An Exception for Contract Support Services (CSS)?

Export Control Reform (ECR) has brought many changes over the last few years regarding the US Munitions List (USML), the International Traffic in Arms Regulations (ITAR), Commerce Control List (CCL) and Export Administration Regulations (EAR). Along with the need to understand the new categories and the Export Control Classification Numbers (ECCNs) within the CCL, the CCL contains exceptions to the new rules and categories. For a complete list of EAR license exceptions click here. To most, the addition of “Contract support personnel” buried deep in an EAR license exception ruling is not a “game-changer”, but to those Contractors working in the capacity of what is commonly referred to as “CSS” or Contract Support Services the addition could be quite helpful.  

The final rule that warrants discussion is §740.11(b), within the license exception GOV, which authorizes ‘export, reexports, and transfers (in-country) to personnel and agencies of the U.S. Government and certain exports by the Department of Defense.’ The rule goes on to further define ‘Contractor support personnel’ and their eligibility in §740.11(b)(ii): ‘Contractor support personnel of a department or agency of the U.S. Government are eligible for this authorization when in performance of their duties pursuant to the applicable contract or other official duties. ‘Contractor support personnel’ for the purpose of this provision means those persons who provide administrative, managerial, scientific or technical support under contract to a U.S. Government department or agency…’.

In the vast land of Department of Defense (DoD) contracting there are companies who provide direct support to the agencies in the areas of administration, managerial, scientific or general technical competencies. Said Contractors, or CSS, are different from Original Equipment Manufacturers (OEMs) insomuch that they do not make, develop or produce any defense articles. Because of the unique relationship between CSS and an agency, it is often complicated to identify the exact role CSS takes in the case of exporting technical data as defined by the USML within the ITAR and recently due to ECR, the CCL within the EAR. The support that CSS provides does not greatly differentiate from that of Government employees and should be treated as such. This complication however does not preclude CSS from complying with the ITAR and the EAR. Technology Security Associates, Inc. (TSA) is one such CSS and having worked in the capacity as CSS for the past 9+ years, the newly revised EAR exception which includes a definition of CSS caught my attention. 

TSA for example is on contract to provide foreign disclosure, international program and basic security support to a US Navy (USN) program that has multiple Foreign Military Sales (FMS) customers for aircraft and parts which span the USML and CCL. In this capacity TSA supports the Government Program Foreign Disclosure Officer (FDO) and Program Security Manager (PSM). There is no requirement for TSA to interact with or provide (export) any technical data to Foreign Nationals (FNs) or FMS customers therefore TSA is not required to obtain any export licenses in compliance with the ITAR or EAR. 

Separately, TSA is on contract to provide foreign disclosure, international program and basic security support to a USN program that is a Cooperative program with two (2) additional foreign partners for aircraft and parts which span the USML and CCL. TSA supports the Joint Program Office (JPO) Director as well as each partner country and provides (exports) US technical data directly to the foreign partners. In this case TSA is required to obtain the appropriate export licenses or Technical Assistance Agreements (TAAs) in order to support the contract requirements as well as maintain compliance with the ITAR and the EAR. 

Going forward TSA could be eligible to execute the GOV exception when in the capacity of CSS if the ECCN allows it and all other conditions of the exception are met. 

Does your company provide Contract support services to the U.S. Government?

Does your company export a commodity or technical data pursuant to a contract with the DoD?

Is your company eligible to use the GOV exception?  TSA can help! 

Heidi France is a Lead International Trade Specialist, Technology Security Associates, Inc.                   Email: heidi_france@theTSAteam.com

Contributor: Jackie Sudore-Flood, Director of International Programs, Technology Security Associates, Inc., Email: jackie_sudore-flood@theTSAteam.com

Isn’t that “special”…?

Still having trouble determining if your company’s commodity needs to be controlled by the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR)? Did you know a decision tool has been created to help? The Department of Commerce (DoC), Bureau of Industry and Security (BIS) and Department of State (DoS), Directorate of Defense Trade Controls (DDTC) have each created a “Specially Designed” decision tool to walk an exporter through the steps of making a successful determination. 

Export Control Reform has brought a standardized definition of the term “specially designed” for both the EAR and the ITAR. The term certainly relaxes the rules, but the complexity of the rules remains. For items on the Commerce Control List (CCL), the definition relates to the determination of the Export Control Classification Number (ECCN) or EAR99 (No license required) classification. The term as defined in the ITAR essentially determines the jurisdiction of the items and whether it will remain on the U.S. Munitions List (USML) or move to the CCL. 

The definition of “specially designed” is similar for both regulations but must be looked at separately to make an appropriate determination. Because many products have shifted from the USML to the CCL, if an exporter has solely dealt with ITAR-controlled products in the past, I would recommend the ITAR “Specially Designed” tool as a starting point.

