The United States regulates the export of certain technologies, technical information, and technical services in order to keep it from falling into the hands of individuals and countries that are hostile to or technologically competitive with the United States.
Most exports are obviously exports, because they are commercially shipped to international destinations and must pass through U.S. Customs. Other exports are not intuitively obvious.
For example, taking your laptop overseas without a license can be an export violation. If the laptop contains any export-controlled technical information, then you must obtain an export license, even if the technology is not transferred to a “foreign person” (which is defined in the International Traffic in Arms Regulation (ITAR) to include individuals, businesses and governments).
There is also a type of export that is referred to as a “deemed export.” This occurs when you transfer export-controlled technology, technical information, or technical services to a foreign person while they are in the United States.
Export compliance is the process of complying with United States export regulations. The two primary sets of export regulations are the International Traffic in Arms Regulations (ITAR) (22 C.F.R Parts 120-130) and the Export Administration Regulations (EAR). The Department of State, Directorate of Defense Trade Controls (DDTC) administers the ITAR and The Department of Commerce, Bureau of Industry and Security (BIS) administers the EAR.
An export license may be required if the technology you are exporting appears on the U.S. Munitions List (a part of ITAR) or if it appears in the Commerce Control List (a part of the EAR). The DDTC/ITAR also has licenses in the form of an agreement if you are providing technical assistance services to foreign persons (Technical Assistance Agreement or TAA), or if you are executing an agreement that includes a license for a foreign person to manufacture your technology overseas (Manufacturing License Agreement or MLA).
TAAs and MLAs must be reviewed and approved by the DDTC before you can execute any agreements with the foreign customer. After the DDTC approves your export-licensing agreement, license applicants will typically also execute an agreement that governs the transaction with the foreign customer, including without limitation a description of the technical information or defense services that the U.S. person will provide to the foreign customer(s), terms and conditions, and/or a license to manufacture the applicants product(s), plus the agreed price(s) of the defense services, technical information and/or products that are exported.
The Department of the Treasury, Office of Foreign Assets Control (OFAC) administers and enforces economic sanctions programs that you must comply with when you export. Complying with their sanctions requires a screening of various lists to determine if there are any sanctions and restriction of exports to your prospective foreign customers and/or any intermediate consignees.
You may also need to undergo a review by the Treasury Department’s interagency Committee on Foreign Investment in the United States (CFIUS) if you sell an interest in your company to a foreign person.
A key element of an export-compliance program is an Export Compliance Manual. The DDTC requires all registrants to have and maintain an Export Compliance Manual. The BIS does not require a compliance manual, but it is best to include in your manual information and required procedures for the EAR, OFAC and CFIUS in addition to the ITAR.
This Manual, in addition to complying with a DDTC requirement, will also prove very valuable as a transition guide if you have to hire a new export-compliance representative. Whitcomb, Selinsky attorneys can write a detailed Export-Compliance Manual tailored to your company’s organization and the amount and type of products that your company exports.
ITAR is …
ITAR governs the…
ITAR is managed by…
The ITAR regulations are export controls
Items listed on the United States Munitions List.
Is my product a Defense Article?
Example: CATEGORY I—FIREARMS, CLOSE ASSAULT WEAPONS AND COMBAT SHOTGUNS
(f) Riflescopes manufactured to military specifications (See category XII(c) for controls on night sighting devices).
The Path to Exporting Defense Articles
All manufacturers, exporters, and brokers of defense articles, related technical data and defense services as defined on the United States Munitions List (Part 121 of the ITAR) are required to register with the Directorate of Defense Trade Controls (DDTC). Registration provides information on who is involved in certain manufacturing, exporting and brokering activities. Registration does not confer export rights or privileges, but it is a precondition for the issuance of any license or other approval for export.
Once an entity has properly registered with DDTC, a unique registration code will be assigned to the registrant. The code is proprietary to the registrant and should be handled as such.
The period of validity for new and renewal registrations is twelve months from the date of issuance.
The average review time for a registration request is 45-60 days. Submission must be made electronically, and the request should be submitted at least 60 days prior to the expiration date.
A complete registration package consists of:
Affirmative Duty to Notify of Changes in Registration Information
DDTC advises registered exporters and manufacturers to have procedures in place that ensure export compliance.
Export information and procedures should be set forth in an export-compliance manual that articulates the company’s policies on and commitment to comply with defense trade laws and regulations. Such a manual should also include the identification and duties of empowered officials and responsible persons, and procedures on record keeping and internal auditing.
The Department of Commerce, Bureau of Industry and Security (BIS) administers the Export Administration Regulations which govern export of dual-use items. These items may be sold commercially, but are also sensitive technologies whose export the Government believes it needs to regulate. An example is encryption software; a license may be required to export of this software to certain countries. The EAR regulations are very complicated with respect to some products and encryption software is a good example.
There is no registration requirement associated with BIS/EAR and there are many exemptions that may apply. There are also some regulations that say you only have to notify BIS in writing, rather than obtain a license for some exports. Nonetheless, the empowered official and other employees that work on export compliance must understand whether and how the EAR applies to their products. The Export Compliance Manual must explain the EAR, and manager and employee training should at least make employees aware that some dual-use commercial products may require a license per the EAR.
Typical topics that are covered in an Export Compliance Manual:
EXPORT COMPLIANCE MANAGER
SHIPPING AND RECEIVING
HUMAN RESOURCES MANAGER
EXPORT CONTROL REFERENCE INFORMATION
U.S. MUNITIONS LIST CATEGORIES
EXPORT ADMINISTRATION REGULATIONS
APPENDIX A: ORGANIZATIONAL CHART
APPENDIX B: REGISTRATION LETTER
If you want to become ITAR compliant:
ITAR Compliance ROM Estimate
Step 1 — Registration: Approximately 25 hours*
Step 2 — Licensing: Approximately 20-40 hours*
Step 3 — Compliance: 100 hours*
If you export defense articles as defined by ITAR or dual-use products regulated by the EAR, and you do not have a compliance program in place, please give us a call and we can answer your questions about exporting controlled products and instituting a compliance program. We specifically tailor our Export Compliance Manuals to the circumstances of your company’s company, facilities, products and the countries that you export to. Such a manual can prove invaluable; if you can prove that you have a robust compliance program in place, including an Export Compliance Manual, you may avoid a fine or other other negative consequences if you have a first-time export violation.
* The estimates of attorney time to complete each phase of compliance described above the requirements for the initial steps to become ITAR compliant. Once compliance is achieved it must be maintained and there are annual requirements.