Recent ITAR Revisions

In December 2007 Department of State, Directorate of Defense Trade Controls (DDTC) amended the ITAR by adopting new Section 124.16 (Special Retransfer Authorizations for Unclassified Technical Data and Defense Services to Member States of NATO and the European Union, Australia, Japan, New Zealand and Switzerland) and revising Sections 126.1 (Prohibited Exports and Sales to Certain Countries) and 127.12 (Voluntary Disclosures).

124.16 Third Country and Dual Country Nationals

The practical effect of new ITAR Section 124.16 is that it revises DDTCs procedures for authorizing retransfers to third country/dual national employees of foreign licensees under technical assistance agreements (TAAs) and manufacturing license agreements (MLAs). Heretofore, TAA and MLA applicants had been required to obtain authorization on a country-by-country basis for employees of foreign licensees who are nationals of any country outside the defined "territory" of the agreement. TAA and MLA applicants also had to obtain non-disclosure agreements (NDAs) from all third country national employees prior to releasing or allowing them access to technical data, defense services or defense articles. Now, subject to including required language in the TAA or MLA and the accompanying transmittal letter requesting DDTCs approval, access to unclassified technical data and defense services by foreign licensees employees will be authorized provided the employees are nationals exclusively of Australia, New Zealand, Japan, Switzerland or any NATO or EU country (the Section 124.16 Countries), with no requirement for obtaining NDAs. The following caveats apply to use of §124.16:

• The individuals concerned may not hold nationality from any other country (i.e., they cannot be dual nationals of a country other than those listed in §124.16);
  
  

• DDTC reiterates that, when determining nationality, DDTC considers country of birth as well as citizenship;
  
  

• New applicants must specifically request this authority, and current TAAs and MLAs must be amended (such amendments being treated as "minor") and re-executed before utilizing the new procedures; and
  
  

• All new agreements and amendments to existing agreements submitted to DDTC for review on or after 1 February, 2008, must include language related to §124.16 (i.e., applicants will need to include an affirmative statement with respect to the agreements coverage of dual/third-country foreign nationals and, if covered, whether they are from the Section 124.16 countries, non-qualifying countries, or both), or will be subject to being returned without action.
  
  

It is interesting to note that DDTCs guidance before adoption of the new ITAR provision had stated that NDAs were required from third country nationals, but not from dual nationals. Under the revised §124.16 procedures, and DDTCs current guidance, NDAs will be required from dual nationals as well as from third country nationals of countries other than those listed in Section 124.16.

126.1 Exports and Sales Prohibited by United Nations Security Council Embargoes

Section 126.1(c) continues to provide that whenever the United Nations Security Council mandates an arms embargo, all transactions that are prohibited by the embargo and that involve US persons anywhere, or any person in the United States, are prohibited under the ITAR. The amended §126.1(c) tacks on the following language:

UN Arms Embargoes include, but are not necessarily limited to, the following countries: Cote d'Ivoire, Democratic Republic of Congo, Iraq, Iran, Lebanon, Liberia, North Korea, Rwanda, Sierra Leone, Somalia and Sudan.

While adding the current list of UN embargoed countries to the text of §126.1(c) is helpful, it does not relieve exporters from liability for defense exports to other countries that may become subject to UN arms embargoes in the future.

127.12 Voluntary Disclosures

ITAR Section 127.12, which sets forth the procedures governing submission of voluntary disclosures, has been revised:

• To impose a 60-calendar-day deadline after the initial notification to submit a full disclosure;
  
  

• To clarify the identifying information that should be provided, and to provide that DDTC may require that the written certification accompanying the disclosure be signed by a senior officer in cases of a major violation, a systemic pattern of violations, or in the absence of an effective compliance program; and
  
  

• To clarify that corrective actions and compliance initiatives implemented must be directly in response to the violation in the voluntary disclosure, and designed to deter that particular violation from occurring again.
  
  

Section 127.12(c) continues to provide that persons wishing to disclose information constituting a voluntary disclosure should "initially notify the Directorate of Defense Trade Controls immediately after a violation is discovered" and then conduct a thorough review of all transactions where a violation is suspected. Now, however, parties submitting such initial notices will be subject to a 60-calendar-day clock to complete their investigation and submit a "full disclosure." Failure to meet this deadline (or obtain an extension of the deadline from DDTC) may result in a decision by DDTC not to consider the notification as a mitigating factor in determining the appropriate disposition of the violation, meaning that the disclosing party may lose any benefit from having submitted a voluntary disclosure.

As noted, the revised procedures also appear to place a higher premium on setting forth in the disclosure effective corrective actions and compliance procedures that are directed toward ensuring against recurrences of the specific violations disclosed.

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