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Law Requiring ITAR Training

 

What is ITAR?

International Traffic in Arms Regulations (ITAR) is a set of United States government regulations under the Arms Export Control Act (AECA) that control the export and import of defense-related articles and services on the United States Munitions List (USML). The Department of State Directorate of Defense Trade Controls (DDTC) interprets and enforces ITAR. Its goal is to safeguard U.S. national security and further U.S. foreign policy objectives.

Companies regulated under ITAR are subject to a number of broad requirements including registration requirements, restrictions on transfer of regulated software and technical data, restrictions on the performance of defense services for foreign parties, the requirement to obtain export licenses and recordkeeping requirements. 

The DDTC Web site, http://www.pmddtc.state.gov, is the primary place for ITAR regulated companies to go to for registration, licensing, compliance, reference library, including links to the ITAR and USML, lists of debarred parties and embargoed countries, and other useful information. 

What is the Purpose of ITAR?

For practical purposes, ITAR regulations dictate that information and material pertaining to defense and military related technologies (for items listed on the U.S. Munitions List) may only be shared with U.S. Persons unless authorization from the Department of State is received or a special exemption is used. 

U.S. Persons (including organizations) can face heavy fines if they have, without authorization or the use of an exemption, provided foreign (non-US) persons with access to ITAR-protected defense articles, services or technical data.

Sanctions for Violations of ITAR

Violations of ITAR can result in significant penalties:

  1. Criminal Penalties.  Imprisonment of up to ten years and fines of up to $1,000,000 per violation.  Criminal sanctions can be imposed on the company defendants as well as officers, directors and employees in their personal capacities.
  2. Civil Penalties. The AECA provides for civil penalties of up to $500,000 per violation.
  3. Debarment.  Companies can be barred from selling products and services to the federal government.  This can often be the most severe sanction of all for a government contracting firm. 
  4. Denial of export privileges and seizure of goods being transferred in violation of ITAR requirements.

The State Department has imposed the largest administrative fines in history for violations of the AECA and ITAR, including the Boeing Company ($15 million), EDO Corporation ($ 2.5 million), General Motors/General Dynamics ($20 million), Goodrich/L3 ($7 million), Hughes Electronics ($32 million), ITT ($8 million), L3 Communications Corporation ($1.5 million), Lockheed-Martin ($3 million), Loral ($20 million), and Raytheon ($25 million).

Voluntary Disclosure of Violations – Penalty Reduction

DDTC administers a voluntary disclosure program that encourages industry to self-assess and report violations to the Department. There is a procedure available for companies to voluntarily disclose previous violations to the State Department, which often results in a reduction in penalties or no penalties being assessed against the company.  Voluntary disclosures must be undertaken properly to avoid compounding the legal liability for the company.

DDTC Provides Help

The DDTC Response Team provides responses to the full range of defense trade inquiries.  You can reach the Response Team by telephone at (202) 663-1282, or by e-mail at [email protected]. DDTC’s Response Team handles thousands of phone inquiries and e-mails from the public. You can go here to learn more about the DDTC Response Team: http://www.pmddtc.state.gov/response_team/index.html

The Response Team fields basic process and status questions, and assists exporters in identifying what they need to do to get answers to more complex questions involving issues substantively handled by DDTC's licensing and compliance offices.

Also, you can receive technical support regarding the DDTC’s online Defense Trade Application System (DTAS), which includes DDTC’s registration, licensing, enforcement and compliance system.

Registration Under ITAR

All U.S. manufacturers, exporters, and brokers of defense articles, defense services, or related technical data, as defined on the USML, are required to register with U.S. Department of State. Registration is primarily a means to provide the U.S. Government with necessary information on who is involved in certain manufacturing and exporting activities. Registration does not confer any export rights or privileges, but is a precondition for the issuance of any license or other approval for export.

You can go to http://www.pmddtc.state.gov/registration/index.html to register with ITAR.  Remember, if you need help you can reach the Response Team by telephone at (202) 663-1282, or by e-mail at [email protected] 

“U.S. Person” Under ITAR

Under ITAR, a "U.S. person" who wants to export USML items to a "foreign person" must obtain authorization from the U.S. Department of State before the export can take place.

A "U.S. person" can be

  • a U.S. citizen;
  • a permanent resident who does not work for a foreign company, a foreign government, or a foreign governmental agency/organization;
  • a political asylee;
  • a part of the U.S. government, or
  • a corporation, business, organization, or group that is incorporated in the United States under U.S. law.

“Foreign Person” Under ITAR

A foreign person is any person who is not a lawful permanent resident of the U.S. and includes foreign governments and organizations.

This means that, for example a foreign person who is visiting the U.S. will remain a foreign person for the purposes of ITAR and any export of USML items to them inside the U.S. must be subject to an export authorization.

