The Heritgage Foundation will host a panel discussion today at noon Eastern time on arms export controls featuring executives from Northrup Grumman, Boeing and the Aerospace Industry Association. If you can't make it in person, you can also watch live on the web.
Consider it a nice diversion from yet another soul-destroying lunch at your desk.
10:18 Gene Christiansen, the longtime and more than a little grandfatherly BIS engineer may well be the only guy who can tell a joke with the punchline "EAR99" and actually get a laugh.
10:22 The first of what I expect will be for than a few helpful tips from Christiansen -- classification isn't just about finding a spot for your product on the Commerce Control List. Don't exclude the other possibilities -- specifically, that the item is publicly available or that it is not subject to BIS jurisdiction (i.e. it's on the US Munitions List rather than the CCL).
10:29 If you take a published textbook, extract from it and modify it in some way, the resulting text is not necessarily publicly available. According to Christiansen, even just highlighting the pertinent piece could be construed as a modification which removes something from public availability.
10:33 Element One of a Classification System: Determine if Items are Publicly Available
10:37 Denzil Tice of DDTC: Commodity jurisdiction determination is the first step in trade compliance. It’s also an ongoing effort, since the ITAR captures not just items designed for a military use, but items modified or adapted for one.
10:43 Only about 300 CJs issued by State each year.
10:54 CJ Tips: Remember that you’re writing for two audiences. First, the non-technical reviewers and second the technical people. Be up front and limit the background and flag-waiving. Do your research. Don’t assume State understands the item up for CJ. Fully explain any government funding, including what type. MilSpec/MilStd does not necessarily mean subject to the ITAR, but you should explain fully. If your marketing materials or website indicate a predominantly military application, explain why that differs from your CJ request.
10:56 Element Two of a Classification System: Review for Jurisdiction
11:00 ECCNs change – don’t assume that the classification you made years ago is still accurate today.
11:03 Most software and technology controls are tied to related hardware, though a relative handful are standalone controls.
11:17 Tips when you ask BIS to classify your product: Limit your request to six items. Resolve public availability and jurisdiction before you come to Commerce. Provide information and backup consistent with the technical parameters of the CCL, even if those aren’t necessarily the most common in your industry. Be consistent with the descriptions on your website or, if not, then explain.
11:21 When processing a classification, BIS will assemble the data, review their database for precedents, if jurisdiction is unclear refer to State for 48 hour review, then move forward with the review.
11:24 Q: Can you elaborate on MilStd? If an item is designed to a military standard, but for a commercial application, is it still under the EAR? A: Yes. There are military specifications for chocolate chips and dog cookies. That doesn’t mean they’re subject to the ITAR.
11:28 Q: Can a reexporter trust the exporter/manufacturer with classifications? A: Usually, but if much time passed between the export and the reexport it could be that the ECCN changed.
11:30 Q: How long does it take to process a CJ? A: About 160 days right now. Items are getting more complex even though we’re not seeing a huge increase in numbers of requests.
11:35 Q: What about other agencies’ jurisdiction? NRC? Interior? A: Don’t mean to exclude them, they’re just pretty rare.
Courtesy Doug Jacobson of International Trade Law News here's his summary of this morning's deemed export breakout session:
Department of State Export Controls and Licensing, Ann Ganzer, Director of Office of Defense Trade Controls Policy
--Provided an overview of DDTC – The ITAR is an illustration of what is controlled. “We believe that we control things that have not been invented yet.”
--Export – Conversation, fax, tech data by e-mail. Many things that are exported are electrons only, such as the JSF which is being exported
--Licenses – Going electronic. Had a wake for Ellie Net on Friday. D-Trade licenses get processed first. First, look at applicant first. Exporting is a privilege not a right. Look at end-user and end-use. Look at foreign policy. What impact on country seeking equipment, etc. Look at human rights impact on other countries.
--DOD reviews 1/3 of applications. Staffed to other agencies, such as NASA. But DDTC makes final decision.
