On 6 January 2020 the US Directorate of Defence Trade Controls issued Frequently Asked Questions on Defense Services and U.S Persons Abroad. These provide welcome clarity for non-US companies employing US Persons on defense articles or services.
Ed Peartree is Group Deputy Head of Export Controls, Licensing and Policy at BAE Systems and was previously Director, Defense Trade Controls Policy at the US Department of State.
A “US person” (as defined in ITAR §120.15) providing a “defense service” (as defined in ITAR §120.9) abroad is typically subject to US licensing requirements under a technical assistance agreement (TAA) issued by the Directorate of Defense Trade Controls (DDTC). In most cases, these “US persons” are US national employees of DDTC-registered companies based in and operating out of the United States. Less clear historically has been the status of individual US persons living and working overseas where they may be providing defense services as employees of foreign companies. In May 2015, DDTC published in the US Federal Register a proposed rule change covering US persons working abroad which never advanced to final rule status. Thus, the FAQs issued by DDTC on 6 January 2020 provide welcome guidance for non-US companies employing US person employees.
It is important to note that the new FAQs do not amend the ITAR and do not constitute an actual rule change. They are rather interpretative guidance based on the existing text of the ITAR. For example, the question of whether or not a US person working and possibly providing a defense service abroad would need to register with DDTC has always been somewhat murky. ITAR §122.1(a), which covers “Registration Requirements” reads in part, “Any person who engages in the United States in the business of manufacturing or exporting or temporarily importing defense articles or furnishing defense services, is required to register…”(emphasis added). The new FAQs confirm that a US person living and working abroad where they may be providing a defense service, does require authorisation from the DDTC, but does not need to register – thus distinguishing these US persons from a US-based entity providing a conventional defense service to a foreign person or entity and subject to a TAA.
Similarly, and perhaps most importantly for UK companies and other non-US employers of US persons overseas, the FAQs make clear that “the mere presence or involvement of a U.S. person during the design, development, etc. of a foreign-origin defense article, or the provision of defense services that are authorized via a mechanism other than a TAA or MLA, does not subject the resultant foreign-origin defense article to the ITAR or its reexport/retransfer requirements.” This greatly reduces the risk of so-called “ITAR taint” resulting from having a US person work on non-US defense articles. Other key points in the FAQs include:
- Requests for authorisation of individual US person employees of a foreign company can be submitted electronically to DDTC’s Office of Defense Trade Controls Licensing via the new Defense Export Control and Compliance Systems (DECCS) using a Form DS-6004. Requests can also be sent via a letter of General Correspondence (GC).
- Authorisations for US persons working abroad are made pursuant to ITAR §126.9(b) rather than ITAR §124.1 (Agreements).
- Once granted by DDTC, authorisations for US persons living and working abroad for a non-US company are generally good for 4 years, or until their originally authorised role materially changes, after which a new authorisation may be required.
- Companies may submit requests for authorisation on behalf of US person employees (including multiple employees in a single submission), but the authorisation is issued to the individual US person employee on whom responsibility for compliance with the ITAR ultimately rests.
DDTC issued two supplementary FAQs on 19 February (and updated on 6 April) specifically addressing the issue of “safe harbour” in cases where a US person may already be providing a defense service pursuant to their employment with a non-US company overseas. In these cases, DDTC recommends that the US person (or their employer, on the individual’s behalf) submit a voluntary disclosure (per ITAR §127.12) in conjunction with the request for authorisation. According to the FAQs, “[i]n such cases, the applicant may proceed with the described activities on a provisional basis unless otherwise notified by DDTC.”
Required information to be included in submissions for US person authorisation include a clear description of the programme or defense article that the US person will be working on, as well as the defense service that is being provided. Equally important, applicants must include detailed descriptions of their relevant US education and training and any previous employment in the US, especially USML-related and/or any work involving US government military programmes. Including a resume and full description of the role/job they will be performing overseas is also recommended.
As noted, the FAQs are a welcome addition to DDTC’s export controls guidance resources, particularly for non-US companies, and fill a void that has long clouded the status of US persons living and working abroad in the defence sector. All UK companies who have (or may have) US person employees should carefully read the FAQs and consider developing procedures for identifying such individuals and ensuring that they are properly authorised by DDTC.