DDTC Readying New Guidance, Revamping Part 130 Process, Official Says

The State Department plans to soon issue new export compliance guidance and has made progress updating its Part 130 process, senior agency official Mike Miller said. Miller, speaking during the Defense Trade Advisory Group plenary last week, also said the Directorate of Defense Trade Controls is working more closely with the Commerce Department on end-use checks, and said the agency has seen an uptick in violations involving illegal exports of technical data.

The agency has completed its work on new compliance guidelines, an effort underway since at least May (see 2204290032), said Miller, deputy assistant secretary for defense trade. The guidelines, which Miller expects to be published “later this month,” will be “very useful” for companies and universities looking to improve their compliance with the International Traffic in Arms Regulations, he said. He also said the agency is making “steady progress” on a new “compliance risk matrix,” which will help companies understand if their activities need a license. He said the matrix should be published “later this year.”

DDTC has also improved its Part 130 process, Miller said, which deals with political contributions, fees and commissions relating to sales of defense articles and defense services. The agency last year saw an uptick in issues related to recordkeeping and Part 130 violations and has sought to work closer with industry to understand whether its regulations are clear enough to help companies avoid the violations (see 2109290056).

That work has included bolstering its “internal reporting processes,” Miller said, adding that DDTC is now providing more “detailed reports” to Congress on commissions and contributions under Part 130. Because of the more detailed reports, DDTC staff is conducting more due-diligence on the Part 130 reporting it receives from industry, including asking for “clarification on anything that is not crystal clear to us,” Miller said. “So if you've recently received additional requests for information from us, that is why.”

The agency also began conducting joint end-use checks with Commerce this summer, Miller said. Instead of sending multiple government officials to visit a company two or three times, Miller said both agencies can now conduct a single end-use check “where commodities and foreign parties of interests overlap." This "reduces the burden on our U.S. embassy staff as well as the impacted company,” Miller said, adding that it also “increases efficiencies in the system” and gives more “clarity and transparency for our host-nation partners.”

Among the recent disclosures it has received, Miller said, the agency has seen a “recent trend” involving unauthorized accessing of ITAR-controlled technical data by foreign employees. The agency also has seen more illegal exports of technical data stemming from “improper jurisdiction and classification or insufficient internal controls.” Miller said these violations “can severely damage our national security,” adding that illegal access to this data “may reveal how to make more sensitive items or provide insights into the operation or capabilities of U.S. weapons.”

Miller also said DDTC processed nearly 24,000 licenses in fiscal year 2021, and said he expects the value of its licenses to increase for FY 2022 as U.S. exporters continue to send items to Ukraine. The agency’s current processing time for a license averages 48 days, Miller said, and DDTC continues to maintain an “all-time high” amount of registered manufacturers, exporters and brokers at more than 14,400.

He said the large volume of exporters seeking licenses has been a challenge. “At any given time, our licensing team has thousands of requests pending adjudication. For every request, an analyst must be intimately familiar with the transaction, the technology, end user and the ongoing interagency assessments,” Miller said. “This is far from an easy task to execute effectively.”