One of the most difficult items to export from the U.S. are military armaments. The policing role that the United States plays on the global stage relies heavily on its equipment and technology being the best on the field, and this means taking all of the steps necessary to prevent it from falling into the wrong hands.
Defense contractors and other armament companies, however, may find lucrative deals abroad. Knowing when these transactions are legal, and how to comply with the law to ensure that it remains legal, is extremely important. The arms export control consultants at Corporate Investigation Consulting have walked numerous companies through this tricky situation, ensuring that they were able to make use of legal opportunities that arose while avoiding those that would have run afoul of U.S. export law.
The Two Big U.S. Export Laws Dealing With Armaments
U.S. export law has two main sets of regulations that govern the export of arms and armaments abroad:
- The International Traffic in Arms Regulations, or ITAR
- The Export Administration Regulations, or EAR
We delve into both of them more deeply elsewhere on our site, but a brief overview of each of them is necessary to understand the complexities inherent in arms export controls.
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Former Supervisory Special Agent (FBI)
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Former Supervisory Special Agent (DOD-OIG)
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The International Traffic in Arms Regulations (ITAR)
We are no longer handling ITAR cases. We recommend reaching out to Oberheiden P.C.:
https://federal-lawyer.com/import-export-law/
The International Traffic in Arms Regulations (ITAR) are federal regulations derived from the Arms Export Control Act of 1976 (AECA). This Act gave the U.S. President the authority to control the import and export of defense items and services. That authority was delegated to the Directorate of Defense Trade Controls (DDTC) at the U.S. Department of State, which promulgated regulations to flesh out and enforce the AECA.
Those regulations are the ITAR (22 C.F.R. §§ 120-130).
ITAR applies to companies that make, sell, or export any of the 21 categories of “defense articles, defense services, or related technical data” listed in the U.S. Munitions List (USML) (22 C.F.R. § 121). These categories include detailed and technical lists of military equipment like:
- Firearms, close assault weapons, and combat shotguns
- Ammunition and ordnance
- Missiles
- Explosives
- Aircraft
- Personal protective equipment
- Toxic agents and chemicals
It also includes military-style services like:
- Military training
- Technical data
- Design specifications
What is contained in these listings changes frequently, making it even more difficult for companies to remain in compliance with ITAR. However, if you deal with any of the items or services listed in the USML, you will have to comply with the regulations or risk exposing your company to substantial liabilities. That compliance generally means determining which licenses the goods or services need before they can be exported legally.
The Export Administration Regulations (EAR)
The Export Administration Regulations (EAR) (15 C.F.R. §§ 730-780) are another set of federal regulations that could apply to defense contractors and other companies that want to export armaments. These regulations are implemented and enforced by the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce.
The EAR apply to quasi-military items that are exported from the U.S. Those items are things that have commercial purposes but that could also be used for military purposes. They are categorized by Export Control Classification Number (ECCN) in the Commerce Control List (CCL).
The classification of the item determines where it can be exported legally. Additional legal restrictions may apply based on who the recipient would be and the purpose for which they are ordering the item.
Take the Necessary Compliance Measures for These Export Laws
Both of these laws have their own set of compliance measures that must be met. Furthermore, both of them are based on lists of arms, armaments, and other potential military items that are in constant flux. What was not illegal to export yesterday may be illegal to export tomorrow. Compliance with these regulations is not a “fix it and forget it” endeavor.
Just a few of the compliance requirements your company may need to meet are:
- Written corporate policies
- A Corporate Commitment to Compliance policy
- Employee training and retraining
- Ongoing monitoring of the lists of regulated items and sanctions lists
- Recordkeeping requirements, such as ITAR’s (22 C.F.R. § 122.5)
- Registration requirements
- Risk assessments
- Establishing procedures for reporting any export violations that do arise
- Policies that create appropriate corrective actions for violations
- Obtaining licenses whenever necessary
The compliance professionals at Corporate Investigation Consulting can walk you through these processes or help your company implement them.
