2001/09/30
By: Maarten Sengers
You are a defense company that primarily supplies US armed forces, and the bulk of your deliveries are to locations within the United States. As such, you rarely have a need to get an export license under the International Traffic in Arms Regulations (ITAR). But in a recent deployment, the Marines took all your equipment with them. You now get a call from the US military to deliver spare parts to US forces in some country ending in “stan.” “We need this now,” barks the Marine officer over the phone. What do you do?
Flipping through the ITAR, you find surprisingly few exemptions available for shipments to our armed forces overseas.
At first blush, it looks like the shipment requires a license. Your read is correct. Usually shipments to US forces overseas require licenses from the Office of Defense Trade Controls (ODTC), and that obviously also means a significant delay in shipment. For hardware exports to US armed forces, only one exemption option stands out: The 126.4 exemption for shipments by or for United States Government agencies.
But a deeper analysis reveals that this exemption, like many other ITAR exemptions, is so fraught with hooks that it can easily leave you hanging like a side of beef in a meat locker. The usual conservative ODTC interpretations on use of this exemption in the past have made this exemption virtually an empty box. In times of peace, therefore, I tend to recommend just getting a license over bothering with the exemption. But given military needs in a time of crisis such as the current one in Afghanistan, we obviously should take a harder look at the exemption.
126.4(a) begins with a promising statement that you may temporarily export defense articles to an agency of the US Government for official use of the agency. You’re in luck, you think, this seems perfectly tailored for shipments to our forces on temporary deployments overseas. It also seems to make sense: why would we need a license to ship in support of our own forces? But the rest of 126(a) appears dedicated to taking away what was just offered. Let’s take a look at some of the restrictive conditions.
The killer condition is that the export must occur under a US Government Bill of Lading. In a sense, this means that the US Government is the exporter of record and all you are doing is delivering it to them in the US. If you export the material directly, you would not be using a US Government Bill of Lading. The exemption also takes away any APO/FPO option. If the Marines direct you to deliver the defense articles to an armed forces post office address in the United States for delivery to the Stan, wouldn’t that be okay? 126.4 takes that option away too: “This exemption, however, does not apply when a U.S. Government agency acts as a transmittal agent . . . .” Senior ODTC officials have confirmed in the past that a shipment to an APO/FPO address in the US for overseas delivery is an export and would not qualify for the exemption. Again, the shipment would need to go under a US Government Bill of Lading.
In a similarly restrictive tone, 126.4(b) goes on to reminds you that you cannot use the exemption where otherwise prohibited. For example, you couldn’t use the exemption at all for 126.1 proscribed countries like Tajikistan and Afghanistan, USG Bill of Lading or not.
At this juncture, 126.4 drafters almost have a change of heart about being so tough. Almost. 126.4(c) says that temporary and permanent defense article exports can be to a US Government agency abroad if an “urgent” or emergency situation exist. Based on my experience in such shipments, armed forces almost always say it’s an emergency and insist the US company use the exemption. But 126(c) requires that the urgency be such that “the appropriate export license or US Government Bill of Lading could not have been obtained in a timely matter.”
ODTC views “urgency” when US forces are in immediate harms way. Senior ODTC officials have provided examples in the past to illustrate “urgency,” such as when emergency extraction equipment must be delivered to rescue a downed pilot in hostile territory. In my experience it’s nearly impossible for a US exporter to verify that they have met the urgency condition of the exemption. Armed forces personnel always say the shipment is urgent, and become extremely agitated when a civilian exporter dares ask for a further explanation in order to verify that they are meeting their ITAR compliance obligations. “How dare you question us” or “we can’t tell you the reason – it’s classified,” are common responses.
Another problem is getting the request in writing, as is also required by 126.4(c). I always recommend getting a letter from a senior official or officer that specifically addresses the requirements in 126.4(c), especially when DOD or other Government personnel cannot or will not provide an answer as to the urgency of the shipment. At least if ODTC questions your use of the exemption, you have something specific to show them in your defense. But the reality is that Government personnel are loath to sign letters like this, especially when they see all the ITAR legalese they don’t quite understand.
Fortunately for the exporter, what constitutes a sufficient writing is not defined in 126.4. That leaves the door open for the writing to be a fax or email without an official signature. In one case, a senior military officer sent an email loaded with venom to an exporter who had requested this writing, which angrily closed with the direct order “you will export this material, 126.4(c) applies!” The email was the writing the exporter printed off for the exemption file.
Given all the problems with this shipments by or for US Government agencies exemption, it’s always your best bet is to ask the Marines to take possession of the equipment in the US and to take care of any subsequent export themselves. That way, they are making the export themselves and will have to take responsibility for all the exporting headaches.