What Is ITAR and EAR Compliance?
As a business operating in the defense industry, you know the complex regulations governing the export of military technology and sensitive information.
Understanding and complying with ITAR (International Traffic in Arms Regulations) and EAR (Export Administration Regulations) is essential to avoid hefty fines, legal trouble, and reputational damage.
In this blog post, we will dive deep into understanding what ITAR and EAR compliance means, how they differ, and what you need to know to ensure your business is compliant.
We have also included a section on non-compliance penalties and tips on complying with these regulations. Let’s get started!
What’s The Difference Between ITAR and EAR?
We field lots of questions about the difference between ITAR and EAR regulations. Particularly with the changes from Export Control Reform in recent years, the lines between these two regulations can easily get blurred.
How can you distinguish ITAR vs. EAR? Which regulation applies to your products, data and technology? How are they the same? How are they different? Here’s a quick breakdown of these two concepts:
- International Traffic In Arms (ITAR): Regulates the sale, distribution, and manufacturing of defense-related items.
- The Export Administration Regulations (EAR): Regulates dual-use items not covered by ITAR, but still applies to some defense-related items.
|ITAR||Defense articles and defense services.||U.S. Department of State (DDTC)||United States Munitions List (USML)|
|EAR||Commercial and dual-use items and technology.||U.S. Department of Commerce (BIS)||Commerce Control List (CCL)|
Although no blanket answers apply to every company and situation, here are some general guidelines to help exporters distinguish between the two.
One way to help distinguish between the EAR and ITAR is to determine which governmental agency is involved in the jurisdiction, licensing review, and approval of your items. For the ITAR, you’ll talk to the U.S. Department of State, Directorate of Defense Trade Controls (DDTC).
The International Traffic in Arms Regulations (ITAR)
In the simplest terms, the ITAR regulates the export of defense articles and defense services. However, don’t make the mistake of believing that just because your product is not a rocket, missile or bomb, the ITAR doesn’t apply. In fact, the regulations control a wide array of products, services and technical data. This includes everything from body armor and electronics, to spacecraft, satellites, imaging systems and much, much more.
The regulations control various products, services, and technical data. This includes everything from body armor and electronics to spacecraft, satellites, imaging systems, etc.
It’s also important to realize that the ITAR controls exports, re-exports, temporary exports and temporary imports. Furthermore, an “export” can occur simply by having a U.S. Person provide controlled information to a Foreign Person – even if that transfer of information occurs within the same company located in the United States! The list of items controlled by the ITAR is referred to as the United States Munitions List (USML), and it currently consists of 21 different broad categories of products and technical data. This can include such minor items as spare parts, components, sub-assemblies and accessories.
1. Who’s In Charge?
Export control regulations are primarily overseen by two U.S. government agencies. For the ITAR, the Department of State’s Directorate of Defense Trade Controls (DDTC) is in charge. This office handles issues, questions, and cases related to defense articles and defense services.
The EAR is administered and enforced by the Bureau of Industry and Security (BIS) within the Department of Commerce. This agency regulates less sensitive military items, dual-use commodities, and commercial items that could have military applications.
Central to ITAR compliance is the United States Munitions List (USML), which categorizes defense-related articles and services subject to control. A similar document, the Commerce Control List (CCL), is maintained by the Bureau of Industry and Security for commercial and potential military use items.
The Export Administration Regulations (EAR) govern the CCL. To determine jurisdiction between ITAR and EAR, the Order of Review is used, facilitating the accurate classification of items.
3. Regulated Items
The ITAR governs the export, temporary import, and brokering of defense articles and services, detailed in the United States Munitions List (USML).
The USML covers various items, including weaponry, military vehicles, protective personnel equipment, military training equipment, spacecraft systems, and related technical data. Also, ITAR regulates services like defense contracting, training, and technical assistance.
There are 21 categories of Defense Articles covered under the USML, including:
- Firearms, Close Assault Weapons, and Combat Shotguns
- Guns and Armament
- Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines
- Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents
- Surface Vessels of War and Special Naval Equipment
- Ground Vehicles
- Aircraft and Related Articles
- Military Training Equipment and Training
- Personal Protective Equipment
- Military Electronics
- Fire Control, Laser, Imaging and Guidance Equipment
- Materials and Miscellaneous Articles
- Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment
- Spacecraft and Related Articles
- Nuclear Weapons Related Articles
- Classified Articles, Technical Data, and Defense Services Not Otherwise Enumerated
- Directed Energy Weapons
- Gas Turbine Engines and Associated Equipment
- Submersible Vessels and Related Articles
- Articles, Technical Data, and Defense Services.
4. Violation Penalties
Violations of the International Traffic in Arms Regulations (ITAR) can result in severe penalties for companies and individuals. Civil penalties can reach fines of up to $1 million per violation and imprisonment for up to 20 years.
Companies may also face debarment, which prohibits them from participating in export activities. Further, non-compliance can damage a company’s reputation, leading to loss of potential business and strained relationships with customers and partners.
Violators can also be faced with consent agreements, including external (third-party) compliance oversight, periodic audits, training, and other investment to improve the company’s compliance programs.