Who is Subject to ITAR?

The ITAR was developed originally to regulate military products and services.  However, these controls also cover many products that are commercial in nature. If a company’s product or service is on the U.S. Munitions List (USML), then that company is subject to the ITAR requirements.

Items Covered On The USML

At the core of the ITAR is a list of products called the U.S. Munitions List (“USML”).  If a company’s product, software, technical data or services are identified on the list, the company is subject to the ITAR requirements.  The USML contains twenty-one broad categories of products, ranging from firearms and military vehicles to computers and communication equipment:

  1. Firearms, weapons
  2. Guns and armaments
  3. Ammunition, ordinance
  4. Launch vehicles, missiles, rockets
  5. Explosives, incendiary agents
  6. Naval vessels
  7. Military vehicles
  8. Aircraft and equipment
  9. Military training services, equipment
  10.   Protective personnel equipment and shelters
  11.   Military electronics
  12.   Optical and guidance control equipment
  13.   Auxiliary equipment (cameras, encryption, camouflage)
  14.   Toxicological, chemical, biological agents, protective equipment
  15.   Space systems and equipment
  16.   Nuclear weapons, technology
  17.   Classified technical data and services
  18.   Directed energy weapons
  19.   Reserved
  20.   Oceanographic equipment
  21.   Other items designed or adapted for military use

 ITAR’s Broad Reach

The ITAR reaches into many corners of the business world and covers a broad range of activities. Every government contracting firm should check the USML to determine if its products or services are set forth on the USML.

  1. Category 21.  Category 21 is an important provision for government contracting firms since, when a firm develops a product or service for a U.S. military customer, this often results in the product, technical data, software or service being on the USML and the company being subject to ITAR. 
  1. Regulation of Technical Data and Software.  If an item is listed on the USML, software required to run that item is typically also covered on the USML.  Similarly, technical data related to the item is also usually listed on the USML.
  1. Services.  The ITAR covers defense services.  If an item is listed on the USML, services related to such item for foreign parties are also covered on the USML and subject to ITAR.  In addition, providing military training to foreign defense forces as well as “military advice” to such parties are considered defense services subject to ITAR.
  1. Products and Technologies Developed From Government Research Funding.  If a product, technology or software was developed originally using U.S. defense research funding, such as SBIR grants or other DOD research grants – The State Department will often consider these to be military products and place the products and related technical data, software and services on the USML.

Overview of Obligations of U.S. Companies Under ITAR 

ITAR imposes a number of requirements on companies subject to the ITAR:

  1. Registration.  A company must register with the U.S. State Department, even if it does not export any of its products.
  2. Transfer of Technical Data And Software to Foreign Nationals.  A company is prohibited from transferring software or technical data on the USML to foreign nationals, either in the US or abroad, without an export license.
  3. Transfer of USML products to representatives of foreign governments and military organizations (including NATO, the United Nations, etc.) in the United States is prohibited without a license.
  4. Defense Services.  A company is prohibited from performing services for foreign parties related to items on the USML, either in the US or abroad, without obtaining a State Department authorization called a Technical Assistance Agreement (“TAA”).
  5. Export License.  A company is prohibited from exporting products listed on the USML without obtaining an export license.
  6. Imports.  A company is prohibited from importing defense items listed on the U.S. Munitions List without obtaining a temporary import license.
  7. Recordkeeping Requirement.  A company is required to maintain records in accordance with the ITAR recordkeeping requirements.
  8. Brokering.  A company is prohibited from brokering the sale of defense items without complying with the DDTC brokering requirements.
  9. Reports For Payments of Sales Commission, Fees and Political Contributions.  Companies are subject to restrictions on the payment of sales commissions, fees and political contributions made in connection with defense transactions.
  10. Transactions With Debarred Parties.  Companies are prohibited from entering transactions subject to ITAR regulation with certain debarred parties identified on the State Department’s Debarred Party Lists.

Commodity Jurisdiction

The purpose of a commodity jurisdiction (CJ) request is to determine whether an item or service is covered by the U.S. Munitions List (USML) and therefore subject to export controls administered by the U.S. Department of State pursuant to the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR). 

If after reviewing the USML and other relevant parts of the ITAR, in particular ITAR §120.3 and §120.4, you are unsure of the export jurisdiction of an item or service, you should request a CJ determination. Note that Applicants are not required to be registered to submit a CJ request.  You can go to the DDTC website to submit the request: http://www.pmddtc.state.gov/commodity_jurisdiction/index.html

For general questions on commodity jurisdiction, including preparation of forms and status of your request, please contact the Response Team at (202) 663-1282 or by email at [email protected] 

For technical issues or questions concerning downloading and submitting the form, please contact the Help Desk at (202) 663-2838 or by email at [email protected]

ITAR Certification

ITAR Certification.  Many companies require members of their supply chain be ITAR Certified or ITAR Compliant. Nowhere in the ITAR is it spelled out what “ITAR certified” means. 

