by Steven Pelak, Jason Prince and Gwen Green
Reflecting the thaw in United States–Sudan diplomatic relations, the U.S. Government announced on October 6, 2017 that it would permanently revoke certain economic sanctions against Sudan, effective October 12, 2017. Following the lifting of those sanctions imposed by the Office of Foreign Assets Control (“OFAC”) which were imposed by the President’s November 1997 Executive Order 13067, U.S. persons are no longer prohibited generally from engaging in transactions that were previously prohibited without an OFAC license under the Sudanese Sanctions Regulations (“SSR”). Sudan remains, however, designated on the U.S. Department of State’s State Sponsors of Terrorism List, along with Iran and Syria. The Trump Administration has not indicated whether the terrorism designation of Sudan will change in the near future.
That being the case, now is a good time to ask: How and why does the Department of State/Directorate of Defense Trade Controls (“DDTC”) (a) treat Sudan differently under the International Traffic in Arms Regulations (“ITAR”) than the other designated state sponsors of international terrorism, and (b) apparently ignore the statutory prohibition on the export of defense articles and defense services to state sponsors of international terrorism as required by Congress under the Arms Export Control Act (“AECA”)?
Unlike the treatment of Iran and Syria for which the ITAR notes a blanket policy of denial (22 C.F.R. 126.1(d)(1)), the ITAR specifies with regard to Sudan that “[i]t is the policy of the United States to deny licenses or other approvals for exports or imports of defense articles and defense services . . . except a license or other approval may be issued, on a case-by-case basis, for” certain broadly defined categories of defense articles and defense services. 22 C.F.R. § 126.1(v). On what authority has DDTC allowed for a case-by-case evaluation of license applications for the export of defense articles and defense services destined for Sudan, given that Congress has expressly prohibited such exports under the AECA, 22 U.S.C. § 2780? The answer to this question is unclear, and it appears that DDTC may have overstepped its statutory and constitutional authority in suggesting that it maintains the authority on a case-by-case basis to license the export of arms and defense services to Sudan. Continue reading
by Steven Pelak, Jason Prince and Gwen Green
On October 5, 2017, the Second Circuit upheld the over 8 years sentence of Mozaffar Khazaee who pleaded guilty in February 2015 to violating the Arms Export Control Act, 22 U.S.C. § 2778 (the “AECA”) by attempting to transfer to Iran proprietary, trade secret and export controlled material relating to the U.S. Air Force’s F-35 Joint Strike Fighter (JSF) Program. Mr. Khazaee allegedly stole the materials from U.S. defense contractors where he had formerly worked, and many of the documents were prominently labeled as “Export-Controlled” and stamped with “ITAR-controlled” warnings.
In November 2015, we published a blog post noting the surprise of many that the U.S. Government originally charged and indicted Mr. Khazaee solely with the federal offense of Interstate Transportation of Stolen Property (“ITSP”) rather than a violation of the AECA and the International Traffic in Arms Regulations (“ITAR”). Mr. Khazaee pleaded guilty on February 25, 2015 via a “Substitute Information” to one count of the unlawful export of technical data from the United States in violation of the AECA. On October 23, 2015, Mr. Khazaee was sentenced to 97 months in prison and ordered to pay $50,000 in fines for violating the AECA. Continue reading
by Steven Pelak, Jason Prince and Gwen Green
In July 2015, we published a blog post regarding the U.S. Department of State, Directorate of Defense Trade Controls’ (“DDTC”) temporary modification of Category XI of the United States Munitions List (“USML”). At the time, DDTC had recently modified paragraph (b) of Category XI on a temporary basis to clarify the extent of International Traffic in Arms Regulations (“ITAR”) control over “certain intelligence analytics software.” In December 2015, DDTC published a final rule that continued the July 2015 temporary modification to August 30, 2017. On August 30, 2017, DDTC published another final rule announcing its determination to continue the matter for yet another year to August 30, 2018.
Although some may wish otherwise, this issue and other related complications will not ease with time. Various aspects of export control reform and deregulation instituted initially in 2013 have inserted subjective engineering intent as a controlling principle in determining whether certain parts, components, and software constitute a defense article, in particular, ITAR Section 120.41(b)(4). In short, the U.S. Government, by that provision and associated provisions in Section 120.41’s definition of “specially designed,” no longer always controls under the current version of the ITAR which parts, components, and software constitute “defense articles.” Continue reading
by Gwen Green and Amani S. Floyd
On March 14, 2017, the D.C. Circuit dismissed a law firm’s challenge to the State Department’s application of the International Traffic in Arms Regulations (“ITAR”) Part 129 brokering provisions against practicing attorneys. In its lawsuit, law firm Matthew A. Goldstein, PLLC (“Goldstein”) alleged that the State Department lacked constitutional and statutory authority to apply Part 129 to legal services provided to its clients and sought declaratory and injunctive relief to prevent the State Department from applying the brokering provisions to the firm.
