ITAR Compliance: International Traffic in Arms Regulation

Major TopicITAR Compliance

Getting Started Document

What is ITAR Compliance?

  • What is an export?
  • Am I Manufacturer?
  • Is my product controlled?
  • Compliance Program

ITAR LICENSING

ITAR is …

  • International Traffic in Arms Regulations (ITAR) (22 C.F.R Parts 120-130)

ITAR governs the…

  • The sale, export, and re-transfer of defense articles and defense services

ITAR is managed by…

  • The Directorate of Defense Trade Controls (DDTC), in accordance with 22 U.S.C. 2778-2780 of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120-130). The DDTC is charged with controlling the export and temporary import of defense articles and defense services covered by the United States Munitions List (USML).

ITAR Compliance

ITAR is an Export Control

  1. The Arms Export Control Act authorizes export to be controlled by The President of the United States
  2. The President issued EO 11958 which delegates responsibility to the DoS which works closely with the DoD
  3. The DoS publishes the ITAR Regulations and determines what items, services and information are export-controlled
  4. The DoS Directorate of Defense Trade Controls and the DoD Defense Technology and security Administration work together to maintain the ITAR US Munitions List and issue coordinated licenses in support of the President’s strategic and foreign policy goals.

The Department of State

  • 22 U.S.C. 2778 of the Arms Export Control Act (AECA) provides the authority to control the export of defense articles and services and charges the President to exercise this authority. Executive Order 11958, as amended, delegated this statutory authority to the Secretary of State.
  • The Directorate of Defense Trade Controls (DDTC), in accordance with the AECA and the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120-130), is charged with controlling the export and temporary import of defense articles and defense services covered by the United States Munitions List (USML).
  • The AECA, among these other requirements and authorities, provides for the promulgation of implementing regulations, the ITAR.

The Department of Defense

  • DDTC works closely with the Department of Defense (DoD) through the Defense Technology Security Agency (DTSA).
  • The DTSA administers the development and implementation of DoD technology security policies on international transfers of defense-related goods, services and technologies.
  • In addition to conducting export license authorization with DDTC, DTSA also issues instructions for requesting exemptions through designated authorities.

Export means:

(1) Sending or taking a defense article out of the United States in any manner

(2) Transferring control of any U.S. Munitions List item to a foreign person

(3) Oral/visual disclosure or transfer of any defense article to a foreign government

(4) Oral/visual disclosure or transfer of technical data to a foreign person

(5) Performing a defense service on behalf of or for the benefit of, a foreign person

Defense service means:

(1) Assistance (including training) to foreign persons to develop/use defense articles

(2) The furnishing to foreign persons of any technical data

(3) Military training of any foreign units and forces including formal or informal instruction, training exercise, and military advice.

Defense article:

Items designated by 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 ArticlesITAR Compliance

  1.  Registration
  2. Licensing
  3. Compliance

Registration

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 is a precondition for the issuance of any license or other approval for export.

Registration code

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.

Validity period

The period of validity for new and renewal registrations is twelve months from the date of issuance.

Timelines

The average review time for a registration request is 45 days. Submission must be made electronically.

Manufacturers/Exporters

  • Per ITAR §122.1, any person who engages in the United States in the business of either manufacturing or exporting or temporarily importing defense articles or furnishing defense services is required to register with DDTC. Manufacturers who do not engage in exporting must nevertheless register.
  • Note: U.S. distributors and other U.S. persons exporting parts and components and other defense articles and services outside of the United States are considered to be exporters.

Brokers

  • Per ITAR §129.3, any person identified under ITAR §129.2(a) who engages in brokering activities identified under ITAR §129.2(b) is required to register with the DDTC unless exempt under ITAR §129.3(b). Registration is generally a precondition for the issuance of approval for brokering activities required under Part 129 or the use of exemptions.
  • Note: Brokers may not obtain export licenses. U.S. Brokers that need to obtain export licenses must also be registered as an exporter.
  • Note: U.S. distributors and other U.S. persons that broker defense articles or defense services must register as a broker. Foreign (i.e., non-U.S.) distributors and other foreign persons that are located in the United States or are owned or controlled by U.S. persons who broker defense articles or defense services must register as a broker.

A complete registration package consists of:

  • An “unsigned” DS-2032 Statement of Registration
  • A completed “signed” DS-2032 submitted as an attachment. “Signed” refers to the completed, printed, signed, scanned DS2032.
  • Additional applicable supporting documentation including: 1) Articles of incorporation, business license, articles of organization or partnership agreement; 2) Electronic payment confirmation; 3) Annual Brokering report, if applicable.

