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Proposed DFARS amendment would ease DCMA access to export authorizations but may require improved coordination between contracts administration and trade compliance

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Home Perspectives Proposed DFARS amendment would ease DCMA access to export authorizations but may require improved coordination between contracts administration and trade compliance
The Department of Defense has published a proposed rule seeking to amend DFARS 252.225-7048, Export-Controlled Items to require certain contractors to submit export authorizations and contact information for the company’s empowered official or export point of contact directly to the Defense Contract Management Agency (DCMA). DCMA needs this information to determine whether the agency’s quality assurance activities can be performed by a foreign auditor. The current version of this DFARS clause requires contractors to make export authorizations available to DCMA, rather than submitting them to DCMA, therefore requiring DCMA to seek out and, reportedly in some cases, travel to contractor sites in order to review the export authorizations.

Contractors performing under contracts that require government quality assurance oversight and require delivery to, or production or performance in, government quality assurance countries will, under the proposed rule, be required to provide export authorizations, such as licenses, license exceptions, or license exemptions, and the name of a point of contact to answer questions directly to DCMA. Accordingly, if the proposed rule is adopted, contractors will need to ensure there is an information-sharing process between contracting and trade compliance personnel, which should already – but often does not – currently exist between these functions.

The proposed rule also revises the definition of “export-controlled items” to specifically state that it includes “[a]ny information or material that cannot be released to foreign nationals or representatives of a foreign entity, without first obtaining approval or a license from the Department of State or the Department of Commerce” and incorporates certain definitions from the International Traffic in Arms Regulations and the Export Administration Regulations. The proposed rule defines “quality assurance countries” as countries that have current Government Reciprocal Quality Assurance agreements with the Department of Defense or Reciprocal Government Quality Assurance annexes contained in a Reciprocal Defense Procurement Memorandum of Understanding, such as Australia, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Israel, Italy, the Republic of Korea, the Netherlands, Norway, Poland, Romania, Slovakia, Spain, Sweden, Turkey, and the United Kingdom.

Comments on the proposed rule are due on or before May 22, 2023, and will be considered in the formation of a final rule. Comments may be submitted under DFARS Case 2018–D053, at regulations.gov, or by email. Reed Smith will continue monitoring the progress of this proposed rule for any necessary enhancements to contractor policies for trade compliance and recordkeeping requirements.

Client Alert 2023-086