International Law Advisory - DDTC Clarifies Policy on Reexport Exemption for NATO by Amending the ITAR

On March 26, 2008, the US Department of State, Directorate of Defense Trade Controls (“DDTC”), published a Federal Register notice (73 Fed. Reg. 15,885) amending International Traffic in Arms Regulations (“ITAR”) § 123.9(e) to clarify that reexports and retransfers of US origin components to be incorporated into foreign defense articles by the North Atlantic Treaty Organization (“NATO”) and NATO agencies are allowed under an existing exemption for NATO, Australian, or Japanese governments. ITAR § 123.9(e) previously stated that the exemption was allowed for the governments of NATO (e.g., member country governments) or the governments of Australia or Japan. Through this amendment, it appears that DDTC has confirmed publicly that NATO itself and agencies thereof now qualify as permissible foreign destinations under this exemption. We note, however, that although the definition of “NATO” is set forth in ITAR § 120.31, the term “NATO agencies” is not defined in the ITAR.

To qualify for this exemption, the US origin components must have been initially authorized for export from the United States, either by a license or an exemption. Additionally, the US origin components cannot be (i) significant military equipment, (ii) major defense equipment sold under a contract in the amount of US $14 million or more; (iii) defense articles or defense services sold under a contract in the amount of US $50 million or more; or (iv) identified as items in the Missile Technology Control Regime of ITAR § 121.16. Finally, the person reexporting the defense article must provide written notification to DDTC about the retransfer not later than thirty (30) days after the transaction, and such notification must identify the articles reexported and the recipient government or NATO entity. Depending on the circumstances, DDTC can decide to place retransfer restrictions on a license prohibiting use of the ITAR § 123.9(e) exemption.

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 Jack Hayes at 202.429.6491 or Andy Irwin at 202.429.8177.