State Dept Proposes to Require Electronic Submission of ITAR Annual Registration Fees, Etc.

Comments are due by April 25, 2011.

Annual Registration Fees Are Currently Paid by Check, Manually Processed

Persons who manufacture or export defense articles¹ or engage in brokering activities with respect to the manufacture, export, import, or transfer of defense articles¹ must register with the State Department’s Directorate of Defense Trade Controls (DDTC). Registration is required annually, and must be submitted on the paper Statement of Registration (Form DS-2032), along with a check or money order for the registration fee.

The electronic payment of these fees would simplify DDTC’s collection and verification of payments, eliminate the need to manually process and collect returned payments, and eliminate the possibility of lost payments.

ACH Would be Sole Means of Paying Fee for Mfrs and Exporters

The proposed rule would revise 22 CFR 122.2(a) to make electronic payment the sole means of registration fee submission for manufacturers and exporters, as follows:

“An intended registrant must submit a Form DS-2032 to the DDTC by registered or overnight mail delivery, and must submit an electronic payment via Automated Clearing House (ACH) payable to the State Department of one of the fees prescribed in 22 CFR 122.3(a). ACH is an electronic network used to process financial transactions in the U.S. Intended registrants should access DDTC’s website at www.pmddtc.state.gov for detailed guidelines on submitting an ACH electronic payment. Electronic payments must be in U.S. currency and must be payable through a U.S. financial institution. Cash, checks, foreign currency or money orders will not be accepted.”

ACH or SWIFT Would be Sole Means of Paying Fee for Brokers

22 CFR 129.4(a) would be revised to provide for electronic payment as the sole means of registration fee submission for brokers², as follows:

“An intended registrant must submit a Form DS-2032 to the DDTC by registered or overnight mail delivery, and must submit an electronic payment via ACH or Society for Worldwide Interbank Financial Telecommunications (SWIFT), payable to the Department of State of the fees prescribed in 22 CFR 122.3(a). ACH is an electronic network used to process financial transactions originating from within the U.S. and SWIFT is the messaging service used by financial institutions worldwide to issue international transfers for foreign accounts. Payment methods (i.e., ACH and SWIFT) are dependent on the source of the funds (U.S. or foreign bank) drawn from the applicant’s account.

The originating account must be the registrant’s account and not a third party’s. Intended registrants should access DDTC’s website at www.pmddtc.state.gov for detailed guidelines on submitting ACH and SWIFT electronic payments. Payments, including from foreign brokers, must be in U.S. currency, payable through a U.S. financial institution. Cash, checks, foreign currency or money orders will not be accepted.”

Intended Registrant Requirements Would be Clarified for U.S. and Foreign Persons

Information regarding intended registrants would be clarified in 22 CFR 129.4(a), including (proposed text is underlined):

“The Form DS-2032 must be signed by a senior officer (e.g., Chief Executive Officer, resident, Secretary, Partner, Member, Treasurer, General Counsel) who has been empowered by the intended registrant to sign such documents. The intended registrant, whether a U.S. or foreign person, shall submit documentation that demonstrates it is incorporated or otherwise authorized to do business in its respective country. Foreign persons who are required to register shall provide information that is substantially similar in content to that which a U.S. person would provide under this provision (e.g., foreign business license or similar authorization to do business). The DDTC will notify the registrant if the Form DS-2032 is incomplete either by notifying the registrant of what information is required or through the return of the entire registration package. Registrants may not establish new entities for the purpose of reducing registration fees.”

Transmittal Letter Certifications Would be Incorporated into Revised DS-2032

Additionally, the certifications previously required through the transmittal letter referenced in 22 CFR 122.2(b) would be incorporated into the revised Form DS-2032. Consequently, 122.2(b) would no longer address a separate transmittal letter, but would address certain certifications to be made on the Form DS-2032 that used to be provided via the transmittal letter. 22 CFR 122.2(b) would be revised to read as follows:

The Statement of Registration of the intended registrant shall include a certification by an authorized senior officer of the following:

(1) Whether the intended registrant, chief executive officer, president, vice presidents, other senior officers or officials (e.g., Comptroller, Treasurer, General Counsel) or any member of the board of directors: (i) has ever been indicted for or convicted of violating any of the U.S. criminal statutes enumerated in 22 CFR 120.27; or (ii) Is ineligible to contract with, or to receive a license or other approval to import defense articles or defense services from, or to receive an export license or other approval from, any agency of the U.S. Government.

(2) Whether the intended registrant is foreign owned or foreign controlled (see 22 CFR 120.37). If the intended registrant is foreign owned or foreign controlled, the certification shall also include whether the intended registrant is incorporated or otherwise authorized to engage in business in the U.S.

(22 CFR 122.3(a), regarding registration fees, would also be revised to remove reference to the transmittal letter.)

DS-2032 Would be Revised to Add Date Elements, Would Indicate Need for Electronic Payment

The DS-2032 would be revised to reflect that fee payments are to be made electronically. It would also include additional data fields to match the electronic payment to the DS-2032. Additionally, data elements would be added to ensure clarification during analysis as well as standardization of responses. Specifically, necessary information would be listed in the form, only requiring the respondent to make a selection by simply clicking the applicable checkbox. Country and state information would be listed via a pick list requiring a selection rather than manual insertion of information. This enhancement would eliminate typographical errors and the misinterpretation of information requested which often results in the submission of incorrect information.

In addition, the form would be added to the list of forms in 22 CFR 120.28(a) as available from the DDTC.

Definitions of Ownership and Control Would be Renamed and Relocated

The prior definitions of “ownership” and “control” would be renamed as “foreign ownership” and “foreign control” and moved to new 22 CFR 120.37 (they would be removed from 22 CFR 122.2(c)).

¹or furnish defense services

²Brokers means any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee, commission, or other consideration.

State Department contact- Lisa Studtmann (202) 663-2477

(FR Pub 02/24/11, Public Notice 7338)