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Department of State to Mandate Electronic Submission of Agreements, Amendments, and Proviso Reconsiderations Required by the International Traffic in Arms Regulations
Department of State to Mandate Electronic Submission of Agreements, Amendments, and Proviso Reconsiderations Required by the International Traffic in Arms Regulations
V&E Export Controls and Economic Sanctions E-communication, July 6, 2010
Beginning September 1, 2010, the Department of State, Directorate of Defense Trade Controls (DDTC) will no longer accept paper submissions of agreements, amendments, and proviso reconsiderations. Exporters will be required to submit these requests electronically, using DDTC’s Internet-based DTrade 2 system. As a result, agreements originally approved in paper format must be resubmitted electronically by the applicant and approved again by DDTC, which generally requires substantially updating the agreement (rebaselining) to incorporate regulatory requirements that were enacted after the agreement was originally approved. In some cases, the rebaselining exercise may uncover evidence of possible past noncompliance. Agreements must be rebaselined before electronic applications for proposed amendments to the agreement may be submitted. Therefore, exporters should rebaseline all paper agreements that may need to be amended as soon as possible.
In addition, beginning on September 1, DDTC will require that proposed amendments integrate the approved agreement and all previous amendments, to create one conformed document. This means that new amendments must comprehensively describe the scope of the entire agreement and may not simply describe changes to the scope. After September 1, failure to meet these requirements in an agreement, amendment, or proviso reconsideration resubmission will result in the application being Returned Without Action (RWA). Vinson & Elkins has substantial experience rebaselining agreements and preparing new agreements, amendments, and proviso reconsiderations that meet DDTC’s current requirements.
Pursuant to the International Traffic in Arms Regulations (ITAR), DDTC must approve all exports of defense articles, defense services and related technical data, and manufacturing know-how. In general, defense articles are items that are designed for military use and are listed on the United States Munitions List. The U.S. exporter may request that DDTC approve an agreement between the U.S. exporter and the foreign parties receiving the export. DDTC reviews and approves three types of agreements: Technical Assistance Agreements (TAA), Manufacturing License Agreements (MLA), and Warehouse and Distribution Agreements (WDA). An approved TAA allows a U.S. person to perform defense services and disclose technical data to the foreign parties of the agreement. A TAA may allow the assembly of defense articles, but exporters must have an approved MLA to provide production rights or convey manufacturing know-how to the foreign parties. An approved WDA allows a U.S. person to establish a warehouse or distribution point abroad for defense articles exported from the U.S. to distribute to entities in an approved foreign sales territory. To the extent the scope of a previously approved agreement changes, the agreement needs to be amended. Most amendments require prior DDTC approval.
Prior to submitting proposed agreements or amendments electronically, exporters must register with DTrade 2, in addition to maintaining their DDTC registration. For detailed instructions on the steps to take prior to using DTrade 2, see DDTC’s publication Getting Started with DTrade.
As previously discussed, beginning September 1, the process for obtaining agreements or for requesting reconsideration of provisos (conditions) imposed by DDTC upon approval of an agreement will be entirely paperless. Applicants will provide the same information through DTrade 2 that is currently required in a paper submission of agreements to DDTC. When submitting agreements via DTrade 2, applicants will utilize the DSP-5 vehicle, although the DSP-5 vehicle serves only as the tool that transmits the agreement proposal from the applicant to DDTC, and DDTC’s position back to the applicant. The DSP-5 vehicle is not an authorization, and DDTC will include provisos on all electronically submitted agreements to this effect. In addition, applicants may disregard the 48 month expiration date shown on the DSP-5 vehicle; DDTC will specify the correct expiration in the first proviso. Because the information required for a DSP-5 application varies slightly from the information required for an agreement application, applicants must be careful to submit all of the information required by the ITAR for proposed agreements.
The transmittal letter and proposed agreement or amendment should be included as attachments within the DSP-5 vehicle. These documents are still the primary focus of the review by DDTC. A separate ITAR Section 126.13 certification to accompany the transmittal letter is no longer required, as long as an empowered official certifies the DSP-5 vehicle and there are no previous violations related to the request. Other documents shall also be uploaded to the DSP-5 vehicle, including executed copies, notification of initial export, minor amendments, sales reports, and DSP-83 certificates. Applicants may submit electronic copies of these documents by attaching them to the DSP-5 vehicle, but should maintain the original versions pursuant to record-keeping requirements of the ITAR. To expedite DDTC review, applicants should attach documents as searchable “pdf” files, use descriptive names for the attached files, and integrate the proposed agreement and all exhibits, appendices, and annexes into a single document. The total submission package must be less than 35 MB, or applicants risk serious delays. Additional or missing documentation can be uploaded after submission of the agreement.
For agreement proposals, applicants must specify that it is an agreement submission, and not a DSP-5 application, by preceding the transaction number on the DSP-5 vehicle with the letters “AG.” For proviso reconsiderations, the General Correspondence letter and 126.13 Certification Letter, traditionally submitted in paper, should be attachments to the DSP-5 vehicle.
When agreements or amendments are submitted electronically, applicants may track the status electronically by referencing the nine-digit number automatically generated by DTrade 2 upon submission. This number is used throughout the adjudication process and is searchable on MARY Status Retrieval System, Ellie Net, and Export License Status Advisor (ELISA). Like paper submissions, DDTC will assign each agreement a six-digit number upon receipt of the application, which provides a reference for all activities occurring under the approved agreement throughout its duration.
According to DDTC, the electronic submission of agreements will result in reduced processing time, improved tracking of cases, and will eliminate the requirement to submit CD-roms for lists of sublicensees over 15. For more specific instructions, including step-by-step guidance on completing the DSP-5 vehicle for agreements, amendments, and re-baselines, see DDTC Guidelines for Preparing Electronic Agreements.
For further information about the preparation and electronic submission of ITAR agreements, amendments and proviso reconsiderations, as well as managing any compliance issues resulting from the new electronic submission process, please contact Vinson & Elkins lawyers Kathleen Little, David Johnson, or Suzanne Reifman. Visit our website to learn more about V&E's Export Controls and Economic Sanctions practice, or e-mail one of the practice contacts.
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