In April 2024, the U.S. State Department published a proposal to increase the fees for DDTC registration and renewal. It’s the first proposed increase in 16 years, and although it could be months before a final decision is made, it’s reasonable to assume an increase of some kind will be approved.
For some entities, the cost of any such increase will be negligible. But for others, it will be substantial.
Any business or individual in the U.S. who manufactures, exports or temporarily imports defense articles or defense services subject to the ITAR is required to register every year with the Directorate of Defense Trade Controls (DDTC). According to the State Department, DDTC receives about 38,000 export license applications a year from the roughly 14,000 registered entities.
Here’s a look at the current and proposed fees.
| Applies to: | Current fee | Proposed fee | Increase | |
| Tier 1 | New registrants; and renewals for entities that didn’t obtain any licenses in the prior year (see details) | $2,250 | $3,000 | 33% |
| Tier 2 | Renewals for entities with 5 or fewer (was 10 or fewer) licenses in the prior year | $2,750 | $4,000 | 45% |
| Tier 3 | Renewals for entities with more than 5 (was more than 10) licenses in the prior year | $2,750 + $250 per license after the first 10 | $4,000 +$1,100 per license after the first 5 (see details) | Varies with licensing volume |
According to the proposal, “The [State] Department has concluded that Tier 3 registrants have benefited the most from DDTC’s improvements, specifically DECCS and customer service improvements, they are best positioned to contribute from their export-derived revenue to continue and improve DDTC’s services. Because these improvements would primarily benefit Tier 3 registrants, it is those registrants that will be asked to contribute more.”
The proposal is subject to a public comment period, ending June 10, 2024. Consideration may be given to comments received later but is not guaranteed.
Comments are accepted two ways:
- Email: DDTCPublicComments@state.gov. Include the subject line: Registration Fees-RIN 1400-AF78
- Federal eRulemaking Portal: http://www.regulations.gov. Identify by the Department docket number DOS-2023-0034 or RIN 1400-AF78. Follow the instructions for sending comments.
While we’re on the topic, here’s some background on what the registration is all about.
The purpose of registration
The rules about DDTC registration are covered in Part 122 of the ITAR, which states:
Registration is primarily a means to provide the U.S. Government with necessary information on who is involved in certain manufacturing and exporting activities. Registration does not confer any export rights or privileges. It is generally a precondition to the issuance of any license or other approval.
Registration is sometimes incorrectly understood to be some kind of government certification or approval of an organization’s exporting competency. Similarly, some companies may require potential vendors to register with DDTC before submitting a proposal or bid. But that’s their own policy; it’s not part of the regulation.
Registration is nothing more or less than a requirement to inform the government if you’re in the United States and involved in any of the following activities:
- Exporting anything on the S. Munitions List (USML);
- Temporarily importing anything to the United States that’s on the USML;
- Manufacturing anything in the United States that’s on the USML – even if you don’t export it;
ITAR Part 129 contains a separate, though similar, registration rule for those engaged in brokering activities. Notably, brokering registration is the only ITAR registration requirement which may apply to people located outside the U.S.
There is a brief list of exemptions from the requirement to register. But unregistered parties aren’t normally able to apply for export licenses or any other approval from DDTC, so the exemptions are really only relevant as long as an entity has no need to interact with DDTC.
The registration rule has at least one common source of confusion: It fails to define “manufacturing.” If a company specializes in a value-added process, such as heat treating or plating or machining, does it need to register if it occasionally handles items on the USML? The answer is unclear.
Registration process
Registration takes place through the Defense Export Control and Compliance System (DECCS) – the online portal for working with DDTC.
The registration form, DS-2032, is extensive; it seeks information about the company’s ownership, officers and the details about whatever activities triggered the need to register. Large companies are expected to roll up all activities of their divisions and subsidiaries into a single registration, while identifying all their affiliates engaged in defense trade.
DDTC reviews the registration and may follow up with requests for further information. Once a registration is accepted, the applicant pays the appropriate fee and receives a registration number to use in any future communications.
Most companies absorb the registration fee as a cost of doing business, while others attempt to pass it along to customers in the form of export processing fees. Foreign ownership isn’t an inherent barrier to registration, but it must be disclosed in the application.
Once an entity is successfully registered, it can begin applying for export and other types of licenses.
Maintaining registration
Registration must be renewed every year, with fees based on the previous year’s activity. So once an entity has reason to register with DDTC, it should establish an infrastructure to maintain the registration.
If there are material changes to information provided in the registration, it’s supposed to be reported to DDTC within five days. It’s a difficult standard to meet.. The annual registration renewal would seem the appropriate time to update such information, but any effective export compliance program should include attention to the notification requirement.
Big changes – such as mergers, acquisitions and divestments – must be managed carefully with respect to DDTC registration.
If a registered entity is purchased or makes an acquisition, it’s required to update its registration. If both companies are registered, those filings need to be consolidated into a single registration. Any existing export licenses don’t automatically carry through such transactions; a request must be made to transfer them.
If a registered entity is changing to foreign control, notification must be provided 60 days before the transaction closes—also a difficult standard to meet in many circumstances. Whether that change will affect the status of any existing export licenses is a question that will only be addressed after the notification is provided.
Transactions involving foreign control also may be reviewed by the Committee on Foreign Investments in the United States (CFIUS) to determine if and how the transaction may affect national security. DDTC liaises with CFIUS.
Described by The New York Times as a “secretive interagency panel,” it was CFIUS that was called on in early 2024 to review whether Nippon Steel of Japan would be allowed to acquire U.S. Steel. That review – relevant to national security conversation but not specifically to the ITAR – was still ongoing at the time of this post.
Looking for more detail on this topic? See ECTI’s on-demand webinar “Cornerstones of ITAR Compliance: Registration, Empowered Officials & Exemptions.”
Visit u2y8.smxjjl.com to learn about our company, our faculty, our staff and our esteemed Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars in the U.S., Europe and elsewhere and live webinars and browse our catalog of 80-plus on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute at 540-433-3977 for more information.
Scott Gearity is President of ECTI, Inc.