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The Second Step in ITAR Registration

GraceBIO

ABC Company is registered with the Department of State as a manufacturer of defense articles. During the company annual registration renewal process, the ABC Company office administrator assigned to prepare the registration renewal for signature by the senior corporate officer identified that ABC Company had in the preceding 12 months since the last registration renewal moved and changed their name due to a corporate rebranding effort.

 

In the DECCS DS-2032 registration form, as ABC Company attempts to prepare the renewal, they find that they cannot make these changes because the name and address are greyed out on the application.

 

What are they doing wrong?

 

Is it administrative? Or is there a regulatory compliance matter that they have failed to comply with?

 

ABC Company is experiencing both an administrative issue and a compliance issue.

 

There is an administrative issue because the name and address blocks on the renewal form are greyed out; the DECCS system will not allow for these changes to be made on the renewal form. A registration amendment must be filed to change these details on the DS-2032.

 

There is a compliance issue because a change in company name and address requires ABC Company to notify DDTC of the changes under 22 C.F.R. § 122.4. By failing to notify DDTC, ABC Company has found themselves to be in non-compliance with the ITAR.

 

22 C.F.R. § 122.4 states that within 5 days of the event, or 60 days in advance, written notification must be made to DDTC by the senior officer of the registrant of that change.

 

What counts as a change in company information?

  • Any change to the eligibility and/or conviction status of those listed on the registration statement. This includes indictment or otherwise charged (i.e. by criminal information in lieu of indictment) for or conviction of violating any of the U.S. criminal statutes listed in ITAR 120.6 or foreign criminal law on exportation of defense articles where conviction of such law carries a minimum term of imprisonment greater than 1 year; or becomes ineligible to contract with, or to receive a license or other approval from any agency of the U.S.G;
  • Any change to your company name or address.
  • Any change to your company organizational structure.
  • Any change in the ownership or control status of the company (DDTC requires all persons directly or indirectly with 5% or more ownership to be listed)
  • Any change in your senior officials, owners, and board members:
    • Resignations/Retirements
    • New appointments
    • Ownership percentage changes
  • Any acquisition, divestment, or establishment of a new subsidiary engaged in ITAR related activities.
  • Any change to parent/subsidiary or affiliate companies’ information.

 

As exports consultants, we routinely discover that our ITAR registered clients have failed to properly notify the Department of State, Directorate of Defense Trade Controls and Compliance (“DDTC”) of material changes to their company information. We learn of this when asking our clients to verify the accuracy of the information contained in the current DS2032 filing made 1 year earlier. Name changes, address changes, owners/officer and ownership changes are significant material changes that should be managed within your company with an eye towards making all notifications within the 5-day post event notice timeline. Failure to notify the Department of State signals that your company doesn’t have a pulse on this administrative obligation. If your company is not managing its registration within the Department of State ITAR requirements and compliance guidelines[1], what else is your company not compliant with?

 

All companies and organizations involved in ITAR-regulated manufacturing and exporting must have a valid registration with DDTC. Filing a registration with DDTC annually and receiving approval is the first step in ensuring your company avoids any ITAR related compliance violations.

 

Maintaining a valid registration is the second step. Maintenance of your registration is more involved than submitting a renewal application each year and submitting the DDTC renewal fee payment (see below for a recent update on fees). All DDTC registered companies are required to submit notification to the Department of State of certain changes to the company information listed on your registration statement. This requirement is stipulated in 22 C.F.R. § 122.4(a)[2].

 

22 C.F.R. § 122.4(a) requires notification to DDTC within 5 days of the event of any change to the eligibility and/or conviction status of those individuals or entities listed on the registration statement. This includes indictment or otherwise charged (i.e. by criminal information in lieu of indictment) for or conviction of violating any of the U.S. criminal statutes listed in ITAR 120.6 or foreign criminal law on exportation of defense articles where conviction of such law carries a minimum term of imprisonment greater than 1 year; or becomes ineligible to contract with, or to receive a license or other approval from any agency of the U.S.G.

 

22 C.F.R. § 122.4(a) also requires 5-day notification to DDTC if there is a change in the registrant’s name or address, organizational structure, ownership of control of the company, establishment, acquisition, or divestment of a subsidiary company, or any change to the board of directors, senior officers, partners, or owners.

 

22 C.F.R. § 122.4(b)[3] requires notification to DDTC 60 days prior to an intended sale or transfer of ownership or control of the registered company to a foreign person or entity. The 60-day notification does not relieve the requirement to notify the DDTC of the sale or transfer (5-day notice) after the Committee on Foreign Investment in the United States (CFIUS) review is complete, or to secure export licenses for any possible export of technical information during the due diligence process.

 

22 C.F.R. § 122.4(c)[4] requires notification to DDTC within 5 days of the event to any merger, acquisition, or divestiture of a registrant. The details of the transaction should be provided in the notification along with all licenses and agreements that will be affected by the change. Following notification to DDTC, the registrant must subsequently receive approval of the transaction.

 

 

Recent update from DDTC on registration fees:

 

On June 26, 2023, The Department of State’s IT Modernization Team deployed the new “Renewal Fee Details” functionality to the DECCS Registration application. This feature will only be visible to Registration application users and affect small companies who fall into the Tier 3 (submitters of more than 10 export license applications) with a reduced registration fee.

