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) ICE Liaison FBI Liaison David Trimble, Director Daniel Buzby, Deputy Director • 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
RegistrationAECA 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 UnitedStates in the business of either Manufacturing or Exporting defense articles or FurnishingDefenseServices 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 DDTCResponseTeam@state.gov • Learn More About U.S. Defense Trade Controls • Registration, Licensing, and Other ITAR Regulatory • Matters at: • www.pmddtc.state.gov