By Kenneth Schmidt – Senior Associate
After a fifteen-year pause in price increases, impressive by any measure, the Directorate of Defense Trade Controls (DDTC) proposes to recalibrate its registration fee structure for exporters, importers, brokers, and manufacturers to fund ongoing operations, technology modernization, registrant support, monitoring and enforcement, and general public outreach operations. The change will mostly impact the approximately 14,500 current DDTC registrants. The rationale, inflation increases over the 15-year period when the rates were last established is a staggering 40%. Given the irregularity of the fee increases, some of the proposed fees are below the 40% inflation while other rates represent an increase that accounts for inflation but adjusts for the future.
DDTC uses a three-tiered structure for registrations. Tier 2 and Tier 3 will see the biggest adjustments, both in terms of price and tier scope.
The tiers are proposed to be defined as follows:
Tier 1 registrants are persons in the business of manufacturing who (i) do not export, (ii) utilize ITAR exemptions for export, or (iii) have yet to receive a favorable determination from DDTC (i.e. approval, approval with provisos, or written authorization from DDTC to conduct ITAR-regulated activities. Tier one will also include persons engaged in the business of brokering activities (whether you license or not).
Tier 2 registrants are moderate users of DDTC services and comprise those who received five or less favorable determinations on license applications or requests for authorization for the twelve months preceding ninety days prior to the expiration of current registrant’s expiration.
Tier 3 registrants comprise those receiving more than five favorable determinations in the twelve months preceding ninety days prior to the expiration of current registrant’s expiration. Additionally, Tier 3 registrants pay an additional $1,100.00 for each favorable determination over five.
DDTC’s current registration discount for exporters and temporary importers of low-value items who fall under Tier 3 will remain unchanged. This low-value discount formula is currently available on the DDTC website.
Finally, Tier 2 and Tier 3 non-profit organizations (26 U.S.C. 501(c)(3)) may also be eligible for a discount to Tier 1 treatment.
Now for the sticker shock:
- Tier 1 registrations will now be a flat fee of $3,000.00 (33% increase)
- Tier 2 registrations will now be a flat fee of $4,000.00 (45% increase) and permit five or less favorable determinations within the lookback period.
- Tier 3 registrations will now be a flat fee of $4,000.00 (45% increase) and $1,100.00 (~440% increase) for each determination beyond the gratis five determinations within the lookback period.
- Exceptions: Existing discounts apply to exporters with low value exports and temporary import license filers
- Tier 2 and Tier 3 non-profits may qualify for Tier 1 rate
Comments on the proposed rule are requested by June 10, 2024.