International Law Advisory - DDTC Publishes Debarment Order Against ITT Corporation

On April 11, 2007, the Department of State, Directorate of Defense Trade Controls, published notice in the Federal Register (72 Fed. Reg. 18310) that ITT Corporation has been statutorily debarred from participating in exporting defense articles or furnishing defense services. The debarment is the result of ITT’s March 28, 2007, guilty plea for violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). (See Steptoe & Johnson LLP client advisory, "ITT Corporation Pleads Guilty to Transferring Night Vision Equipment for Foreign Destinations" (3/28/2007), for more information.)

The ITAR require debarment of any person convicted of violating the AECA. Debarred persons may not participate directly or indirectly in the export of ITAR-controlled hardware or technical data, or in the provision of defense services, absent a waiver from the State Department.  According to DDTC’s Federal Register notice, ITT Corporation as a whole has been debarred, but all ITT Corporation business units except for the ITT-Night Vision Division have been excepted out of the debarment order after a review of the circumstances and a determination by the State Department that appropriate mitigating actions have been taken. 

The ITT-Night Vision Division is subject to a three-year debarment order, although the State Department may consider reinstating the division’s export privileges after one year provided that appropriate mitigating steps have been taken. In addition, the debarment order notes that “transaction exceptions” have been granted on a case-by-case basis with respect to certain existing authorizations and pending authorizations relating to key programs involving the ITT-Night Vision Division. The State Department noted that it may approve future requests should they be consistent with the foreign policy and national security interests of the United States. 

The Federal Register notice notes that, pursuant to 127.1(c) of the ITAR, a company with knowledge that ITT is subject to debarment may not participate “directly or indirectly, in any export in which [ITT] may benefit or have any direct or indirect interest” unless that company has informed DDTC of ITT’s involvement and has received written approval from DDTC to proceed. Based on our conversations with DDTC personnel, it is our understanding that this restriction applies only to activities in which the ITT-Night Vision Division has an interest. 

Moreover, it appears likely that DDTC will not require companies to undertake any special procedures for activities involving ITT when the activities have been granted a transaction exemption. Rather, it appears that the primary obligation of most companies participating in ITAR-controlled export or defense service activities in which ITT is involved will be to explicitly inform DDTC in any future license or agreement applications of ITT’s role in the transaction, and to obtain approval from DDTC prior to proceeding. DDTC is expected to issue additional guidance to the exporting community to clarify the obligations of companies involved in ITAR-controlled transactions in which ITT has an interest.

We will continue to keep you apprised of this and other developments related to export controls issues. If you have any questions regarding DDTC’s actions, please contact Ed Krauland at 202.429.8083 or Meredith Rathbone at 202.429.6437.