DDTC Modifies Procedures to Utilize ITAR Section 126.18 Exemption to Transfer Technical Data to Foreign Nationals Via Agreements

The State Department's Directorate of Defense Trade Controls (DDTC) has issued updated procedures for exporters utilizing the exemption contained in section 126.18 of the International Traffic in Arms Regulation (ITAR) authorizing the intra-company or intra-organization transfer of ITAR-controlled technical data via technical assistance agreements (TAAs) and manufacturing licensing agreements (MLAs).

Section 126.18 of the ITAR, which was published by DDTC in May 2011 and went into effect on August 15, 2011, allows companies, governmental entities and international organizations, to transfer unclassified defense articles, including technical data, to their dual and third-country full-time employees as long as “effective procedures” are in place to prevent diversion to unauthorized destinations, entities or for unauthorized purposes.

In guidance issued on July 25, 2011, DDTC required all TAAs and MLAs to be amended prior to use of the ITAR § 126.18 exemption to (1) update the new verbatim clause at ITAR § 124.8(5); and (2) to add specific language to the ITAR § 124.7(4) section of the agreement.

Based on DDTC's review of these requirements and through experience gained by DDTC in administering the new provision, DDTC has decided to change the requirement for utilizing the § 126.18 in connection with TAAs and MLAs.

Effective immediately, TAAs and MLAs do not have to be amended to include the modifications cited above in order to utilize the ITAR § 126.18 exemption. However, all agreement holders and foreign parties utilizing the ITAR § 126.18 exemption must maintain a copy of DDTC's web notice in their records.

However, DDTC will require all TAAs or MLAs that are amended to be updated to include the updated ITAR §124.8(5) verbatim clause. All pending TAAs and MLAs, or amendments, which do not include the updated ITAR § 124.8(5) verbatim clause will receive a proviso to correct prior to execution of the agreement or amendment.

In addition, the requirement to specifically request use of the ITAR § 126.18 exemption in the ITAR § 124.7(4) paragraph of the agreement is no longer required. However, in order to continue the use of ITAR § 124.16 under Option 1 (foreign vetting), or the initial request of ITAR § 124.16, the TAA or MLA must be amended to include Option 2 (DDTC vetting) language.

DDTC will soon update its guidelines for preparing electronic agreements to reflect this policy change.