Once your company has become compliant, though, more still needs to be done to ensure that it does not fall out of compliance. In addition to monitoring the regulations and sanctions lists to make sure your products have not been added to armaments lists or your business partners to the list of embargoed parties, you should also audit your company’s compliance mechanisms. This is the best way to make sure they are working as effectively as they should be, or as they were intended to work. If you do not regularly audit your arms export control protocols, you will not know if they are adequate until it is too late and their failure has already exposed your company to liability.
The Costs of Noncompliance
Willfully violating either EAR or ITAR carries massive criminal sanctions, including up to a million dollars in fines and 20 years in prison (15 C.F.R. § 764 et seq. and 22 C.F.R. § 127.3(b)). Administrative cases – generally for non-willful violations – can carry fines of either up to $300,000 per violation (adjusted for inflation) or twice the value of the transaction, whichever one is higher.
Violators are also likely to lose their export privileges, and may even get listed as a “denied person” on U.S. economic sanctions lists, which would make them unable to lawfully obtain U.S. exports, as well.
Finally, there are the publicity problems. Shipping arms or armaments to the wrong people is likely to put your company in the news for some very bad reasons. Depending on the circumstances, the blemish to your company’s brand and business reputation can be impossible to remove completely.
5 Frequently Asked Questions About Arms Export Control Law and Corporate Investigation Consulting
1. Are There Specific Compliance Expectations for EAR and ITAR?
No, the federal agencies that enforce EAR and ITAR do not provide specific recommendations for complying with the regulations that they oversee. Instead, they only provide generalized suggestions that are little more than summaries of the language used in the pertinent regulations.
Therefore, it is up to the company to figure out what particular policies it needs to implement in order to comply with the law.
2. What is the Difference Between ITAR and EAR?
The biggest difference between ITAR and EAR regulations is what is covered. ITAR focuses on actual military equipment and services, like firearms and tanks. EAR focuses on items that have both a commercial use as well as a military one, like GPS devices. This is why EAR compliance standards are relatively lower than ITAR’s – the stakes are not as high, so U.S. export laws are less concerned about where the items go.
3. What Should I Do if My Company is Being Investigated for Violating Arms Export Controls?
The first thing to do is assemble a team of defense lawyers and arms export control consultants to determine what will be the best way forward. An investigation for arms export control violations is still just that – an investigation. However, taking an affirmative stance and defending your company’s interests is the best way to ensure that it does not turn into legal liability or criminal sanctions. You still have options at your disposal, including the voluntary disclosure of the violation, which can help your company in the long run.
4. Why Should I Consider Hiring Corporate Investigation Consulting?
Several things set Corporate Investigation Consulting apart from other compliance consultants and law offices that offer arms export control services. Chief among them, though, is the fact that Corporate Investigation Consulting is staffed with extremely experienced professionals, most of whom came to our organization only after long and illustrious careers within some of the leading federal investigatory agencies like the Department of Justice, Commerce, or the State Department. These compliance professionals, federal agents, and investigators know what companies like your own need to do in order to comply with EAR, ITAR, and other export laws because we have years of experience handling these cases from the side of the government.
5. Are There Any Other Import/Export Laws that Could Apply to My Business?
It depends on the specific transaction that you are trying to make, but quite possibly. Particularly in the field of arms exportation, companies and defense contractors need to pay attention to U.S. economic sanctions and the laws that implement them. You do not want to sell weapons to a person or party that is on the sanctions lists. However, other laws may apply as well, and not just on the U.S. side of things – other countries also have their own import/export laws to comply with.
The Arms Export Control Consultants at Corporate Investigation Consulting
If your company manufactures, sells, or exports any military equipment, or anything that could be used for military purposes, U.S. arms export controls may apply. These regulations carry substantial compliance requirements that are highly technical, complex, and constantly evolving.
The arms export control consultants at Corporate Investigation Consulting can help you devise and implement the compliance protocols that you need in order to stay on the right side of these important laws. Contact us online or call us at (866) 352-9324.