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© W. Brad Lewis, TCA, LLC 1
U.S. Export Controls:
An ITAR Primer.
SAFE Europe 2012
© W. Brad Lewis, TCA, LLC
Disclaimer
“Information provided should not be construed as legal analysis or advice. Please direct specific legal issues to
your attorney/counsel for further consideration.”
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© W. Brad Lewis, TCA, LLC
“Attitude is a little thing that makes a big difference.”
-- Winston S. Churchill
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© W. Brad Lewis, TCA, LLC
Export Controls
All countries have some form of Export Control.
They can be quite different:
What is controlled?
How it is controlled?
How are the regulations enforced?
U.S. Export controls are dynamic and complex but can be managed – Knowledge is Power.
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© W. Brad Lewis, TCA, LLC
Why Are We Here? The United States Government regulates the
export and reexport of U.S. commodities, software & technology.
DFARS 204.73 requires DoD contractors and subcontractors have an effective export compliance programs & conduct audits.
Which U.S. rules apply? Dept. of State (ITAR), Commerce (EAR) or Treasury (OFAC)? Or…all of them?
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© W. Brad Lewis, TCA, LLC
How do U.S. Export Controls work?
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© W. Brad Lewis, TCA, LLC
What is an Export? Sending or taking products or data out of U.S.;
Disclosing “Technical Data” (including orally or visually) to a non-U.S. person, in the US or abroad;
Providing a “Defense Service” to a non-U.S. person whether in the U.S. or abroad – ITAR only
Re-exporting U.S. products or data from one country to another;
Re-transferring U.S. products or data to a third party in a non-U.S. country.
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© W. Brad Lewis, TCA, LLC
USG Export Control Authorities
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© W. Brad Lewis, TCA, LLC 9
President President
National Security Council National Security Council
Department of
Commerce
Bureau of Export
Administration
Export Administration Regulations
Department of
Commerce
Bureau of Industry &
Security (BIS)
Export Administration Regulations
Department of
State
Office of Defense Trade
Controls
International Traffic in Arms
Regulations
Department of
State
Directorate of
Defense Trade
Controls (DDTC)
International Traffic in Arms
Regulations
Department of the
Treasury
Office of Foreign Assets
Control
Foreign Assets Control
Regulations
Department of
Treasury
Office of Foreign Assets Control (OFAC)
Foreign Assets Control
Regulations
Central Intelligence Agency
National Security Agency
Central Intelligence Agency
National Security Agency
Department of State Bureau of
Political - Military Affairs
Arms Control & Disarmament Agency
Department of State Bureau of
Political - Military Affairs
Arms Control & Disarmament Agency
Department of Defense / Defense Threat
Reduction Technology
Defense Intelligence Agency
Department of Defense / Defense Technology
Security Administration
Defense Intelligence Agency
Department of Energy
Sub-group on Nuclear Export Coordination
Nuclear Regulatory Commission
Department of Energy
Sub-group on Nuclear Export Coordination
Nuclear Regulatory Commission
Dual-Use Goods and Technology (CCL)
Defense Articles and Services (USML)
People and Money
Licensing Agencies
DHS - CBP US Census Bureau / OEE
Export Enforcement/Clearance Agencies
U.S. Export Control System
Nat’l Export Enforcement Center
Dept. of Justice - NSD
© W. Brad Lewis, TCA, LLC
U.S. and EU Export Regulations Comparison
EU Regulations
Civil & commercial products Wassenaar Dual Use List – Dual
use list agreed upon by members of Wassenaar.
Licenses not required for most exports.
Military Items Munitions/National/Military List
Various notes exempting items.
General Agreements available.
Licenses required for some exports (BAFA, BIS, DGA).
U.S. Regulations
Civil and commercial products Export Administration Regulations
(EAR) – Commerce Control List (CCL).
Dual use items, however, various levels of controls.
Many Exceptions available.
Military Items International Traffic in Arms
Regulations (ITAR) – U.S. Munitions List (USML).
Also, may cover many “Dual-Use” items.
Licenses required for most every export.
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© W. Brad Lewis, TCA, LLC
DDTC’s Mission: “The U.S. Government views the sale, export
and re-transfer of defense articles and defense services as an integral part of safeguarding U.S. national security and furthering U.S. foreign policy objectives. 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), is charged with controlling the export and temporary import of defense articles and defense services covered by the United States Munitions List (“USML”).”
