So, for the DDTC Registered organizations who claim they operate using compliant processes, I have a question or two.

Does your Technology Control Plan include Cloud Computing? If not, then is your organization at risk using a resource that may not be a U.S. Person, or staffed by U.S. Persons? Can your stored Defense Articles (i.e., Technical Data) be accessed by Non-U.S. Persons without US Government Authorization?

Update your Technology Control Plan to include the assessment and monitoring of your Cloud Provider.

The ITAR outlines that any organization who engages only in the fabrication of articles for experimental or scientific purpose – including research and development – can claim the § 122.1 (b) (3) exemption.

If your organization falls under this exemption then save the $2,250 registration fee and tactfully inform your customer of your use of the exemption. Organizations need to read and understand the whole ITAR. It saves money!

When claiming the exemption be sure to keep your records showing documented evidence of meeting the exemption requirements. Not knowing what you don’t know can be costly, so make sure when making the determination that a professional is involved who is experienced with the ITAR.

Pay close attention to the second sentence. Just because you are DDTC registered does not infer you are accredited or certified to manufacture defense articles. No rights or privileges are conferred to the organization, none.

The Debarred List is maintained by Department of State. Any person convicted or found in violation of the AECA (Arms Export Control Act) are included on this list. Persons listed here cannot export defense articles and/or defense services, this includes participating in an export transaction.

The Unverified List contains those persons who were (in past transactions) did not complete a pre-license check or post shipment verification. Participation in a transaction with these persons raises a red flag.

The Entity List contains those who have been identified and subject to special licensing requirements with export transactions or in-country transfers. Transactions with these persons should raise a red flag that should be assessed by a compliance professional.

There are several other lists, but these listed are often used by the aerospace supply chain.

In fact, we want to analyze organizationly capabilities a little deeper, specifically those organizations who are registered for AS9100 Revision C.

AS9100 Revision C organizations who manufacture defense articles need to take a hard look at the standard, and their duty to comply with the ITAR. Let’s take a look at the standard.

Here is an excerpt from the introduction to the AS9100 Standard, Revision C, by SAE:

This International Standard can be used by internal and external parties, including certification bodies, to assess the organization’s ability to meet customer, statutory and regulatory requirements applicable to the product, and the Organization’s own requirements.

This raises the question: are these manufacturers’ systems being assessed for compliance to the ITAR, when they are audited to AS9100? Most AS9100 auditors I have spoke with have never read the ITAR and are unfamiliar with the registration requirements for manufacturers of defense articles. So, if these auditors are supposed to be auditing for compliance to the AS9100, where is the objective evidence to meeting regulatory requirements such as the ITAR?

Now, I want to stress that I am not advocating that AS9100 auditors should write legal findings, in fact they should stay away from the legal issues. Rather they must at least check, when auditing organizations who manufacture defense articles, whether they are DDTC registered and whether they have implemented a documented compliance program.

Assuring compliance with the International Traffic In Arms is a complex task for any organization, students attending this unique course will be well prepared to meet the challenges within the market place while meeting the rigorous regulatory requirements.

For more information on the program and class schedule please contact Mark Stevens at 562-941-3333 or mark@scbtraining.com

Let’s look at another side of this scenario: Your customer is going to export a USML item (not SME) and your company performs the Nondestructive Testing and preparing the Test Report which will contain Technical Data. The concern is, since you know they are going to export the parts and technical data, should you ask to confirm your company is listed as one of the companies on Block 15? The answer is: absolutely yes. Without having positive evidence of a properly issued DSP-5 License listing both your company as the NDT service provider and the technical data created, you should not proceed (See 127.1 Violations).

Often we hear excuses from the aerospace supply chain about why they think it is not their responsibility to perform reasonable care and due-diligence: “the customer never told us”, or “that is the Prime’s responsibility” or even “we have been in business for 20 years without a problem”.

It is the organization’s responsibility to have the proper controls in place (i.e., processes and procedures), including records of risk analysis and mitigation. Use Part 764.2 (listed below) as an audit tool for your systems, does your organization protect against these issues?

Title 15: Commerce and Foreign Trade

SUBTITLE B: Regulations Relating to Commerce and Foreign Trade (Continued)

CHAPTER VII: BUREAU OF INDUSTRY AND SECURITY, DEPARTMENT OF COMMERCE

SUBCHAPTER C: EXPORT ADMINISTRATION REGULATIONS

PART 764: ENFORCEMENT AND PROTECTIVE MEASURES

764.2 – Violations.

(a) Engaging in prohibited conduct. No person may engage in any conduct prohibited by or contrary to, or refrain from engaging in any conduct required by, the EAA, the EAR, or any order, license or authorization issued thereunder.

(b) Causing, aiding, or abetting a violation. No person may cause or aid, abet, counsel, command, induce, procure, or permit the doing of any act prohibited, or the omission of any act required, by the EAA, the EAR, or any order, license or authorization issued thereunder.

(c) Solicitation and attempt. No person may solicit or attempt a violation of the EAA, the EAR, or any order, license or authorization issued thereunder.

