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The International Traffic in Arms Regulations (ITAR) regulatory system should be familiar to you if your company is involved in buying or selling services or goods on the United States Munitions List (USML). If you are manufacturing, exporting, distributing or acting as a broker for defense-related items, goods, or data you must be ITAR compliant. Failure to comply can not only ruin your day – it can kill your business.

The purpose of the ITAR is to safeguard the security of the US and its allies by controlling the movement of defense-related goods and technologies. The USML has 21 categories of items covered by the ITAR ranging from firearms to missiles, explosives, and biological agents. Arms manufacturers tend to be fully aware of the ITAR compliance rules, but smaller companies can get into trouble when they deal in “dual-use” items that are not primarily intended for military use. For example, an electronic device that’s designed for civilians may also be used in a piece of military equipment – and could trigger a need for ITAR compliance.

What Does “Compliance” Involve?

As a first step, your company must be registered with the Directorate of Defense Trade Controls (DDTC). By registering with DDTC, you are acknowledging that you understand all of the ITAR requirements and are compliant. The onus is on you to be familiar with the regulations and abide by them. This includes knowing who you can (and can’t) do business with. Upon registration, you’ll pay a fee and be issued with a license or authorization to deal with goods and services governed by the ITAR.

Compliance also means following all the necessary steps to prevent the transfer of USML restricted goods, services and technologies to foreign nationals – either within the US or overseas. This requirement includes any defense articles, defense services, or defense-related technical data. Your data needs to be closely guarded and protected, which can be a real challenge for companies that regularly transfer sensitive information over the internet and store data overseas.

What Kind of Trouble Could I Get Into?

The State Department is extremely serious about controlling the manufacture and export of items on the United States Munitions List. This list, however, contains many goods, services, and technologies that may not be traditionally classified as “military items”. This includes things like commercial satellites, certain photography lenses, and chemicals used on the civilian market. Most importantly, it’s not just the end product that’s restricted – the ITAR applies to all of the components that went into making the final product.

If you are found to be in violation of the ITAR, you can face civil fines of up to $500,000, criminal fines of $1,000,000, and be imprisoned for up to 10 years per violation.

Before the DDTC comes calling, talk to an experienced attorney with expertise in ITAR compliance. Determine whether or not your company is dealing with goods or services on the USML. If you do, in fact, provide goods or services on the USML, immediately seek legal advice on how to ensure you’re ITAR compliant. This will include not only registering with the DDTC but also becoming fully aware of all the measures you are required to take in order to stay on the right side of the regulations. When it comes to the ITAR, it’s always better to be safe than very, very sorry.

 

Posted in: Business Law, Government Contracts