International Traffic in Arms Regulations – A Very Brief Primer

Kerry Scarlott, Esq., Partner, Posternak Blankstein & Lund

Author - ITAR Events - AeA Contact

U.S. businesses are subject to stringent regulatory controls on the export of products, services and related technical data (including software).  In some cases, an “export” in the traditional sense (i.e., physical transfer of a product outside U.S. territory) is not required to trigger export controls.

The International Traffic in Arms Regulation (ITAR) is one of the key regulatory regimes that technology companies must consider as they conduct their business. Administered by the Department of State’s Directorate of Defense Trade Controls (DDTC), the ITAR governs the development, manufacture and export of defense articles, services and related technical data. Contrary to popular belief, the ITAR governs much more than guns and bullets.  It applies also to a wide range of wholly benign (non-lethal) articles, services and related technical data. For example, an array of electronic equipment, from sensors to signal processors, is potentially subject to the ITAR.

Complying with the ITAR begins with an understanding that any article (and associated technical data) that has been specially designed, modified or configured for a military purpose is subject to ITAR jurisdiction.  In some cases, this includes articles that have a long-standing commercial sales history.  For example, commercial-off-the-shelf (COTS) computer processors that have undergone a simple modification for use in military aircraft can become subject to the ITAR.  In addition, components, parts, accessories, attachments, and associated equipment specifically designed or modified for use in an ITAR-controlled article are subject to the ITAR.  Even a simple metal screw, with threads designed for an ITAR-controlled article, can itself become subject to the ITAR. 

The key to determining whether the ITAR applies in a particular circumstance is having a precise understanding of the genesis of an article and what, if any, modifications have occurred over time (including the specific purpose of each such modification).  It is not always easy to obtain this understanding, particularly when technology has evolved over time -- personnel with knowledge of a product’s evolutionary history may no longer be available, records may be scarce or non-existent, and memories fade.  Even in real time, the specific purpose for which an article is being modified is not always clear, particularly when the modification is performed under subcontract.

U.S. businesses that are engaged in the design, development or manufacture of defense articles, or that provide defense services, are required to register with the DDTC (even if they never engage in an export transaction).  They must also obtain a license from the DDTC in connection with nearly every export transaction.  Moreover, under the so-called “deemed export rule,” even the act of sharing controlled technical data with a foreign national (including foreign nationals present within U.S. borders) requires a license in most circumstances.  Thus, any business that employs, contracts with, or makes sales presentations to foreign nationals must be particularly vigilant in determining whether they are subject to the ITAR.  With the sharp increase in export control enforcement since 9/11, particularly in the ITAR arena, U.S. businesses cannot afford to operate in the dark.

Kerry T. Scarlott, Esq., Partner at Posternak Blankstein & Lund.  Kerry is a member of the firm’s Corporate Department. His practice is focused on business law and international trade law, with particular expertise in assisting technology-based companies. In the international trade arena, Kerry assists clients in entering or expanding their presence in international markets. He advises clients regarding import and export compliance, foreign sales and distribution of products, overseas manufacturing and sourcing, establishing strategic alliances and joint ventures, and acquiring and selling businesses. Kerry has expertise in counseling technology-based companies in navigating the Export Administration Regulations and the International Traffic in Arms Regulations. Kerry lectures and writes regularly on international trade matters, including export compliance, foreign distribution and sale of products, and related topics.
 

AeA New England will host a webinar on ITAR on Wednesday, November 28, 2007.  Details.

AeA New England has also hosted previous events on this topic:
-- WEBINAR: U.S. Export Controls:  Determining Which Regulatory Regime Applies to Your Business on Tuesday, October 31, 2006
-- SEMINAR:  ITAR: What Every Technology Company Needs to Know, held at Cadence Design Systems, Inc. in Chelmsford, MA on Thursday, December 7, 2006. 

This page was last updated on 10/18/07.  
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