Registration & Compliance

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

Discussion Topics

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

Office of Defense Trade Controls Compliance (DTCC)

David Trimble, Director Daniel Buzby, Deputy Director ICE Liaison FBI Liaison 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 Congress

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

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

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

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

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)

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.

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.”

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.

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 country’s interests with strong internal controls

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

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!

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

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

FY 2006 – Blue Lantern Results Blue Lantern End Use Checks

•

613 checks

•

94 Unfavorable**

** Many companies not doing their job!!!

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

Enforcement Action

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

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

Criminal Enforcement (FY04-FY06)

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

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)

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

Why Disclose ?

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

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) Don’t Hesitate to Seek U.S. Government Guidance

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 [email protected]

• Learn More About U.S. Defense Trade Controls Registration, Licensing, and Other ITAR Regulatory Matters at:

www.pmddtc.state.gov