DDTC Sees Rise in Initiated End-Use Checks, Citing 'Expanding Interest' in Academia

The State Department’s Directorate of Defense Trade Controls initiated more end-use checks in FY 2022 compared with FY 2021 and saw an increase in in-person site visits due to loosened COVID-19 pandemic-related travel restrictions. In its annual Blue Lantern report released this week -- which details the agency’s end-use monitoring efforts on export-controlled defense articles and services -- the agency said it began checks on 305 export authorizations or authorization requests, an uptick from the 281 checks it began in 2021 (see 2204180030).

The increase in Blue Lantern checks was “largely” due to an “expanding interest in potential vulnerabilities posed by academic institutions,” the report said. The Bureau of Industry and Security has similarly placed more emphasis on academia, launching a university outreach program last year and announcing plans to expand the program to additional universities (see 2303100021 and 2206290019).

DDTC also said it performed Blue Lantern checks on nearly 2% of approved license applications in 2022, a "higher rate than in previous fiscal years." The agency also spent about $70,000 for Blue Lantern inquiries closed last year compared with the $25,747 it spent in 2021 because of a “gradual return to in-person site visits and inventory checks.” DDTC’s Country and End-Use Analysis Division also resumed its in-person overseas outreach visits to meet with embassy personnel and host government officials and “foreign businesses engaged in trade” of items controlled under the International Traffic in Arms Regulations.

Although the agency scheduled more in-person visits in most countries, it faced restrictions traveling to Ukraine because of Russia’s invasion. The agency said it suspended routine Blue Lantern checks in the country in February 2022 and instead began “consulting” with the Ukrainian Embassy in Washington, D.C., to “confirm the details of certain transactions.” This effort isn’t “intended to reflect a permanent change in operations,” the report said, adding that DDTC resumed some “limited” in-person visits in Ukraine this year.

The agency also noted it closed 226 Blue Lantern checks in FY 2022, a slight drop from the 256 closed in 2021. Of the 226 checks, the agency said about 30% were closed as “unfavorable” -- meaning the agency couldn’t verify certain information -- the same figure as in 2021. The most common reasons for the unfavorable findings included “unresponsiveness of a foreign party” or “discrepancies between the information the foreign party provided and what was authorized in the license.”

DDTC also updated about 1,000 entries and added about 1,500 new entries to its Watch List, an internal DDTC screening tool that includes more than 229,000 entities that receive “extra scrutiny” when they appear on a license application. DDTC also continued an initiative begun in 2020 to “systematically” share its Watch List with BIS, which improves BIS' ability “to regulate items it controls, especially those items formerly controlled" on the U.S. Munitions List.

The State Department also released its annual report on Defense Department end-use monitoring for items transferred through the agency’s Foreign Military Sales program. The agency’s Golden Sentry program reviewed more than 500 letters of offer and acceptance and other transfer agreements in 2021, similar to the previous year. The Defense Department also conducted more than 2,500 “physical security checks” of storage facilities and carried out “accountability inventories” of more than 200,000 controlled defense items.

The Defense Department noted that it introduced new “defense article accountability practices for the hostile environment in Ukraine through expanded self-reporting procedures.” This included a “new accountability policy and enhancements” to allow Ukraine to inventory its defense articles efficiently, the agency said. “The self-reporting procedures are successfully establishing evidence of in-country receipt of U.S. defense articles,” the report said. “Ukraine is establishing reasonable assurance under combat conditions that U.S. defense articles are accounted for in accordance with EUM requirements.”

The agency also said it didn't find “any compliance issues or concerns related to transfers of small arms and light weapons” in 2022. DOD plans to conduct both in-person and virtual compliance visits in FY 2023 and 2024 for Chile, Colombia, Costa Rica, Ecuador, Egypt, Ethiopia, Georgia, Greece, India, Indonesia, Iraq, Kenya, Lebanon, Malaysia, Mexico, Morocco, Pakistan, Peru, Portugal, Saudi Arabia, Tunisia, United Arab Emirates, Uganda and Uruguay.