Virginia Conference On World Trade

ITAR COMPLIANCE R. Ellen Coley ReavesColey PLLC [email protected] 757.410.8066 office 757.383.5876 mobile

Objectives • To provide instruction on the International Traffic in Arms Regulations (“ITAR”) • To provide guidance on ways to avoid ITAR violations

Why Does ITAR exist? • • • • •

National Security Anti-Terrorism Weapons Controls Crime Control Non-Proliferation

U.S. Export Control Laws • ITAR- International Traffic in Arms Regulations United States Munitions List (USML)

• EAR- Export Administration Regulations Commerce Control List (CCL)

Who is subject to ITAR? • Any person subject to the jurisdiction of the United States who, as principal or agent (including a forwarding agent), participates in an export transaction

What is controlled by ITAR? • Items (plus technical data and software) listed on the United States Munitions List (“USML”) • Items specifically designed, developed, configured, adapted or modified for a military application (intended use does not matter) • Services related to items on the USML

What does it mean to “Export”? • Actual shipment or transmission of items out of the United States • Release of technology or software subject to the ITAR to a foreign national in the United States

What does it mean to “Re-export”? Actual shipment or transmission of items subject to the ITAR from one foreign country to another foreign country

What is a “Deemed Export”? • Transfers of technology (even within the U.S.) to a foreign national are deemed as an export to the foreign national’s home country • All deemed exports subject to ITAR require a license • Watch out for plant visits, negotiations, and employees (Form I-129 Certification)

Foreign Nationals • NOT a U.S. citizen or lawful permanent resident (green card holder) • In the U.S. on a temporary visa

Technical Data and Software • If the item is controlled, then any technical data and software related to the product is also controlled • Examples: - Technical drawings - Operating Manuals - Training Manuals

Exporting Technical Data and Software • Ship it out of the U.S. • Travel out of the U.S. and talk about the technical data and/or software • Transmissions out of the U.S. (phone call, fax, email) • Foreign national has access

Restricting Access

• • • •

Internal control plan for restricting access Visitor sign-in (state citizenship) Locked doors/file cabinets Do not leave technical data visible to the open public

ITAR Controlled • Registration requirements - Renew yearly • Must obtain a license prior to exporting - DTRADE • Must inform employees about the terms and conditions of the license

EAR Restricted • Review the Commerce Control List • Depending on what country it will be exported to, the export may require a license • EAR 99- No license required to a particular country (unless general prohibitions apply)

Licensing of Technical Data • Technical Data - Technical proposals (drawings & specs) - Follow-up discussions • Office/Plant Visits • Foreign national employees

What if the Item does NOT Require a License? • Export item unless: – The end user is a prohibited person or entity – The country of destination is under an embargo

– You have knowledge of an impending violation

Screening • • • •

Screen each customer Denied persons list Specially Designated Nationals list Documentation

Check the Country of Final Destination • Is it an embargoed country? – Cuba, Iran, Iraq, North Korea, Sudan, Syria • Re-exports - check the country of FINAL destination even if it will be shipped through another foreign country first

Watch out for Red Flags • The customer or its address is similar to one of the parties found on the Commerce Department's [BIS's] list of denied persons. • The customer or purchasing agent is reluctant to offer information about the end-use of the item. • The product's capabilities do not fit the buyer's line of business, such as an order for sophisticated computers for a small bakery.

Watch out for Red Flags • The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry. • The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing. • The customer has little or no business background.

Watch out for Red Flags • The customer is unfamiliar with the product's performance characteristics but still wants the product. • Routine installation, training, or maintenance services are declined by the customer. • Delivery dates are vague, or deliveries are planned for out of the way destinations. • A freight forwarding firm is listed as the product's final destination. • The shipping route is abnormal for the product and destination. • Packaging is inconsistent with the stated method of shipment or destination. • When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.

ITAR Certificates • Government contractors may request an ITAR certificate from their vendors and subcontractors • It may be broad, but do NOT over-certify • ITAR registration • Compliance program

ITAR Violations • Fines - Up to $1,000,000 per violation • Criminal - Up to ten (10) years imprisonment (can prosecute company, officers and directors, and employees) • Denial of export privileges • Barred from working on government contracts

Compliance Plan • Management commitment - Management Policy Statement - Reviewed and Signed every year

Compliance Plan • Written guidelines – Polices and procedures – Review the handbook – Identify the Compliance Team – Handbook will be maintained by the Compliance Team

Compliance Plan • Compliance Training – Annual training for all employees - on-line classes - in-house seminars - external seminars – Training for all new export personnel

Compliance Plan • Cradle to Grave Export Compliance Security – The Compliance Team will manage the EMCP – Document the entire process

Compliance Plan • Recordkeeping Requirements – 5 year retention period – All records should be easily retrievable for any given export transaction

Compliance Plan • Export Compliance Monitoring & Auditing – Identify violations/problems – Corrective measures

Compliance Plan • Recordkeeping Requirements – 5 year retention period – All records should be easily retrievable for any given export transaction

Compliance Plan • Guidelines for Handling & Reporting Export Violations/Problems

– Employees should discover and report violations and problems – Anonymous reporting

Questions/ Contact Information R. Ellen Coley ReavesColey PLLC [email protected] 757.410.8066 office 757.383.5876 mobile