Regulation of Brokering Activities
The State Department regulates international arms brokering under the Arms Export Control Act (“AECA”) and the ITAR. The AECA mandates that “every person . . . who engages in the business of brokering activities with respect to the manufacture, export, import, or transfer of any defense article or defense service” shall register with the State Department and obtain a license before engaging in “the business of brokering activities.” The AECA further provides that “brokering activities shall include the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import of a defense article or defense service.” These requirements are implemented and further defined at Part 129 of the ITAR. Continue reading
by Steven Pelak and Gwen Green
On January 20, 2016, the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”) announced the elevation of Lisa Aguirre to the position of Managing Director. Although DDTC has used the title of Managing Director in the past, this new role has different responsibilities from those held by previous Managing Directors.
As Managing Director, Ms. Aguirre will serve as deputy to the Deputy Assistant Secretary (“DAS”), acting when the DAS is unavailable, and dividing the DDTC front office responsibilities with the DAS. Prior to this appointment, Ms. Aguirre most recently served as Director of the Office of Defense Trade Controls Management. DAS Brian Nilsson has made an excellent and outstanding choice in his selection of Ms. Aguirre.
In light of emerging threats to U.S. national security, it is particularly important to have a judicious decision maker with a strong background in arms export controls such as Ms. Aguirre in such a critical position at DDTC. Ms. Aguirre has deep experience and knowledge in the AECA, the ITAR, and the role various law enforcement agencies and the intelligence community play in export controls. She understands well the important role of DDTC’s enforcement function in safeguarding the superiority of U.S. military technology, particularly with regard to constant efforts by the Chinese, Russian, and Iranian governments to obtain U.S. military technology. With the promotion of Ms. Aguirre and the October 2015 appointment of a new Deputy Assistant Secretary, DDTC has turned a corner. Under such professional and informed leadership, DDTC undoubtedly will serve the People effectively, independently, and wisely.
by Gwen Green
On June 3, 2015, the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”) and the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) published proposed rules to amend the International Traffic in Arms Regulations (“ITAR”) and the Export Administration Regulations (“EAR”) to harmonize key definitions and terms between the two regulations. The proposed rules are a part of the continuing Export Control Reform (“ECR”) initiative to enhance U.S. national and economic security, facilitate compliance with export controls, and streamline the U.S. export control system.
Harmonization of Definitions Between ITAR and EAR
DDTC and BIS have identified a series of similar terms in the ITAR and the EAR that are defined differently and that warrant either harmonization or the creation of similar structures that would identify more unambiguously the differences in how similar concepts are treated under the two regulations. DDTC proposes to therefore revise the ITAR’s definitions of the terms “defense article,” “defense services,” “technical data,” “public domain,” “export,” and “reexport or retransfer,” and create definitions for the terms “required,” “technical data that arises during, or results from, fundamental research,” “release,” “retransfer,” and “activities that are not exports, reexports, or retransfers.” Likewise, BIS proposes amendments to the EAR regarding the definitions of the terms “technology,” “required,” “peculiarly responsible,” “proscribed person,” “published,” results of “fundamental research,” “export,” “reexport,” “release,” “transfer,” and “transfer (in-country).”
by Gwen Green
On May 29, 2015, the U.S. Department of State issued a final rule amending the International Traffic in Arms Regulations (“ITAR”) to rescind its previous policy of denying the export of defense articles and defense services to Fiji. The final rule, effective May 29, 2015, comes approximately eight months after Fiji held the first democratic elections in the country since retired Rear Adm. Voreqe Bainimarama seized control in a military coup in 2006.
The Multinational Observer Group (“MOG”), representing 14 countries including the United States, was invited by the acting Fijian Government to observe the September 2014 parliamentary elections, which resulted in the landslide victory of Bainimarama’s Fiji First Party. In April 2015, the MOG released its final report on the Fijian elections finding, “The outcome of the 2014 Fijian Election broadly represented the will of the Fijian voters. The conditions were in place for Fijians to exercise their right to vote freely.”
In the final rule, the Department of State explained it has therefore determined it is in the best interests of U.S. foreign policy, national security, and human rights concerns to rescind its previous policy of denying defense exports to Fiji.
by Gwen Green
On May 26, 2015, the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”) published a proposed rule to amend the International Traffic in Arms Regulations (“ITAR”) to clarify requirements for the registration and licensing of U.S. persons providing defense services while employed by non-U.S. employers.
The proposed rule would require U.S. “natural persons”, who furnish defense services to and/or on behalf of their non-U.S. employer, whether in the United States or abroad, to register with the Directorate of Defense Trade Controls (“DDTC”), unless their non-U.S. employer is an ITAR-registered entity or is listed on the ITAR registration statement of a U.S. parent or other U.S.-affiliate entity. In the proposed rule, the term “natural person” is defined as an individual human being, as distinguished from a corporation, business association, partnership, society, trust, or any other entity, organization or group.