Busting Myths About DDTC RegistrationOhio Aerospace Institute Industry RoundtableSeptember 21, 2012

Law Offices of Jon P. Yormick Co. LPAAn International Law PracticeAttorney Advertising

Disclaimer

• The information provided is believed to be accurate as of the date of the presentation, but is subject to change without notice.

• This presentation is designed for informational purposes only and is not intended to be, nor should it be deemed, specific legal advice. If such advice is required, please consult with qualified legal counsel.

Common Questions

• What is this DDTC?

Ever hear of ITAR…

• Why register?

– Business opportunities

– Compliance

– IT’S THE LAW!

Key Terms (cont’d)

• Defense article – 22 CFR 120.6

– item or technical data designated in the U.S. Munitions List (USML)

• Defense service – 22 CFR 120.9

1. Providing assistance to foreign persons (in U.S. or abroad) in the:

design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles

2. Furnishing to foreign persons technical data controlled under the USML

Key Terms (cont’d)

• Technical data – 22 CFR 120.10

1. Information required for design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles.

Blueprints, drawings, photos/videos, plans, instructions or documentation

2. Classified information relating to defense articles and defense services

Does NOT include scientific, math or engineering principles taught in schools, information in the public domain, or basic marketing

Fact or Myth #1?

Only Large Companies [e.g., multinationals, primes] Need to Worry About ITAR and DDTC Registration • “It can’t happen to me.”

• ITAR and DDTC registration do not discriminate

• No SME exception/exemption

Registration Requirements – 22 CFR 122.1• (a) Any person who engages in the United States in the

business of …

“Person” – natural person, corporation, business association, partnership…or any other entity, organization or group, including governmental entities.” (22 CFR 120.14)

• (b) Exemptions

(1) USG officers/employees acting in official capacity;

(2) Pertinent business activity confined to production of unclassified technical data only

(3) Atomic Energy Act applies to manufacturing and exporting actitivities

(4) Fabricate articles for experimental/scientific purposes only

Only Large Companies [e.g., multinationals, primes] Need to Worry About ITAR and DDTC Registration

Fact or Myth #2? Our items/technical data are commercial, not military, and/or we do not sell to the military so we do not need to register

• USML is broad • Cat. I - Firearms, Close Assault Weapons and Combat Shotguns• Cat. II – Guns and Armament• Cat. III - Ammunition/Ordnance• Cat. IV - Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets,

Torpedoes, Bombs, and Mines• Cat. V - Explosives and Energetic Materials, Propellants, Incendiary Agents, and

their Constituents• Cat. VI - Vessels of War and Special Naval Equipment• Cat. VII -Tanks and Military Vehicles

• Cat. VIII - Aircraft and Associated Equipment• Cat. IX -Military Training Equipment

• Cat. X - Protective Personnel Equipment

• Watch for variants, modifications – jurisdictional change

Fact or Myth #2? (con’t)

• Cat. XI. - Military Electronics

• Cat. XII - Fire Control, Range Finder, Optical and Guidance and Control Equipment

• Cat. XIII - Auxiliary Military Equipment

• Cat. XIV - Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment

• Cat. XV - Spacecraft Systems and Associated Equipment

• Cat. XVI - Nuclear Weapons, Design and Testing Related Items

• Cat. XVII - Classified Articles, Technical Data and Defense Services Not Otherwise Enumerated

• Cat. XVIII - Directed Energy Weapons

• Cat. XIX - [Reserved]

• Cat. XX - Submersible Vessels, Oceanographic and Associated Equipment

• Cat. XXI - Miscellaneous Articles

Is it that easy to decide jurisdiction?

• Consider variants, modifications, alterations – ITAR “creep”

– Adding a NAVAIR coupling = ITAR

• November 2011 - DDTC removed chemical toilets manufactured by MAG Aerospace Industries for use in military aircraft. The toilet in question was initially manufactured for the Lockheed C-130 and was subsequently modified for other military aircraft.

Commodity Jurisdiction Request – 22 CFR 120.4

• When doubt exists or remove article/service from USML

• Some Factors:

– Number, variety, and predominance of civil applications

– Nature, function and capability of civil/military applications

– Form, fit, and function

– Significant military or intelligence applications

– Intended use after export “is not relevant” – 22 CFR 120.3(b)

Fact or Myth #3? We do not export our items/technical data, we sell it only in US

• (a) Any person who engages in the United States in the business of …

either manufacturing or exporting defense articles or furnishing defense services…

“Manufacturers who do not engage in exporting must nevertheless register.”

22 CFR 122.1

Fact or Myth #4?

We only expect to manufacture/export a special order once

• One-time event = DDTC registration

• (a) …manufacturing or exporting defense articles or furnishing defense services requires only one occasion of manufacturing or exporting …

Fact or Myth #5? We registered years ago and we are all set, right?

• Annual renewal

• Lapse – back fees plus registration fee

• Lapse Registration Certificate

Registration Package

• DS-2032 Statement of Registration

• Certificate of Incorporation, Articles of Organization (LLC), Certificate of Good Standing or Articles, etc.

• Payment of Fees• $2,250 (first time, brokers, renewals without

licenses)

• $2,750 (renewals with 10 or fewer licenses)

• $2,750 + ($250 x # of licenses over 10) • Exception: high number of low value licenses

Once Registered – Compliance Obligations

• Naming Empowered Official(s)

• Policy Manual

• Organizational Charts

• Management Letter

• Internal processes and controls for:» Identifying and controlling ITAR items and data

» Obtaining licenses

» Screening buyers and identifying “deemed exports”

• Training

• Recordkeeping

“Deemed” Exports

§ 120.17 Export

(a) Export means:

. . . .

(4) Disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad; or

(5) Performing a defense service on behalf of, or for the benefit of, a foreign person, whether in the United States or abroad.

§ 120.16 Foreign Person

Foreign person means any natural person who is not a lawful permanent resident . . . .

Fact or Myth #6Registration = Certification?

• Avoid the PR pitfall…

And being publicly mocked by export control lawyers!