DDTC Issues Proposed Rule Streamlining Export Controls On Replacement Parts And Defense Articles Incorporated Into Civilian/Dual-Use Items

On March 15, 2011, the State Department's Directorate of Defense Trade Controls (DDTC) issued a proposed rule amending two aspects of the International Traffic in Arms Regulations (ITAR). The new rule would eliminate export licensing requirements for:

1) Replacement parts and components sent abroad under certain circumstances for the repair of previously-licensed US-origin defense end-items in the inventory of foreign governments; and

2) Defense articles that have been incorporated into an end-item subject to the Export Administration Regulations (EAR) under certain conditions.

The new license exemptions promise to significantly reduce the licensing burden for exports that meet the specified requirements. Given certain ambiguities in the language of the proposed rule and DDTC's invitation to comment, exporters should evaluate how the proposed rule may affect their operations and consider providing comments to DDTC prior to April 15, 2011.

Replacement Parts and Components

DDTC proposes to add a new Part 123.28 to the ITAR to facilitate the repair of US-origin defense end-items that have already been shipped abroad under a license. The change comes in large part as a response to calls by US allies operating in Iraq and Afghanistan for a streamlined process to obtain replacement parts for US-origin defense articles. Under the new rule, license-free exports of replacement parts and components (hereinafter "replacement items") for US-origin end-items held in foreign government inventories may occur if all of the following conditions are met:

The exporter must have been the applicant for a previously-approved export of the US-origin end-item; The exporter must be eligible to export defense articles (e.g., it must be registered with DDTC and cannot be debarred or suspended from exports); The consignee of the shipment must be the foreign government authorized under the original end-item license; The replacement items cannot "upgrade" or enhance the capability of the end-item; The type, frequency and amount of replacement items to be supplied must accord with normal logistical support requirements in light of the end-user's inventory of eligible end-items; The shipment and use of the replacement items adhere to the requirements (e.g. license provisos and terms) of the original export authorization of the end-item; The replacement items "are consistent with the US Government authorized maintenance activities"; The value of the order cannot exceed...