Export Authorizations Pertaining to the U.s. Government: Current Scope and Historical Perspective

• Jurisdiction: United States,Federal
• Publication year: 2023
• Citation: Vol. 1 No. 3

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Beth Peters and Ashley E. Roberts ^*

In this article, the authors summarize the two key export authorizations that are very important to U.S. industry in support of government objectives.

The International Traffic in Arms Regulations (ITAR), administered by the U.S. Department of State's Directorate of Defense Trade Controls (DDTC), and the Export Administration Regulations (EAR), administered by the U.S. Department of Commerce's Bureau of Industry and Security (BIS), include authorizations for exports, reexports, or transfers involving the U.S. government (USG) that do not require specific licenses (i.e., companies do not have to prepare and submit a license application to the BIS or DDTC but can review the authorizations included in the regulations, and if the conditions are met, rely on those authorizations for the export, reexport, or transfer).

Under the ITAR, this license exemption, "Transfers by or for the United States Government," is included at 22 C.F.R. § 126.4 (ITAR Section 126.4). Under the EAR, this license exception, "Governments, international organizations, international inspections under the Chemical Weapons Convention, and the International Space Station" (GOV), is included at 15 C.F.R. § 740.11 (EAR Section 740.11).

This article summarizes the two key authorizations that are important to U.S. industry in support of government objectives. Exporters should appreciate the conditions and limitations of each authorization, including the activities that are permissible and the countries where performance can take place. In some ways, by understanding the historical evolution of these authorizations, companies can more easily comply with the regulations, understand when specific licenses are needed, and advocate for future

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expansion of these authorizations to support export compliance of industry as well as USG missions and programs.

ITAR Section 126.4

The ITAR Section 126.4 exemption, last updated April 19, 2019, authorizes exports, reexports, and transfers of defense articles by or for the USG. ¹

Paragraph (a): By a Department or Agency

Under ITAR Section 126.4(a), an ITAR license is not required to export, reexport, retransfer, or temporarily import a defense article or perform a defense service, when made by a department or agency of the USG and one of the required conditions is met: (1) official use, ² (2) carrying out a cooperative program, (3) carrying out a foreign assistance or sales program, or (4) any other security cooperation programs of the U.S. Department of Defense (DOD).

Paragraph (a)'s authorization for "official use" applies to (1) official use by a department or agency of the USG, including (i) employees in their official capacity, and (ii) persons or entities in a contractual relationship with the USG using the defense article or performing the defense service to conduct the contracted-for activities within the scope of the contractual relationship and (A) within a USG-controlled facility, (B) when an employee of the USG is empowered and responsible to ensure that the defense article is not diverted and is only used within the scope of the contractual relationship, or (C) authorized by the Deputy Assistant Secretary of State for the DDTC at the request of a department or agency of the USG. However, the provisions in (a)(1)(ii) may not be used to release technical data to a person or entity of a country identified in Section 126.1. They also do not generally authorize exports by U.S. contractors supporting USG programs. ³ Rather, such exports generally must comply with the requirements put forth in paragraph (b) for nongovernment persons in contractual relationships with the USG. ⁴

Paragraph (a) does not authorize transactions when a USG department or agency acts as a transmittal agent on behalf of a private individual or a firm. In addition, the DDTC does not need to approve a change in end use or end user if the export, reexport,

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retransfer, or temporary import made by the USG was for official use by the USG, for carrying out a cooperative project pursuant to an international agreement or in arrangement with certain authorized international partners, or for carrying out any foreign assistance or sales program under (a)(2) and (a)(3).

