DDTC Preparing to Issue New Agreement Guidelines, Facing Some Licensing Delays
The State Department has crafted new guidelines for preparing defense trade agreements and plans to release them soon, said Catherine Hamilton, licensing director at the Directorate of Defense Trade Controls. She said the agency also plans to make changes to the International Traffic in Arms Regulations to reflect the new document, which would update submission guidelines for Technical Assistance Agreements, Manufacturing License Agreements, and Warehouse and Distribution Agreements.
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“That is something that I'm super excited about,” Hamilton said during a Feb. 9 event hosted by Content Enablers. She said she recently received “final clearance” and is working with the agency’s public affairs team to issue the guidelines. “I'm hopeful that within the next couple of days they will be posted to the website.”
Some in industry have been pushing for an update to the current set of guidelines, which still references the old Defense Trade Electronic Licensing System as opposed to the recently created Defense Export Control and Compliance System. Hamilton said the agency wants to “make sure that at least we're referring to the correct system of record that industry is using, as well as some other things.”
She also said the agency plans to make regulatory changes to reflect the updated guidance, which currently stresses that if any of its provisions conflict with the ITAR, the ITAR should take precedence. “We’re really emphasizing that some of what we have codified in the guidelines over the years in response to advisory opinions are things that should be in the regulations. And so we will work towards getting some of that information into the regs,” Hamilton. “But in the interim, we didn't want to hold back.”
Hamilton also said DDTC is working on publishing the first rule in its ITAR reorganization effort. Officials have said for years they are “very close” to releasing the rule, which would reorganize and consolidate various definitions and exemptions in the ITAR (see 2111040056, 2010220049 and 2005080038).
“There's always second- and third-order effects to doing something like that, even internal,” Hamilton said. “It's not just the industry-facing piece of it, but even for us.” She said DDTC officials are training to understand all the changes resulting from the reorganization so they are prepared when talking to or providing guidance to industry. She also said there will be a “training element” as industry grows acquainted with the new ITAR locations for the definitions and exemptions. “We've been talking about it for a while,” Hamilton said. “We recognize that it is a heavy lift for both sides.”
DDTC has faced delays in areas aside from the ITAR reorganization rules, Hamilton said, including license reviews and notifications to Congress. She said some of the lengthy processing times have been caused by teleworking due to the COVID-19 pandemic, which has slowed its licensing and management offices.
“I don't want to pretend that we haven't had interagency review challenges,” Hamilton said, “and that we haven't seen extended review times with the folks that are reviewing our license applications.” She said lawmakers have shown “lots of interest” about defense sales. “We've had some delays in the congressional notification portfolio,” she said. “So it's a balancing act of making sure that we’re able to answer their questions while also supporting our partners and allies with defense equipment.”
Despite the delays, Hamilton said she has been “very impressed” with the agency’s licensing team, which has maintained an average processing time of 48 days. “I had to do that calculation a couple of times because I expected that it was going to go up, especially in light of [ITAR] Categories I, II and II moving,” Hamilton said, referring to the transfer of certain weapons export controls from the State Department to the Commerce Department (see 2001170030).
“It is a very good number,” she added. “I've been very impressed with the licensing [team’s] ability to keep things moving, despite their colleagues not being in the building.”
Hamilton also said DDTC continued to see a drop in licenses -- it received 24,000 last year compared with 28,000 the previous year (see 2105210015). The drop may be explained by the transfer of controls to Commerce and exporters using new exemptions, Hamilton said, such as the 126.4 exemption issued in 2019 that authorizes certain exports and other activities made by or for a U.S. government agency (see 2005120027 and 1904180024).
“This is in line with what we expected with the transition of [Categories] I, II and II,” Hamilton said. In the “beginning days” of Export Control Reform, she said, the agency typically received about 85,000 licenses, a “far cry” from the current levels. “It’s not alarming,” she said of the 24,000 number, “but it certainly raises my eyebrows.”
In comparison, BIS processed more than 40,000 licenses last year, Matt Borman, BIS’s deputy assistant secretary for export administration, said during the event. He also said the agency’s average processing time is around 25 days. “That may not be fast enough for the individual companies,” Borman said, “but it certainly is very fast for an interagency government review process.”
Hamilton also said DDTC received 580 voluntary disclosures last year, which resulted in 58 directed disclosures. “We've had no shortage of consent agreements and disclosures that the team has worked,” she said. “They've been able to make the telework work for them, and they've been chasing industry when there's been questions related to our transactions.”