IAQG Workshop:
Washington DC General Assembly
Surviving US Export Control
regulations:
The ITAR and EAR
Don Buehler - SAE
April 16, 2010
Company Confidential
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Topics we will cover:
•Why should aerospace companies
care?
•How does the US government
control exports?
•How are companies affected by
these laws?
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Why should aerospace companies care?
1. Most aerospace companies
work on U.S. origin items
2. Many of these items are
restricted by US Export laws
and regulations
3. The laws and regulations apply
to all companies or individuals
who have possession of
restricted items
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Why should aerospace companies care?
4. Aerospace companies and
individuals are regularly
prosecuted – fined or debarred
for violations of the laws and
regulations
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EXAMPLES:
1. DHL fined $9.44 million
DHL Owned by: Deutsche Post
World Net / Deutsche Post DHL
– a German company
This was the largest fine in history
for a freight forwarder.
Their violations: primarily record
keeping (Aug 2009)
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EXAMPLES:
2. Thermon Mfg Co fined
$176,000
Three affiliates (in India & the UK)
committed 33 violations – reexporting restricted items
without a license and exporting
to embargoed countries and to
debarred companies
(Sept 2009)
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EXAMPLES:
3. Quoptiq fined $25 Million
A Luxembourg LLC
163 violations of the ITAR
Exported night vision
technology without proper
licenses to various European
and Asian companies
(December 2008)
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EXAMPLES:
4. Bass Pro Shops fined
Violation: Gun Sights
Between June 1999 and January 2004,
Bass Pro, Inc. exported gun sights to a
variety of destinations without a license in
violation of the EAR.
Gun sights are controlled pursuant to U.S.
treaty obligations, as well as for human
rights and anti-terrorism reasons.
Bass Pro agreed to pay an administrative
penalty of $510,000.
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EXAMPLES:
TFC Mfg – aerospace fabrications
company
• TFC Manufacturing, Inc. The Violation:
Between March and April 2006, TFC
Manufacturing, Inc. (TFC), a Lakewood,
California- based aerospace fabrication
facility, released U.S-origin technology for
the production of aircraft parts (classified
under ECCN 9E991) to an Iranian national
employee in the U.S. without the required
license under the EAR. The Penalty:TFC
agreed to pay a $31,500 administrative
penalty.
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Maximum Penalties
EAR
 Civil penalties may be the greater of
$250,000 or twice the value of the
transactions
 Criminal violations may be up to
$1,000,000 and/or 20 years
imprisonment
ITAR
 Civil fines up to $500,000 per violation
 Criminal fines up to $1,000,000 per
violation and/or 10 years
imprisonment
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The question:
• Does your company work on U.S. origin
products or have possession of US
technical data?
• Does your company understand the US laws
and regulations?
• Is your company vulnerable to violations?
The purpose of this presentation is to raise
your awareness of the laws and regulations
which may be affecting your company right
now – and to give you some basic
information on the regulations.
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The BASICS
•There are two major regulations
which affect US exports:
- The International Traffic in Arms
Regulations (22 CFR Chapter I,
Subchapter M) - ITAR
And
- The Export Administration
Regulations (15 CFR Part 700 –
799) - EAR
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The BASICS - ITAR
• The ITAR is administered by the
US Department of State – Office:
Directorate of Defense Trade
Controls (DDTC)
• The ITAR controls defense
articles and defense services
which are listed on the United
States Munitions List (USML)
(Part 121)
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The United States
Munitions List (USML) (Part 121)
Category I
Firearms, Close Assault
Weapons and Combat
Shotguns
Category VI
Vessels of War and Special
Naval Equipment
Category II
Guns and Armament
Category VII
Tanks and Military Vehicles
Category III
Ammunition/Ordnance
Category VIII
Aircraft and Associated
Equipment
Category IV
Category IX
Military Training Equipment
and Training
Launch Vehicles, Guided Missiles,
Ballistic Missiles, Rockets,
Torpedoes, Bombs and Mines
Category V
Explosives and Energetic Materials,
Propellants, Incendiary Agents and
Their Constituents)
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Category X
Protective Personal Equipment
and Shelters
The United States
Munitions List (USML) (Part 121)
Category XI
Military Electronics
Category XVI
Nuclear Weapons, Design and
Testing and Related Items
Category XII
Fire Control, Range Finder,
Optical and Guidance and
Control Equipment
Category XVII
Classified Articles, Technical
Data and Defense Services Not
Otherwise Enumerated
Category XIII
Auxiliary Military Equipment
Category XVII
Directed Energy Weapons
Category XIV
Category XIX Reserved
Category XX
Submersible Vessels,
Oceanographic and Associated
Equipment
Toxicological Agents, Including
Chemical Agents, Biological Agents,
and Associated Equipment
Category XV
Spacecraft Systems and
Associated Equipment
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Category XXI
Miscellaneous Articles
ITAR Licensing
If the item you are exporting
has been designed for a military
application
And
is listed on the USML
you will have to get a license for the export
(unless there is an exemption)
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DDTC registration requirement
• Does your company work on defense
items or perform defense services (as
described in the United States
Munitions List)?
