On December 13, 2007, the Department of State Directorate of Defense Trade Controls (“DDTC”) issued a final rule amending the International Traffic in Arms Regulations (“ITAR”) regarding the timeline and procedures for making an effective voluntary disclosure. 72 Fed. Reg. 70,777 (Dec. 13, 2007). DDTC relies upon the voluntary disclosure mechanism to assist with the prompt discovery and prevention of export controls violations. In turn, DDTC will often consider an effective voluntary disclosure a significant mitigating factor when determining what, if any, penalties should be applied to a particular violation.
Most substantially, the new rule requires that a full disclosure – following a comprehensive internal export compliance review – be filed within 60 calendar days of an initial notification. By imposing a 60 day time limit on a company’s internal review, the new rule could pose logistical challenges for large companies or for companies with complicated or extensive export compliance issues. Under the amended regulation, failure to meet the deadline will result in a determination by DDTC that the notification does not constitute a voluntary disclosure. While a company may request an extension in writing, DDTC reserves the right to decline to treat the notification as a mitigating factor if a full disclosure is not submitted “within a reasonable time.”
Further, the new rule includes amendments to the nature of information that should be provided in a voluntary disclosure. Specifically, the new rule amends ITAR section 127.12(c)(2)(iii) to provide that a disclosure must include as much identifying information as possible (“including mailing, shipping, and email addresses; telephone and fax/facsimile numbers; and any other known identifying information”) regarding individuals involved in the disclosed violation. The new rule also clarifies that any mitigating corrective actions and compliance initiatives must have been implemented directly in response to the disclosed violation and must have been designed to deter that particular violation from recurring.
DDTC’s new rule also amends ITAR section 127.12(e) to clarify that, in cases of a major violation, a systemic pattern of violations, or the absence of an effective compliance program, DDTC may require a senior officer of the company, rather than a company’s empowered official, to certify the truth and accuracy of the disclosure.