Government contractors may soon face another compliance burden. The Department of Defense recently proposed a new rule limiting public access to export-controlled information “in the possession or under the control of a DoD component” agency. As proposed, the rule would require contractors to meet specific criteria before DoD provides controlled information to them, and establish a new regulatory program to administer access.
There are a few things that I really don’t like in the DoD proposal; I’ll get to these after summarizing the main elements. Affected parties, meaning any government contractor that uses information controlled for export, should review the document (available here) in detail and consider commenting by the December 30, 2016 deadline.
Restrictions on Release of Information
The proposed rule’s definition of export-controlled information is identical to that in the International Traffic in Arms Regulations (“technical data”) and Export Administration Regulations (“technology”). It establishes a presumption against public disclosure of such information, with exceptions for “qualified U.S. contractors” that need the information for a “legitimate business purpose” and “certified Canadian contractors” having a “legitimate business relationship” with the U.S. government.
To qualify, a U.S. contractor or subcontractor must provide certifications as to its compliance with export controls and that it needs specified information from DoD for bidding on or performance of a government contract. Canadian entities must qualify under the bilateral U.S.-Canadian memorandum of understanding on “strategic technical” exchange. U.S. and Canadian contractors must also submit DD Form 2345, the Militarily Critical Technical Data Agreement.
DoD will establish procedures to determine the control status of requested information and the requester’s qualifications and need to receive it, as well as enforcement mechanisms for parties that fail to comply with the information disclosure requirements or export controls in general. The proposed rule also provides a mechanism for identifying information that DoD releases to a contractor. Although not included in this proposal, DoD anticipates that conforming changes will be incorporated into contracts governed by Title 48 of the Code of Federal Regulations.
Open Issues Posed by the Proposed Rule
Now here’s what I don’t like.
First, the reference to information “in the possession or under the control of a DoD component” is either ill-defined or too open-ended. Is the intention to cover only data originating within the Defense Department, or does it encompass information that has been generated by a non-governmental actor and then provided to DoD?
Second, a contractor may have its eligibility to participate in the program temporarily suspended terminated upon DoD’s “receipt of substantial and credible information that a qualified U.S. contractor has violated U.S. export control law.” This standard provides no differentiation based on the nature of an alleged offense or the degree of culpability. Will a self-disclosed violation resolved through issuance of a warning letter by the Commerce or State Department be sufficient to trigger suspension? Must a suspension last until a potential violation has been resolved by the applicable export control agency? Must a contractor inform DoD of pending export enforcement matters, even those commenced through a self-disclosure? The proposed rule does not say. Even though there is an appeal process, it appears that a temporary suspension may be imposed before the contractor has an opportunity to be heard.
Third, the proposed rule implicitly provides that allegations of export control violations may originate with the Defense Department, which confer on that agency a de facto export compliance role. DoD involvement could compromise a party’s ability to submit an effective voluntary self-disclosure, since previous knowledge by a U.S. government agency negates the benefits that a disclosure otherwise bestows.
We must anticipate that some version of the proposed DoD rule eventually will be adopted. The public comment period provides the best opportunity for potentially affected parties to voice their concerns and seek clarifications and improvements.
