Export of Defense Services and Technical Data 

December 2006This presentation is not meant to constitute legal advice to any

participants.

What is an Export?

• The definitions of “export” are quite broad.– An actual shipment or transmission of items or technology out of the U.S.– A release of goods, technology, or software in the U.S. to a foreign national or an

embassy or affiliate of a foreign country– A transfer to any person of goods or technology either within the U.S. or outside the

U.S. with the knowledge or intent that the goods or technology will be shipped, transferred, or transmitted to a recipient in a foreign country.

• The definition of “export” is particularly broad with respect to technical data.– Sending or taking any documents or material that contain or embody technical data

out of the U.S., by any means– Disclosing (including oral or visual disclosure) or transferring technical data to a

foreign person, whether in the U.S. or abroad– Performing a service involving technical know-how (e.g., providing technical

assistance) on behalf of, or for the benefit of, a foreign person, whether in the U.S. or abroad.

Examples of the Broad Definition of Exports

• Submitting a proposal to a foreign customer

• Negotiating a sale with a foreign customer

• Employing a foreign national

• Making a technical presentation at a conference

• Giving a plant tour to a foreign national

• Participating in a telecon with foreign persons involved

• Providing technical advice by phone to a customer abroad

• Sending a fax or e-mail to a customer abroad

• Sending an e-mail to a distribution list that contains a foreign person.

Proposals as Exports

• Prior written approval is required from the US State Department Defense Trade Controls (DTC) before a company is allowed to submit a proposal for Significant Military Equipment (SME) to a foreign entity when all of the following conditions are met:

– The value of the equipment or services is in the amount of $14M or more, and

– The export is intended for use by any foreign country other than a member of NATO, Australia, Japan, or New Zealand, and

– The identical equipment has not been previously licensed for permanent export or approved for sale under DOD’s Foreign Military Sales program to any foreign country.

• Additionally 30 days prior notification is required when the above conditions are met and the identical SME have been previously licensed for permanent export or approved for an FMS sale to any foreign country.

• Since the definition of proposal is relatively broad (any communication designed to constitute a basis for a decision), your Export Compliance Office should be consulted before discussions are held on any defense program intended for a foreign entity with a potential value of $14M or more.

Export Control Regimes and Export Authorization Requirements

• Primary Agencies– Department of Commerce, BIS – handles non-military and dual

use products.– Department of State, Directorate Defense Trade Controls (DDTC)

– handles military items and some dual use items– When there is ambiguity about jurisdiction, a formal jurisdiction

determination must be obtained from DDTC.

• Standard DDTC Export Authorizations– DSP-5 – license for the export of commodities and technical data.– Technical Assistance Agreement– Manufacturing License Agreement– Warehouse and Distribution Agreement

How to Prepare the TAA

• Contents of TAA– Do not imbed a TAA into a contract.– ITAR 124.8 clauses must be verbatim.– Reference pages 14-15 of the Guidelines for Preparing

Agreements– Include as referenced attachment the “scope of work.”– Include as a referenced attachment a DSP-83 if required.

• Increasingly seeing special requirements on sublicensing.• If classified effort is involved, additional section is needed.

Articles for TAAs Involving Classified Effort

• Section 6.1 All classified information and material furnished or generated pursuant to this agreement shall be protected as follows:

• The recipient will not release the information or material to a third-country government, person, or firm without the prior approval of the releasing government.

• The recipient will afford the information and material a degree of protection equivalent to that afforded it by the releasing government; and

• The recipient will not use the information and material for other than the purpose for which it was furnished without the prior written consent of the releasing government.

• Section 6.2 Classified information and material furnished or generated pursuant to this agreement shall be transferred through government channels or other channels specified in writing by the Governments of the United States and Israel and only to persons who have an appropriate security clearance and an official need for access to the information in order to perform on the agreement.

• Section 6.3 Classified information and material furnished under this agreement will be remarked by the recipient with its government’s equivalent security classification markings.

• Section 6.4 Classified information and material generated under this agreement must be assigned a security classification as specified by the contract security classification specifications provided by the U.S. Government.

• Section 6.5 All cases in which it is known or there is reason to believe that classified information or material furnished or generated pursuant to this agreement has been lost or disclosed to unauthorized persons shall be reported promptly and fully by the contractor to its government’s security authorities.

• Section 6.6 Classified information and material furnished or generated pursuant to this agreement shall not be further provided to another potential contractor or subcontractor.

• Section 6.7 Upon completion of the agreement, all classified material furnished or generated pursuant to the agreement will be returned to the U.S. contractor or be destroyed.

How to Prepare the Cover Letter

• Contents of Cover Letter– Reference pages 7-12 of the Guidelines for Preparing

Agreements.– Identify USML Category prominently in the cover

letter.– Identify your customer “champion.”

• Contents of Certification Letter– Content is specified in ITAR 126.13 (equivalent of a

“responsible contractor” certification). See page 28 of Guidelines for a sample.

Part 130 Compliance

• When submitting license applications to DOS Defense Trade Controls, your Export Compliance office provides information required to comply with Part 130 of the ITAR for all transactions with an anticipated value greater than $500,000.