(d) Conspiracy. No person may conspire or act in concert with one or more persons in any manner or for any purpose to bring about or to do any act that constitutes a violation of the EAA, the EAR, or any order, license or authorization issued thereunder.

(e) Acting with knowledge of a violation. No person may order, buy, remove, conceal, store, use, sell, loan, dispose of, transfer, transport, finance, forward, or otherwise service, in whole or in part, any item exported or to be exported from the United States, or that is otherwise subject to the EAR, with knowledge that a violation of the EAA, the EAR, or any order, license or authorization issued thereunder, has occurred, is about to occur, or is intended to occur in connection with the item.

(f) Possession with intent to export illegally. No person may possess any item controlled for national security or foreign policy reasons under sections 5 or 6 of the EAA:

(1) With intent to export or reexport such item in violation of the EAA, the EAR, or any order, license or authorization issued thereunder; or

(2) With knowledge or reason to believe that the item would be so exported or reexported.

(g) Misrepresentation and concealment of facts. (1) No person may make any false or misleading representation, statement, or certification, or falsify or conceal any material fact, either directly to BIS, the United States Customs Service, or an official of any other United States agency, or indirectly through any other person:

(i) In the course of an investigation or other action subject to the EAR; or

(ii) In connection with the preparation, submission, issuance, use, or maintenance of any export control document as defined in 772.1, or any report filed or required to be filed pursuant to 760.5 of the EAR; or

(iii) For the purpose of or in connection with effecting an export, reexport or other activity subject to the EAR.

(2) All representations, statements, and certifications made by any person are deemed to be continuing in effect. Every person who has made any representation, statement, or certification must notify BIS and any other relevant agency, in writing, of any change of any material fact or intention from that previously represented, stated, or certified, immediately upon receipt of any information that would lead a reasonably prudent person to know that a change of material fact or intention has occurred or may occur in the future.

(h) Evasion. No person may engage in any transaction or take any other action with intent to evade the provisions of the EAA, the EAR, or any order, license or authorization issued thereunder.

(i) Failure to comply with reporting, recordkeeping requirements. No person may fail or refuse to comply with any reporting or recordkeeping requirement of the EAR or of any order, license or authorization issued thereunder.

(j) License alteration. Except as specifically authorized in the EAR or in writing by BIS, no person may alter any license, authorization, export control document, or order issued under the EAR.

(k) Acting contrary to the terms of a denial order. No person may take any action that is prohibited by a denial order. See 764.3(a)(2) of this part.

1. Perform a customer Screening of the Denied Parties and other U.S.G. Agency lists
2. Prepare the export documentation. When a defense article is exported, whether under a license, and agreement, or an exemption, the bill of lading and invoice must bear the following statement:

These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end user]. They may not be transferred, transshipped on a non-continuous voyage, or otherwise be disposed of in any other country, either in their original form or after being incorporated into other end-items, without the prior written approval of the U.S. Department of State.

3. The exporter also must present to CBP at the port of export such documentation as proof of AES filing and the AES External Transaction Number or Internal Transaction Number.
4. At the time of export, the ultimate consignee named on the Shipper’s Export Declaration (SED) must be the same as the foreign consignee or end user of record named at the time of import; and
5. As stated in § 126.1, the temporary import must not be from or on behalf of a proscribed country listed in that section unless an exception has been granted in accordance with § 126.3.
6. At the time of export, in accordance with the U.S. Customs and Border Protection procedures, the Directorate of Defense Trade Controls (DDTC) registered and eligible exporter, or an agent acting on the filer’s behalf, must electronically file the export information using the Automated Export System (AES), and identify 22 CFR 123.4 as the authority for the export and provide, as requested by U.S. Customs and Border Protection, the entry document number or a copy of the U.S. Customs and Border Protection document under which the article was imported.

LICENSE EXEMPTIONS FOR TEMPORARY IMPORT TRANSACTIONS
Imports for Overhaul, Service and Repair – ITAR § 123.4(a)(1)
A license is not required for the temporary import (and subsequent export), for a period of up to 4 years, of unclassified U.S. origin defense items (including items manufactured abroad with U.S. Government approval) if the items are inspected, tested, serviced, refurbished or repaired (including one-to-one replacement of any defective parts, but excluding modification or enhancement) and subsequently returned to the country from which they were imported.

The procedures for Temporally Importing the Part is:

The following will need to be presented to U.S. Customs UPON ENTRY:

To the satisfaction of the Port Director of U.S. Customs and Border Protection, the importer and export must comply with the following procedures:

(1) At the time of temporary import: File and annotate the applicable U.S. Customs and Border Protection document (e.g., Form CF 3461, 7512, 7501, 7523 or 3311) to read: “This shipment is being imported in accordance with and under the authority of 22 CFR 123.4(a) (1),” and “Include, on the invoice or other appropriate documentation, a complete list and description of the defense article(s) being imported, including quantity and U.S. dollar value;”

Next time, the procedure for returning the inspected part.