--Congressional notifications. When required, DDTC does not notify Congress when it is not in session. This impacts the licensing timetable.
--If approved, will issue with provisos. If not, will RWA or deny. Unlike BIS, at DDTC RWAs are not a good thing. Many licenses have technical flaws or carelessness that cause the application to rejected. Many of these problems are addressed by D-Trade.
--DDTC processed 70K applications in FY 2006.
--After about 15 minutes, Anne started taking questions from the audience.
-- Deemed exports under State – Long running joke between BIS and State. At State, it is an export, not a deemed export. DDTC looks at all citizenships held.
--Review of USML? Still working on it. Now looking at revising sections of ITAR, not entire category. Under “constant review” since 2000, but becoming more and more complex.
--Demilitarized Aircraft policy – not a broad brush policy. Need to see specifics of proposed transactions.
--License processing times – Taking from 2 days to 5 months by D-Trade. Could have been an electronic glitch, but would need to see specifics.
--How to get items decontrolled by DDTC? Come in and talk.
--DDTC Venezuela sanctions not in accordance with BIS. Working on revising ITAR, but should assume in section 126.1.
--Greg Suchan noted 10,000 case backlog will it ever get fixed? “always hopeful”. Like filling a bathtub with drain open. Have a few new people, but are new. Take time to train. Times are decreasing.
--Public domain technology – Can take public domain info and create defense article. Like Oklahoma City bonding. Can provide defense service even if items are not ITAR controlled.
--Punted brokering questions.
--Trying to improve outreach efforts – Staffing problems caused nearly zero programs last year. Trade between work and outreach. Working on it.
--Aircraft Parts – Does ITAR part ever lose its ITAR identity? Section 38(f) requires congressional notification to remove from USML. If aircraft part, needs to be removed from USML before migrating to commercial. Easier to use commercial components on military aircraft, rather than the reverse.
--Item on USML does not lose its character. Used QRS-11 as example. Three CJs held that QRS-11 was on USML. “Bomb in a suitcase is still a bomb, not a suitcase.” QRS-11 carve-out for stand-by instruments. Carve out for FPAs in night vision. Carve out for personal protection gear.
--Providing USML item to foreign person in US would require a license. Transfer of title can be an export.
--Best not to contact licensing officers, contact Response Team.
--Have to register with DDTC if you are engaged in defense services or are manufacturing defense articles. If you are selling toothbrushes to the Navy, no need to register.
--Electronic registration is being worked on, but time table is not set.
-UK and TAAs. No broader change of policy, but let DDTC know if there is a problem.
--Due diligence on buying and selling ITAR within US. Depends on case. Confirming registration is good. Depends on who you are selling to though.
--Voluntary disclosures – Concerned about companies that do not submit VSDs.
--Consistency of license approvals is an issue – DDTC is looking at this issue. End-users can change, though, requiring a fresh look. Concerned about consistency.
--No additional brochures publish on defense service, but will look at that.
--If you changed fit for military use, it is subject ITAR.
--Freight forwarders and export licenses – if FF can fulfill requirements of exporter under ITAR, they can apply for and obtain a license. However, if a FF can’t open the package then they can’t apply for a license.
--DFARS and export control policy change – Doesn’t think that DDTC will be issuing additional guidance.
--Whether to release licenses to a customer is the exporter’s decision.
--Example of an item that is first used for military, but not subject to ITAR. For example, an aircraft part that was first used by military while waiting for FAA certification.
--Can’t rely on Response Team guidance for legal purposes. Response Team is supposed to be a help to the exporting public, but can’t absolutely rely on it. Even if you contacted Response Team 27 times, it won’t absolve exporter of liability.
--Can exporter find out which agency provided provisos. Not specifically, but they can be figured out. Most come from DOD.
--If major reorganization of a registered company is pending, request a meeting.
--DDTC considers all citizenships when reviewing licenses. Thus, if person holds Chinese citizenship, prohibits exports of USML items to China and Chinese nationals.
