UPDATE 2009 Commodity Jurisdiction Sept 30 and Oct 1, 2009 Gene Christiansen (202) 482-2984 gchristi@bis.doc.gov The First Step In Export Control Compliance System Have a system for jurisdiction review Don t confuse the State Jurisdiction process with the Commerce Classification process Key Issues Screen your product Screen the products you procure Pass on to your suppliers/customers Guidance on jurisdiction of the procurement package Guidance on jurisdiction of your product 1
An Effective Jurisdiction System Your review process Documented Calibrated with periodic formal submissions Applied continuously Formal submissions We need the facts Address all of the critical factors Limited to exceptional cases Critical Factors for Jurisdiction Determination (see new form posted on State website for complete set of required facts ) Description of item---specification Designed/modified for Funding source for development Sales data---civil vs military Export History Jurisdiction history Equivalent civil items Foreign Availability 2
Jurisdiction Jurisdiction---State Department makes final decision Based on 120.3/4 criteria facts Defense and Commerce provide technical input Subject to escalation (agency) and appeal (applicant) Classification Classification---Commerce makes final decision Limited to items subject to EAR Jurisdiction should be resolved first If Jurisdiction issues indicated 48 hour review by State and Defense Return without action 3
Classification Based on technical parameters as described in individual Export Control Classification Numbers (ECCN) Process of fitting your item into the ECCN bounded box Jurisdiction/Classification Sequence is significant Not interchangeable Supported by different data requirements Resolved under different regulatory guidance and agencies 4
Key Issues Screen your Products Initially When modified When civil applications are predominant When there are civil performance equivalents Key Issues Notify customers of jurisdiction of items Notify suppliers of jurisdiction of data provided in procurement packages Screen items purchased Preferably before incorporation ITAR content will impact licensing requirement 5
Summary Jurisdiction is based on facts not desires A comprehensive corporate system will yield correct results in most cases Jurisdiction issues are resolved by State Department Objective and complete presentation of the facts leads to timely decisions Summary The correct sequence is jurisdiction and then classification Make jurisdiction decisions early in product life and at key points thereafter When you know it, share it Protect the integrity of your product by knowing the jurisdiction of it s parts 6
Defense Trade Controls Commodity Jurisdiction Overview Charles B. Shotwell Director, Defense Trade Controls Policy Bureau of Political Military Affairs Directorate of Defense Trade Controls Mission: Advance US national security and foreign policy through licensing of direct commercial sales in defense articles and the development and the enforcement of defense trade export control laws, regulations and polices. 7
DDTC Organization Robert S. Kovac Deputy Assistant Secretary, Acting Bureau of Political-Military Affairs Robert S. Kovac Managing Director Directorate of Defense Trade Controls Managing Director s Staff Office of Defense Trade Controls Compliance (PM/DTCC) Office of Defense Trade Controls Licensing (PM/DTCL) Office of Defense Trade Controls Policy (PM/DTCP) Defense Trade Controls (DTC) Policy Organization DTC Policy Director Response Team Commodity Jurisdiction Team Policy Team 8
Designating Defense Articles and Defense Services The AECA provides that the President shall designate the articles and services deemed to be defense articles and defense services in furtherance of world peace and the security and foreign policy of the United States Policy is at 22 CFR 120.3 Guidance for a Commodity Jurisdiction (CJ) determination is at 22 CFR 120.4 A CJ issued by DDTC is an official determination of jurisdiction Designating Defense Articles and Defense Services 120.3(a) is specifically designed, developed, configured, adapted, or modified for a military application, and (i) Does not have predominant civil applications, and (ii) Does not have performance equivalent (defined by form, fit and function) to those of an article or service used for civil application; or 9
Designating Defense Articles and Defense Services 120.3(b) is specifically designed, developed, configured, adapted, or modified for a military application, and has significant military or intelligence applicability such that control under this subchapter is necessary. Intended end-use is not dispositive of commodity jurisdiction. Designating Defense Articles and Defense Services Military application - articles or services that perform or support core military functions: Includes targeting, target acquisition/ destruction, passive/active countermeasures aimed at military systems, protection of warfighters & their systems, intelligence gathering, perimeter security, search, reconnaissance, monitoring, & surveillance Broader than military use 10
Where Specifically Designed Does Not Apply Items/categories designated on the U.S. Munitions List w/o the specific limitation, i.e., firearms, guided missiles, spacecraft, explosives, chem/bio agents, etc., ITAR 121.1 When determined to be in the national interest by the Director, DDTC, such as significant military or intelligence applicability, ITAR 126.3 How many this past year What percentage increase was that over the previous year How long does it take to process (average, median) Statistics Steady increase of caseload: Incoming CJs increased by 20% in 2008 Incoming CJs increased by 49% from 2006 to 2008 11
Statistics CY 2006 CY 2007 CY 2008 CJ Determinations 412 405 574 CJs by Percentage: USML 24% 18% 20% not USML 66% 69% 70% Split Jurisdiction 6% 7% 7% RWA/Withdrawn 3% 6% 3% TOTAL 100% 100% 100% New NSC CJ Guidelines 18 June 09 NSC Guidelines approved New 60-day approval process Decision by DDTC within 30 days DAS-Level Review/Decision by day 43 IPC - Assistant Secretary Level Review/ Decision by day 60 12