The structure / use of the ‘specially designed’ provision is the same for the CCL and USML – both utilize the “catch and release” method. Paragraph (a) is the “catch” provision (of many items) and Paragraph (b) is the “release”. Paragraph(a) seeks to control items that warrant.

For a product to qualify as “specially designed” it has to meet all of the requirements of Paragraph (a) and NONE of the requirements of Subparagraphs to (b). It was much easier to explain what was NOT “specially designed” therefore Paragraph (b) is very detailed in its inclusion of parts, components, accessories, etc. In an effort to eliminate discretion from companies and subjectivity, several other key terms are now defined as notes within the “specially designed” definition. Other defined terms include: commodity, production, and development among others. 

In Paragraph (b)(3), there is mention of “equivalent” form or fit. Its worthy to point out that “equivalent” here means that the “form has been modified solely for fit purposes” and also important to note that the “fit” can changes as long as it doesn’t change the performance capabilities. 

With regard to Paragraph (b)(4) and (5), the term “knowledge” actually means that the said “knowledge” during development must be in writing. While this isn’t stated outright in the definition; clearly looking into the mind of the original designer or intent of an item at conception is difficult, therefore records must be kept.

If, after going through the “Specially Designed” decision tools, there is still uncertainty about a commodity classification the exporter can still choose to file a Commodity Jurisdiction (CJ) request through DoS or Commodity Classification Automated Tracking System (CCATS) with DoC. See my previous post on CJ requests at: http://export-dinary.blogspot/2014/02/pick-commodity-any-commodity.html.  The purpose of the “Specially Designed” tools is to assist exporters with eliminating the need for a CJ or CCATS. 

A strong understanding of the new rules and definitions coupled with the Tools that have been provided assist exporters in making solid and confident decisions about proper commodity classifications. 

Useful link for the DoS DDTC Specially Designed Tool: http://www.pmddtc.state.gov/licensing/dt_SpeciallyDesigned.htm

Useful link for the the DoC, BIS Specially Designed Tool: http://www.bis.doc.gov/index.php/specially-designed-tool

Link to ITAR 120.41, Definition of “specially designed”: http://www.ecfr.gov/cgi-bin/text-idx?SID=86008bdffd1fb2e79cc5df41a180750a&node=22:1.0.1.13.57&rgn=div5#22:1.0.1.13.57.0.31.41

Link to EAR772.1, Definition of “specially designed”:  http://www.bis.doc.gov/index.php/regulations/export-administration-regulations-ear

The DoS DDTC has a very useful link for a Commodity Jurisdiction request:  http://www.pmddtc.state.gov/commodity_jurisdiction/index.html

The DoC, BIS has a very useful link for Classification requests: http://www.bis.doc.gov/index.php/licensing/commerce-control-list-classification/classification-request-guidelines

Need help with export controls?  TSA Inc. can help!

Heidi France is a Lead International Trade Specialist, Technology Security Associates, Inc.

Email: heidi_france@theTSAteam.com

Contributor: Jackie Sudore-Flood, Director of International Programs, Technology Security Associates, Inc., Email: jackie_sudore-flood@theTSAteam.com

Where Have All the Licenses Gone?

When the first of three (3) final rules to change the International Traffic in Arms Regulations (ITAR) U.S. Munitions List (USML) categories and establish the new “600 series” on the Export Administration Regulations (EAR) Commerce Control List (CCL) was published on April of 2013, it seemed like everyone was scrambling to meet the 180-day transition period. October 15, 2013 is now in the rear-view mirror and (from where I sit) there has yet to be a significant spike in the number of export licenses we are reviewing, let alone getting ANY licenses with a new “600 series” commodity staffed from Department of Commerce (DoC). 

So I am wondering - Why all this hype, excitement, and preparation?  I have a few theories.

Maybe exporters have just decided to take the “mea culpa” route. The three (3) final rules are quite detailed and admittedly a perplexing read. For larger exporters / big industry, determination of new classifications, for the over 30K parts, is a daunting task and for smaller exporters / small businesses, the specially-trained staff and time to analyze the new rules does not exist (to determine what license might be required). The difficulty with this approach is the risk of the exporter receiving an ITAR violation. 

Another reason could be that exporters are filing Commodity Jurisdiction requests (with either Department of State (DoS) or DoC (or both) to obtain an authoritative ruling on the appropriate placement of their commodity before moving forward with any license request. Please refer to my previous post regarding Commodity Jurisdictions at: http://www.thetsateam.com/export-control-blog/

Or, perhaps exporters who HAVE read / understood the new rules have decided to actually use them and have chosen to execute ITAR 120.5(b) and EAR 734.3(e) which “authorizes the export, reexport, or in-country transfer of items subject to the EAR when the items subject to the EAR will be used in or with items subject to the ITAR and are included on the same DDTC license, agreement, or other approval.” This provision removes the requirement to obtain licenses from both agencies in certain circumstances and even allows for both USML and CCL items to be included on a DSP-5 (permanent export license) or Technical Assistance Agreement / Manufacturing License Agreement (TAA / MLA). Of course exceptions exist; therefore I recommend a thorough analysis of the rules for a comprehensive understanding. 

