Registration

1
Registration Compliance

• David Trimble, Director
• Daniel Cook, Senior Compliance Specialist
• Defense Trade Controls Compliance
• May 23 2007

2
Discussion Topics

• Organizational Structure
• Registration
• Record Keeping
• Compliance Program
• Enforcement

3
Office of Defense Trade Controls Compliance (DTCC)
ICE Liaison FBI Liaison
David Trimble, Director Daniel Buzby, Deputy
Director

• Enforcement Division
• Glenn Smith, Chief
• Support to the law enforcement
• community for criminal
• investigations and prosecutions
• Administrative enforcement
• actions (charging letters
• consent agreements), policies of
• denial, debarments, transaction
• exceptions and reinstatements
• Voluntary directed disclosures

• Compliance Registration
• Division
• Deborah Carroll, Chief
• Registration of 5000
• manufacturers, exporters
• brokers
• Company Visit Program
• Consent Agreement monitoring
• PM lead on CFIUS

• Research Analysis Division
• Ed Peartree, Chief
• Blue Lantern end-use monitoring
• program and outreach
• Watch List maintenance
• Watch List screening license
• holds
• Compliance Report
• Various intelligence research
• projects
• AECA Section 3 reports to

4
DTCC Role in Licensing

• Registration
• Provide assistance and information during the
  license review
• Registration, Watch List, Blue Lantern End-Use
  Monitoring Program
• Work to ensure exports are made in compliance
  with the terms of the export authorization
• Prevention work with companies to improve
  compliance procedures
• Deterrence civil and criminal penalties

5
Registration AECA Section
38(b)(1)(A)(i) ITAR Part 122

• Registration is primarily a means to provide the
  U.S. Government information on the defense
  industry (legal status, export eligibility,
  foreign ownership/affiliations, legally
  responsible personnel, areas of activity)
• Channel to provide industry information about
  export regulations and Government concerns
• Helps validate the bona fides of U.S. industry
  and institutions engaged in defense trade,
  especially during the review of license
  applications
• Registration does not confer any export rights or
  privileges, it is generally a precondition to the
  issuance of any license or other authorization

6
Registration

• Manufacture / Exporter
• Any US Person (unless exempt) who engages in
  the United States in the business of either
  Manufacturing or Exporting defense articles or
  Furnishing Defense Services is required to
  register with DDTC

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Exporter/Manufacture
Registration Exemptions

• Officer and employees of the United States
  Government acting in official capacity
• Persons whose pertinent business activity is
  confined to the production of unclassified
  technical data only
• Persons all of whose manufacturing and export
  activities are licensed under the Atomic Energy
  Act of 1954, as amended
• Persons who engage only in the fabrication of
  articles for experimental or scientific purpose,
  including research and development

8
Registration Requirements For Manufacture
/ Exporter (ITAR Part 122)

• US Person submission of complete registration
  package (with fee)
• Information on legal structure, export
  eligibility, foreign ownership/affiliations,
  legally responsible personnel, areas of defense
  activity
• Use helpful hints instructions
• Information must be kept current
• (Ineligibility Senior Officers Establishment,
  Acquisition or Divestment of a Sub or Foreign
  Affiliate Merger Change in Location or Dealing
  in an Additional ITAR Category)

9
Registration Maintenance

• Maintain copies of all the registration-related
  documents submitted to DDTC.
• - DS-2032, transmittal letter, check
• other correspondence.
• Take note of the registration renewal date.
• Ensure that you have received a confirmation
  letter from DDTC. This letter provides the
  registration number for the registrant.

10
Record Keeping
Section 122.5 A person who is required to
register must maintain records concerning the
manufacture, acquisition and disposition of
defense articles the provision of defense
services and information on political
contributions, fees, or commissions furnished or
obtained, as required by part 130 of this
subchapter.
11
Record Keeping

• All records must be maintained for a period of
  five years from the expiration date of the
  authorization or date an exemption is claimed
  (ITAR Section 123.26).
• If an on-going program, recommend keeping records
  through end of program vice five years.
• DDTC may prescribe longer or shorter retention
  period in individual cases.
• Records must be available at all times for the
  Directorate of Defense Trade Controls (DDTC),
  Immigration Customs Enforcement (ICE) and/or
  Customs Border Protection (CBP) inspection and
  copying.

