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Registration & Compliance

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.

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Registration & Compliance

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  1. Registration & Compliance David Trimble, Director Daniel Cook, Senior Compliance Specialist Defense Trade Controls Compliance May 23 2007

  2. Discussion Topics • Organizational Structure • Registration • Record Keeping • Compliance Program • Enforcement

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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)

  9. 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.

  10. 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.”

  11. 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.

  12. 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

  13. 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

  14. 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!

  15. 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

  16. 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

  17. FY 2006 – Blue Lantern Results Blue Lantern End Use Checks • 613 checks • 94 Unfavorable** **Many companies not doing their job!!!

  18. 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

  19. Enforcement Action • Indictment: Policy of Denial • Conviction: Debarment • Administrative Penalties: Consent Agreement

  20. 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

  21. Criminal Enforcement (FY04-FY06) Arms Export Control Act violations • 283 Arrests (AECA Violations) • 198 Indictments • 166 Convictions

  22. 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)

  23. 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

  24. Why Disclose ? • It is Voluntary • Sign of a Working Compliance Program • Mitigating Factor Regarding Penalties

  25. 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

  26. 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

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