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Source: DDTC website
© W. Brad Lewis, TCA, LLC
What do U.S. Regulations Control? All U.S. made products;
All U.S. technology;
Any product, item, hardware, software & technical data, etc.. in the U.S. (including foreign origin products and technology);
All products made from U.S. technology;
All products containing U.S. manufactured parts and components;
The controls require an authorization to export – License or exemption/exception to a license
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© W. Brad Lewis, TCA, LLC
Who is it Controlled to? U.S. Export Licenses are End-Use and End-User
Specific:
Intended only for the parties listed on the license.
Only for the parties in the countries listed on the license.
Intended only for an identified end-use on the license.
Some form of authorization is required for export of a controlled items to ANY non-US person - in the U.S. or abroad.
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© W. Brad Lewis, TCA, LLC
How do Exports occur under ITAR? Tangible shipments
Hand-carrying products / Foreign Travel
Electronic transmission (fax, modem, E-mail)
Presentations open to public / Oral conversations
Publishing articles
Placing Technical Data on the Internet
Foreign visitors (meetings, reviews, plant tours)
Trade Shows (U.S. and Non-U.S.)
Offshore procurement/sourcing
Reexports of U.S. commodities or data.
ITAR applies to both tangible and intangible exports. 14
© W. Brad Lewis, TCA, LLC
Who is subject to ITAR Controls? United States companies that engage in international trade.
U.S. Persons and any person in the U.S.
Non-U.S. Persons (e.g. companies & individuals) Reexports of U.S.-origin items.
Conduct of activities that are subject to ITAR regulations (e.g. Defense services, Reexports, Brokering)
Your Company is subject to export laws and regulations, as well as the corresponding laws of the foreign countries in which your company does business.
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© W. Brad Lewis, TCA, LLC
What the ITAR (State) Controls? U.S. Department of State
Military/Space/Defense Items
Items listed on the U.S. Munitions List – “USML”
Some Dual Use Items
Commodity Jurisdiction determinations (CJ)
Licenses Required for almost ALL exports
Over 50 Exemptions which could/may apply
5 year record-keeping
“Deemed Export” rule applies (non-U.S. persons exposed to U.S. technology).
Current “catch-all” categories of USML
“ITAR”
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© W. Brad Lewis, TCA, LLC
The ITAR (Parts 120-130) Part 120 – Key Definitions: Export, Defense Service, etc.
Part 121 – The U.S. Munitions List & MTCR
Part 122 – Reg. of Manufacturers & Exporters (+10K)
Part 123/124 – Export Authorizations (Lic. & AGs)
Part 126 – Proscribed or Prohibited Countries
Part 127 – Violations, Penalties & Voluntary Self Disclosures (VSDs)
Part 129 – Reg. & Licensing of Brokers
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--Selected Highlights
© W. Brad Lewis, TCA, LLC
The ITAR’s USML (Control List) Part 121 – 21+> Categories make up the USML.
“Catch-all” parts, components, accessories, attachments, etc. - subparagraph at the end of each category.
“…specifically designed, modified or adapted for...”
Category VIII - Aircraft & Associated Equipment.
Category IX – Military Training Equipment.
Category X - Protective Personnel Equipment & Shelters.
*Category X(a)(1) – Body Armor.
Category X(a)(4) – Pressure suits capable of…
Category X(a)(5) – Helmets specially designed…w/milcom hrdw.
Category X(c) – Tooling & equipment specially designed…
Category X(e) – T.D. and defense services directly related…
* SME = Significant Military Equipment
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© W. Brad Lewis, TCA, LLC
A Sampling…ITAR controlled? Hydraulic test stand for a/c
actuators/valves (ITAR)
Hydrogen Generator (ITAR)
Parachute Fabric (EAR)
Air Cargo Pallet (ITAR)
Helo LCD Cockpit Display (EAR)
Cable Connector (ITAR)
*From DDTC CJ website…
Communication Headset – Active Noise Cancelling (ITAR)
Hydration system for protective breathing apparatus (EAR)
Alloy steel bars & tubes (EAR)
TWT Amplifier (ITAR)
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© W. Brad Lewis, TCA, LLC
Jurisdiction How does a U.S. company determine Jurisdiction?
Self Determination
Designed, developed, configured, adapted or modified for a military application in form fit or function, then ITAR controlled
Not designed for or used in military applications, then EAR controlled
Official USG Determination Commodity Jurisdiction request (CJ) Recommended for any question mark or “if in doubt” items Administered by Department of State, Directorate for Defense Trade
Control - DDTC
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© W. Brad Lewis, TCA, LLC
Commodity Jurisdictions (CJ) First week of September 2010, electronic submission
of CJs started and the utilization of a new form. (New Form: DS-4076).