12
Successful Compliance

• Why do you need a Compliance Program?
• Laws and regulations
• Violations subject you to serious monetary and
  non-monetary penalties
• Sophisticated procurement networks trying to fool
  you and the government to get this technology
• Strict liability makes you potentially
  responsible
• Good universities, institutions and laboratories
  must protect themselves and our countrys
  interests with strong internal controls

13
Successful Compliance

• No magic formula
• One size does not fit all
• Starts with written direction issued by senior
  management
• Continues with senior management support,
  oversight and training

14
Successful Compliance

• Establish responsibilities procedures
• Inform employees
• Establish comprehensive records
• Timely reporting
• Be proactive, not reactive
• Conduct training regularly
• Report violations promptly
• Senior level management support a must!

15
Successful Compliance

• Does your program allow you to
• Screen for proscribed countries/ ineligible
  parties
• Review for restrictions in contracts/subcontracts
• Monitor publications that may rely or include
  restricted data
• Review staffing participation of foreign person
  employees students
• Screen international local visits to discuss
  projects that may contain or disclose restricted
  technical data

16
Successful Compliance Continued

• Does your program allow you to
• Validate exemption or license criteria satisfied
• Review hardware, technical data, (including
  instruments) needed to be used in order to obtain
  desired fundamental research results
• Maintain physical and IT security
• Monitor Defense Services to remain within scope
  of license or exemption

17
FY 2006 Blue Lantern Results

• Blue Lantern End Use Checks
• 613 checks
• 94 Unfavorable
• Many companies not doing their job!!!

18
Penalties

• Civil
• Each violation a fine of not more than 500,000
• Criminal
• Each violation a fine of not more than
  1,000,000, or imprisonment not more than 10
  years, or both

19
Enforcement Action

• Indictment Policy of Denial
• Conviction Debarment
• Administrative Penalties
• Consent Agreement

20
Civil Enforcement (FY04-FY06)

• 7 Consent Agreements Concluded
• 60 Million in Fines
• 44 Debarments
• 12 Companies Under Direct Oversight Through
  Ongoing Consent Agreements
• 459 Directed Disclosures

21
Criminal Enforcement (FY04-FY06)

• Arms Export Control Act violations
• 283 Arrests (AECA Violations)
• 198 Indictments
• 166 Convictions

22
FY 2006 Results

• 75 Directed Disclosures
• 22 Million in Civil Fines
• 34 Statutory Debarments
• 23 Companies visited
• 50 jump in support to criminal investigations
• 50 jump in criminal indictments/convictions
• Record of Blue Lantern Checks Derogatory
  Results
• VDs up 15 (466)

23
Disclosure

• Voluntary (ITAR 127.12(a))
• Self-directed
• Initial notification
• Full review and reporting of violation, and
  additional violations discovered
• Requires certification by senior officer - ITAR
  Section 127.12(e)
• Must be made prior to U.S. Government awareness
  and inquiry into the activity
• DDTC-directed

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Why Disclose ?

• It is Voluntary
• Sign of a Working Compliance Program
• Mitigating Factor Regarding Penalties

25
Conclusion

• Regulations are Comprehensive Detailed
• Liability Penalties are Significant
• Regulatory System Reflects the Importance of
  Defense Trade to U.S. National Security and
  Foreign Policy Interests
• Be Proactive, Not Reactive!
• Maximize Training Opportunities (e.g., SIA ACI)
• Dont Hesitate to Seek U.S. Government Guidance

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How to Obtain Further Guidance

• Advisory Opinion May be Sent to DDTC Regarding
• Export or Registration (ITAR Part 126.9)
• General Questions on Registration and Licensing
• 202-663-1282 and DDTCResponseTeam_at_state.gov
• Learn More About U.S. Defense Trade Controls
• Registration, Licensing, and Other ITAR
  Regulatory
• Matters at
• www.pmddtc.state.gov