By Tom Reynolds, Export Solutions

The DDTC Rolling Out New Rules & Regulations

DDTC has served up a new proposed exemption for ITAR replacement parts and incorporated components. This follows several DTAG recommendations, some of which have been incorporated into the new language, and others which have not.

Here’s a look at the new proposed exemption as it currently stands:

  • A new section (123.28) would be added to the ITAR. This section would allow the export, without a license, of U.S.-origin end-items held in the inventory of a foreign government, provided that: (1) the exporter is not subject to a denial order or otherwise ineligible to export; (2) the exporter was the applicant of a previously-approved license authorization to export the same U.S.-origin end-items; and (3) the replacement parts/components do not upgrade the capabilities of the end items.
  • There are six additional conditions which must be met to claim this exemption. Briefly, they are: (1) the type/amount/frequency of exports are consistent with those for normal logistical support; (2) the value of the exporter’s purchase order does not exceed congressional notification thresholds; (3) the consignee for the shipment is the foreign government previously approved via a DDTC license to receive the end-items; (4) the foreign government is not subject to any restrictions under 126.1; (5) the replacement parts/components meet all terms, conditions and provisos on the original license authorization; and (6) the replacement parts are consistent with authorized U.S. Government maintenance activities.

Updated ITAR Exemption Language That You Should Know

In addition, DDTC has proposed some modifications to Part 126 and the infamous “ITAR see-through rule.” Here are the highlights:
  • A new section (126.19) describes the conditions for which a license is not required from DDTC for the export or re-export of defense articles which have been incorporated into an end-item which is “subject to the EAR.”
  • The end-item must be “rendered inoperable” by the removal of the defense article, in order for this exemption to apply.
  • Furthermore, the export cannot include technical data for the production or development of the defense article; nor can the end-item be used for a military application.
  • A license would still be required if the defense articles can be removed from the end-item without destroying them.
We’ll have to wait and see how this plays out – especially for subcontractors. Right now, it seems that subcontractors would still need to apply for an original license, and then claim exemption 123.28 for subsequent shipments that meet those conditions.

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ITAR Exemptions F.A.Q.

What Does ITAR Mean?
ITAR is the abbreviation for and the typical way to refer to the International Traffic in Arms Regulations, which documents the US State Department’s requirements for the export and import of specific items, referred to as defense articles, that are controlled for foreign policy and national security purposes.
What Is ITAR Compliance?
ITAR Compliance means that an exporter or manufacturer of specific hardware (defense articles) needs to meet certain requirements and operate in a certain manner consistent with those requirements to be allowed to participate in the supply chain involved with these items.
What Are Penalties For ITAR Violations?
Penalties for violating ITAR requirements include denying the ability to export items, seizure of goods, significant fines, and potentially even jail time in the most extreme cases.
How Do I Find Out If My Company Is ITAR Compliant?
The way to ensure that your company is compliant is to have an experienced trade compliance professional or team of professionals in your company develops and maintain a trade compliance program.

Tom Reynolds is the President of Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.