--DDTC wants to get the word out. Has long-relationship with SIA, but interested in working with other organizations.
--10% in crease in CJs in 2006. Total of 364. Expect companies to do their own CJs, but consult with DDTC in gray areas or where you can’t figure it out. Working with groups to develop best practices in CJs.
--DDTC has been successful on keeping aircraft parts from Iran’s military.
--President Bush has only waived sanctions on China three time. Very rare. Examples included bomb disposal equipment and chemical weapons destructions equipment.
--Regarding military grade safety glass, some on USML and some on CCL. Armored Suburban may be on CCL, but would want to look at this issue closely.
I don't know anything about the company behind it, but this export compliance training demo from Northern Virginia-based Content Enablers is more visually attractive and -- gasp -- entertaining than anything in the genre. Here's how the Indian developer behind the instructional website describes it:
International Trade Arms Regulation training is about reading miles of content. Apparatus converted this task into an experience styled after film noir style comic books. With a compliance detective called Max Blanca, video snippets, and more the course was a big hit with the learners.
...After deliberating over the concept we finally arrived at the Film Noir detective comic book and Max Blanca was born. We scripted the overviews, created the strips for scenarios, photographed and constructed the case studies at our Bangalore studio. The video snippets of Max were shot with a talent and a voice talent recorded the noir-style voice over at Virginia.
This page will tell you more about Content Enablers' offerings. Don't mistake this for an endorsement, but if you're looking to roll out online training, especially in a far-flung organization, their solutions might be worth investigating further.
David S. Cloud reports in today's New York Times that DDTC (which Cloud refers to by its previous moniker) is looking into Israel's use of cluster munitions in Lebanon. In doing so he understates the importance of the Arms Export Control Act by calling it an "agreement" which it is not. AECA is statutory law, duly enacted by Congress and approved by the president.
Whether Israel complies with the AECA is not a new issue.
In the perennial battle between the Directorate of Defense Trade Controls and molasses, the syrupy byproduct has pulled ahead once again. License processing times have been on an upward trend for some time now, but in recent months the situation has only gotten worse. As of June, the last month for which numbers are available, it took DDTC a median time of 26 days to turn around a non-staffed application. For staffed applications, 66 days was the median. A staffed application is one which is referred out to other agencies for their opinions, so naturally they take longer. (These are the statistics for applications made on paper; D-Trade is quicker, but only about a fifth of applications are submitted electronically.)
Based on these website figures and a related 2005 GAO report (pdf), the directorate's overall processing times now appear to be the slowest since at least 1999. (ECB previously discussed the GAO report here.)
Wait, it gets worse. We haven't even discussed agreements yet. It's not clear to me if either the DDTC figures or the GAO report include agreements in their definition of "licenses". But what is clear -- from my own experiences as well as conversations with exporters -- is that agreement processing has utterly gone off the rails. Four, five, even six month delays are now entirely common. And we're not talking about SME or anything else especially sexy here.
Not to mix transportation metaphors, but the painful slowdown in agreement processing at State reminds me of a car trip I took last year in Southern California. The journey taught me that there are three ways to measure the time it takes to do something:
To understand what I mean, allow me to set the stage. For those of you familiar with the area, I had to get from Irvine to Sherman Oaks (for the uninitiated, here's a map of my approximate route). In theory, traveling at posted highway speeds, it should take about an hour to cover the sixty mile distance. Sort of like how it should only really take DDTC a month at most to review your typical proposed TAA or MLA. But I knew enough to appreciate that I was delving into the most notoriously awful and unpredictable traffic in the country. So I figured maybe it would take twice as long as it should -- perhaps two hours. Not so different from how everyone who's ever dealt with the ITAR bureaucracy realizes that it generally takes DDTC two or three months to approve an agreement.
Did I mention that I left Irvine at 4pm on a Friday?
