DDTC

Proposed Harmonization Rule: The Defense Service Problem

August 3, 2015 is the deadline for submission of public comments to the Department of State Directorate of Defense Trade Controls (“DDTC”) proposed rule at 80 Fed. Reg. 31,525 (June 3, 2015), which seeks to redefine “Public Domain,” “Defense Service,” “Fundamental Research,” and other key terms used in the International Traffic in Arms Regulations (“ITAR”).  

The Proposed Rule marks DDTC’s third attempt to properly define the scope of defense services in the course of the President’s Export Control Reform Initiative. Its two previous proposed revisions of the defense service definition were published on April 13, 2011, under 76 Fed. Reg. 20,590, and on May 24, 2013, under 78 Fed. Reg. 31,444.

In both prior proposed rules, DDTC expressly acknowledged that the definition of defense service is overly broad, capturing certain forms of assistance or services that do not warrant ITAR control. To address this overbreadth, both proposals sought to narrow the scope of defense services to the furnishing of assistance using “other than public domain data,” integrating items into defense articles, or training of foreign forces in the employment of defense articles.

Among other things, the Proposed Rule abandons DDTC’s prior proposals to expressly exclude services using only public domain information from the definition of “defense service.” In their place, DDTC now seeks to impose a new definition of defense service that is highly subjective and broadens the scope of the term even further.

Specifically, at page 31,534 of the Proposed Rule, DDTC seeks to define defense services as assistance provided to a foreign person in various activities related to a defense article, “by a U.S. person or foreign person in the United States, who has knowledge of U.S.-origin technical data directly related to the defense article that is the subject of the assistance, prior to performing the service.” Under this newly proposed definition, it is unclear whether activities can constitute defense services regardless of whether the provider relies on his or her knowledge of the technical data. It is also a highly subjective standard, which is entirely reliant on what the government believes a person knew prior to the time of the services in question.

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*The above is not intended as an exhaustive list of restrictions that may apply to a particular transaction nor advice for a specific transaction because the specifics of an individual case may implicate application of other U.S. laws as well as foreign laws that carry added or different requirements.  In addition, U.S. export control and sanctions laws are frequently subject to change.  Such changes can affect the continued validity of the information above, which is based on U.S. law existing as of July 22, 2015. For these reasons, assistance from a qualified attorney competent to advise on such matters is highly recommended. Matthew A. Goldstein is an International Trade Attorney in Washington D.C. licensed to practice in the District of Columbia.  He can be reached at (202) 550-0040 and Matthew@GoldsteinPLLC.com

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