• It is critical that the sales staff accurately report the anticipated value of transactions to the Export Compliance Office.

• Part 130 compliance involves the identification of any political contribution of $5,000 or more, or fees or commissions totaling $100,000 or more.

• A supplementary report must be filed if political contributions totaling $2,500 or more, or fees or commissions totaling $50,000 or more are made subsequent to filing the initial report.

• The Part 130 report is required for all direct foreign sales and for all Foreign Military Sales.

Submission of the Agreement Package

• Use overnight mail until electronic capability is in place, noting the special address for courier deliveries.

• Collated copies in the number specified (usually original plus seven).

• ITAR 126.13 certification letter is required only with the original package, not the copies.

Best Practices for TAA Work Statements

• Provide background.• Be specific about the nature of the work and sources of

data– Avoid “include but not limited to”– Don’t omit material to avoid controversy.

• Be specific about what will be shared with the foreign licensee

• If there are other U.S. parties, be specific about what they will be able to do under the agreement.

• Identify what will not be provided (e.g., source code, U.S. classified data)

• Append descriptive literature if possible.

Nontransfer and Use Certificate

• Significant military equipment

• Classified effort

• Certification by the foreign government is usually required if classified effort is involved (covered in provisos).

TAA Review Process

• Timelines– 2-3 months for a DSP-5– 3-6 months for a TAA– 6-12 months if missile technology is involved.

• Primary Reviewers– DOD (through DTSA)– NASA– MTEC

• Plans for Electronic Submissions

Provisos

• Common– End date– Sublicensing– Process if TAA is not concluded within a year– Depositing the signed TAA

• Special– Limits on what you can provide within the work you

have described adequately.– Clarifications on what you cannot provide where your

package had ambiguities.

Managing the Export of Technical Data and Services

• General - This section presents an overview of the procedures that should be followed with respect to the control of technical data.

• Ensuring the proper control of technical data presents a special problem because both the term “technical data” and the concept of an “export” of technical data are defined broadly. They cover all forms of data and all types of transfers and disclosures, including the transmission or disclosure of technical data in intangible form (including the furnishing of technical assistance) to foreign persons and firms. Under these broad definitions, an export may occur even in cases where a disclosure takes place in the U.S.

Export Control Plan

• An Export Control Plan should be established for each Technical Assistance Agreement, Manufacturing License Agreement, or other License to transmit technical data which details among other things:– the parties to the agreement or license

– the export documentation process for each license or agreement

– the provisos of the license or agreement approval.

• Following is a recommended template to be used for acknowledging acceptance of responsibility for implementation of the Export Control Plan.

Documenting the Export

• External Reporting– Initial Export Reporting - In accordance with 22 CFR § 123.22(b)(3)(ii),

prior to the initial export of defense services or technical data by any means in furtherance of an Agreement, DTC must be notified by the Export Compliance Office that exports using the Agreement have begun. A copy of the DTC notification and documentation of all subsequent exports made under the Agreement shall be maintained by the Export Compliance Office and made available to DTC upon request.

– Reporting of Exports from A US Port - In accordance with 22 CFR § 123.22(b)(3)(ii) and (iii), where technical data is to be exported from a US Port, DTC must be notified by the Export Compliance Office prior to the export. A copy of the DTC notification must accompany the technical data shipment and be available to the Bureau of Customs and Border Protection upon request.

Documenting the Export

• Internal Reporting– The International Traffic in Arms Regulations (ITAR) imposes stringent

reporting and records retention requirements. Therefore, it is imperative that documentation of not only Initial Export transactions be reported, but a complete and thorough list of all export transactions pertaining to the Agreement or License be recorded.

– A Technical Data / Defense Services Checklist should be completed prior to any export against the Agreement or License, including an electronic posting of data. The checklist will be initiated by the individual effecting the export and counter-signed by the ECP Owner or his designate.

• For oral or visual disclosures - Prior to providing technical data, hosting a meeting or teleconference, or otherwise providing defense services against the Agreement, the cover page, charts, or introductory material must contain the appropriate export authority statement. The host of the meeting must maintain a record of the export and provide the Export Compliance Office with a copy of the record.

Documenting the Export

• Marking of Technical Data: All Technical Data (hard copy or electronic transmission) exported pursuant to the Agreement or License should have the following legend printed at the bottom of the first page of the document:

WARNING: EXPORT CONTROLLED. This document contains technical data whose export is

subject to the Arms Export Control Act (Title 22, U.S.C. Section 2751 et. seq.).

• On the cover page to the Technical Data document or label of any electronic medium (i.e., compact disk) exported against the Agreement or License, the appropriate Destination Control Statement must be used.

NOTE: A destination control statement must be used on all export actions, including physical exports, electronic transmissions, and facsimiles.

Destination Control Statements

• For Commerce Department transactions – “These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law prohibited. United States law prohibits disposition of these commodities to any end-user for any end-use related to the design, development, production, stockpiling, or use of chemical, biological or nuclear weapons or missiles, without the prior approval of the United States government.”

• For State Department transactions - “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.”

DDTC Guidance on Tech Data and Defense Services

• Data in the “public domain”

• Deemed exports

• Sublicensing

• Dual-country citizenship (non-U.S.)