DDTC Issues New FAQ for Debarments and Voluntary Disclosures

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Nov. 30, 2021

Last week the State Department’s Directorate of Defense Trade Controls (DDTC) provided new guidance on debarments, export controls violations, and voluntary disclosures. These FAQ provide clarification on several key export compliance issues.

Debarments

The DDTC clarifies that when it lists a debarred party, that means the person is subject to statutory or administrative debarment and generally prohibited from participating directly or indirectly in ITAR-controlled activities, such as the export of technical data and other defense articles and the furnishing of defense services for which a license or other approval is required. However, the DDTC does not impose any restrictions on a debarred party’s eligibility to obtain banking services, engage in real estate transactions, purchase automobiles, or participate in any other activity not controlled under the ITAR. Generally, administrative debarment is for a period of three years. Statutory debarment will usually apply for three years following the administrative debarment. The term of administrative or statutory debarment does not end automatically, and debarred persons who wish to have their debarment rescinded must submit a request in writing.

The DDTC also explains how to address uncertainty regarding whether an individual is in fact the person identified as a statutorily or administratively debarred party. The debarment listing will include a Federal Register Notice (FRN) announcing the debarment. This announcement may provide additional identifying information about the debarred party, such as date of birth. It is also possible to contact the DDTC directly in writing for assistance.

Export Controls Violations and Voluntary Disclosures

Many of the voluntary disclosure FAQ cover the fundamental issues of when and how to file a voluntary disclosure. For example, the agency provides that if a person believes they may have violated the ITAR, they are strongly encouraged to voluntarily disclose the full circumstances to DDTC, even if there is uncertainty about whether a violation occurred. Further, the DDTC points out that ITAR mandates disclosures of certain types of violations and failure to disclose may itself constitute a violation of the ITAR. For instance, disclosures are required in certain cases involving countries listed in ITAR § 126.1 (see ITAR §§ 126.1(e)(2), 126.16(h)(8), and 126.17(h)(8)), and unreturned temporary exports of personal protective gear (see ITAR § 123.17(j)). It is also worth mentioning that if the DDTC reaches out regarding a potential violation, not previously reported through a voluntary disclosure, the agency wants a “Directed Disclosure” as outlined in ITAR § 127.12.

As for the process of filing a voluntary disclosure, the DDTC provides that anyone who believes they may have violated any export control provision may submit voluntary disclosures pursuant to ITAR § 127.12. They do need not be registered with DDTC to submit a voluntary disclosure. A third-party representative, such as a consultant or outside counsel, may also prepare and submit voluntary disclosures to DDTC on behalf of another.

DDTC provides that anyone submitting a voluntary disclosure pursuant to ITAR § 127.12 should notify DDTC immediately after a violation is discovered. If at the time of this initial notification, all the information required for a full disclosure is unavailable, disclosing party has sixty (60) calendar days from the date of the initial notification to conduct a thorough review and submit a full disclosure. The information for a full voluntary disclosure is provided in ITAR § 127.12(c)-(e). The DDTC also provides that a voluntary disclosure submission should also include:

• A first page with the disclosing party’s letterhead;
• The disclosing party’s contact information (including email address);
• Documentation substantiating any claims made within the submission (e.g., proof of corrective actions, relevant compliance procedures in effect at the time the violation occurred, etc.); and
• A certification, signed by an empowered official (see ITAR § 120.25) or a senior officer, stating that all of the representations made in connection with the voluntary disclosure submission are true and correct to the best of that person’s knowledge and belief.

While these new FAQ from DDTC provide helpful guidance for export compliance programs, debarment and voluntary disclosure issues can still be very complex. If you have any questions relating to the ITAR or export controls do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.