Who Is Required To Register With Directorate Of Defense Trade Controls

Is My Company Required to Register Under ITAR?

A frequently asked compliance question among government contracts firms is whether they are required to register under the International Traffic In Arms Regulations (ITAR).

ITAR are the State Section controls that regulate defence force products, technical information and services.  Under ITAR 22 CFR §122.one, parties that manufacture, export or temporarily import "defense articles" or replenish "defence force services" are required to register with the Advisers of Defence force Trade Controls (DDTC) within the Land Section.  It is important to note that fifty-fifty parties that engage solely in domestic manufacturing of defence articles that practice not engage in whatsoever exporting or importing are required to register.  Under §122.ane, engaging in such activity "requires only ane occasion of manufacturing or exporting, or temporarily importing, a defense article or furnishing a defense service" to trigger this registration requirement.  In addition, parties that engage in defense "brokering" (see below) and freight forwarders that perform services under the Strange Armed forces Sales programme are also required to register under ITAR.

Defense Articles.  "Defense articles" are any items that are listed on the U.Southward. Munitions List.[1]  The USML is a list of 21 categories of items covering a wide array of products, parts, components, technical data, software and services that are useful in defense applications.  These include products in the aerospace, maritime, communications, It/calculator/software, electronics, optical, toxicological/biological and other industries.  To assess if a company is required to register, information technology must showtime by reviewing the USML to determine if products or services with which it is involved are listed.

Companies that frequently are required to register under ITAR include:

• Federal contractors involved in defense force, intelligence, security, homeland security and free energy contracts;
• Subcontractors and second- or third-tier suppliers of parts, components, subsystems, accessories and attachments used in such contracts;
• It, computer, software, data security and like firms involved in defense applications;
• Companies engaged in projects involving classified information (USML Category XVII is "Classified Articles, Technical Data and Defense Services");
• Companies engaged in the repair, refurbishment and maintenance of defence products and systems, and logistics activities related to such items;
• Companies that perform armed services training or provide armed services communication;
• Companies that receive research grants and contracts from the DOD including under SBIR and similar programs;
• Manufacturers of firearms, ordinance and related equipment, gunsmiths;[ii]
• Universities (especially those that receive research grants and contracts from defense force agencies); and
• Firms involved in engineering and technical services related to defence projects.

Since the USML covers non just end items but likewise certain subsystems, parts and components, many 2nd- and tertiary-tier suppliers that practice not consider themselves to be in the defense industry are nonetheless required to register.  In addition, firms that merely perform services and do not supply any products may be required to register in sure circumstances.

DFARS §225.79 and 252.225-7048.  It has become common for federal prime contractors involved in defense projects to crave their subcontractors to register under ITAR, and this has created pregnant defoliation among subcontractors and suppliers.  This requirement is due in part to DFARS §225.79 and 252.225-7048[three] which apply to many federal defence force contracts.[4]  Based on these requirements, prime contractors are increasingly concerned that if their subcontractors commit ITAR violations (such as failing to register), the prime contractors could also accept liability.  Consequently, prime number contractors are oft requiring that their subcontractors register under ITAR and prefer ITAR compliance programs.  If a prime number contractor is registered, this does not relieve the subcontractor of the responsibility to register separately – each firm must conduct its own cess and register individually if required.  Subcontractors that are registered and take ITAR compliance programs in place often create less compliance adventure for prime contractors and thus are oftentimes more desirable candidates for subcontract awards.

ITAR registration is a machinery for the U.S. government to track firms involved in the U.S. defense industry.  In addition, registration is a prerequisite for a company to utilize to DDTC for licenses, Technical Assistance Agreements (TAAs) and other authorizations.  Since it takes upward to 60 days for a registration to become effective, failure to register tin can result in meaning delays in obtaining licenses, TAAs and authorizations.  DDTC also advises that registration is required for a visitor to rely on ITAR exemptions.

Registration Process.  As role of the registration procedure, the registrant is required to submit documentation that demonstrates that it is incorporated or otherwise authorized to do concern in the U.S.  The registration documents must include a certification by an authorized senior officeholder stating if the registrant, its affiliates and officers, directors and principals (i) have ever been indicted, charged or convicted of violating certain criminal laws; or (ii) are ineligible to contract with or receive consign/import licenses from the U.Due south. regime.  In improver, the registrant must identify if it is owned or controlled by a foreign political party, and if so provide an explanation of such ownership or control, including the identities of the foreign person or persons who ultimately ain or control the registrant.

Penalties.  Penalties for ITAR violations include civil and criminal fines of upwardly to $ane 1000000 per violation and 20 years' imprisonment, including personal liability for the visitor's officers, directors and employees.  Failure to register is listed as an ITAR violation in 22 CFR §127.1(b)(ii) and (b)(3).[5]

Exemptions and Broader ITAR Requirements.  There are certain exemptions from the registration requirement.[6]  However information technology is important to note that even if a visitor is exempt from the ITAR registration requirement, it may still be subject to other requirements under ITAR and this exemption does not relieve it of the responsibility for complying with these other requirements.  Such requirements include:  the requirement to obtain consign and temporary import licenses for the export/import of defense force articles, the requirement to obtain authorizations for the transfer/disclosure of ITAR-controlled technical data and software to foreign nationals in the U.S. (including foreign national employees of the U.S. contractor), the requirement to enter TAA'due south authorized by DDTC for the operation of defence services, restrictions on reexports and retransfers and reporting and recordkeeping requirements.  A more detailed list of requirements under ITAR are ready forth in ITAR For Government Contractors.

