**[Getting Started with Defense Trade]{.underline}**

**[The Directorate of Defense Trade Controls (DDTC) and the Defense
Trade Function]{.underline}**

**Contents:**

**I. Does Defense Export Controls Apply to Me? A Quick Action
Checklist**

**II. Rationale for Regulating Defense Exports**

**III. DDTC -- The Offices that Administer the Defense Export
Regulations**

# IV. Authority for Control of Arms Exports

# V. U.S. Government Regulatory Measures

## **VI. End-Use/End-User Monitoring**

# VII. Other Compliance Mechanisms

### VIII. D-Trade -- Conducting Your Defense Trade Business Electronically

**IX. To Learn More**

**Does Defense Export Controls Apply to Me? A Quick Action Checklist**

-   Find out if what you want to export (hardware, technical data,
    and/or defense services) is covered in the U.S. Munitions List
    (USML), found in [Part 121 of the
    ITAR.](http://pmddtc.state.gov/regulations_laws/documents/official_itar/ITAR_Part_121.pdf)

-   Not sure if your desired export is covered by the USML? File a
    [Commodity Jurisdiction
    request](http://pmddtc.state.gov/commodity_jurisdiction/index.html).

-   If what you want to export is on the USML, you must be
    [registered](http://pmddtc.state.gov/registration/index.html) with
    DDTC.

-   After you are registered, you may apply for an export license.
    [D-Trade](http://pmddtc.state.gov/DTRADE/index.html) is the
    preferred way of licensing.

-   Have basic questions you need answered? Call the [DDTC Response
    Team](http://pmddtc.state.gov/response_team/index.html).

**Rationale for Regulating Defense Exports**

The U.S. Government views the sale, export, and re-transfer of defense
articles and defense services as an integral part of safeguarding U.S.
national security and furthering U.S. foreign policy objectives.
Authorizations to transfer defense articles and provide defense
services, if applied judiciously, can help meet the legitimate needs of
friendly countries, deter aggression, foster regional stability, and
promote the peaceful resolution of disputes. The U.S., however, is
cognizant of the potentially adverse consequences of indiscriminate arms
transfers and, therefore, strictly regulates exports and re-exports of
defense items and technologies to protect its national interests and
those interests in peace and security of the broader international
community.

**DDTC -- The Offices that Administer the Defense Export Regulations**

The Directorate of Defense Trade Controls (DDTC), Bureau of
Political-Military Affairs, in accordance with 22 U.S.C. 2778-2780 of
the Arms Export Control Act (AECA) and the International Traffic in Arms
Regulations (ITAR) (22 CFR Parts 120-130), is charged with controlling
the export and temporary import of defense articles and defense services
covered by the United States Munitions List (USML). To learn more about
DDTC, please visit its Web site
([www.pmddtc.state.gov](http://www.pmddtc.state.gov/)).

# Authority for Control of Arms Exports

The AECA provides the authority to control the export of defense
articles and defense services. The AECA charges the President to
exercise this authority, which has been delegated to the Secretary of
State. The [AECA](http://pmddtc.state.gov/regulations_laws/aeca.html) is
available through the DDTC Web site.

The ITAR implements the AECA. These regulations are frequently updated
and revised to reflect change in the international political and
security climate, as well as technological development. The
[ITAR](http://pmddtc.state.gov/regulations_laws/itar.html) may be
accessed on the DDTC Web site.

In accordance with [Executive Order
11958](http://www.archives.gov/federal-register/codification/executive-order/11958.html),
the State Department, with the concurrence of the Department of Defense,
determines what commodities are covered by the USML. Guidance on the
[commodity jurisdiction (CJ)
function](http://pmddtc.state.gov/commodity_jurisdiction/index.html) is
available on the DDTC Web site.

In addition to seeking technical support and national security
assessments from the Department of Defense, the State Department relies
on extensive interagency cooperation and coordination to perform the
arms export control function. It:

-   Works closely with U.S. Customs and Border Protection (review of
    defense industry registration, performance of defense export end-use
    checks, investigations, civil penalties);

-   Works with the Intelligence Community to review alleged diversions
    and unauthorized transfers; and

-   Cooperates with the Justice Department and U.S. Attorneys (pre-trial
    consultations, trial documentary preparation, expert testimony).

# U.S. Government Regulatory Measures

For the U.S., licensing and compliance are two sides of the same coin,
and there is constant interaction between the two functions.

I. [Registration]{.underline}

-   In accordance with the AECA, registration with the State Department
    (via DDTC) of all U.S. persons that manufacture or export defense
    articles, furnish defense services, or U.S. and foreign persons
    engaged in arms brokering, is required. The information submitted by
    registrants is reviewed by the Treasury Department to ensure there
    are no outstanding law enforcement concerns.

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-   Registration does not confer any export privileges, but is a
    prerequisite to export licensing approval.

