ITAR: What It Is & How to Comply with It

What is ITAR?

ITAR stands for the International Traffic in Arms Regulations, a set of U.S. government regulations that control the export and import of defense-related articles, services, and technologies. These regulations are designed to ensure that sensitive military and defense technologies and information do not end up in the hands of foreign governments, organizations, or individuals that could pose a threat to national security or U.S. interests.

ITAR is managed and enforced by the Directorate of Defense Trade Controls (DDTC), which is part of the U.S. Department of State. The regulations govern a wide range of defense-related items, including:

• Weapons (firearms, ammunition, explosives)
• Military equipment (tanks, aircraft, satellites)
• Technical data (blueprints, designs, and other technical information)
• Defense services (training, maintenance, or technical assistance)

Any business or individual involved in manufacturing, exporting, or brokering defense articles or services must comply with ITAR regulations.

Why ITAR Compliance is Important

ITAR compliance is critical for any company or individual involved in the manufacturing, export, or brokering of defense articles or services.  Violating ITAR regulations can lead to severe penalties, including:

• Criminal penalties (fine up to $1 million per violation and up to 20 years in prison)
• Civil penalties (fines up to $500,000 per violation)
• Loss of export privileges
• Damage to reputation and business relationships

How to Comply with ITAR

Here are the key steps to ensure compliance with ITAR.

1. Understand ITAR and Its Scope

• Know the U.S. Munitions List (USML): ITAR controls products and services listed in the U.S. Munitions List (USML), which includes defense-related articles, services, and technologies. Understanding whether an organization’s products or services fall under this list is essential to compliance.
• Recognize Export Controls: ITAR applies not just to physical goods but also to the export of technical data and services, and even the “deemed export” of controlled technology to foreign nationals inside the U.S.

2. Register with the Directorate of Defense Trade Controls (DDTC)

• Mandatory Registration: If a company is involved in manufacturing, exporting, or brokering defense articles or services, they are required to register with the DDTC. Registration is an annual process.
• Pay Fees: The registration process requires payment of an annual fee, which is tiered depending on the size of a business. Failure to register can result in penalties and loss of export privileges.

3. Classify Products and Services

• Determine Applicability: The first step for organizations is to classify their products, services, or technologies to determine whether they are subject to ITAR. This involves reviewing the U.S. Munitions List (USML) and understanding whether their items fall under it.
• Commodity Jurisdiction (CJ) Request: If one is unsure whether their products or services fall under ITAR or the Export Administration Regulations (EAR), they can submit a Commodity Jurisdiction (CJ) request to DDTC for clarification.

4. Obtain Export Licenses

• License Requirement: If an organization intends to export ITAR-controlled items, services, or technical data to foreign countries, they must obtain an export license from the U.S. government.
• Types of Licenses: Depending on the nature of the export, one may need different types of licenses, including individual, transactional, or agreement licenses.
• Deemed Exports: ITAR also applies to the sharing of controlled technology with foreign nationals, even if they are within the U.S. This is considered a “deemed export,” and requires a license if the technology is restricted.

5. Implement an ITAR Compliance Program

• Appoint a Compliance Officer: Designate a responsible individual or team within the organization to manage ITAR compliance. This person should be knowledgeable about export control laws and regulations.
• Develop Policies and Procedures: Create written procedures for handling ITAR-controlled items, including how to classify products, maintain records, and apply for export licenses. A company’s procedures should also include protocols for dealing with technical data, compliance checks, and audits.
• Employee Training: Regularly train all relevant employees, especially those involved in exports or handling technical data. Employees should understand the importance of ITAR and how to avoid accidental violations.

6. Maintain Proper Records

• Record-Keeping: ITAR requires that businesses maintain detailed records of all exports, including licenses, communications with foreign parties, and the movement of controlled items. Records must be kept for at least five years from the date of the transaction.
• Documentation: Ensure that all export transactions are documented, including licenses, shipping details, contracts, and technical data transfers.

7. Secure Facilities and Data

• Physical Security: Ensure that access to ITAR-controlled items and technical data is restricted to authorized personnel only. This may involve securing warehouses, production areas, or office spaces.
• Cybersecurity: Implement cybersecurity measures to protect controlled technologies from unauthorized access, both internally and externally.
• Technical Data Control: Ensure that technical data (designs, blueprints, specifications) is protected and only shared with authorized individuals or entities.

8. Conduct Regular Audits

• Internal Audits: Conduct regular audits of operations to verify compliance with ITAR regulations. This can help identify any weaknesses or gaps in an organization’s compliance program.
• Third-Party Audits: Consider working with an external expert or law firm to audit company compliance. This can be especially valuable in identifying potential risks that may not be apparent from within the organization.

9. Stay Informed of Changes

• Regulatory Updates: ITAR regulations can change, so it’s important to stay updated on any changes to laws, procedures, or compliance requirements. Regularly review the DDTC website and subscribe to updates if necessary.
• International Trade Agreements: Changes in international agreements or trade relations may affect ITAR compliance, so stay informed about global export control frameworks.

10. Seek Legal and Compliance Support

• Legal Counsel: Export control regulations can be complex, and noncompliance can result in significant penalties. Consulting with a legal expert specializing in export controls or ITAR compliance can help a business navigate the regulations and avoid pitfalls.
• Compliance Consultants: There are many consulting firms and compliance experts who specialize in ITAR and can help companies implement compliance programs, conduct training, and assist with licensing.

To learn more about McKonly & Asbury’s Cybersecurity, CMMC, ITAR, or Internal Audit services, contact Dave Hammarberg, Partner, or Victor Kong, Senior Manager. We would be happy to discuss how our team can assist you with your compliance needs.

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