To be ITAR Compliant, a company needs to register with DDTC, know what is required of them to be in compliance with the ITAR, meet those requirements under ITAR, and self certify.

Suggestions for Compliance with ITAR

  1. Review contracts and activities to determine if you are subject to ITAR.  Speak with the DDTC Response Team if you need help at (202) 663-1282, or by e-mail at [email protected]
  2. If subject to ITAR, register with State Department, apply for Technical Assistance Agreement to perform services for foreign parties, apply for export license, apply for export authorization for disclosure to foreign nationals of technical data, and apply for import license of defense items.  You can do all of this at the DDTC web site at http://www.pmddtc.state.gov.
  3. Appoint a company employee to be in charge of ITAR Compliance, establish policies and procedures for employees to follow, train employees, adopt procedures for handling ITAR items, adopt a procedure for dealing with foreign nationals, adopt an audit procedure and a procedure for dealing with potential violations of ITAR, and otherwise create a compliance program as suggested by DDTC at http://pmddtc.state.gov/compliance/documents/compliance_programs.pdf

Note that having a compliance program may help mitigate damages if a violation is found to have occurred.

Export Exemptions

There are 60 exemptions established in the International Traffic and Arms Regulations (ITAR) (CFR 120-130) that permit the permanent or temporary export or temporary import of defense articles and technical data by U.S. persons in lieu of obtaining a U.S. license from the U.S. Department of State Directorate of Defense Trade Controls. An exemption is an authorization that covers various situations with specific requirements.

This table will provide the exporter the specific ITAR citation exemption number needed for the export shipment from the requirement for a license or other written authorization: http://www.census.gov/foreign-trade/aes/documentlibrary/usmldataelements.html#DDTCExemptionNumber

If in need of further assistance in determining the correct code, contact the DDTC in writing or request advice from individual licensing officers familiar with the commodities being exported.

ITAR Record Keeping Requirements

The International Traffic in Arms Regulations (ITAR) has specific record keeping requirements that must be met. Generally speaking, any documentation or record related to an ITAR controlled project, shipment, agreement, license or license exception/exemption must be maintained for 5 years after the project, shipment, agreement, license or license exception/exemption has been finalized.

The following is a sample of the ITAR records that should be maintained for a minimum of five years of the date of the transaction:

  • Contracts and Quotes
  • Customer Questionnaire (End Use and End User Statements)
  • Shipping and Receiving Documents (i.e., Airway bill, Bill of lading, Commercial invoices, etc.)
  • Certificates of Conformance/Test Reports/Consultation Reports & White Papers
  • Specifications and drawings
  • Long Term Agreements, TAAs and DSP Applications
  • Any DDTC Correspondence
  • Customer correspondence (Paper and Electronic)
  • Denied Party Screening Results
  • Personnel ITAR Training Records
  • Visitor Records
  • Documented approvals by the Empowered Official, Chair Export Compliance Council for all export control documents and actions (i.e., Emails, Memorandums, etc.)

Specific record keeping requirements can be found in the following regulations: 

  • Here are the major ITAR recordkeeping provisions:
  • ITAR § 122.5(a) (DDTC registrants must maintain records);
  • ITAR § 123.5(b) (retention of endorsed temporary export licenses by licensee);
  • ITAR § 123.22(b)(3)(ii) & (b)(3)(iii) (recordkeeping requirement for subsequent exports of technical data under a MLA or TAA);
  • ITAR § 123.26 (recordkeeping requirement if export to be made under an exemption to the license requirement);
  • ITAR § 126.6(c)(5) (records to be kept for exports under FMS exemption);
  • ITAR § 126.14(b)(1)(v) & (b)(6) (recordkeeping requirement for export under special NATO comprehensive export authorization);
  • ITAR § 126.18(c)(2) (recordkeeping requirements for international end-users with dual-citizen and/or third-country national employees);
  • ITAR § 129.4(c) (DDTC-registered brokers must maintain records as required by ITAR § 122.5);
  • ITAR § 129.9 (DDTC-registered brokers must file an annual report of brokering activities); and
  • ITAR  § 130.14 (All DDTC-registered brokers and exporters must (a) report any political contributions and/or fees or commissions of $50,000 or more made in connection with an ITAR-regulated activity, and (b) keep records thereof).
  • Also, see, generally, ITAR Part 127 (failure to comply with ITAR’s recordkeeping and other records maintenance and production requirements is a violation of ITAR and will subject the violator to the fines, fees and penalties)
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