More than two-thirds of the defense export end-use cases closed in fiscal year 2022 were favorable, according to an annual report from the State Department’s Directorate of Defense Trade Controls on the performance of DDTC’s “Blue Lantern” end-use monitoring program. The report’s findings highlight the importance for defense exporters to maintain effective compliance procedures.
The Blue Lantern program aims to minimize the risk of diversion and unauthorized use of U.S. defense articles, combat gray arms trafficking, uncover violations of the Arms Export Control Act, and build confidence and cooperation among defense trade partners. Blue Lantern end-use monitoring includes pre-license, post-license, and post-shipment checks to verify the bona fides of foreign consignees and end-users, confirm the legitimacy of proposed transactions, and provide reasonable assurance that (1) the recipient is complying with U.S. government requirements with respect to use, transfers, and security of defense articles and services and (2) such articles and services are being used for the purposes for which they are provided.
DDTC maintains a watch list with more than 229,000 entities (up from 224,500 in the last annual report) that is used to flag export authorization applications for possible Blue Lantern checks. In FY 2022 DDTC reviewed 65,677 watch list name matches (down from 72,472 the previous year) and made 1,536 new entries (up from 1,487) and 2,096 modifications (up from 1,889). DDTC systematically shares this list with the Bureau of Industry and Security, which improves BIS’ ability to regulate items it controls, especially those formerly controlled on the U.S. Munitions List.
According to the report, in FY 2022 the Blue Lantern program initiated 305 checks (up from 281) in more than 60 countries. Europe accounted for the largest share of these initiations at 41.7 percent (up from 40.6 percent), followed by East Asia and the Pacific at 22.3 percent (down from 23.1 percent), the Near East at 11.2 percent (down from 11.3 percent), the Western Hemisphere at 9.7 percent (up from 9.1 percent), South/Central Asia at 3.6 percent (up from 3.4 percent), and sub-Saharan Africa at 0.9 percent (down from 1.0 percent).
Of the 226 Blue Lantern cases closed in FY 2022 (down from 256), 67 (29.6 percent, down from 30 percent) were determined to be unfavorable. South/Central Asia had the highest rate of unfavorable checks at 50 percent (up from 17 percent), followed by sub-Saharan Africa at 40 percent (down from 50 percent), the Near East at 33.3 percent (down from 38 percent), Europe at 31.0 percent (down from 38 percent), East Asia and the Pacific at 30.8 percent (up from 17 percent), and the Western Hemisphere at zero (down from 13 percent).
The report states that the leading causes of an unfavorable finding in FY 2022 were derogatory information/foreign party deemed unreliable (25 cases, down from 47) and refusal to cooperate (also 25 cases, down from 29). Other reasons included unlicensed party (8, down from 11) and unauthorized reexports/retransfers (3, down from 4). No instances of indications of potential or actual diversion were documented.
Finally, the report notes that unfavorable cases resulted in several types of actions, including returning without action or denying export license applications, removing parties from licenses, updating the DDTC Watch List, or referring cases to the Office of Defense Trade Controls Compliance.
For more information on defense export issues, please contact attorney Kristine Pirnia (at (202) 730-4964 or via email.
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