Proposed Registration Fee Changes at DDTC

I wanted to take a moment to let you know that the State Department’s Directorate of Defense Trade Controls (DDTC) is proposing an increase in annual registration fees. The change creates a multi-tiered fee system. I have included the heart of the proposed change below for your review as this will impact some of you significantly:


“The first tier will be a set fee of $2,250 per year for registrants who are renewing a registration, required to register by law and who have not submitted any applications during the twelve month period ending 90 days prior to the expiration of their current registration. This tier includes those registering with the Department for the first time.

The second tier is for registrants who have submitted ten or fewer applications during the twelve month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a set fee of $2,750 per year.

The third tier is for registrants who have submitted more than ten applications during the twelve month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a fee of $2,750 plus an additional fee that is based on the number of applications they submitted during the twelve months ending 90 days prior to the expiration of their current registration. The additional fee will be determined by multiplying $250 times the number of applications over ten submitted during the twelve month period ending 90 days prior to the expiration of the current registration.”

This proposed change is going to require that your businesses track their application history to determine the volume of applications submitted. It is also going to create an added cost of $250 per license request over ten during any given year. While this is only a proposed change at this time, I recommend planning for this increase in your cost structure moving forward. If any of you would like more information about the proposed change please visit: http://edocket.access.gpo.gov/2008/E8-17232.htm . If your business has strong objections to the change it is possible to make your objections known. Please contact me directly if you have any questions.

I am a member of the American Bar Association Export Controls & Economic Sanctions Committee. On May 2, 2008 I attended a committee meeting with a small group of other attorneys familiar with the ITAR and the Department of State Directorate of Defense Trade Controls (“DDTC”). During that meeting an attorney presented some materials that were of grave concern to all in attendance.

A company the attorney represents prepared a marketing brochure for their products. The marketing materials included photographs of military aircraft and cockpits that were obtained using an internet search. The photos are similar to those that can be found online at the following links:

http://en.wikipedia.org/wiki/B-2_Spirit

http://en.wikipedia.org/wiki/B-52_Stratofortress

http://en.wikipedia.org/wiki/F-117_Nighthawk

Upon completion of the brochure the company submitted the brochure to the DDTC for review to ensure that no “Technical Data” were included in the brochure and that the brochure was in full compliance with the ITAR. The company was confident that the images used in the brochure were part of the “Public Domain” because it had retrieved the materials from the internet.

On April 10, 2008 the company received a letter from Kevin Maloney, Director of the Office of Defense Trade Controls Licensing at the DDTC (copy available upon request). In that letter the company learned that the marketing brochure should be considered “Technical Data.” Mr. Maloney explained, in part, that:

“[P]hotographs of various military aircraft, vessels and vehicles or the photographs of military aircraft cockpits (found throughout the brochure) should not be assumed as information in the public domain because they were retrieved from the Internet using Google’s Images search engine. Military photographs being downloaded from the Internet DOES NOT automatically mean the photos are public domain; they MAY be technical data.”

DDTC’ s position on this matter essentially gave the company three options:

(1) The company can obtain an export license every time it wanted to “export” the brochure; or
(2) The company can create new marketing materials without pictures; or
(3)The company can follow Mr. Maloney’s advice and obtain a public release by the Department of Defense Office of Security Review.

This development has caught many in the legal profession by surprise in light of the definitions of “Technical Data” and “Public Domain” as defined by the ITAR (See the definitions below).

Knowing the difficult situation that the interpretation on internet images can cause for businesses, many of us in the American Bar Association have begun to try some change politically rather than through the courts. I would encourage the same if you or your business feel oerly burdened by the ITAR.

I have personally spoken with Brian Dubie, Vermont’s Lieutenant Governor about some industry concerns about the ITAR, including the DDTC position on internet images. He is the current chair of the Aerospace States Association and is a fighter pilot. His group has been active in encouraging changes to the ITAR. It is positive that there are some in government who recognize the ITAR is extremely burdensome to businesses and are seeking for change.

Despite these efforts it is important for businesses to comply with the regulations as currently interpreted by the State Department. If your company’s marketing materials have images of aircraft, parts, cockpits, drawings or other “technical data” they should be reviewed and scrubbed for compliance in light of Mr. Maloney's position on internet images. If you have concerns we would be happy to review them with you to ensure your marketing materials comply with the ITAR regulations as interpreted by DDTC. If necessary we can also work with you to submit materials for review to the Department of Defense Office of Security Review.

If you have any questions please feel free to contact me directly.

Yours truly,

Aaron Melville, Esquire
Law Office of Deborah T. Bucknam & Associates
1097 Main Street
PO Box 310
St. Johnsbury, VT 05819
(802) 748-5525 ext 104
(802) 748-4888 fax
www.vtlegalhelp.com
www.amelville@vtlegalhelp.com


ITAR § 120.10 Technical data.
“(a) Technical data means, for purposes of this subchapter: (1) Information, other than software as defined in §120.10(a)(4), which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles. This includes information in the form of blueprints, drawings, photographs, plans, instructions or documentation. (2) Classified information relating to defense articles and defense services; (3) Information covered by an invention secrecy order… (5) This definition does not include information concerning general scientific, mathematical or engineering principles commonly taught in schools, colleges and universities or information in the public domain as defined in §120.11. It also does not include basic marketing information on function or purpose or general system descriptions of defense articles.”
ITAR § 120.11 Public domain.

“(a) Public domain means information which is published and which is generally accessible or available to the public: (1) Through sales at newsstands and bookstores; (2) Through subscriptions which are available without restriction to any individual who desires to obtain or purchase the published information; (3) Through second class mailing privileges granted by the U.S. Government; (4) At libraries open to the public or from which the public can obtain documents; (5) Through patents available at any patent office; (6) Through unlimited distribution at a conference, meeting, seminar, trade show or exhibition, generally accessible to the public, in the United States; (7) Through public release ( i.e. , unlimited distribution) in any form (e.g., not necessarily in published form) after approval by the cognizant U.S. government department or agency (see also §125.4(b)(13) of this subchapter)…”

I heard there are some countries exempt from the ITAR. Where can I find the list?

The title of this post comes by way of an e-mail I received from another lawyer in Vermont. I could not believe my eyes when I saw the question. This attorney honestly believed that exports to some countries were 100% exempt from the ITAR rules.

Let me get the record straight...if you are going to sell USML products internationally, no matter where it is going, you are going to need a license, unless one of the exemptions applies. Specific destinations are not exempt from ITAR restrictions. For all of you hoping otherwise I hate to burst your bubble.

The closest thing there is to a blanket country exception is found under ITAR Part 126.5 (the Canadian Exceptions), but those rules by no means give unfettered access to the Canadian market.

I love my job.

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