Industry Asks DDTC to Nix, Streamline ITAR’s Redundant Brokering Reporting Rules

The agency should specifically slash requirements that lead to duplicative reporting, members of DDTC’s Defense Trade Advisory Group said, and take other steps to help American defense firms more clearly understand what type of information they need to submit to the government, which is sometimes tied to vague ITAR definitions.

Trade lawyer Johanna Reeves, who helped present recommendations from the DTAG working group during a Dec. 5 meeting, said the recommendations were meant to address issues raised by both the defense industry and officials from DDTC. The agency told her it sometimes struggles to “consolidate” the information it receives in brokering reports to share with other government agencies, and it’s also regularly concerned about the “accuracy of the data” in those reports.

Renata Rice of Northrop Grumman, who also presented the recommendations, said the working group identified “some opportunities for streamlining and simplification” within the ITAR’s brokering reporting requirements. The suggestions are meant to “improve the reporting process, but also to facilitate the accurate, consistent and timely submissions of the reports and to ensure that the State Department has access to information to allow for that policy and enforcement oversight.”

Brian Rissing, DDTC’s transaction analysis and mitigation division chief, said the agency would consider the recommendations along with a suggestion that DDTC explore ways to improve the ITAR’s definition for brokering activities. He said updating that definition “makes a great deal of sense.”

“What I can say with all sincerity is that we will take the recommendations very seriously,” Rissing said. “We'll explore it.”

One suggestion said DDTC should nix a portion of the ITAR that requires companies to submit reports to the agency about their brokering activities even if the company has already obtained a license from DDTC for that activity. Rice said DDTC already has “visibility” into that activity because it issued a license, so requiring a company to submit a report is unnecessary.

Under the change, companies would be required to submit brokering reporting only for activities that are exempt from DDTC licensing requirements.

“If the State Department were to take that recommendation and to limit the reporting requirement to only exempt activities,” Rice said, “then that would still achieve the objective in terms of ensuring visibility by the department on all brokering activities, but it would limit and also clarify what needed to be presented.”

DDTC should also require reports only for activities that lead to direct sales or transfers, the working group said, not the activity that companies carry out early in the sales process, such as promoting. Rice said some companies are required to start reporting “quite early on in an activity process, and because it's reported on an annual basis, they may need to report soliciting in one year and then report again the same activity the following year as that sale progresses.” That can lead to “duplicative reporting,” she said, “but also some confusion about how to report.”

She added that DDTC would still have “visibility” about those early activities from information submitted by the company during the “licensing approval process.”

Another recommendation could reduce the number of redundant brokering reports received by DDTC, which Rice said can occur if more than one broker is involved in a transaction or if multiple reports are required for the same sale over the course of several years.

“It may be a brokering activity that lasts multiple years -- soliciting one year and finalizing the sale the subsequent year,” she said. “Or it may be a case where there are multiple licenses involved in one brokering activity.”

For brokering activity that lasts multiple years or spans multiple licenses, Rice said DDTC should require each registrant to “only report the brokering activity once.”

She also acknowledged it may be difficult to stop multiple brokers reporting the same activity. But DDTC could help itself more easily identify those duplicative reports if it published a “standardized reporting template” for the defense industry to use when submitting its reports. Reeves said there’s “no current standard for structure or formatting of the report,” which causes challenges for both defense companies and DDTC.

Other recommendations focused on ways DDTC can clarify the type of information that should be included in brokering activity reports. The ITAR requires those reports to identify “all persons” who participated in the brokering activity, but Rice said that the “all persons” phrase doesn’t have a definition, which “can create some confusion and perhaps lead to inconsistent information being provided to the government.” She said DDTC should publish “more defined parameters on who you'd like to receive that information about.”

Another ITAR requirement says those brokering reports must include the dollar value of “any consideration received or expected to be received” by any person involved in the brokering activity. Rice said DDTC registrants usually have insight into only their own compensation, not necessarily the “consideration” received by others.

She said DDTC should revise this requirement to “only request direct compensation or consideration received by the registrant.”