Another possibility for the delay in DoC licenses is the ‘transition plan’ presented by both DoC and DoS allowing for some additional delays in obtaining new licenses. Part of the transition plan allows for existing licenses or agreements to stay in effect for up to two (2) years, from the effective date of the revised USML category (only if ALL of the items within the license or authorization have transitioned from the USML to the CCL). Another part allows for licenses or agreements to remain valid until its expiration (only if SOME of the items on the license or authorization have transitioned from the USML to the CCL). Simply stated, some cases will enable exporters to wait and apply for a new license, specifically exporters can obtain authorization two years after the effective date of the revised USML category or when their existing license / authorization expires (in the case of USML Category VIII, exporters potentially have until October 14, 2015 to obtain a new license). The transition is clearly going to take time and perhaps five months is premature to expect the changes to come into effect given that export control reform has taken more than five (5) years to implement.

I am curious to see how export control reform is going to change…and am anxiously awaiting!

More information on the transition plan can be found at:  https://www.pmddtc.state.gov/FR/2013/78FR22740.pdf

http://www.bis.doc.gov/index.php/regulations/federal-register-notices/17-regulations/496-federal-register-notices-2013#78fr22660

Link to the ITAR 120.5(b):http://www.ecfr.gov/cgi-bin/text-idx?SID=86008bdffd1fb2e79cc5df41a180750a&node=22:1.0.1.13.57&rgn=div5#22:1.0.1.13.57.0.31.5

Link to the EAR 734.3(e): http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=a8460dee9a3ce9050bf04fa7591c1a2a&ty=HTML&h=L&n=15y2.1.3.4.22&r=PART#15:2.1.3.4.22.0.1.3

Need help with export controls?  TSA Inc. can help!

Heidi France is a Lead International Trade Specialist, Technology Security Associates, Inc.

Email: heidi_france@theTSAteam.com

Contributor: Jackie Sudore-Flood, Director of International Programs, Technology Security Associates, Inc., Email: jackie_sudore-flood@theTSAteam.com

Pick A Commodity – Any Commodity

If only it were as easy as a simple card trick. Choosing the correct classification for a commodity has recently become more difficult.  In the past year there have been three final rules issued by the Department of State (DoS) and Department of Commerce (DoC) which outline the restructuring of the U.S. Munitions List (USML) and the Commodity Control List (CCL) respectively. Many items that were previously included on the USML are now controlled on the CCL. The third and latest implementing rule was issued on 2 Jan 2014 with an effective date of 1 July 2014. 

Within each revised USML category the parameters have become increasingly narrower to keep in line with a goal of Export Control Reform of creating a “positive” list of items that warrant control. Those items that don’t “make the cut” have been moved to the CCL and newly established Export Control Classification Numbers (ECCN) have been assigned. 

If there is still uncertainty about where a commodity falls, an exporter can apply for a Commodity Jurisdiction (CJ) per §120.4 of the International Traffic in Arms Regulations (ITAR). It is not required for an exporter to be registered with the DoS in order to apply for a CJ. The exporter should provide as much information as possible on the Commodity Jurisdiction Determination Request Form (DS-4076) and also provide any amplifying information as attachments so the reviewers at the DoS and agency levels can properly identify the product and locate the correct technical authority to determine the proper classification. 

It is important to note that because of the specificity within the new USML Categories, it is recommended for the exporter to provide details about the product and its use. For example, instead of just indicating that a commodity is for use on a F/A-18 aircraft, provide the Model (A-D or E/F or EA-18G). This aligns with the new breakdown of aircraft within USML Category VIII. Do your homework before applying for a CJ.  Block 17 on the DS-4076 asks for a suggested USML Category or ECCN. If this block is left blank, the reviewers could make the determination that the commodity is something other than the exporter’s desired outcome leaving the exporter unprepared to take the necessary steps to export their product timely and compliantly. If a USML Category or ECCN is provided within the application it is much easier for the reviewers to pinpoint a correct placement of the commodity and helps to advance the application. That’s not to say that the reviewers will always agree with the exporter’s assessment, but it does assist in expediting the review. 

