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News from Reeves & Dola, LLP
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May 7, 2019
EXPORT AND COMPLIANCE NEWS -
IMPORTANT UPDATES FROM STATE, TREASURY, AND MORE
I. U.S. Senate Confirms New Assistant Secretary of State, Bureau of Political-Military Affairs
On April 30, 2019, the U.S. Senate confirmed R. Clarke Cooper as the new Assistant Secretary of State for Political-Military Affairs. His term began on May 2, 2019. The following biography is available on the Department of State's website:
Immediately prior to taking on his present role in the Trump Administration, Cooper served as the Director of Intelligence Planning for Joint Special Operations Command's Joint Inter-Agency Task Force - National Capital Region.
Mr. Cooper brings to Political Military Affairs over two decades of experience in both diplomatic and military roles. In the Bush Administration, Cooper served as U.S. Alternate Representative to the United Nations Security Council, U.S. Delegate to United Nations Budget Committee, Senior Advisor in the Bureau of Near Eastern Affairs, and Advisor at U.S. Embassy-Baghdad. His active duty military assignments include tours with Joint Special Operations Command, U.S. Africa Command, Special Operations Command Africa, Joint Special Operations Task Force Trans-Sahara, and Special Operations Command Central.
An outdoor enthusiast, he served as an Assistant Director of the National Park Service early in his career, and was an Eagle Scout in his youth.
Mr. Cooper is a graduate of The Florida State University with a bachelor's degree in history, and he maintains a field grade commission with the U.S. Special Operations Command.
He is married to fellow combat veteran, Michael Marin.
II. DDTC Revises "By or For the U.S. Government" Exemption (ITAR Section 126.4)
On April 19, 2019, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) published a final rule amending the International Traffic in Arms Regulations (ITAR) (27 C.F.R. Parts 120-130) to make changes to the license exemptions available for transfers by or for an agency or department of the U.S. Government. The changes were effective immediately upon publication.
In this revision, DDTC expands the scope of the existing exemption in ITAR § 126.4 to include temporary and permanent exports, temporary imports, reexports, and retransfers. It also allows for transfers by third parties under specific criteria.
The first subparagraph (a) covers activities undertaken by a U.S. government department or agency, and retains the prohibition that the exemption cannot be used when the U.S. government is merely acting as a transmittal agent for a private entity as a convenience or to satisfy certain security requirements. While the exemption in subparagraph (a) has been fleshed out and its scope broadened and clarified, it remains usable for exports affected by the U.S. government only.
Subparagraph (b), on the other hand, lists the exemptions for non-governmental third parties who export, reexport, retransfer, temporarily import, or provide a defense service for the U.S. government in two specific scenarios:
(1)
When the activity is to a department or agency of the U.S. Government, at its request. Do note that DDTC makes it clear in the Supplementary Information of the Federal Register notice that "under no circumstances" can subparagraph (b)(1) be used to authorize an export to non-U.S. government entity. DDTC leaves it up to the respective department or agency to determine who is authorized to use the exemption and to issue the appropriate written direction.
(2)
When the activity is to an entity other than the U.S. Government at the written direction of the U.S. Government, or pursuant to an international agreement or arrangement so long as the activity would have been authorized under subparagraphs (a)(1)-(4). Again, DDTC leaves it up to the respective department or agency to determine who is authorized to use the exemption and to issue the appropriate written direction.
It is important to note, "transfers by third parties to anyone other than the U.S. Government, including directly to any contractors, must be conducted pursuant to written direction from the U.S. Government department or agency, such as through contractual documents, or pursuant to an international agreement or arrangement. For example, transfers by a company to itself may be authorized by written direction from the U.S. Government department or agency requiring the transfer. Under no circumstances shall a transfer to any non-U.S. Government entity be authorized under paragraph (b)(1)." 84 Fed. Reg. 16398, 16399 (Apr. 19, 2019).
In addition to the two major changes outlined above, the revisions add a new subparagraph (c) to allow for the return of defense articles to the United States without a license if the following conditions are met: (1) the defense articles were exported pursuant to § 126.4 and not reexported or retransferred other than pursuant to § 126.4; and (2) the articles are being brought into the United States for return to either the U.S. Government or to the person who originally exported the item.
This revision to the "by or for" exemption is a welcome change and should allow industry to better and more quickly support U.S. Government operations overseas, as well as international agreements and arrangements. However, like most ITAR exemptions, this one also has restrictions for §126.1 countries. If your transaction involves one of those countries, be sure to review the exemption carefully to make sure it applies.
III. OFAC Publishes "A Framework for OFAC Compliance Commitments"
On May 2, 2019, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) published new guidance on sanctions compliance programs. In the document, OFAC identifies at least five essential components for an effective compliance program: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. The guidance document is available here.
IV. Justice Department Issues "Evaluation of Corporate Compliance Programs" Guidance Document
Also on May 2, the U.S. Department of Justice, Criminal Division updated its guidance on evaluating corporate compliance programs. While this document is issued to guide DOJ prosecutors in the context of criminal investigations, it is a useful resource to review when preparing or updating internal compliance programs. DOJ's guidance is available here.
The above alert is for informational purposes only and is not intended to be construed or used as legal advice. Receipt of this alert does not establish an attorney-client relationship.
Questions about this alert may be directed to:
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About Reeves & Dola
Reeves & Dola is a Washington, DC law firm that specializes in helping clients navigate the highly regulated and complex world of manufacturing, sales and international trade of defense and commercial products. We have a deep understanding of the Federal regulatory process, and use our expertise in working with a variety of Federal agencies to assist our clients with their transactional and regulatory needs.
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