[co-author: Alex Cotoia]
Alex Cotoia, Regulatory Manager at The Volkov Law Group, rejoins us for a posting on recent ITAR Guidance on U.S. Persons Abroad.
On January 5, 2023, the U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) published updated guidance concerning authorizations issued to U.S. Persons Abroad (“USPABs”) as defined in 22 C.F.R. Section 120.62. Current regulations require all USPABs—U.S. Persons residing overseas in the employ of a foreign national who furnish either their employer or a third party with certain defense services—to request specific authorization from DDTC permitting such activity. As the new guidance stresses, for the purposes of an authorization submission to DDTC, USPABs are considered the applicants, while any foreign parties—to include the USPAB’s foreign employer and third parties—are considered the foreign end-users of the USPAB’s defense services.
USPABs file their license applications utilizing DDTC’s “Defense Export Control and Compliance System” or “DECCS” (accessible here) and Form DS-6004. Significantly, applicants are not required to be registered with DDTC to make a Form DS-6004 submission utilizing that system, although they must register for a DECCS user account. A complete Form DS-6004 submission consists of the form itself, along with a submission letter, resume, detailed job description (to the extent such information is not already provided in the submission letter); an ITAR Section 126.13(a) certification; and other supporting documentation.
What is an ITAR Section 126.13(a) certification?
Ordinarily, an ITAR Section 126.13(a) certification is an attestation signed by an empowered official of an entity—or in this case, a USPAB applicant— that attests to the fact that:
(1) neither the applicant nor its principal executive officers, or any members of its board of directors (collectively, “Senior Officials”), have been subject to an indictment or otherwise charged with, nor been convicted of, violating any U.S. criminal statutes enumerated in ITAR Section 120.6;
(2) neither the applicant nor its Senior Officials is ineligible to contract with, or to receive a license or other approval to temporarily import or export defense articles or defense services from any agency of the federal government;
(3) no party to the intended export has been convicted of or violating any U.S. criminal statutes enumerated in ITAR Section 120.6 or is ineligible to contract with, or to receive a license or other approval to temporarily import or export defense articles or defense services from any agency of the U.S. government; and
(4) the person signing the application or other request for approval is a citizen or national of the United States; has been lawfully admitted as a permanent resident, or if an official of a foreign government entity in the United States, or a foreign person making the request pursuant to ITAR Section 123.9.
Section 126.13(a) certifications are required for virtually all submissions made to DDTC; Form DS-6004 submissions are no exception.
What Constitutes a “Defense Service”?
Notably, USPABs are only required to apply to DDTC for the issuance of license only if they are involved in providing a “defense service” to their foreign employer or third-party end-user as identified by 22 C.F.R. Section 120.32(a)(1) and (3). A “defense service” is specifically defined in those subsections as encompassing any, or all, of the following:
(1) the furnishing of assistance (including training) to foreign persons, whether in the United States or abroad, in the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing, or use of defense articles; or
(2) military training of foreign units and forces, including formal and informal instruction of foreign persons in the United States or abroad by correspondence courses, technical, educational, or information publications and media of all kinds, training aid, orientation, training exercise, and military advice.
In short, USPABs are required to apply to DDTC for an authorization to the extent they are involved in providing either their foreign-based employer or a third-party foreign national with any assistance that might implicate a “defense article” as identified on the United States Munitions List (“USML”) or foreign military training of any kind. When in doubt, USPABs are strongly urged to err on the side of caution and apply to DDTC prior to engaging in any activity that might implicate a designated USML article.
What are the elements of a complete USPAB authorization application?
As mentioned above, a complete USPAB authorization application (Form DS-6004) consists of the form itself (available in DECCS), along with a submission letter, resume, detailed job description (to the extent such information is not already provided in the submission letter); an ITAR Section 126.13(a) certification; and other supporting documentation. The content of the submission letter should largely replicate the substantive sections of the template also released by DDTC contemporaneous with the issuance of the updated guidance. As the guidance notes, however, USPABs should be as “descriptive as possible” when describing what defense services the USPAB will be furnishing to the foreign person. Specifically, the letter should incorporate a description of the USPAB’s precise technical role, the defense article(s) involved, the particular program(s) under which the defense service will be rendered, the ultimate end-use(s) for the item in question, and the specific USML category under which the defense services will be provided. Wherever possible, the USPAB should use the nomenclature contained in ITAR Sections 120.32(a)(1) and (3) when describing the types of activities the USPAB will be involved in (e.g., the design, development and maintenance of a software platform for the operation of XYZ defense article). Generic descriptions are strongly disfavored by DDTC, and may result in return of the application to the USPAB without action (“RWA”) or the issuance of more restrictive “provisos” (license conditions) than would have been ordinarily issued in connection with the USPAB authorization.
Second, USPABs should also thoroughly document their relevant U.S. educational or professional experience, including current or prior affiliations with U.S. defense contractors and/or experience gained while serving in the U.S. armed forces. Applicants that lack relevant U.S. educational or professional experience in relation to the services being provided should state plainly that they have no such experience. As the guidance emphasizes, however, even applicants that were not previously employed by U.S. defense contractors or that lack military experience may still have some experience dealing with defense articles (e.g., USPABs that worked for a commercial space company whose launch vehicle is controlled under Category XV(a)). As such, applicants should carefully scrutinize the totality of their professional experiences for even the slightest exposure to, or familiarity with, USML articles.
Finally, USPABs must furnish a complete list of all foreign parties to whom the defense services will be provided. This includes both the name of the foreign individuals or entities and their full physical addresses. If the list is extensive, then a separate attachment may be utilized by the applicant.
May a third party make a submission on behalf of a USPAB?
A USPAB may designate a third party to make a Form DS-6004 submission on his or her behalf and interact with DDTC with respect to the authorization application. This includes the U.S. person’s prospective or current employer, a U.S. affiliate of the foreign employer, or an attorney engaged by the applicant to act in his or her stead. DDTC requires, however, that the applicant include a statement at the end of the submission letter noting that a third party has been utilized in connection with the submission by incorporating the following statement verbatim:
““I, (applicant name), authorize DDTC to contact (designee name) with any questions related to my application. I acknowledge that I have read through this application and all the information contained herein is true and correct.”
It should be noted, however, that the act of appointing a third party to act on the USPAB’s behalf does not relieve the USPAB from complying with the provisions of the ITAR.
Are there limitations to a USPAB authorization once issued by DDTC?
Yes. As the guidance explains, a USPAB authorization permits the applicant to provide the defense services listed in the authorization only, as defined in ITAR Section 120.32(a)(1) and (3). To the extent an export of a defense article or technical data is required, the applicant must make a separate license application to DDTC. In addition, the applicant may only provide defense services to the foreign nationals identified in the final authorization. Finally, the responsibility lies with the applicant to share his or her USPAB authorization with a foreign employer or third party to whom the defense services will be provided.
Navigating the constraints of the ITAR can be complex for even the most experienced practitioner, but the issuance of updated USPAB guidance and templates is designed to assist a growing number of USPABs applying for permission to provide defense services to foreign nationals abroad with the authorization process. In conjunction with updated Frequently Asked Questions (“FAQs”), the new guidelines should serve to streamline the overall process, and allow for the more expeditious processing and issuance of USPAB authorizations. Of course, when in doubt, individuals new to the trade compliance field should engage competent counsel with questions in relation to both the ITAR and the USPAB authorization process.