Stop, read and apply ITAR exemptions

1/14/20

• ITAR
• Best Practices

By Tom Reynolds, Export Solutions

What is ITAR?

The International Traffic in Arms Regulations (ITAR) regulates the export of defense articles and defense services. However, these rules don’t just apply to weapons, but also anything that could be used by a foreign country to threaten U.S. interests and national security.

Any company in the United States who is engaged in ITAR-controlled work is required to go through ITAR registration and keep detailed record-keeping for a wide array of products, services, and even technical data.  This requirement applies even if the company does not export.

The ITAR may seem complicated at first glance because there are so many different types of products under its purview.  Companies may find themselves with more questions than answers when they’re trying to understand how these regulations affect their business outside America’s borders.

The good news is that the U.S. government has identified specific exports that do not require prior approval before shipment.  In these cases, the government allows certain exports to ship under an ITAR exemption.

Let’s take a closer look at what ITAR exemptions are, and how they impact your business.

What is an ITAR Exemption?

Many people focus on the need to obtain an ITAR license, without first considering whether or not an exemption may apply to their transaction.

What is an ITAR exemption?

Simply put, an exemption is a set of conditions which – if met – allow you to ship to your destination without the need to obtain an export license based on how your products are categorized on the United States Munitions List (USML).

The U.S. Munitions List is a compilation of all items that come under the jurisdiction of ITAR. The 21 categories currently include everything from fully-assembled end items to spare parts, components and accessories, as well as minor equipment such as sub-assemblies, machines, or other items that can be used in manufacturing sensitive military technologies.

The government allows the use of exemptions because they have evaluated specific exports and feel confident that – as long as the conditions of the exemption apply – these items can be safely exported without harm to U.S. national security.

What kinds of exemptions are available under the ITAR?

There are numerous ITAR exemptions that your products might fall under. Here are just a few types of ITAR exemptions that you should be aware of:

• Exemptions for temporary imports and exports
• Technical data exemptions
• Retransfers
• U.S. Government and Foreign Military Sales (FMS) exemptions.

For an exporter to qualify for the use of a license exemption, they must be registered with the Directorate of Defense Trade Controls (DDTC) and meet all requirements. They may then apply for that particular Exemption from Export License on their Electronic Export Information (EEI) which will allow them to export certain types or amounts without prior approval from the U.S. government, in accordance with guidelines set forth by law.

In addition, the U.S. government has relaxed some licensing requirements for international trade with specific ally countries around the world. For example, there areITAR exemptions for certain countries, including:

• The Canadian Exemption (§126.5): This allows for the export of certain unclassified ITAR controlled materials and services to recipients in Canada registered under their Controlled Goods Program.
• The US-Australia Defense Trade Cooperation Treaty (§126.16): The U.S. government has created a licensing exemption for US companies wanting to send certain goods and technology to Australia. This is due in large part to growing trade relations between our two nations, with an emphasis on STEM disciplines such as advanced manufacturing or medical research-focused technologies.
• The Defense Trade Cooperation Treaty (§126.17): The United States and the United Kingdom (UK) will be able to collaborate more fully, benefiting from improved interoperability between their armed forces.
• A variety of exemptions/authorizations for NATO and other allied countries (most notably in §123.9).

It’s important to remember that not all defense articles and defense services are covered by these exemptions.  For example, simply claiming the Canadian exemption because you are shipping a defense article to Canada is not enough and can easily result in a violation.  Exporters must make sure that their specific product qualifies for the exemption and that all of the other conditions of the exemption are met.

Where can I find all possible ITAR exemptions?

Unfortunately, there is no single section or “chapter” of the ITAR that contains all of the exemptions in one place.

Instead, you will find these exemptions throughout the ITAR – particularly in sections 123, 125, and 126.

What else do I need to know about ITAR exemptions?

Here are a few additional helpful tips about using ITAR exemptions:

1. ITAR Exemptions Means You Self-Certify Transactions

Remember that by claiming an exemption, you are self-certifying that your transaction meets all the criteria defined in the ITAR and is eligible to ship without a license.

This means you must read the exemption carefully, and make sure that all of the conditions apply!

Never assume!

When in doubt, seek professional help or apply for a license.

2. In Some Cases, You Must Report ITAR Exemptions To DDTC

Certain exemptions may have requirements for your company to keep a log of exemptions used and report these to DDTC.  Even if you are not required to report these to DDTC, you must recognize that your company could be asked at any time to provide evidence of exemptions used.  Companies should maintain accurate records of exemptions utilized and be prepared to provide such information to DDTC on demand.

3. ITAR Exemptions Require Detailed Paperwork

Don’t forget to document the exemption you used on your shipping paperwork and bill of lading.

4. You Need To Keep Good Records With All ITAR Exemptions That You Claim

Keep good records! We recommend maintaining an exemption/exception log, which is an easy reference to show all of your shipments.

Some useful information to capture on this log includes:

• Date of Shipment
• Exemption/Exception Claimed
• Jurisdiction (ITAR or EAR)
• USML/ECCN
• Description
• End-User
• Country
• Type of Export (e.g., hardware, technical data, etc.)
• Value
• Export Method (e.g., email, shipment, hand-carry, face-to-face meeting, etc.)

ITAR exemptions are not something to play with!

ITAR exemptions make it easier to transact export shipments, however, some companies get in trouble by not paying attention to the “fine print” and loosely claiming exemptions for broad categories of shipments.  Using an ITAR exemption is more complicated than simply putting “NLR (No License Required)” on your shipping documents.

However, in some circumstances, these exemptions can save your company valuable time and money compared to applying for a license.

For more information, get in touch with your company’s Empowered Official or feel free to contact us for help!

Image by Gerd Altmann

ITAR Exemptions F.A.Q.