Have Questions on Voluntary Disclosures and Debarments?

On November 21, 2021, the Directorate of Defense Trade Controls (“DDTC”) published seventeen (17) new Frequently Asked Questions (FAQs) concerning a variety of compliance topics, more specifically on debarment, export controls and voluntary disclosures. The full list of FAQs may be found on the DDTC website.

While the FAQs are an effort to clarify previously provided information in other FAQs and in §127 of the International Traffic in Arms Regulations (“ITAR”), DDTC attempts to make clearer the rationale behind the requirements for disclosures and debarment. Below is a synopsis of the information provided in the FAQs:

• Is a Voluntary Disclosure Necessary? – While DDTC strongly recommends the submission of a Voluntary Disclosure, as outlined in 127.12, where it is believed an export violation may have occurred under any export provision of the Arms Export Control Act (AECA), any other export regulation or order, or a license authorization; it may not be required. DDTC does impress that disclosing such a compliance issue has been viewed as being a mitigating factor in the agency’s review of the circumstance. However, the ITAR is specific about the requirements to file a disclosure where actual or final sale, export, transfer, reexport, or retransfer of a defense article, technical data, or defense service to any of the §126.1 countries (“proscribed countries). And, the unreturned temporary exports of personal protective gear as outlined in ITAR Exemption §123.17(j), (i.e., if not returned to the United States, a detailed report must be submitted to the Office of Defense Trade Controls Compliance as outlined in §127.12(c)(2)).

 

• What is a Directed Disclosure? – DDTC may initiate what is referred to as a ‘directed disclosure,’ based on information it may have received from a company’s competitor, a whistleblower, or even other government agencies. It is imperative, if such a request is received, the company provide a ‘complete and detailed response’ (i.e., 127.12(b)(3)) to DDTC on what is suspected to be a failure to submit a voluntary disclosure for a probable violation.

 

• How much time do I have to submit a Voluntary Disclosure? – Once an Initial Notification letter has been submitted and accepted by DDTC, the disclosing party has sixty (60) calendar days from the date of the initial notification to the agency to conduct a complete investigation of the potential violation and its related export activities to submit the full, signed disclosure. If after conducting the internal investigation, a company finds they cannot meet the sixty-day timeframe, they can submit a written request, signed by the Empowered Official, for an extension. The request must follow the guidelines in 127.12(c)(ii) and (iii), as well as stating what section of §127.12(c)(2) could not be met in the original sixty days.

 

• Distinction between Rescission of Statutory Debarment and Reinstatement of Export Privileges – DDTC has stated that the concepts of rescission of statutory debarment and the reinstatement of export privileges are not the same. If a company or individual is convicted of, or conspiring to, violating specific statutes, including AECA Section 38, then DDTC will issue a Presumption of Denial, based on 127.11(a), for all export related activities. In order to remove the Debarment, the company or individual must go through the Appeals process outlined in §127.7(b) while the statutory debarment remains in force. Under this process, DDTC now has the capability of lifting the Debarment, but not restoring the company or individual their export privileges. In the process of reinstatement of export privileges, a company or individual must provide a written explanation of why their export privileges should be reconsidered; this would include providing satisfactory evidence that any law enforcement or export concerns are resolved sufficiently to warrant reinstatement of their exporting privileges, (i.e., license or other approvals). If DDTC determines the company or individual has satisfactorily demonstrated, they have resolved all of the issues that lead to a statutory debarment, they may reinstate export privileges and revoke the debarment.

These FAQs help to provide clarification to exporters on the regulations, however, they are not a substitute for knowing and understanding the full scope of the ITAR. If you need assistance interpreting or understanding export regulations, contact ESI for a free consultation.