By John Herzo, Senior Associate
On August 11, 2016, the Department of State, Directorate of Defense Trade Controls (DDTC) published its latest iteration of the Guidelines For Preparing Agreements (guidelines). DDTC updated the guidelines based on the changes to certain definitions and other sections of the ITAR that were published in the Federal Register on June 2, 2016, which go into effect on September 1, 2016. A majority of the changes to the guidelines are editorial and will not affect an applicant’s submission (DSP-5 vehicle, transmittal letter and agreement) of a proposed agreement/amendment to the Department of State for review.
Firstly, there are no changes to the guidance on how to prepare the DSP-5 Vehicle.
There is only one change required to the transmittal letter. The June 2, 2016 changes to the ITAR deleted the 22 CFR § 124.16 dual/third country national requirements. Therefore, § 124.12(a)(10) of the transmittal letter pertaining to § 124.16 should be deleted.
A summary of the main changes to the guidelines related to the preparation of the proposed agreement/amendment are as follows:
- If the applicant wishes to export EAR controlled technology under the proposed agreement the § 124.7(2) section of your agreement must identify that EAR controlled technology will be transferred and will be used in or with the ITAR technical data to be transferred under the agreement.
- The U.S. sub-licensing clause has changed slightly due to the addition of the definitions of reexports and retransfers to the ITAR. The U.S. sub-licensing clause should read as follows:
“This agreement authorizes sublicensing to U.S. Persons. Exports, reexports, retransfers or temporary imports by the U.S. sublicensee must be conducted as part of a separate authorization initiated by the U.S. Person.”
- As stated above, the June 3, 2016 changes to the ITAR deleted the § 124.16 dual/third country national requirements, therefore the proposed agreement should no longer contain the § 124.16 language
- While the § 124.16 language was deleted, the essence of § 124.16 was added to the § 126.18 dual/third country national exemption. It is not a requirement to include any language pertaining to § 126.18 in your proposed agreement/amendment, however FD Associates believes such a reference is a best practice as it puts the foreign licensee(s) on notice that they may utilize the exemption and will provide the foreign licensee(s) with information regarding the requirements of the exemption, which they are allowed to use.
- Included with the changes to authorizing dual/third country nationals was the removal of DDTC’s consideration of country of birth when dual/third country national authorization is vetted by DDTC via § 124.8(5) (Option 2 from the guidelines). When determining nationality, DDTC will now consider all countries in which a foreign person has held or holds citizenship or holds permanent residency.
- Lastly the verbatim § 124.8(5) language (USG clauses) was changed and should read as follows:
“The technical data or defense service exported from the United States in furtherance of this agreement and any defense article which may be produced or manufactured from such technical data or defense service may not be transferred to a foreign person except pursuant to §126.18, as specifically authorized in this agreement, or where prior written approval of the Department of State has been obtained.”
All changes to current agreements pursuant to the changes to the ITAR and the guidelines do not have to be made until the applicant submits its next major amendment to DDTC.
DDTC will accept new agreements with the required changes prior to September 1, 2016, the date of implementation of the changes to the ITAR. Any agreement/amendment submitted without any of the required changes after August 11, 2016, but before September 1, 2016 will be reviewed by DDTC. In such instances the applicant will be required to make the required changes to the agreement/amendment prior to execution pursuant to Provisos to the agreement/amendment. Starting on September 1, 2016 all agreements/amendments must be submitted to DDTC in accordance with the changes to the ITAR and the guidelines.