DDTC Updates Guidelines on Preparing Electronic Agreements
State's Directorate of Defense Trade Controls issued updated and revised guidelines for preparing electronic agreements April 24. The guidelines will help in applying International Traffic in Arms Regulations, provide clarity to defense trade policy pertaining to agreements and establish a standard basis for submissions of agreements and related correspondence, according to DDTC. Should changes to the regulations take place, the regulatory changes take precedent, DDTC said. Some of the guideline updates include:
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Expiration Dates
The guidelines include a new provision which states the expiration date of the agreement approved by the Office of Defense Trade Controls Licensing (DTCL) cannot exceed 10 years in duration from the current year when approved. An agreement request submitted to the agency should include a statement identifying the duration of the proposed agreement with a specific date -- a simple statement such as “the duration of this agreement is not to exceed ten years” is not enough.
Agreement Definition
DTLC will now consider the provision of limited defense services under the DSP-5 license, in accordance with federal regulations 124.1(a), which govern the approvals of manufacturing license agreements and technical assistance agreements. To qualify for this provision the activities must be limited in scope and duration. Examples of limited defense services that would qualify include short-term training, low technology repair and certain activities supporting a U.S. government contract. A submission for limited defense services must be submitted as a DSP-5 and include a signed letter requesting a 124.1(a) waiver.
Submissions for manufacturing licensing, technical assistance or warehouse and distribution agreements should also include:
- Transmittal letter per 124.12 or 124.14(e) and (f)
- Proposed agreement or amendment, which should include specific clauses required in the applicable following regulations: 124.8, 124.9, 124.14(c), 124.14(d)
General Licensing requirements
Foreign licensees are no longer required to sign the sublicensee non-disclosure agreement. This allows foreign sublicensees to interact with multiple foreign licensees under an agreement’s scope, without having to sign multiple NDAs. Prior to any transfers, the foreign licensee must ensure the sublicensee has signed an NDA for the respective agreement. The foreign licensee should also ensure the sublicensee understands their role and what the agreement authorizes.
Foreign sublicensees are allowed to exchange technical data among themselves, as long as they are authorized to receive that data based on Section 3.2.b(1) of these guidelines, and the data originated from a foreign signatory -- not a sublicense -- to the agreement. Foreign sublicensees authorized to receive defense articles per 3.2.b(1) can also transfer defense articles to other foreign sublicensees
To request a U.S. person as a sublicensee, the applicant must clearly state: “This agreement authorizes sublicensing to U.S. Persons. Exports or temporary imports by the U.S. sublicensee must be conducted as part of a separate authorization initiated by the U.S. Person.” Applicants do not have to specifically identify potential U.S. sublicensees in the agreement request.
Congressional Notification
DDTC added new guidelines for agreements previously notified to Congress through a 36(c) Notification, a value-based notification mandated by the Arms Export Control Act. The following amendments now require re-notification: value increase from a prior 36(c) notification equal to or larger than the respective congressional notification threshold, and an increase in authorized sales territory of a manufacturing license agreement.
The guidelines also state that congressional notification is required for warehouse and distribution agreements. Since such agreements do not have an overall assigned value, the verification of whether the congressional notification threshold is met and any required notification are accomplished via the IFO license submissions.
The guidelines also include a step-by-step explanation of the process for notifying agreements that meet the threshold for 36(c) or 36(d) congressional notifications.
Updated License Requirements for Exporting Hardware In Furtherance of an Agreement
For customs purposes, the license must identify the foreign address where the defense articles will initially be received, or multiple potential foreign addresses if that if is unknown, when the license is submitted. The guidelines also include detailed instructions depending on the specifics of the export, such as directions for government entities who are signatories.
The guidelines also specify requirements for using the 123.16(b)(1) exemption -- for the permanent export of unclassified hardware without an export license -- as well as other exemptions, like the Canadian exemption.