DDTC Issues FAQs on Registering Joint Ventures

The State Department’s Directorate of Defense Trade Controls published new guidance this week to clarify how and when joint ventures must be included on registration statements. The new frequently asked questions cover companies subject to the International Traffic in Arms Regulations and that are governed by a joint venture agreement.

In one FAQ, the agency said the DDTC registrant that “manages the day-to-day operations” of the joint venture is generally the one that’s required to add the venture to Block 8 of its DS-2032 Statement of Registration. If both registrants “have equal management control” of the venture, DDTC said it may look to “other factors” to determine controls, including which company is most responsible for “specific ITAR related activities enumerated in the JV agreement.” DDTC may also examine “specifically stipulated tie-breakers, arbitration agreements, etc.”

If the venture has a 50/50 ownership split and is “independently managed,” then it must “send a registration submission using a DS-2032 form in Defense Export Control and Compliance System (DECCS) Registration to receive its own, separate registration and code,” DDTC said.

Another FAQ addresses which joint venture member “holds responsibility for listing the JV” on the registration form in the Defense Export Control and Compliance System. DDTC said that will “depend on several factors,” adding that if a registrant owns more than 50% of the outstanding voting securities, it must add the venture to the form in DECCS as a subsidiary, “so long as the JV is separately incorporated as its own legal entity.” If the registrant doesn’t own more than 50% of the voting securities of the JV, “but otherwise manages the day-to-day operations of the JV,” then it should add the venture to the form in DECCS “as a controlled affiliate,” the agency said.

Other FAQs cover registering a foreign-incorporated joint venture; the type of legal entities that can be added to Block 8 of the DS-2032 form; and a joint venture that is incorporated in the U.S. but the management and control are split between two foreign persons.