Brokers and FMS Freight Forwarders.  Registration is also required for ITAR "brokers" nether ITAR §129.3.  Brokers are parties that facilitate the sale or transfer of ITAR-controlled products, services and technical data by others, fifty-fifty if they are not direct principals in the transaction.[7]  Brokers are also subject area to other requirement under ITAR including the requirement to obtain advance authorization from DDTC for certain transactions, reporting requirements, recordkeeping requirements and restrictions on engaging in transactions involving countries identified in 22 CFR §126.1.  In addition, equally referenced in a higher place, pursuant to ITAR §126.6(c)(6)(i), U.S. freight forwarders performing services nether the Strange Military Sales (FMS) programme are required to register with DDTC.

Empowered Official.  As role of the registration process registrants are required to appoint an "empowered official."  This is a U.Southward. person direct employed by the registrant that has a position of authority for policy and management within the company and is: (i) legally empowered past the registrant to sign license applications; (ii) understands the requirements of the export laws and penalties for violating them; and (iii) has the independent authority to enquire into any aspect of a proposed transaction, verify the legality of the transaction and refuse to sign any license applications without adverse recourse from the company.

Other Requirements.  Other obligations under the ITAR registration requirement that frequently apply to government contractors include:

• Amendments.  If at that place are changes in the primal data submitted in the registration statement, the registrant is required to notify DDTC of such changes in writing within 5 days of the event.
• Annual Renewal.  The registration must be renewed annually, provided that the company continues to engage in activities that trigger the registration obligation.
• ITAR Recordkeeping Requirements.  Registrants are required to maintain records of their ITAR activities for a five-year period (and longer in certain instances) pursuant to 22 CFR §122.5.

Registration is only part of the broader obligations that may apply to authorities contractors under ITAR.  Contractors should sympathize the specific requirements that may arise in their particular activities and employ care to comply with these in their concern operations.  For a more detailed discussion of these requirements see ITAR For Government Contractors.

To be placed on our list to receive additional manufactures on export and import law please contact Thomas McVey at tmcvey@williamsmullen.com or (202) 293-8118.  Additional articles on ITAR, EAR and U.South. sanctions programs are bachelor at: "Export Articles."

Note:  This article contains full general, condensed summaries of actual legal matters, statutes and opinions for information purposes.  It is not intended and should not exist construed as legal communication.

[i] The U.S. Munitions Listing is set forth at 22 CFR §121.i.

[3] DFAR 252.225-7048(b) and (e) provide in pertinent office:

      (b)  The Contractor shall comply with all applicable laws and regulations regarding export-controlled items, including, but not limited to, the requirement for contractors to register with the Department of State in accordance with the ITAR. The Contractor shall consult with the Department of Land regarding whatsoever questions relating to compliance with the ITAR and shall consult with the Department of Commerce regarding any questions relating to compliance with the EAR.

* * *

      (east)  The Contractor shall include the substance of this clause, including this paragraph (due east), in all subcontracts.

[4] These provide that contractors are required to comply with ITAR and the Export Administration Regulations in performing the relevant contracts and are required to "flow down" this requirement to their subcontractors.

[5] 22 CFR §127.one(b)(3) provides as follows: "(b) It is unlawful:  * * * (three) To appoint in the United States in the concern of either manufacturing or exporting defence articles or furnishing defense force services without complying with the registration requirements. For the purposes of this subchapter, engaging in the business of manufacturing or exporting defence force articles or furnishing defense force services requires only one occasion of manufacturing or exporting a defense article or furnishing a defense service."

22 CFR §127.i(b)(2) provides as follows: "(b) It is unlawful:  * * *(ii) To engage in the business concern of brokering activities for which registration and a license or written blessing is required by this subchapter without first registering or obtaining the required license or written approval from the Advisers of Defense Trade Controls. For the purposes of this subchapter, engaging in the business of brokering activities requires only 1 occasion of engaging in an action equally reflected in §129.ii(b) of this subchapter."

[6] 22 CFR §122.1(b) provides as follows: "(b) Exemptions. The registration requirements of paragraph (a) of this department do not employ to:(ane) Officers and employees of the U.S. Government acting in an official capacity; (ii) Persons whose pertinent business organisation activity is confined to the production of unclassified technical data only; (iii) Persons all of whose manufacturing and export activities are licensed under the Diminutive Energy Act of 1954, every bit amended; or (iv) Persons who engage in the fabrication of articles solely for experimental or scientific purposes, including research and development."  Come across also 22 CFR §129.3(b) for exemptions for registration past brokers.

[vii] See 22 CFR §129.2.

Who Is Required To Register With Directorate Of Defense Trade Controls,

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