Paragraph (b): By a Person on Behalf of a Department or Agency

Paragraph (b) authorizes exports, reexports, retransfers, and temporary imports made by another person for a USG department or agency (1) to a USG department or agency at its request or (2) to another entity at the written direction of a USG department or agency or pursuant to an international agreement or arrangement for an activity authorized for that department or agency that is for official use by the USG, for carrying out a cooperative project pursuant to international agreement, for carrying out any foreign assistance or sales program, or for any other security cooperating programs and activities of the DOD. The authorization under (b)(2) is only permitted when the agency itself would have been authorized under paragraphs (a)(1)-(a)(4). ⁵

Technical data is eligible for authorization under paragraphs (a) and (b) if the transaction satisfies the provisions. ⁶ However, (a)(1)(ii), which authorizes transactions for official use by a department or agency of the USG, including by persons or entities in a contractual relationship with the USG, cannot be used to release technical data to a person or entity identified in Section 126.1. Under (b)(1), transfers of technical information to a USG department or agency are approved pursuant to a "request," while under (b)(2), transfers of technical information to an entity other than the USG or pursuant to an international agreement are approved pursuant to a "written request." ⁷ Government agencies are responsible for developing their own criteria and procedures of what qualifies as a "request," which means in some instances it could be verbal, but "written requests" may never be verbal. ⁸

Conditions of ITAR Section 126.4 Use

Broadly speaking, ITAR Section 126.4 can be used to conduct classified transfers. ⁹ It cannot be used in lieu of obtaining third-party transfer approval for articles procured via the Foreign Military

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Sales program. ¹⁰ The person or entity undertaking any transfer is responsible for the filing, record keeping, and certification requirements, while the exporter should be able to satisfy relevant record-keeping requirements. ¹¹ The text of Section 126.4 does not limit the scope of the exemption to apply only to certain portions of the U.S. Munitions List (USML). However, transfers otherwise prohibited by any other administrative provisions or by any statute are not permitted. ¹²

Exemptions such as Section 126.4 generally cannot be used to export to any proscribed Section 126.1 country, with some exceptions, such as when the recipient is a USG department or agency. ¹³ In addition to reviewing Section 126.4, exporters must review Section 126.1, which has been amended in the context of sanctions against Russia. In relevant part, Section 126.1 states:

The exemptions provided in this subchapter, except §§ 123.17, 126.4(a)(1) or (3) and (b)(1), and 126.4(a)(2) or (b)(2) when the export is destined for Russia and in support of government space cooperation, and § 126.6, or when the recipient is a U.S. government department or agency, do not apply with respect to defense articles or defense services originating in or for export to any proscribed countries, areas, or persons. ¹⁴

On March 18, 2021, Section 126.1 was amended to add the language "when the export is destined for Russia and in support of government space cooperation," which appears to narrow the use of the exemptions in Section 126.4(a)(2) or (b)(2). Prior language in Section 126.1 exempted "§ 123.17 of this subchapter and §§ 126.4(a) (1) or (3) and (b)(1) and 126.6, or when the recipient is a U.S. Government department or agency," ¹⁵ leaving out Sections 126.4(a)(2) and (b)(2) completely. The updated language therefore now includes an exception for exports, reexports, and transfers authorized by a cooperative program or completed by an entity other than the USG at the written direction of a department or agency or pursuant to an international agreement as long as the export is destined for Russia and in support of government space cooperation.

EAR GOV

EAR Section 740.11, last updated on October 21, 2021, authorizes exports, reexports, or transfers of items subject to the EAR

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for or by the USG. The GOV license exception consists of five paragraphs, and only paragraph (b) deals with the USG. ¹⁶ GOV (b)(2) authorizes exports, reexports, and transfers (in-country) (i) for personal use by personnel and agencies of the USG, (ii) by or consigned to a department or agency of the USG solely for its official use, (iii) for carrying out any USG program with foreign governments or international organizations, or (iv) at the direction of the DOD. ¹⁷

GOV (b)(2)(i): Items for Personal Use by Personnel and Agencies

Under GOV (b)(2)(i), items may be shipped for personal use by personnel and agencies of the USG only for items in quantities sufficient for the personal use of members of the U.S. armed forces or civilian personnel of the USG (including U.S. representatives to public international organizations), ¹⁸ and their immediate families and household employees.

GOV (b)(2)(ii): Made by or Consigned to a Department or Agency

GOV (b)(2)(ii) authorizes exports made by the USG to contractor support personnel of a USG department or agency when in the performance of their duties and pursuant to the applicable contract. Contractor support personnel is defined as those who provide administrative, managerial, scientific, or technical support under contract to a USG department or agency. Private security contractors do not qualify under this provision. It is limited to those individuals who are providing such support within a...