In 2010, we observed two important changes in the ITAR that help exporters and proposed changes to lessen the burden on foreign licensees to technical assistance and manufacturing license agreements.

Clarification of Exemption for Export of Technical Data by US Employees

The license exemption under ITAR § 125.4(b)(9) permits certain exported technical data to be “sent by a US corporation,” but no regulations – until now – specifically addressed hand-carried technical data, including exports of technical data stored on laptops. On August 27, 2010, DDTC issued its final rule, which was nearly identical to the November 2009 proposed rule.1 The amended rule finally clarifies that the export exemption for technical data, regardless of format or media, covers data sent or taken by a US person who is employed by a US corporation or Government agency to a US person employed by that US corporation or agency outside the United States. It should be noted that the preamble to the final rule explicitly excludes accredited institutions of higher education or universities from this exemption. The exemption applies only when: (i) the technical data that will be used outside the United States solely by the US person; (ii) the US person is employed by the US government or a US corporation, not by a foreign subsidiary; and (iii) any classified information is sent outside the United States subject to the Defense Department’s National Industrial Security Program Operating Manual (NISPOM).

Elimination of Approvals for Proposals

In August 2010, DDTC eliminated its duplicative requirement for prior approval or notification for certain proposals to foreign persons relating to significant military equipment under ITAR § 126.8.2 The amendment removes the requirement for effectively reviewing the export transaction twice. DDTC reasoned that the requirement imposes an unnecessary administrative burden with effectively no advanced notice, especially given that the State Department’s more expeditious processing time for licenses (e.g., manufacturing licensing agreements) is now only about 15 days on average.

Proposal to Relax Requirements for Employment of Dual and Third-Country Nationals

One result of the president’s Export Control Reform Initiative effort (discussed in detail above) is that DDTC recently published a proposed rule to lessen the requirements for approved end-users to employ dual-nationals and third-country nationals who have access to ITAR-controlled technical data or defense articles.3 According to the preamble to the proposed regulations, the State Department recognizes that its prior policy created large administrative burdens on approved end-users and raised human rights implications with primary US allies.

In short, the proposed regulations would permit approved end-users to transfer defense articles and technical data without DDTC approval, if the transfer is within the foreign business or government entity or international organization that is an approved end-user. This includes transfers to dual-nationals and third-country nationals employed by the foreign entity as bona fide, regular employees, as long as the transfer occurs within the physical location of the end-user and within the scope of the approved export license or exemption. The rule shifts the responsibility of compliance to the end-user by requiring screening processes to ensure the employees do not retransfer the ITAR-controlled defense articles or technical data to prohibited countries.