By the time I finally arrived in Sherman Oaks, exhausted and with a dead cellphone battery. more than four hours had passed. That's how long it actually took to cover those sixty miles. How long will it take for the government to sign off on your agreement? I can't tell you for sure. Guess you'll just have to wait. Like everyone else.
Lebanese Government and UNIFIL are excepted.
What exporter doesn't appreciate the ITAR's Canadian exemptions? Hey, it's better than not. But there's one problem. How do you know just who's a "Canadian-registered person"? In other words, which Canadian companies are eligible to receive those exports made under the exemption? Here's how the regulations define the term:
[A]ny Canadian national (including Canadian business entities organized under the laws of Canada), dual citizen of Canada and a third country (subject to Sec. 126.1), and permanent resident registered in Canada in accordance with the Canadian Defense Production Act, and such other Canadian Crown Corporations identified by the Department of State in a list of such persons publicly available through the Internet Web site of the Directorate of Defense Trade Controls and by other means.
I've noticed some confusion over specifically who qualifies. DDTC does indeed publish a list of Canadian crown corporations. It's a short one. A very short one. In fact, there's only one name on it -- the Canadian Commercial Corporation, which seems to be something like the Ex-Im Bank of the Great White North.
But to find the much longer compendium of private Canadian-registered companies, you need to visit the site of the Controlled Goods Directorate (CGD). What's the CGD? Glad you asked:
The CGD is a domestic industrial security program that helps strengthen Canada's defence trade controls through registration, prevention, deterrence and detection, and prevents the proliferation of weapons of mass destruction and of conventional weapons. This is done by regulating and controlling the examination, possession, and transfer in Canada of controlled goods and/or controlled technology. Anyone who deals with controlled goods and/or controlled technology in Canada is required to register with the CGD. The CGD is legislated by the Defence Production Act (DPA) and the Controlled Goods Regulations (CGR).
The CGD is not to be confused with the Export Import Controls Bureau, which actually regulates inbound and outbound goods, administers the dual-use and munitions control lists, and, most importantly, protects Canadians against the scourge that is European frozen pork.
So add a bookmark (that's a favorite to you, IE users) to the CGD and be sure to check your Canadian customers and partners against it before using the ITAR's Canadian exemptions. Oddly enough, this is a link you won't find on the DDTC website.
The Telegraph claims to have found Russian-made arms in the hands of Hezbollah:
Abandoned Hizbollah positions in Lebanon yesterday revealed conclusive evidence that Syria - and almost certainly Iran - provided the anti-tank missiles that have blunted the power of Israel's once invincible armour.
After one of the fiercest confrontations of the war, Israeli forces took the small town of Ghandouriyeh, east of the southern city of Tyre, on Sunday evening, hours before a ceasefire brokered by the United Nations took effect.
...Outside one of the town's two mosques a van was found filled with green casings about 6ft long. The serial numbers identified them as AT-5 Spandrel anti-tank missiles. The wire-guided weapon was developed in Russia but Iran began making a copy in 2000.
Beyond no-man's land, in the east of the village, was evidence of Syrian-supplied hardware. In a garden next to a junction used as an outpost by Hizbollah lay eight Kornet anti-tank rockets, described by Brig Mickey Edelstein, the commander of the Nahal troops who took Ghandouriyeh, as "some of the best in the world".
Written underneath a contract number on each casing were the words: "Customer: Ministry of Defence of Syria. Supplier: KBP, Tula, Russia."
KBP is no stranger to US sanctions -- the State Department has imposed them on the Russian firm on at least four occasions in the past seven years (1999, 1999x2, 2002, and 2003), most recently for allegedly supplying antitank weapons to Iraq in the run up to the 2003 US invasion. KBP denied that accusation, but has acknowledged selling both Kornet and Metis antitank missiles to Syria (which is what triggered the first round of US sanctions). These ATGMs, along with another Russian-made munition, the RPG-29, are believed to have accounted for the bulk of Israel's military casualties in its latest war with Hezbollah.
