DDTC Publishes Debarment, Rescission, & Reinstatement FAQs
- Category: Blog - Denied Party Digest
DDTC Publishes Debarment, Rescission, & Reinstatement FAQs
On November 22, 2021, the Department of State, Directorate of Defense Trade Controls (DDTC) published a set of Frequently Asked Questions (FAQs) on debarment, rescission, and reinstatement. These help explain the implications of debarment and how it can be removed. The FAQs may be particularly useful if your screening result involves DDTC debarment. While a DDTC debarment is serious and may be indicative of other compliance problems, the action itself is of limited scope.
Q:
How do I know whether an individual whose name appears on the lists of statutorily or administratively debarred parties is the same as the person I'm dealing with?
A:
DDTC’s debarment listing includes a link to the Federal Register Notice (FRN) announcing the debarment. The FRN may provide additional identifying information, such as birth date. If you are unable to confirm the identity of the person based on the information in the FRN, it may be necessary to consult court or other records for confirmation. You may also reach out to DDTC directly by contacting the Office of Defense Trade Controls Compliance in writing to:
U.S. Department of State
Office of Defense Trade Controls Compliance
SA-1 Columbia Plaza, L132
2401 E. Street, N.W.
Washington, D.C. 20037
Please note that DDTC has specified the consequences of debarment in the ITAR, and those consequences are limited to activities subject to the ITAR. DDTC does not impose any restrictions on a debarred party’s eligibility to obtain banking services, engage in real estate transactions, purchase automobiles, or participate in any other activity not controlled under the ITAR.
Q:
What does it mean to be on one of DDTC's lists of debarred parties?
A:
Persons subject to statutory or administrative debarment are generally prohibited from participating directly or indirectly in ITAR-controlled activities, such as the export of technical data and other defense articles and the furnishing of defense services for which a license or other approval is required. Also, pursuant to ITAR § 127.1(d), it is a violation for a person with knowledge that another person is ineligible under ITAR § 120.1(c)(2), which includes debarred parties, to, among other things, apply for, obtain, or use an export control document on behalf of a debarred party, or participate in a transaction subject to the ITAR that will benefit a debarred party, without first obtaining DDTC’s approval.
DDTC has specified the consequences of debarment in the ITAR, and the Federal Register Notices announcing the debarment provide further detail regarding the debarment. DDTC does not impose any restrictions on a debarred party’s eligibility to obtain banking services, engage in real estate transactions, purchase automobiles, or participate in any other activity not controlled under the ITAR.
Q:
How long does my administrative debarment or statutory debarment last? Can I apply to have my administrative or statutory debarment rescinded?
A:
The Assistant Secretary of State for Political-Military Affairs will determine the appropriate period for administrative debarment, but it is generally for a period of three years. Statutory debarment will generally apply for three years following the statutory debarment. However, for both administrative and statutory debarment, the term of debarment does not end automatically, and debarred persons who wish to have their debarment rescinded must submit a request in writing to:
U.S. Department of State
Office of Defense Trade Controls Compliance
SA-1 Columbia Plaza, L132
2401 E. Street, N.W.
Washington, D.C. 20037.
Debarred persons will remain subject to administrative debarment or statutory debarment until the Department rescinds the debarment. In addition, it is the policy of the Department not to consider a request for rescission of debarment until at least one year after the date of the debarment. While rescission of debarment can generally occur only at the request of the debarred person, the Department may rescind debarment on its own initiative if it determines that the debarred individual has died or the debarred entity no longer exists.
After a rescission request is submitted, the Department will conduct a thorough review of the circumstances surrounding the debarment to determine whether appropriate steps were taken to mitigate both the Department’s reasons for imposing the debarment and any law enforcement concerns. Even if DDTC rescinds a person’s debarment, however, the debarred person may continue to be subject to a presumption of denial under ITAR § 127.11, unless the person’s export privileges have been reinstated pursuant to the procedure set forth in ITAR § 127.11(b).
Q:
Can DDTC grant an exception so that a statutorily or administratively debarred party can participate in an ITAR-controlled activity?
A:
Pursuant to ITAR § 127.1(d), participation of debarred persons in ITAR-controlled activity requires written authorization from DDTC. A request for such authorization is commonly referred to as a “transaction exception request.” DDTC grants transaction exception requests on a case-by-case basis after a full review of the relevant circumstances. The person submitting a transaction exception request to DDTC should explain why the debarred party should be permitted to be part of the transaction.
Q:
Is the rescission of statutory debarment under ITAR § 127.7(b) the same as the reinstatement of export privileges under ITAR § 127.11? If not, how can I get a presumption of denial under ITAR § 127.11 lifted?
A:
Rescission of statutory debarment under ITAR § 127.7(b) is not the same as the reinstatement of export privileges under ITAR § 127.11. Section 38(g)(4) of the AECA precludes the issuance of licenses to persons convicted of violating certain statutes or conspiring to violate certain statutes, including Section 38 of the AECA. The Department implements this restriction through a presumption of denial in ITAR § 127.11(a). Upon conviction, the Department automatically applies the presumption of denial in ITAR § 127.11. This is separate and distinct from the Department’s imposition of administrative or statutory debarment under ITAR § 127.7(a) and (b). Below provides further details on rescission and reinstatement processes:
Process for Rescission of Statutory Debarment Without the Reinstatement of Export Privileges - Prior to March 2019, the Department maintained a policy of requiring that export privileges be reinstated pursuant to ITAR § 127.11(b) prior to the rescission of statutory debarment under ITAR § 127.7(b). The Department abandoned this policy in March 2019 and may now rescind a person’s statutory debarment without reinstating the person’s export privileges. This policy change recognizes that the circumstances warranting rescission of statutory debarment may be different than those warranting the reinstatement of export privileges (see 84 FR 7411).
Process for the Reinstatement of Export Privileges - ITAR § 127.11(b) sets out the process for having the presumption of denial lifted—commonly referred to as “the reinstatement of export privileges.” It states that the Department will only reinstate export privileges if the applicant demonstrates, to the satisfaction of the Assistant Secretary of State for Political-Military Affairs, that the applicant has taken appropriate steps to mitigate any law enforcement and other legitimate concerns and to deal with the causes that resulted in the conviction or ineligibility. The applicant must explain, in a letter requesting the reinstatement of export privileges to the Deputy Assistant Secretary of State for Defense Trade Controls, the reasons why the application should be considered. If the Department decides to reinstate export privileges in response to a request for reinstatement from an applicant that is also statutorily debarred, the Department will also rescind the applicant’s statutory debarment.