Once the CJ review is complete, DoS will provide a determination letter to the exporter indicating whether the commodity falls under the USML or the CCL. If it is determined that the commodity belongs in a USML category, the licensing requirements of the ITAR must be followed. However, if the commodity is determined to belong on the CCL, then a very specific ECCN must be assigned in order to determine the licensing requirements. There is a separate process to assist with the proper classification of a commodity within the CCL. The process falls under the Export Administration Regulations (EAR) which is Title 15 Code of Federal Regulations (CFR) §748.3. The great thing about this process is that the Bureau of Industry and Security (BIS) will provide an ECCN down to the paragraph or subparagraph level. The results are only considered an “Advisory Opinion” but will provide the exporter with an answer whether a license is required or not for a particular commodity, end user and end use. 

The DoS Directorate of Defense Trade Controls (DDTC) has a very useful link for a Commodity Jurisdiction request:  http://www.pmddtc.state.gov/commodity_jurisdiction/index.html

The BIS, DoC has a very useful link for Classification requests: http://www.bis.doc.gov/index.php/licensing/commerce-control-list-classification/classification-request-guidelines

Need help with export controls?  TSA Inc. can help!

Heidi France is a Lead International Trade Specialist at Technology Security Associates, Inc.

Email: heidi_france@theTSAteam.com

Cover Letters - Make a Good First Impression

In the nine (9) years that I have been reviewing and pre-coordinating export license applications, one of the biggest complaints about obtaining an export license is the time factor – “How long will it take for my application to go through the system?” Certainly one of the most important things to ensure an expeditious review is to make a good first impression; and by that I mean state your purpose clearly in a well-written explanatory letter. Having reviewed thousands of applications for the Department of the Navy as a Contractor, I have seen it all; from no cover letter (Gasp!), to a cover letter that only provides a point of contact (POC) at the applicant’s company, who happens to also be the HR manager / empowered official = just took an International Traffic in Arms Regulations (ITAR) boot camp last week, to eight page cover letters that drag on (and put the reviewer to sleep) but not before Returning Without Action (“RWA-ing”) the application. Then of course, are the letters that are well-written, concise and believe me – refreshing to review so the process can move along as expeditiously as possible.

Per the ITAR (§124.12), only Technical Assistance Agreements (TAA) and Manufacturing Licensing Agreements (MLA) require an explanatory letter. It is also advisable to include an explanatory letter with all export license applications (DSP-5, DSP-61, DSP-73, and DSP-85). The required information is outlined within the regulations and quite procedural – detailed information is not mandatory, however, even with those requirements clearly outlined some letters barely make the mark.

Be sure to provide the company’s registration number, as well as contact information of the individual in your company / organization who can answer questions (should clarification be needed) about the application. A person reviewing the application at all levels within the Government review process will not hesitate to pick up the phone and call an applicant if additional information is needed. On more occasions than I would like to report, I have called a company to get clarification on a license (as a courtesy before denying or “RWA-ing”) and the person responsible for the application has had no technical background about the products or a clear understanding of why the license was sought. These occasions often led to a comprehensive discussion regarding the importance of ITAR training, the need for an internal export compliance program (for said company), and potential violations should adhering to the rules not be followed.  

When writing a cover letter, be concise and provide clear details regarding background information and reasons why the license is needed. If a precedent case exists, include the case number and clearly identify the changes of the new application from the previous approved license. The reviewer of your application is not intimate with your company and writing your letter with this understanding, is a sound approach.

If the cover letter is for an Agreement (TAA or MLA), clearly state all of the involved parties in the Agreement. Too often I review applications and the end-user list in the electronic application does not match the end-user list provided in the letter. Any inconsistency can lead to delays in the application review.  

If possible, in addition to the Government contract number, provide a knowledgeable point of contact within the appropriate DoD Program Office(s) who is aware of the application and in agreement with the purpose / intent of the license. In my experience, most DoD Programs have a single position through which licenses are staffed. That person then further staffs the license to the correct Technical POCs (TPOCs) within their Program office. If years have passed since your last application, update your POCs. I have seen names on licenses of people who have long since left a program / organization. Keeping abreast of employees and accurate organizational structures are important. Spelling, grammar, and clear requests are also very useful and helpful to the reviewer. 

Incorporating a few of the above recommendations will certainly aid in the advancement of your application. The goal is to clearly explain to DoS why your application / license is needed, include the who, what, where, when, and why…if any of the basics are missing, more time is needed by DoS to review…which may negatively impact your business / organization.

The US DoS has a very useful link of frequently asked questions and answers:  www.pmddtc.state.gov/faqs/index.html

Need help with export controls?  TSA Inc. can help!

Heidi France is a Lead International Trade Specialist at Technology Security Associates, Inc.

Email: heidi_france@theTSAteam.com

Contributor: Jackie Sudore-Flood, International Trade Director, Email: jackie_sudore-flood@theTSAteam.com