Understand The DDTC Registration Process For Your Business
Whether you are a small business or a large business, you will need to ensure your trade compliance program meets all requirements set out by the Directorate of Defense Trade Controls (DDTC).
These strict export controls apply to all international trade operations as defined in the USML, Part 121 of the International Traffic in Arms Regulations (ITAR):
- A business of manufacturing
- Brokering activities of defense articles
- Defense services
- Related technical data.
Even more confusing is that registering with the DDTC is simply a precondition for insurance or export approval.
DDTC registration is a confusing – and often – misunderstood aspect of trade compliance.
Simply put, if your company works with ITAR items (whether they be products or services), and you are located in the United States. You should be registered with the U.S. Department of State, Directorate of Defense Trade Controls (DDTC).
This is true even if your company does not export.
What does DDTC registration mean? Once again, you’ll find a lot of misinformation out there. Many companies make false or misleading statements about their DDTC registration … likely out of ignorance of the ITAR.
Who Does DDTC Impact?
The DDTC regulates defense services and defense articles to prevent dangerous items and data from falling into the wrong hands.
As you can imagine, in an increasingly digital world, defense articles cover technical files, defense data, and services associated with exporting specific products.
In addition to the wide-reaching activities and items listed as defense articles, DDTC also covers actions and activities that can help create defense-related items:
Due to the complexities of ITAR, DDTC guidelines can impact anyone involved with furnishing defense services or uses items listed in the USML. You should pay special attention to the guidelines if you are:
- A Distributor
- An Importer
- A Software Or Hardware Vendor
- Third-Party Suppliers
- A Government Contractor
- A Wholesaler
The government requires you to go through the necessary steps for ITAR registration before exporting or importing items from the U.S. In addition to ITAR registration, you must also register with the DDTC to avoid serious noncompliance headaches and fines.
In addition to ITAR registration, you must also enroll with the DDTC to avoid severe noncompliance headaches and fines.
When Do You Need To Contact The DDTC?
Companies need to register with DDTC when first applying for an export license. Still, your business will also need to notify DDTC of any material changes with your business or operations. Here are a few types of material changes that you will need to update the DDTC about:
- Personnel Changes: You will need to notify DDTC of changes to chief executive officers, senior officers, or changes with your board of directors. Failure to notify the DDTC of this material change can result in jail time and disrupt your current/future export licenses. You are required to notify the DDTC within five days of the event.
- Sale or Transfer of Company To Foreign Person: You must inform the DDTC if you intend to sell or transfer your business from a U.S. person to a foreign person or control. This must be reported at least 60 days in advance of the intended transfer date and five days before the event’s effective date.
- Start A Business or Entity That Builds Military Equipment: If you start a business that manufactures, distributes, or supports defense articles, then you must tell the DDTC before you begin work. You must submit your report to the DDTC within five days of the effective date.
- Change of Business Structure: You will need to inform the DDTC if you change your company name, address, and organizational structure. This notification must be submitted within five days of the effective date.
- Add or Remove USML Categories: If your company plans to remove or add defense-related items, then you must inform the DDTC of these changes. The report has to be submitted within five days of the addition or deletion of the USML category.
How Much Are DDTC Registration Fees?
Registration fees will vary based on different parameters and details involved in the registration process. You will need to pay special attention to what, where, and who you are shipping because there is a 3-tier fee structure for renewal registration applications.
- Tier I: $2,250 per year. This registration fee applies to all new registrants who have not had their application reviewed, had a license issued, or adjudicated by the Department within the past 90 days.
- Tier II: $2,750 per year. This tier is applied to all license applications that have submitted ten or fewer licenses in the past twelve months.
- Tier III: This amount varies. This tier is one of the trickier to determine because this applies to registrants who have submitted more than ten licenses in the past twelve months. The general fee structure for this tier includes a baseline $2,750 fee, plus $250 for each registration request (capped at 3% total value of licenses) in the past 12-month period.
Once you are registered, you will receive a DDTC registration code that coincides with a letter prefix, M for manufacturer/importer, K for a broker, followed by four to five digits. This code is unique to the registrant and should be appropriately handled.
On May 1, 2020, the U.S. Department of State announced a temporary reduction of registration fees to help businesses operate through the COVID-19 pandemic.
What DDTC Registration Does Not Mean
If your company is registered with DDTC, it does not mean that:
- You are approved to export ITAR controlled items.
- You are ITAR compliant.
- You are ITAR, “certified.”
- The U.S. Government has approved you to perform ITAR work.
- You understand and comply with all aspects of the ITAR.
What DDTC Registration Does Mean
Here’s what DDTC registration means:
- By registering, your company is complying with Part 122 of the ITAR.
- Your company has a registrant code, which will enable you to apply for ITAR export licenses, agreements, or claim ITAR exemptions with DDTC.
- DDTC is aware that your company engages in ITAR-controlled work.
What If My DDTC Registration Lapsed?
If you have allowed your registration to expire, the registrant’s sole responsibility is to ensure imports or exports do not occur until the DDTC reinstates the registration.
Expired registrations do not retroactively cover periods between the original expiration date and the date of license renewal.
If you received a renewal registration letter but allowed your registration to lapse, you will need to pay the fee specified in the renewal letter, along with any lapse fees.
Our DDTC ITAR experts can help you take the proper steps to reinstate your DDTC registration and ensure you are ITAR compliant.
Expert DDTC ITAR Consults For Your Business
If you have questions about registration or need help, our team of ITAR experts can guide you through every step of the process. Perhaps more importantly, we can also help you figure out the next steps of ITAR compliance. After all, registration is the easy part. What happens next is where most companies get into trouble.
Let us help! Schedule a no-charge consultation with our team today.