The International Traffic in Arms Regulations (ITAR) control the export and import of defense-related articles and services.
Established under the Arms Export Control Act (AECA), ITAR's primary goal is to ensure that U.S. defense technologies do not fall into the wrong hands, protecting national security interests.
ITAR compliance is a crucial requirement for all entities involved in the defense industry, including defense contractors, manufacturers, and exporters of defense-related products. It is a legal and ethical necessity for conducting operations in this sector.
Simply put, the International Traffic in Arms Regulations, known as ITAR, controls the import and export of any defense-related goods, technologies, and data as defined in the United States Munition List (USML).
All parties involved in supply chains involving these goods must comply with these laws, including manufacturers, distributors, or contractors. While these laws are straightforward, these parties must obtain specific licensure and documentation and register properly to avoid being charged with ITAR violations.
ITAR applies to a wide range of entities, including manufacturers, exporters, brokers, and government contractors. These entities are involved in the production, shipment, facilitation, or handling of defense-related hardware, services, or technical data.
- Manufacturers: Companies producing defense-related hardware like military equipment, weapons, and ammunition.
- Exporters: Entities shipping defense articles or services outside the U.S.
- Brokers: Individuals or businesses facilitating the sale or transfer of defense materials between U.S. companies and foreign parties.
- Government Contractors: Companies involved in U.S. government defense programs may handle sensitive data subject to ITAR.
ITAR compliance isn't just for large defense contractors; small businesses, research institutions, and universities dealing with controlled technical data or defense services must also follow ITAR regulations. Noncompliance, whether intentional or accidental, can lead to severe penalties or even criminal charges.
The Broad Scope of ITAR
The scope of the ITAR is incredibly broad, encompassing any defense products found on the United States Munitions List. The list is divided into three subcomponents: defense articles, defense services, and related technical data. This comprehensive coverage ensures that all aspects of defense-related activities are regulated and protected.
Let's look at the most common ITAR violations below.
Willful Failure to Comply
Intentional noncompliance with ITAR is a serious offense. Entities may deliberately ignore ITAR requirements, often due to the desire to expedite transactions or reduce costs. Such willful violations undermine national security and can lead to severe penalties. Willful violations can include:
- Deliberately exporting defense articles to a foreign country without proper licensing.
- Intentionally sharing technical data with foreign nationals, either within the U.S. or abroad, without authorization.
- Knowingly conducting business with entities or individuals from countries subject to U.S. arms embargoes.
Willful noncompliance with ITAR can lead to severe consequences, including substantial fines and potential criminal prosecution. Authorities pay particular attention to such violations due to the higher level of intent involved.
Accidental or Unintentional Violations
While intent matters in the legal context, even accidental violations of ITAR can lead to penalties. Many businesses may unknowingly export defense-related materials or share sensitive data with foreign parties without realizing they are in violation. Common scenarios for accidental breaches include:
- Misclassifying products that fall under ITAR's jurisdiction, leading to unlicensed exports.
- Sending defense articles or technical data via email or online without encryption, inadvertently making it accessible to foreign nationals.
- Assuming that certain exemptions apply, only to find out later that they do not.
Failure to Register
Entities involved in manufacturing, exporting, or brokering defense-related articles must register with the Directorate of Defense Trade Controls (DDTC), which oversees ITAR compliance. Failure to register is a common violation, especially among small businesses or new entrants to the defense industry.
Some entities may not be aware that their activities fall under ITAR regulations, leading to a failure to register. Even those who do know about the requirement may not keep their registrations up to date, which is also considered a violation. Registration is the first step toward obtaining export licenses and complying with ITAR, so overlooking this requirement can lead to significant legal trouble.
Technical Data Violations
Technical data related to defense articles is strictly regulated under ITAR, and failure to control this data is a common compliance issue. Technical data includes blueprints, diagrams, manuals, and other forms of information related to military technology. Violations can occur when:
- This data is transferred to foreign nationals without a license or proper authorization.
- Technical data is stored on unsecure servers or transferred through unencrypted communication channels.
- Employees from foreign countries are given access to controlled data without the necessary approvals.
In many cases, businesses fail to establish proper access controls or do not conduct adequate cybersecurity assessments, leaving sensitive information vulnerable to unauthorized access.
Misrepresentations or Omissions
Misrepresentations or omissions on ITAR-related paperwork, such as license applications, can lead to serious violations. Whether intentional or due to oversight, providing inaccurate information or omitting critical details when applying for export licenses is a significant compliance issue. Common examples include:
- Failing to disclose all parties involved in an export transaction.
- Underreporting the value or quantity of defense articles being exported.
- Omitting information about the end-user or the ultimate destination of the goods.
Failure to Vet Other Parties
ITAR requires exporters to ensure that their partners, customers, and intermediaries are not prohibited from receiving defense-related materials. Violations can occur when:
- A company exports goods to an entity that is on a restricted or denied parties list.
- Businesses fail to conduct due diligence on foreign recipients, resulting in unauthorized exports.
- Exporters work with third-party brokers who do not comply with ITAR, leading to violations by association.
- Giving foreign employees access to ITAR data. (Only U.S. persons are legally allowed such access.
What are the Criminal Consequences for ITAR Violations?
ITAR violations can result in severe penalties, including civil and criminal consequences. Civilly, fines can reach up to $1.2 million per violation, and businesses may lose export privileges and face suspension from U.S. government defense contracts. These penalties underscore the serious nature of ITAR violations and the potential risks and consequences.
Criminal, willful violations can lead to imprisonment for up to 20 years and fines of up to $1 million per violation. The severity of the penalties depends on the nature of the violation and its potential harm to national security.
All manufacturers, exporters, and brokers of defense products under the USML must comply with the ITAR, or they face fines or incarceration. To comply with the ITAR, a company must register with the DDTC and apply for an export license or temporary import license. For additional information, contact Eisner Gorin LLP, our federal criminal defense lawyers based in Los Angeles, California.
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