In addition to physical items (“hardware”), the ITAR also controls technical data and services. The scope of this information can be far-reaching. “Defense services” can include a range of assistance or training, such as design, development, production, testing, operation, maintenance, and repair services (just to name a few).
If you are unsure whether your item is controlled by ITAR or EAR, the first place to begin is the ITAR and a thorough review of the USML. Sometimes, you may need to seek the expertise of a consultant like Export Solutions to help make this determination. Other times, your customer may be able to provide you with information about the item and its end-use that can be helpful. And still in other cases, your company may wish to obtain a Commodity Jurisdiction (CJ) from DDTC to understand which regulation applies.
Once you have definitively ruled out the ITAR for your item, then it’s time to move over to the EAR …
The Export Administration Regulations (EAR)
One way to think about the EAR is “everything else that the ITAR does not control.” Just be careful! This is not a hard-and-fast rule since some items do not fall under either regulation’s control, and still other items that may be subject to other U.S. governmental agency controls. (For example, FDA, NRC, USDA, and so on).
Generally speaking, the EAR will control commercial and dual-use items, information, and technology.
1. Who’s in Charge?
The EAR is primarily administered by the Bureau of Industry and Security (BIS), a U.S. Department of Commerce component.
BIS is responsible for implementing and enforcing EAR, which governs the export and re-export of most commercial items, “dual-use” goods, and less sensitive military items. Additionally, the Office of Export Enforcement (OEE) within BIS investigates potential EAR violations. OEE works closely with the Department of Justice and other governmental agencies to handle any subsequent prosecutions.
The cornerstone document for the EAR is the CCL, which is a detailed list that categorizes items subject to the EAR based on their nature and potential use.
Each item on the CCL has an Export Control Classification Number (ECCN) that determines its licensing requirements. The Country Chart, another key document, is used with ECCNs to determine if a license is required for a specific destination.
So, how do you know if the EAR controls your item? You need to complete a thorough review of the Commerce Control List (CCL). There are 10 different categories and 5 product groups on the CCL. You’ll want to find the Export Control Classification Number (ECCN) that matches your item.
And be careful of “jumping to” the catch-all category of EAR99 without ruling out all other ECCNs for your product or technology first. In addition, talking to your customer may help determine the correct classification of your item, or hiring a consultant can also help.
Also, like the CJ process for ITAR vs. EAR jurisdiction, the BIS has a process called CCATS that can help exporters determine the correct ECCN of their item.
3. Regulated Items
The EAR governs the export and re-export of commercial items, less sensitive military items, and dual-use goods that have civilian and potential military applications.
Items under EAR control are listed on the Commerce Control List (CCL), spanning diverse categories such as electronics, computers, telecommunications, sensors, navigation, aerospace, and propulsion.
The CCL breaks down various categories for different EAR-controlled items based on their function, intended use, and application. The ten broad categories covered in the CCL are:
- Nuclear Materials, Facilities, and Equipment, and Miscellaneous
- Materials, Chemicals, Microorganisms, and Toxins
- Materials Processing
- Telecommunications and Information Security
- Lasers and Sensors
- Navigation and Avionics
- Propulsion Systems, Space Vehicles, and Related Equipment
It’s essential to be aware that the EAR does control certain types of munitions and “military hardware,” including some types of firearms, aircraft, military vehicles, materials, chemicals, and more. This also covers items controlled by the Wassenaar Munitions List (WAML). If you don’t believe me, look at ECCN 0A918 (“bayonets”) as just one example.
4. Violation Penalties
Violations of the EAR carry severe penalties for both companies and individuals.
Civil penalties can amount to the greater of $300,000 per violation or twice the value of the transaction in each case. Criminal penalties can result in fines of up to $1 million per violation or imprisonment for up to 20 years.
Beyond fines and imprisonment, companies may face denial of export privileges, effectively prohibiting them from participating in international trade.
Reputational damage from violations can also lead to significant business loss, which can result in substantial financial losses across the company for years to come.
Differences / Similarities between ITAR and EAR
|U.S. Department of State (DDTC)||U.S. Department of Commerce (BIS)|
|Regulates defense articles and defense services.||Regulates commercial and dual-use items and technology.|
|United States Munitions List (USML)||Commerce Control List (CCL)|
|USML Category and Sub-Category. |
|Exemptions: Some exemptions may authorize export without prior approval from DDTC.||Exemptions: Some exceptions may authorize export without prior approval from BIS.|
|Export license applications submitted through DTrade.||Export license applications submitted through SNAP-R|
Although they are different in terms of their structure, administration and items controlled, the ITAR and EAR both seek to accomplish the same basic goal – to protect the United States’ national security by preventing the unauthorized export of controlled items to foreign persons.
However, their jurisdiction, control lists, licensing procedures, and enforcement agencies differ. Understanding these similarities and differences is crucial for businesses engaged in international trade, as misclassification or non-compliance can lead to significant penalties.
|ITAR & EAR Similarities||ITAR & EAR Differences|
| || |
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If you have questions or need more assistance, please schedule a no-charge consultation with us. We would be happy to learn more about your challenges with import/export compliance and see if there’s any way that we can assist you.
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Tom Reynolds is the President of Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.