Changes Implemented under New NSC CJ Guidelines One-day notices of draft DTC determination if no consensus Escalation by reviewing agencies to DAS Review automatic if they do not concur with draft Adjudication at DAS level; one day notice; escalation by any reviewing agency if no consensus to IPC Review New On-Line CJ Form pending New Electronic CJ Form Updated/comprehensive form: New request, resubmission, appeal End-item, component, accessory, software, services, tech data, etc. PDF form-fillable & text searchable Ability to upload documents/attachments Electronic submission Publication of CJ results pending 13
Best Practices for CJ Applications Explain the origin of the product Full background on R&D funding Include comprehensive sales data 5 yrs Commercial & Governmental markets Fully identify foreign performance equivalents Country, company, & model number How is form, fit, & function equivalent? Best Practices for CJ Applications List current and past uses Identify special characteristics Compare/contrast with other products Provide licensing history Beware marketing hyperbole 14
Additional Advice Remember the audiences both technical & non-technical Quality of information is more important than quantity If demilitarized, explain/describe how so References CJ Team 202-663-2911 DDTC Response Team 202-663-1282 DDTC Website: http://pmddtc.state.gov/ ITAR: http://pmddtc.state.gov/regulations laws/itar_official.html 15
Commodity Jurisdiction Department of Defense Role Dr. Kenneth M. Peoples Senior Export Control Analyst Defense Technology Security Administration (DTSA) 703-325-3984 ken.peoples@dtsa.mil DTSA Mission Preserve critical U.S. military technological advantages Support legitimate defense cooperation with foreign friends and allies Control and limit transfers that could prove detrimental to U.S. security interests Prevent proliferation of WMD and their means of delivery Prevent the diversion of defense-related goods to terrorists Assure the health of the defense industrial base 16
DOD Review DTSA reviews both Commodity Classifications and Commodity Jurisdictions when requested by DoC or DoS Both the CCL and USML are used as measures Precedents are important Performance equivalents are very important Capability is extremely important Sales history is important Legal Basis of DoD Review Arms Export Control Act, Sec 38(a): The President is authorized to designate those items which shall be considered as defense articles. EO 11958--Administration of arms export controls, Sec 1(l)(1): Designations, including changes in designations, by the Secretary of State of items or categories of items which shall be considered defense articles shall have the concurrence of the Department of Defense 17
Regulatory Basis of DoD Review International Traffic in Arms Regulations, 22 CFR 120.3 An article may be designated a defense article if it: OR (a) Is specifically designed, developed, configured, adapted, or modified for a military application; and (i) Does not have a predominant civil application and (ii) Does not have a performance equivalent (defined by form, fit and function) to articles used for civil applications, (b) Is specifically designed, developed, configured, adapted, or modified for a military application, and has significant military or intelligence capability such that control under the ITAR is necessary. The intended use of the article after its export is not relevant in determining whether an item is a defense article. Important Safety Tips The Department of State designates defense articles with DoD concurrence Evaluated criteria include a military application not simply for a military use/user. A performance equivalent (defined by form, fit and function) to articles used for civil applications. The item has significant military or intelligence capability such that control under the ITAR is necessary. 18
Military Applicability Informal rule of thumb: "military application" involves: Systems, services or equipment designed, modified or configured for purposes such as target destruction, intelligence gathering, providing security, search, reconnaissance, monitoring surveillance, targeting and target acquisition, passive and active countermeasures aimed at military systems and their unique frequency and operating environments, and protective equipment designed to protect warfighters and their systems used to carry out the missions of regular, irregular, law enforcement, special weapons and tactics units, border security, paramilitary or militia forces. Item specifically identified in USML = defense article (e.g., rifle, tank, missile, satellite, etc.) see-through rule Important CJ Issues Specifically designed, modified or configured for COTS How is it used: civil vs. military Military application vs. military use/user Compare/contrast: civil vs. military variants DIFFERENT PART NUMBERS! (civil / military) Capability (what required to use for military mission?) Export history Sales history Foreign availability Nature and level of control: CCL vs. USML 19
Hints for CJ Submittals Audience: (1) DoD/DoC Engineers (2) Senior Decision Makers [NON-TECHNICAL!] No lawyerese! No marketing hyperbole! Identify platforms/end-uses; MAKE THEM REAL, not possible or future end-uses Demilitarize? How? Be specific! Be brief and to the point CJ Positions from DTSA 8/1/2008 to 7/31/2009 SPLIT 59 (9%) RWA 21 (3%) Total = 627 cases CCL = 381 (62%) USML = 166 (26%) SPLIT = 59 (9%) RWA = 21 (3%) USML 166 (26%) CCL 381 (62%) 20
DoD s Bottom Line WOULD SALE AND EXPORT OF THIS COMMODITY TO A FOREIGN PARTY AFFECT U.S. NATIONAL SECURITY INTERESTS? If so, HOW? If it is at all sensitive, what would constitute an adequate level of USG review and control over individual exports of the item? 21