ITAR Violations & Your Business
The International Traffic in Arms Regulations (ITAR) controls the import and export of defense-related goods, technology, and data as listed on the United States Munitions List (USML). Everyone in the supply chain of these goods must remain compliant, whether manufacturers, distributors, or contractors.
These strict export controls apply to all international trade operations as defined in the USML, Part 121 of the International Traffic in Arms Regulations (ITAR):
- A business of manufacturing
- Brokering activities of defense articles
- Defense services
- Related technical data.
ITAR compliance does not have to be complicated, but companies must receive specific licenses and documentation, and they must be registered with the State Department’s Directorate of Defense Trade Controls (DDTC).
ITAR Violations Carry Serious Consequences
Legal compliance with ITAR requires that your business follows all regulations, and you also need to keep updated on amendments and updates to regulations. Even though most people think of physical goods when shipping USML items, compliance covers a broad range of technical data and services.
The United States Government takes ITAR compliance seriously.
ITAR carries massive repercussions for each violation, and your business could receive criminal penalties and civil fines if you fail to comply with any part of those regulations. While violations vary based on severity, type, and scope, there are some general guidelines that you should know when it comes to ITAR violations:
- Business Fines: Violators can be fined up to $1 million per violation. The business entity will address these fines, and this substantial fine can significantly impact the company’s ability to compete in the market.
- Personal Civil Penalties: The Secretary of State can choose to apply civil penalties up to $500,000 per violation to an individual.
- Personal Criminal Penalties: Criminal penalties resulting in years of improvement often applied to violators who knowingly violate ITAR regulations.
- Debarment or Loss of Export Licenses: In addition to monetary loss through fines, you could lose your ability to conduct business by losing your export license. If you violate ITAR regulations, then you could lose your ability to conduct business as a government contractor.
- Business Disruption: Receiving sanctions and penalties for ITAR violations is a scary time for company leaders. Not only do you risk severe civil and criminal penalties, but violating the ITAR can also lead to disruptions across your business. Delayed shipments and damage to your brand’s reputation can lead to long-term impacts.
As an exporter of defense articles, you will be required to have sufficient organizational infrastructure to maintain compliance and have the resources to ensure you do not conduct a single violation, whether willful or unintentional.
Potential ITAR Violations Penalties
Export compliance is a complex and often overlooked element of any export business. However, your company has nothing to gain and everything to lose if you intentionally (or unintentionally) violate the rules from a strategic position.
The State Department puts an exceptional amount of resources to monitor export control laws. They partner with many other U.S. Government agencies that monitor businesses just like yours to follow each step of the export process.
ITAR-controlled items are closely monitored, and as a result, the State Department applies severe penalties for any company found to be in noncompliance. Criminal penalties can reach $1 million and ten years in jail, but ITAR violations most commonly result in civil penalties.
Yet, civil penalties can enter into the millions of dollars per violation, so a company found in noncompliance could face hundreds of separate charges.
Most large export companies can absorb fines, but debarment can ruin a defense exporter of any size in severe cases — debarment results in the loss of ITAR export privileges. The company will lose all government contracts and have a permanent “blackball” on their record, so no other companies with government contracts can do business with that company. This could spell the end of any business.
Why Is ITAR Important For Your Business?
The International Traffic in Arms Regulations (ITAR) is a complex set of rules that govern the export/import of defense articles and defense-related services.
ITAR is implemented by the State Department’s Directorate of Defense Trade Controls (DDTC). It places a heavy burden on companies that export commodities to foreign countries or foreign persons.
Compliance can be very complicated, depending on some variables. Due to the dynamic nature of ITAR regulations, your company could be subjected to severe civil and criminal repercussions for ITAR violations.
What Are The Most Common Compliance Violations?
It is almost impossible to list all actions that could cause your company to become non-compliant since ITAR undergoes significant changes each year and export controls often change. However, over the years, we have found a handful of violations that many companies commit.
1. Willful Failure To Comply With ITAR
If your company is knowingly in violation of various ITAR provisions, you are at a high risk of receiving criminal and civil penalties. Both of these willful violations often receive the harshest penalties that can amount to millions of dollars and result in imprisonment.
If any of your employees become aware of an ITAR compliance issue, your company needs to have a system to communicate that infraction to appropriate officials.
Manufacturers of firearms, ammunition, and other defense services need to register with the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) to produce various controlled items. Some companies receive export violations because they fail to register with the appropriate government agencies.
The defense industry has several compliance measures to prevent unauthorized exports for the interest of national security reasons. Companies must comply with strict ITAR compliance programs to ensure they receive prior approval before exporting defense services or technical data to foreign persons or entities.
It’s also important to mention that enforcement actions can be taken even if you don’t ship data or defense services. Even discussing with an engineer in a foreign country requires appropriate licenses.
4. Unintended Mistakes Or Oversight
Violations of the ITAR can be made by your company without you even knowing it is taking place. Given the breadth and complexity of regulations, it can be easy for a company of any size to fall victim to the civil and criminal penalties of noncompliance.
However, it is essential to note that ITAR provides a voluntary disclosure process that can substantially reduce your fines or penalties … or even mitigate them down to nothing … when you are forthcoming and cooperative, and when you undertake a serious effort to improve.
5. Misrepresentations and Omissions
Many companies get confused about one aspect that noncompliance does not just require a violation of specific elements of ITAR. If you are an exporter and make the factual omission of information, licensing, or reporting, you could receive criminal and civil penalties.
ITAR requires absolute honesty and accuracy, so your company needs to ensure that all information is disclosed about each export.
How Can You Avoid ITAR Violations?
If you love your export business and the thought of steep penalties scares you (which they should), then you simply can’t risk the chance of non-compliance. There is just too much to lose if you are caught intentionally (or unintentionally) violating ITAR.
No matter the size, any infraction can spell disaster for you and your business, and the best way to ensure your ongoing success is by partnering with the ITAR consultants at Export Solutions.
Take the first steps to secure your business and prevent unnecessary headaches so you and your employees can focus on your business. Our ITAR specialists are standing by and ready to talk with you today!