Exporting is a very profitable business. However, in the industry of defense trade, exporting military-related items requires you to follow a strict set of regulatory guidelines to do business while staying on the right side of the law. Non-compliance may result not only in huge regulatory fines but also incarceration as well as loss of business.
Therefore, it is critical for businesses in the defense trade to comply with the International Traffic in Arms Regulations (ITAR) for exporting items in or outside the US. This is where the ITAR compliance checklist comes into the picture, a handy guide to help you stay in business and out of regulatory troubles.
ITAR Compliance Checklist: 6 Important Steps
To ensure compliance with ITAR, it is important for businesses to develop a good understanding of all the key provisions provided under the regulation. Most of the provisions in ITAR are kept open to different interpretations intentionally. This is beneficial for both the regulatory bodies as well as the ITAR-covered entities. The regulatory bodies will leverage it to make necessary amendments to the regulation to meet the complex needs of evolving technologies. Businesses, on the other hand, can optimize their ITAR compliance program according to their specific business profiles.
The following ITAR compliance checklist includes all the key details and requirements that businesses involved in trading military-related items and data must consider for compliance.
1) Check the Jurisdiction of the Export Items
ITAR applies to businesses that manufacture, sell, or distribute military or defense-related goods, services, software, and even technical data. However, it does not apply to every category of military items but only those categories that are specifically mentioned in the United States Munitions List (USML).
USML is a part of ITAR that lists up to 21 categories containing various military goods, such as weapons, armory, software, patents, or technical documents. USML is regulated by the Arms Export Control Act (AECA). The act gives the authority to the US president to categorize any goods and services as military related.
Apart from that, there can be some military-grade goods that may have dual purposes, such as military and civil. Hence, most of such items are regulated by a different regulation, namely the Export Administration Regulations (EAR). The EAR is administered by the U.S. Department of Commerce's Bureau of Industry and Security (BIS). Therefore, if the item that a company deals in aren’t included in the USML, then the item may be regulated under the EAR. As a result, ITAR may not be applicable here.
2) Get the Business Registered with the DDTC
The next important step for ITAR applicants is to fill out, sign, and submit a Statement of Registration. The statement includes key information regarding the applicants and the ITAR-covered items they manufacture, sell, or distribute. For instance, the statement must mention the details of the registrant and the USML-covered items they deal in, such as software, technical documents, weaponry, etc. The registration must be submitted to the Directorate of Defense Trade Control (DDTC), which is also the regulatory body that supervises and implements the regulation.
Another important aspect of the registration process is the signature of one of the senior officers of the registrant’s business, who certifies that the business hasn’t been subject to any criminal activity or prosecution. More importantly, the registrant isn’t banned from exporting or importing any USML-covered items. Finally, the registrant must be a US person whose definition is further provided under the regulation.
3) Determine the End-User & Intended Use of the Items
The primary purpose of the regulation is to ensure the national security of the United States and its citizens. Therefore, the government is keen on ensuring that the goods and services are used only for intended and valid purposes, and such goods do not end up in the wrong hands.
That being said, for ITAR compliance, it is mandatory for every ITAR-covered entity to determine and report the end user and the end use of the goods and services. Registrants must ensure that the recipient to whom the goods and services are exported to are authorized for the transaction under US laws. Moreover, the recipient is not a country that is included in the non-sanctioned list. Furthermore, the ITAR-covered entity must ensure that the recipient would be using the military-related item for valid purposes and that they do not re-export the same item without the approval of the DDTC.
4) Obtain the Export License
Export licenses are an integral part of the regulation. To export ITAR-covered items to sanctioned countries as per US laws, it is important for businesses to get an export or temporary import license which is provided by the DDTC. The license provides all the important details regarding the transaction, such as the details regarding the recipient, the recipient country, the goods, and services, etc. Licenses are subject to renewal every four years.
5) Ensure Other Vendors in the Supply Chain are Complaint
ITAR compliance isn’t limited to the consultant, manufacturer, or any business that deals in the export of defense items, but it extends to all the vendors down the supply chain. If any vendor isn’t compliant with the regulation, the ITAR-covered entity will also fall under non-compliance risks.
6) Fulfill Recording Requirements
Maintaining comprehensive records of all ITAR-related activities is also an integral component of ITAR compliance. All the activities that are associated with the trade of defense-related goods and services must be properly recorded for audit purposes and to show compliance with the regulation of the DDTC. All records can be retained for up to 5 years.
The ITAR compliance checklist is a fairly handy tool for businesses to stay compliant while exporting defense-related goods, services, and sensitive data. This checklist is essential not only for compliance but also to prevent any regulatory fines and other damages.
Moreover, businesses must encourage a culture of compliance in their organization by increasing compliance awareness through privacy training programs. This helps build a culture of integrity and responsibility which are much-needed components to stay afloat in the world of ever-complex regulatory laws.
Anas Baig is a Product Manager at Securiti.