the page before it disappeared, which you can see by clicking here.

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Oct

19

Unguided Missile Attacks

Posted by Clif Burns at 3:04 pm on October 19, 2009

Category: BIS • DDTC • MTCR

Bill Gertz's Scream A headline in last Thursday’s Washington Times portentously warned: “EXCLUSIVE: Obama loosens missile technology controls to China.” The sub-head was “Fulfill Your Final Wishes. Nuclear Apocalypse Expected Tomorrow!!” Well, not really, that wasn’t the actual subhead, but it could have been, given the stern warnings in the article about the supposed dangers of the White House’s actions.

The reason for the doomsday tone was likely that the Washington Times reporter Bill Gertz wrote a story about something that he didn’t really know anything about. Indeed, he probably would have had a better chance of writing an accurate story if he had reported instead on, say, aspectual features of the verb and the relative position of the locatives in Mandarin Chinese.

Let’s roll the tape:

President Obama recently shifted authority for approving sales to China of missile and space technology from the White House to the Commerce Department — a move critics say will loosen export controls and potentially benefit Chinese missile development.

About the only thing in that sentence that is true is the phrase “critics say,” the rest being sadly misinformed. Items on the Missile Technology Control Regime (“MTCR”) are, depending upon whether the MTCR item is on the United States Munitions List (“USML”) or the Commerce Control List (“CCL”), licensed either by the Department of State’s Directorate of Defense Trade Controls (“DDTC”) or the Department of Commerce’s Bureau of Industry and Security (“BIS”). Items on the USML are licensed by DDTC and are subject to the embargo in section 126.1 of the International Traffic in Arms Regulations (“ITAR”), meaning, of course, that none of these items will be approved for export to the PRC. Items on the CCL are licensed by BIS and those license are considered on a case-by-case basis by BIS. Nothing in the bemoaned action by the Obama administration changed any of that or shifted any licensing authority over MTCR items from State to Commerce

The action that the Washington Times is referring to is a Presidential Determination made on September 29 that delegated to the Commerce Department the President’s obligation to certify to Congress under section 1512 of the National Defense Authorization Act of 1999, 22 U.S.C. Â§ 2778 note, that exports to China of missile and space technology won’t be detrimental to the U.S. space industry or measurably improve the missile or space launch capabilities of the PRC. This is a certification that is made after DDTC or BIS has already approved the export, so the White House action here didn’t shift the authority to approve at all.

Nor did the White House’s action shift, as a practical matter, the obligation over section 1512 certifications from State to Commerce. Given the embargo on shipping USML items to China, the only MTCR items being exported now are items that have already received an export license from BIS. As a result, any section 1512 certifications made by the White House on those exports were undoubtedly made in consultation with the Secretary of Commerce and, no doubt, highly influenced by the findings by BIS and the Secretary of Commerce made in order to justify the export of the MTCR items to China. The White House delegation is really nothing more than a formal delegation of what already had been effectively delegated to Commerce prior to the September 29 Presidential Determination. Suggestions that this change is effective to handing over U.S. nuclear missile technology to Beijing are, simply put, crazy talk, more likely informed by the Washington Times‘s political agenda than by any actual understanding of export law.

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Oct

15

Agreement Guidelines Update Updated

Posted by Clif Burns at 7:37 pm on October 15, 2009

Category: DDTC

State Department Earlier this week, we reported on the new Agreement Guidelines posted last Friday by the Directorate of Defense Trade Controls (“DDTC”). The new Guidelines provided instructions for electronic filing of requests for approval of agreements to exchange technical data on military items with foreigners (“TAAs”) and agreements for the manufacture of military items overseas (“MLAs”).

One source of concern was the new format announced for filing amendments to these agreements. Although not stated clearly in the new guidelines, DDTC has advised us that the new format, although permissible now, will only become mandatory when electronic filing becomes mandatory in 2010. In the meantime, exporters can still file amendments in the old format — at least if they still have a hard copy of the earlier guidelines which described the old format since those guidelines have disappeared from DDTC’s website.

Another clarification was provided with respect to the requirement that conformed copies of the agreement be submitted with the amendment. DDTC, in describing those conformed copies, stated:

DDTC will only accept amendments that have been “conformed” or consolidated. In other words, all major amendments MUST be submitted as entire agreements with proposed changes identified by bolded text (not “track changes”). Applications that simply describe which sections or articles to the agreement are being modified shall be Returned Without Action

We wondered how all changes, both insertions and deletions, could be bolded without unnecessary confusion. DDTC told us today that additions should be bolded in the conformed copy of the agreement and that deleted sections should simply be deleted, with each deletion being described in the part of the amendment that summarizes the changes accomplished by the amendment. That’s not what the new guidelines say, but it is certainly easier and clearer than bolding all changes in the conformed copy.

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Oct

13

New Agreement Guidelines Posted by DDTC

Posted by Clif Burns at 7:42 pm on October 13, 2009

Category: DDTC

State Department On Friday the Directorate of Defense Trade Controls (“DDTC”) issued revised guidelines for submitting agreements such as Technical Assistance Agreements (“TAA”) and Manufacturing License Agreements (“MLA”). As most export geeks know, TAAs and MLAs, once submitted to and approved by DDTC, permit, respectively, the exchange of technical data on defense articles with foreigners and the manufacture of defense articles overseas.

Most of the changes in the revised guidelines relate to matters relating to the long-awaited electronic submission of TAAs and MLAs though DDTC’s electronic filing system. Electronic filing of agreements will become mandatory in 2010. After reviewing these new guidelines for electronic submission, my guess is that most exporters would be happy to wait more, a long time more, maybe a decade or so, in fact, for electronic filing of agreements.

What DDTC has managed to do is to make electronic filing even more complicated and difficult than paper filing. Not only must the exporter file everything that it had previously been submitting, including the tediously ornate transmittal letter, but also the exporter must now complete and file with all that a DSP-5 which, in this case, DDTC quaintly calls a “vehicle DSP-5.” Why on earth DDTC can’t simply let exporters upload pdf versions of the agreement documents (a filing procedure used successfully by, for example, almost every court in the country) is unclear. Instead, by adding an additional layer of paperwork, DDTC has just made the procedure more expensive and time-consuming as well as creating the opportunity for mistakes and returned agreements.

Not everything in the new guidelines relates to electronic filing. Some of the changes relate to paper filings before electronic filing becomes mandatory. For example, amendments must now contain a “conformed” copy of the agreement with the changes in bold typeface. The guidelines make clear that “tracked” changes (i.e. additions underlined and deletions stricken out) aren’t acceptable, so it is not entirely clear how DDTC wants agreement filers to indicate the difference between additions and deletions, nor why it is so adamant about not wanting “tracked” changes. Perhaps the computers at DDTC can’t render strikeout text.

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