 

Registration tiers are based on the number of license applications submitted by the registrant. Tier 1 registrants are those submitting an initial registration application, registrants who have not submitted any license applications during the preceding 12 months, and non-profit registrants. The set fee for Tier 1 registrants is $2,250. Tier 2 registrants are those renewing their registration who have submitted 1-10 license applications during the preceding 12 months. The set fee for Tier 2 registrants is $2,750. Tier 3 registrants are those renewing their registration who have submitted more than 10 license applications during the preceding 12 months. The fee for Tier 3 registrations is based at $2,750 and increases $250 for every license application after the 10th application.

 

The process:

  • 90 days or fewer remaining prior to the Registration expiration date;
  • The organization is subject to a Tier 2 or Tier 3 registration renewal fee[5]; and
  • Organizations having a minimum of 1 or more licenses “Approved” or “Approved with Provisos” in the twelve-month window ending 90 days before Registration expiration.

 

Provided the above criteria are met, users will see a new “Renewal Fee Details” button in their Registration dashboard in DECCS when there are 90 days or less before the expiration date. Selecting this button will display a pop-up window featuring additional details and information on how the renewal fee was calculated. Users will now be able to see the following information consolidated into the new Renewal Fee Details window:

 

  • Registration expiration date;
  • License Period “Start” and “End” dates;
    • Any licenses which were either “Approved” or “Approved with Provisos” within this date range were incorporated in the calculation of renewal fees;
  • Number of Licenses;
    • Any licenses which were “Returned Without Action” (RWA) will not be included in the calculation of renewal fees;
    • DS-4294 & DS-6004 licenses are not included in the calculation of renewal fees;
  • Total License Value;
  • 3% of Total License Value Reduced Fee (Tier 3 Renewals Only);
    • The 3% of Total License Value Reduced Fee field is provided only for calculation purposes and will not be applicable to all organizations. Please see the “Payment of Registration” website page to determine your organization’s renewal fee tier and discount fee eligibility; and
  • Renewal Fee Charged By DDTC.

 

Within this pop-up window, users will be presented with a “Download Licenses” button which generates a .csv file of all licenses considered when calculating the renewal fee charged by DDTC. This .csv file will include the case number, license type, approval date, and license value of all licenses “Approved” or “Approved with Provisos” within the license period date range that were used in the calculation of the renewal fee.

 

ITAR registered companies must remain vigilant in maintaining the accuracy of their registrations with The Department of State. Do not skip the second step of your ITAR registration.

 

 

 

[1]https://www.pmddtc.state.gov/ddtc_public/ddtc_public?id=ddtc_kb_article_page&sys_id=4f06583fdb78d300d0a370131f961913

[2] § 122.4 Notification of changes in information furnished by registrants. (a) A registrant must, within five days of the event, provide to the Directorate of Defense Trade Controls a written notification, signed by a senior officer (e.g., chief executive officer, president, secretary, partner, member, treasurer, general counsel), if:  (1) Any of the persons referred to in § 122.2(b) is indicted or otherwise charged (e.g., by criminal information in lieu of indictment) for or convicted of violating any of the U.S. criminal statutes enumerated in § 120.6 of this subchapter or violating a foreign criminal law on exportation of defense articles where conviction of such law carries a minimum term of imprisonment of greater than 1 year, or becomes ineligible to contract with, or to receive a license or other approval to export or temporarily import defense articles or defense services from any agency of the U.S. Government; or (2) There is a change in the following information contained in the Statement of Registration: (i) Registrant's name; (ii) Registrant's address; (iii) Registrant's legal organization structure; (iv) Ownership or control; (v) The establishment, acquisition, or divestment of a U.S. or foreign subsidiary or other affiliate who is engaged in manufacturing defense articles, exporting defense articles or defense services; or (vi) Board of directors, senior officers, partners, or owners.

[3] (b) A registrant must notify the Directorate of Defense Trade Controls by registered mail at least 60 days in advance of any intended sale or transfer to a foreign person of ownership or control of the registrant or any entity thereof. Such notice does not relieve the registrant from obtaining the approval required under this subchapter for the export of defense articles or defense services to a foreign person, including the approval required prior to disclosing technical data. Such notice provides the Directorate of Defense Trade Controls with the information necessary to determine whether the authority of § 38(g)(6) of the Arms Export Control Act regarding licenses or other approvals for certain sales or transfers of defense articles or data on the U.S. Munitions List should be invoked (see § 126.1(e) of this subchapter).

 

[4] (c) The new entity formed when a registrant merges with another company or acquires, or is acquired by, another company or a subsidiary or division of another company shall advise the Directorate of Defense Trade Controls of the following: (1) The new firm name and all previous firm names being disclosed; (2) The registration number that will survive and those that are to be discontinued (if any); (3) The license numbers of all approvals on which unshipped balances will be shipped under the surviving registration number, since any license not the subject of notification will be considered invalid; and (4) Amendments to agreements approved by the Directorate of Defense Trade Controls to change the name of a party to those agreements. The registrant must provide to the Directorate of Defense Trade Controls a signed copy of such an amendment to each agreement signed by the new U.S. entity, the former U.S. licensor and the foreign licensee, within 60 days of this notification, unless an extension of time is approved by the Directorate of Defense Trade Controls. Any agreement not so amended may be considered invalid.