DOD

Part 1: Expedited License Review

Don’t Tell Anybody-Expedited Treatment Available for ITAR Exports to Australia?

According to Kerry Clarke AO, in the Australian Department of Defence, the US State and Defense departments have agreed to give streamlined processing for exports to Australia under two new policies known as Expedited License Review I (ELR I) and Expedited License Review II (ELR II).

But, according to Kerry Clarke, the expedited processing might not yet be in operation and is “dependent on the continued implementation of D-Trade — [which] — the State Department hopes — to have fully implemented by the end of 2007. Until then, licence and TAA approvals may take longer than the 10 and 30 day target times, but hopefully less than the current approval times.”

(Not sure I agree with the hopefulness of Kerry Clarke.)

OK, so the bottom line appears to be that the expedited system might not be in operation yet and hopefully it will be up and running by the end of the year. (I personally am not going to use up my limited supply of personal hope hoping for streamlined processing. I plan to spend all my hope on hoping I win the lottery so I can retire to the mountains.)

Anyway, according to an Australian Department of Defence memo (see end of this article for a copy), here are the two expedited procedures the US and Australian agreed upon:

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In July 2005, the Department of Defense (DoD) proposed a new rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) as it relates to the prevention of unauthorized disclosure of export-controlled information and technology under DoD contracts.  Due to a multitude of public comments criticizing the proposal (145 parties), it has been revised and reissued as of August 2006.  Companies said that the original proposal was overly prescriptive in terms of export compliance burdens.  It mandated more expansive regulatory requirements for export compliance than either the Export Administration Regulations (EAR) or the International Traffic in Arms (ITAR) regulations.

Academic Institutions, in particular, were concerned about the regulations relating to fundamental research.  Under the new proposal it is noted that although fundamental research is not altogether exempt from statute-based export controls, it is to remain unrestricted to the extent possible.

In another provision, the revised proposal continues to place the burden of determining if a contract will generate or require access to export-controlled information or technology on the shoulders of the contracting officer.  The contractor also has the responsibility to comply with EAR and ITAR requirements.  Making both contracting officers and contractors responsible for following regulations is intended to decrease mistakes according to the DoD.

Several requirements relating to contractors were removed in the revised proposal in an attempt to eliminate potential conflicts with the EAR and ITAR.  The new proposal no longer requires that contractors awarded DoD contracts involving export-controlled information:

1. Maintain an export compliance program
2. Conduct training on export compliance controls
3. Perform periodic assessments
4. Develop an access control plan that includes badging and segregated work areas

Contractors would be directed to the EAR and ITAR to determine their compliance with existing requirements.

Attention Joint Strike Fighter (JSF) contractors - did you know that you may be eligible for an exemption to the ITAR license requirement for technical data exports? In accordance with ITAR 125.4(b)(1) (pdf), the Department of Defense has authorized certain technical data exports “for the purpose of evaluating a potential supplier’s capabilities, developing requirements, and/or soliciting bids and proposals in furtherance of the System Development and Demonstration (SDD) Phase to include Low Rate Initial Production (LRIP) activity associated with the SDD phase of the JSF Program” according to a memorandum signed by Richard A. Genaille, Jr., chief of DOD’s Foreign Disclosure & Tech Transfer Division Policy Directorate on January 12, 2005.

Importantly, eligibility for this exemption is not automatic. There are two main requirements: (1) the company must be on the list of authorized users in the DOD memorandum and (2) all proposed disclosures must be reviewed in advance by Judson Mason (judson.mason@jsf.mil) of the JSF Program Office. In addition, your disclosure must follow these guidelines, here quoted verbatim from the DOD memorandum:

1. Technical data provided under this certification will be limited to “build-to-print” and “build/design-to-specification data”. Related technical discussions must not result in the release of “design methodology”, “engineering analysis”, and “manufacturing know-how”. Refer to part 125.4 of the ITAR for definitions.
2. Technical data and or technical discussions are limited to potential foreign suppliers in NATO countries and Australia.
3. Technical data and or technical discussions are limited to unclassified information related only to defense articles that are not designated as Significant Military Equipment.
4. The JSF program office reserves the right to provide a designated escort official, US military or civilian government employee, at activities that require foreign participation.
5. No defense hardware or software will be shipped under provisions of this exemption.
6. Companies must comply with applicable ITAR requirements for use of 125.4(b)(1).
7. Companies named above [i.e. authorized users listed in the memorandum - ed.] must be eligible pursuant to IT AR 120.1.

The memorandum authorizing use of the exemption will expire January 31, 2006, but may well be extended prior to that date.

The Defense Capabilities Initiative (DCI) held so much promise for streamlining the export control process with close allies.  A case in point was the new 125.4(c) exemption, whose purpose was to facilitate close ally cooperation by allowing license free technical collaboration for the purposes of Department of Defense (DoD) procurement.  Many a program manager had eyed this exemption as a way to finally smooth out the bidding process.   DoD probably thought easing these licensing barriers would foster increased competition and thereby improve procurement costs and interoperability.    But once the concept was ITARized, the exemption, like many other DCI efforts, was at best left a vague notion and at worst gutted.   Let’s try to make some sense of the chaos.

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The Department of Defense has announced USXPORT, an initiative to enhance and streamline the current US Government process for reviewing license applications required by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). The purpose of USXPORT is to address the current Commerce Department and State Department licensing systems which are not interoperable and which often require that applicants submit multiple copies of technical and other supporting documentation for license applications.

• DOD has $30 million in funding to use over the next three years to achieve these 5 objectives:
• Establish a common electronic interface between industry and government;
• Improve the quality of reviews that protect military capabilities;
• Improve and standardize computer systems among US Government players in the license review process;
• Decrease license processing times; and
• Ensure that the electronic license submission and review system is secure.

Exporters and reexporters certainly can hope that this DOD initiative will bring increased efficiency and decreased license processing times. It remains to be seen if the other US Government agencies involved in the licensing process agree with the goals and objectives of USXPORT.