• If so, your company is required to be
registered with the U.S. Department
of State, Directorate of Defense Trade
Controls (DDTC).
• Refer to Section 122 of the ITAR
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The BASICS - EAR
• The EAR is administered by the
US Commerce Dept – Office:
Bureau of Industry & Security
(BIS)
• The EAR controls commercial
and “dual use” (commercial and
military use) items and
technology which are listed in
the Commerce Commodity List
(part 774)
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The Commerce Control List (CCL)
Part 774 of the EAR
• Includes five product groups
• Extensive system for classification
of products – Export Control
Classification Numbers (ECCNs)
• Complex rules about what requires
a license (depends on product,
technology and end use)
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Export Control Classification Numbers
(ECCNs)
• The purpose of the ECCN is to
clearly identify the component,
material, or technology so that
proper licenses, restrictions
and exemptions may be
applied.
• If you are going to export items
under the EAR, knowing the
ECCN is critical.
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Examples of ECCNs
9A991
Aircraft and gas turbine engines not
controlled by 9A001 or 9A101
9A992
Complete canopies, harnesses and
electronic release mechanisms
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The BASICS
• What do we mean when we say
“restricted item?”
• This a general term we use to
describe products, goods, technical
data, software , and technology which
is under some kind of restriction by
any of the US laws
• It does not just refer to parts and
products being shipped outside the
US
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What is an export?
Any item sent from the United States to
a foreign destination (company or
person) is an export. All items leaving
the United States are exports and,
therefore, may be subject to controls
and restrictions.
Items include hardware (parts,
materials, sub assemblies), information
(drawings, specifications, test data,
calculations) software and
technologies (e.g., composites).
We use “item” to refer to all three categories (hardware,
information or technologies).
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How can items be exported?
Exports can be …
•
physical (sending items to a
foreign country or person)
•
verbal (telling someone
information about a controlled
item)
•
visual (a non U.S. person sees
controlled items – even if they
see them on your laptop in a
public place)
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Not an export
The shipment or transmission of
restricted items subject to the ITAR or
EAR from one U.S. person to another
U.S. person is not an export. (As long
as the “receiving person” is not
employed by a foreign company.)
U.S. Person
U.S. Person
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Export Examples
The shipment or transmission of
restricted items subject to the ITAR
or EAR from a U.S. Person (company)
to a Foreign Person (company).
U.S. Company
French company
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Re - Export Example
The shipment or transmission of
items subject to the ITAR or EAR
from one Foreign Person
(company) to another.
EXPORT
U.S.A.
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RE-EXPORT
Germany
Japan
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Re- Transfer Example
The shipment or transmission of
restricted items subject to the ITAR
or EAR from one Foreign Person
(company) to another Foreign
Person (company) within the same
country.
EXPORT
U.S.A.
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Company A
(Germany)
RE-TRANSFER
Company B
(Germany)
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Deemed Export
The shipment or transmission of
restricted items subject to the ITAR
or EAR from a U.S. Person
(individual) to a Foreign Person
(individual).
EXPORT
U.S.
Citizen
(or green card
U.K.
Citizen
holder)
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Restriction: license
If the item in any of the previous
examples is restricted by the ITAR
or the EAR, a license may be
required for the transaction.
Granting (or denying) licenses for
the export, re-export, or re-transfer
of restricted items is the first way
that the laws control exports.
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Restriction: embargoed countries &
denied parties
The second major way that the US
government controls exports is
through lists of countries,
companies, and individual citizens
who are not allowed to engage in
exports of US items.
We refer to these as “denied
parties”
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Denied Parties lists
Numerous Governmental agencies
have “denied parties” lists. The
major lists are maintained by DDTC;
BIS and OFAC (Office of Foreign
Assets Controls)
OFAC is the office in the Treasury
Department which maintains a
variety of lists including embargoed
countries.
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Lists to check
ITAR embargoes
OFAC lists
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They are serious!
A 5 person company – East Ways
Shipping (a NY based freight
forwarder) was fined $70,000 by
the BIS for the shipment of 3 orders
of scrap metal to a company listed
on one of BIS’s entity lists.
(August 2009)
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So what should you do?
• Learn More
– Do some research into the regulations
– Find out your vulnerability to violations
• Evaluate Your current work
– Is it covered by one of the US regulations?
– Do we export these items in any way?
– Discover your vulnerabilities to violations
• Develop and Implement a Compliance
System
• Train Employees
• Market Your System
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For more information:
• GO to any of the 3 public web sites:
• ITAR (DDTC)
http://www.pmddtc.state.gov/index
.html
• EAR (BIS): http://www.bis.doc.gov/
• OFAC
http://www.treas.gov/offices/enfor
cement/ofac/
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QUESTIONS?
Send your questions to Don Buehler
donb@exportsolutionsinc.com
and I will be glad to address them.
Or call me at
513-662-5190 (US office)
Or 513-305-7493 (mobile)
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Thank you for attending
The IAQG workshop on
Export Control.
We hope you enjoy your time in
Washington.
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