By: John Black
Under the deep regulatory cover of the Federal Register notice with the new ITAR UK exemption, the Directorate of Defense Trade Controls (DDTC) slipped in some changes to the ITAR 123.9(b). Depending on how you read the changes, they may create a troublesome hassle to change your automated systems and export paperwork, or they also may create a significant new compliance burden.
It seems to me that the likely case is that you, unlike many of your colleagues, have not even read the changes yet. Based on my analysis, this change creates at least two issues you should address.
If I read the new 123.9(b) literally, see three primary changes, based on the words in bold face below in the new 123.9(b):
ITAR 123.9(b) The exporter shall incorporate the following statement as an integral part of the bill of lading, airway bill, or other shipping documents, and the invoice whenever defense articles are to be exported or transferred pursuant to a license, other written approval, or an exemption under this subchapter, other than the exemptions contained in § 126.16 and § 126.17 of this subchapter (Note: for exports made pursuant to § 126.16 or § 126.17 of this subchapter, see § 126.16(j)(5) or § 126.17(j)(5)):
‘‘These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end-user]. They may not be transferred, transshipped on a noncontinuous voyage, or otherwise be disposed of, to any other country or end-user, either in their original form or after being incorporated into other end-items, without the prior written approval of the U.S. Department of State.’’
Issue 1) The ITAR now requires the statement be on “the airway or other shipping documents” in addition to the previous requirement that it be on the bill of lading and invoice. The new “other shipping documents” words seem to expand the documents on which the statement is required to include, but the ITAR, in its typical fashion, does not define what other shipping documents means, so you have to come with your best educated guess, or interpretation. Some other documents that might be shipping documents are for example, packing lists and shipper’s letters of instruction.
Issue 2) The ITAR now requires that the statement be used when defense articles are to be transferred in addition to previous requirement that is be used when defense articles are to be exported. The ITAR does not define “transfer” or “transferred.” Since the ITAR does not control transfers within the United States, I do not think the statement is required for transfers within the United States. The ITAR defines and controls “retransfers.” It could be logically inferred that all retransfers are also transfers so for the first time DDTC wants this statement put on documents for retransfers in addition to exports. If you were naïve, you might assume that DDTC would either use a defined term such as “retransfer” or define a term it uses.
Issue 3) In the actual required new 123.9(b) statement, the word “to” replaces the former word “in” and the words “or end-user” was added after “country.” This means that all such statements need to be updated to reflect the new language. Take care of this means tracking down all the automated systems and non-automated procedures that apply the statement to documents and updating the language.
My issues 1) and 3) above require the attention of companies in the United States, at least. My issue 2) creates issues primarily for companies outside the United States who transfer/retransfer defense articles—companies outside the United States have to decide whether they think this extends the 123.9(b) requirement to retransfers and take appropriate steps to revise their compliance programs accordingly.