DDTC Excludes Temporary Imports from Rule Describing Activities That Don't Need Authorization

The State Department this week published a final version of a rule to expand its regulatory definition of activities that don’t need a license because they don’t qualify as exports, reexports, retransfers or temporary imports. The rule, effective Sept. 16, is largely consistent with the proposed version, though the agency made changes to narrow its scope and make sure certain temporary imports will still require a license.

The original rule, published by the Directorate of Defense Trade Controls in December 2022, proposed two additional activities that it said shouldn’t be exports, reexports, retransfers or temporary imports and therefore shouldn’t qualify as a “controlled event” under the International Traffic in Arms Regulations (see 2212150028).

One would allow companies to avoid submitting license applications for when a foreign government’s armed forces or U.N. personnel takes an exported defense article out of a previously approved country, under certain conditions. The other would clarify that reexport and transfer requirements don’t apply to foreign defense items that are imported into the U.S. but are subsequently exported under a license, as long as those items weren’t modified in some way or had a U.S.-origin defense article integrated into them.

The agency is finalizing both changes but narrowed the scope of their exclusions so that certain temporary imports and subsequent exports still require a license. DDTC stressed that the rule is aimed at foreign transfers of foreign defense items that had already been imported into the U.S. and since exported -- not the temporary import or export itself.

Although DDTC had originally included exports and temporary imports in the proposed rule, it decided to exclude them after other government agencies voiced concerns about how the change could affect import reporting requirements, including through ACE.

“Considerations of tracking temporary imports and a long process to change ACE reporting and coding options led the Department to reevaluate this aspect of its proposal in this particular rulemaking,” the agency said.

It also said the rule was meant to reduce the “need to submit reexport and retransfer requests for activities that are routinely approved." DDTC also wanted to "provide clarity regarding subsequent control of unmodified foreign-origin defense articles that have been subject to ITAR control while in the United States,” not necessarily to capture temporary import licenses.

“The resulting change in this rule does not impose any new obligation or requirement,” DDTC said. “Rather, it is a reduction in the scope of the broader exemption initially proposed.”

DDTC specifically added a “limitation” to clarify the activities outlined in the rule don’t apply to “exports from the United States and temporary imports into the United States.” This clarified that a “transfer of a wholly foreign defense article is not a controlled event, unless it is an export from, or a temporary import into, the United States.”

This wording is meant “to avoid complications when transiting the U.S. border and to stay within the intent of this portion of the rule, which is to clarify policy regarding reexports and retransfers of defense articles previously authorized for export from the United States and in the possession of the armed forces of a foreign government or United Nations,” DDTC said. “This addition is for clarification purposes only and reinforces that the transfer of a wholly foreign defense article outside of the United States and not otherwise subject to the ITAR does not require authorization.”

Although foreign defense items imported into the U.S. are generally subject to American laws, including the ITAR, DDTC noted that those laws generally don’t “govern the activities” of foreign people outside the U.S. “Similarly, foreign defense articles that leave the United States are no longer subject to the ITAR under” certain circumstances.

The agency included an example in the rule to “illustrate this concept.” In the scenario, a U.S. Company A buys a foreign defense article from Foreign Company B located outside the U.S. After U.S. Company A imports the item, it realizes it no longer needs the article and secures a license to export the item back to Foreign Company B. DDTC said Foreign Company B wouldn’t need a DDTC license to then sell the returned item to a "separate party."

DDTC also used the rule to respond to public comments it received about the changes, including one from Boeing that said the agency’s language was too “narrow” when describing how a foreign government’s armed forces or U.N. personnel taking an exported defense article out of a previously approved country doesn’t count as an export, reexport, retransfer or temporary import. Boeing said the agency should expand the wording to capture activity “beyond” a U.S. or U.N. mission, saying that would “enable more widespread and compliant use by exporters when dealing with other training or deployments by authorized end-users” (see 2302270026).

Another commenter said DDTC should include “third-party contractors” in the definition.

DDTC declined to make those changes, saying that wasn’t the “purposeful limited intent” of the rule. “The Department assesses that activities undertaken by other foreign or U.S. parties to an agreement who are not the armed forces of a foreign country or United Nations military personnel still warrant additional review and should continue to require authorization from the Department in order to take defenses articles outside a previously approved country,” the agency said.

Maxar Technologies, which manufactures export-controlled communications, radar and satellite products, asked DDTC to add language to clarify the rule also applies to exports of technical data. Without an “explicit reference” to technical data, the company said exporters and other entities might be confused about whether they need to apply for a license, even if their transaction meets the definition of an activity that doesn't qualify as an export, reexport, retransfer or temporary import.

DDTC said the ITAR’s definition for defense articles already includes technical data, so adding that language would be ‘duplicative. For this reason, the Department is not making the changes proposed by this commenter.”