Registration Fees:

  • The first tier is an annual flat fee of $2,250.00. The first tier includes: 1) First time registrants (Manufacturer, Exporters and stand-alone Brokers); 2) Annual registration renewals for stand-alone Brokers (U.S. and foreign owned or controlled by U.S. persons); and, 3) Registrants who did not submit any license applications or request for authorization during the twelve month period, ending 90 days prior to the expiration of the current registration.
  • The second tier is a set fee of $2,750 for registrants renewing their registration who have submitted and received a favorable authorization on ten or fewer license applications or request for authorization during a twelve month period, ending 90 days prior to the expiration of their current registration.
  • The third tier is a calculated fee for registrants who have submitted and received favorable authorization on more than ten license applications or request for authorization during the twelve month period, ending 90 days prior to the expiration of the current registration. For these registrants, the fee calculation is $2,750 plus $250 times the total number of applications over ten. To ensure fairness to those registrants who may fall within the third tier who may have many applications but all of a low value, there is a provision for a reduced fee if the fee calculated above is greater than 3 percent of the total value of all applications. In such cases, the fee will be 3 percent of the total value of all applications or $2,750, whichever is greater.

Affirmative Duty to Notify of Changes in Registration Information

  • A material change is a change in information contained in the DS-2032 Statement of Registration (“DS-2032”). Examples of material changes include ineligibility changes, changes to name, address, or senior officers; the establishment, acquisition or divestment of a U.S. or foreign parent, subsidiary, or affiliate; a merger; or, the addition or deletion of USML categories.
  • Material Changes = 5-day Notification to DDTC.

Licensing

  • Generally, any person or company who intends to export or to temporarily import a defense article, defense service, or technical data must obtain prior approval from DDTC. The appropriate license form must be submitted for the purpose of seeking approval. In order for a license to be considered, you first must be registered with DDTC.
  • Submit request for license through “Dtrade” (a fully electronic system) or,
  • Through “ELLIE” (to amend licenses)

Compliance

DDTC advises registered exporters and manufacturers to have programs in place that assist in monitoring defense trade activities.

Programs should include a manual that articulates the company’s policy on and commitment to compliance with defense trade laws and regulations, and that outlines procedures for dealing with licensing and compliance matters. Such a manual should also include the identification and duties of empowered and responsible persons, and procedures on record keeping and internal auditing.

 Key to Successful Compliance = Company Manual

Part I: Organizational Information

Part II: Identification, Receipt and Tracking of ITAR Controlled Items/Technical Data

Part III: Re-Exports/Retransfers

Part IV: Restricted/Prohibited Exports and Transfers

Part V: Recordkeeping

Part VI: Internal Monitoring

Part VII: Training

Part VIII: Violations and Penalties

Mutual Questions and Path Forward

Implementation Plan

If you want to become ITAR compliant:

  • Lay out key phases and related ROM estimates)
  • Due Diligence (TIMELINE & HOURS)
  • Key legal actions
  • Registration (90 days / 80 hours)
  • Key legal actions

[NEXT PHASE]

ITAR Compliance ROM Estimate

Step 1 — Registration: Approximately 40-hours*

  • Providing the U.S. Government with necessary information on who is involved in certain manufacturing, exporting and brokering 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.
  • Registration is valid for 12-months.
  • Review of a registration application is approximately 45-60 days.

Step 2 — Licensing: Approximately 120-hours*

  •  Any person or company who intends to export or to temporarily import a defense article, defense service, or technical data must obtain prior approval from DDTC. The appropriate license form must be submitted for the purpose of seeking approval. In order for a license to be considered, you first must be registered.
  • License application must be submitted through “DTrade” an electronic defense export licensing system. DDTC is prepared to receive and adjudicate defense export authorization requests properly submitted by any U.S. person who is a defense trade registrant.
  •  The ability to digitally sign information is required.

Step 3 — Compliance:  120-hours*

  • To ensure compliance with U.S. export law and regulations, the Directorate of Defense Trade Controls requires exporters and manufacturers have programs that assist in monitoring defense trade activities.
  • These programs should include a manual that articulates the company’s policy on and commitment to compliance with defense trade laws and regulations, and that outlines the procedures for dealing with licensing and compliance matters. Such a manual should also include the identification and duties of empowered and responsible persons, and procedures on record keeping and internal auditing.
  • Training programs are also required.

* The estimates provided for each step are the requirements for the initial steps to become ITAR compliant. Once compliance is achieved it must be maintained and there are annual requirements.