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-   The registration process:

    -   Informs the U.S. Government about the U.S. defense industry
        (legal status, export eligibility, foreign
        ownership/affiliations, legally responsible personnel, areas of
        activity);

    -   Serves as a channel to provide industry with information about
        export regulations and Government concerns; and

    -   Helps validate the bona fides of U.S. firms engaged in defense
        trade, especially during the review of export license
        applications.

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-   Registrants, in accordance with the AECA, are charged a fee.
    Congress has created a mechanism that allows the State Department to
    retain the money collected to help support defense export control
    functions.

To learn more about registration, and to access the registration form,
please visit the
"[Registration](http://pmddtc.state.gov/registration/index.html)" page
on the DDTC Web site.

II\. [Licensing]{.underline}

-   Department of State approval of a license application is required
    prior to the export of defense articles or defense services.

-   About 30 percent of the applications processed by the State
    Department are referred to other offices and agencies (e.g., the
    Department of Defense) for comment and recommendations. This is what
    is referred to as "staffing" the case.

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-   During the review process, a computerized review of all parties to
    the proposed transactions is made against a "watch list" of known or
    suspected export violators. A "match" results in a full compliance
    review by the State Department before final action is taken on the
    application.

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-   In addition to sorting through detailed technical specifications,
    the license application review process clarifies the ultimate
    end-use and end-user of the defense export, as well as facts related
    to intermediate handling.

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-   From the enforcement point of view, the review process provides an
    avenue to prevent or eliminate diversions, and to assist the U.S.
    Government in investigations and prosecutions should an export
    violation be suspected or reported.

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-   In submitting license applications, companies must certify
    eligibility to export and an understanding of the laws governing
    such exports. Moreover, in carrying out the physical act of
    exporting, they must meet certain conditions in terms of
    documentation (electronic reporting of export information using the
    [Automated Export System,
    "AES"](http://www.cbp.gov/xp/cgov/trade/automated/aes/)) and
    handling (particularly of classified material).

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-   Exporters must make clear on shipping documents that the defense
    export cannot be resold or retransferred without prior U.S.
    Government authorization -- a licensing requirement that also
    involves compliance issues.

To learn more about licensing, and to view the various licensing forms,
please visit the [D-Trade Info
Center](http://pmddtc.state.gov/DTRADE/index.html) and the
"[Licensing](http://pmddtc.state.gov/licensing/index.html)" page on
DDTC's Web site.

## **End-Use/End-User Monitoring**

End-Use checks are key to the State Department's effort to prevent
illegal defense exports and technology transfers.

End-use checks (known under the program name "Blue Lantern") enlist the
help of U.S. diplomatic posts, the cooperation of U.S. Customs and
Border Protection, and, most importantly, foreign governments in the
conduct of pre-license checks and post-shipment verifications of defense
exports.

[End-Use monitoring
reports](http://pmddtc.state.gov/reports/enduse_reports.html) are
available on DDTC's Web site.

# Other Compliance Mechanisms

The U.S. Government spends considerable effort trying to prevent
violations, via participation in industry conferences, Internet
postings, and publication of regulations.

When a problem arises, the Department of State has broad authority to
take action (i.e., suspend, deny, or revoke license approvals). Working
with law enforcement agencies, it can prosecute criminally (possible
prison sentences and fines) and independently can take civil action
(e.g., fines and denial of export privileges).

Remedial assistance/attention is also offered. The State Department
works with companies to develop effective export compliance programs.
DDTC makes available a [guideline describing the basic elements of a
compliance
program](http://pmddtc.state.gov/compliance/documents/compliance_programs.pdf)
via its Web site.

### D-Trade -- Conducting Your Defense Trade Business Electronically

Effective January 15, 2004, DDTC, through the use of the D-Trade
electronic licensing system, is prepared to receive and adjudicate fully
electronic defense export authorization requests properly submitted by
any U.S. person who is a defense trade registrant and wishes to
permanently export unclassified defense articles via the Form DSP-5,
temporarily import unclassified defense articles via the Form DSP-61, or
temporarily export unclassified defense articles via the Form DSP-73.
Based on envisioned expansion of electronic processing capabilities,
DDTC anticipates, with few exceptions, most export licensing submissions
via D-Trade in the near future.

For more information on D-Trade, consult the [D-Trade Information
Center](http://pmddtc.state.gov/DTRADE/index.html), accessed through the
DDTC home page. There you will find links to more background information
on electronic licensing.

**To Learn More**

The DDTC Web site has more information that may be useful to you. The
[homepage](http://www.pmddtc.state.gov/) has a comprehensive listing of
links to information that can assist you in your defense exporting
endeavors; in addition, consult "New Items and Announcements" for the
latest updates.

If you have any questions about any aspect of the defense export
process, please contact the [DDTC Response
Team](http://pmddtc.state.gov/response_team/index.html).