DDTC CJ Process - Response times:
In 2006 = average was 196 days.
In 2010 = average about 72 days.
Last 3 years, caseload has gone from 412 to over 900.
As of April 2012 about 475 cases (See website).
Now on DDTC’s website –> “Processing Status” & “Final Determinations”
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© W. Brad Lewis, TCA, LLC
Jurisdiction How can a NON-U.S. Company determine Jurisdiction?
Ask Questions of the Manufacturer…
“What is the Export Jurisdiction of this product?” ITAR or EAR? If ITAR, what category in the ITAR?
Example: Category VIII(h) - military aircraft parts & components
If EAR, what ECCN (Export Commodity Classification Number) Example: 9A991d - civil aircraft components
Have they obtained a Commodity Jurisdiction (CJ)?
**Look for a couple of clues… Are there Markings on the Technical data? Destination Control Statements (DCS) on Shipping Documentation? Have you completed a DSP-83 End-Use Form?
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© W. Brad Lewis, TCA, LLC
U.S. Destination Control Statements or (DCS)
State Department:
“These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end-user]. They may not be transferred, transshipped on a non-continuous voyage, or otherwise be disposed of in any other country, either in their original form or after being incorporated into other end-items, without the prior written approval of the U.S. Department of State.”
Commerce Department:
“These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law prohibited.”
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© W. Brad Lewis, TCA, LLC
Key Areas of Interest
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© W. Brad Lewis, TCA, LLC
Key Areas of Interest
President’s Export Control Reform Initiative
4 Pillars of Reform (www.export.gov/ecr)
Many Proposed Rules published in FR.
*U.S.-U.K. ITAR Exemption
ITAR 126.17
*U.S.-Australia ITAR Exemption
ITAR 126.16
*Will take effect when Treaty enters into force later in 2012.
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© W. Brad Lewis, TCA, LLC
ITAR Compliance Program Guidelines
Organizational Structure
Corp. Commitment & Policy
*ID, Receipt & Tracking of ITAR Controlled Items/Technical Data
*Re-exports / Retransfers
*Restricted / Prohibited Exports & Transfers
Recordkeeping
*Internal Monitoring
Training
Violations & Penalties
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Source: DDTC website: www.pmddtc.state.gov
© W. Brad Lewis, TCA, LLC
Conclusion & Takeaways
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© W. Brad Lewis, TCA, LLC
Takeaway #1 Don’t be afraid to use U.S. products.
Using 1 component/part is the same as 100.
The Key is to understand the regulations. Learn and use all the various tools and
methods available. Establish successful relationships with your
U.S. suppliers by: Engaging them early in process. Providing them with all the information they need
to cover all your needs.
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© W. Brad Lewis, TCA, LLC
Best Practices for Compliance with ITAR
Ensure the U.S. Exporter informs you of the jurisdiction of what they are sending you: (State (ITAR) vs Commerce (EAR)).
Engage the U.S. Exporter in the licensing process early and often.
Provide U.S. exporter with all needed information and documentation relative to the transaction.
Determine your re-export obligations, if any. Obtain re-export authorization, if needed. Provide follow up reports or documentation as needed.
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© W. Brad Lewis, TCA, LLC
Takeaway #2 How do I determine if my company has any ITAR risk?
- Conduct an annual ITAR “Internal Risk Assessment”.
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© W. Brad Lewis, TCA, LLC 31
Source: Society for International Affairs
© W. Brad Lewis, TCA, LLC
DDTC / ITAR Enforcement Actions BAE Systems plc - $79,000,000 (2011) (2,591 violation).
Dr. Roth - University of Tennessee (2009) - 4 yrs prison from 17 ITAR violations.
IAL GmbH - $1,000,000 (2010) (7 violations).
Blackwater Worldwide - $42,000,000 (2010).
ITT - $100,000,000 & Debarred (2007) + 9 yrs. scrutiny
GM & General Dynamics - $20,000,000 (2004).
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© W. Brad Lewis, TCA, LLC
Resources DDTC (U.S. Department of State)
www.pmddtc.state.gov or Help Desk (202) 663-1282.
BIS (U.S. Department of Commerce)
www.bis.doc.gov or (202) 482-4811.
Trade Compliance Associates, LLC (TCA, LLC)
E-mail: [email protected]
Tel: 619-437-1080 or 213-706-0771(mbl)
See Brochure.
www.tradecomplianceconsulting.com (under construction)
Society for International Affairs (SIA)-www.siaed.org
4 conferences a year – 2 Basic & 2 Advanced.
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© W. Brad Lewis, TCA, LLC
Questions / Comments
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