When it comes to understanding ITAR compliance requirements and compliance penalties, the Justice Department government has no doubt increased oversight for government contractors, commercial organizations, and individuals for potential EAR vs ITAR laws breaches and non-compliance with import-export regulations. Many companies relax their standards and many do not even have an ITAR Compliance Statement.
However, the backlash from the Justice Department should put CEOs on notice that their companies could be at risk and subject to exposure.
- Companies such as Lockheed, Motorola, Boeing, and Northrup Grumman have all been penalized for violations.
- The government will assess ITAR certification and compliance penalties unless your company is committed to being compliant.
There are mandatory measures that contractors and businesses must have in place. An example would be submitted to external audits and appointment of compliance officers.
- Failure to meet ITAR compliance requirements can result in debarment from a future exporting activity.
- Companies must also have disclosure policies in place for failing to be ITAR compliant.
First, understanding the difference between ITAR and EAR can be beneficial. The distinction sets the tone for how each company goes about developing internal policies and procedures.
Difference Between ITAR and EAR Requirements (EAR vs ITAR)
ITAR: deals military items or defense articles; includes technical data related to defense articles and services; ITAR regulations ensure U.S. security.
EAR: Covers dual use items; includes both the goods and technology; creates a balance of foreign availability, commercial
and research objectives with national security.
US law states that “no person, by fraud, gross negligence, or negligence, may enter or attempt to enter merchandise into the commerce of the United States…by means of a document or electronically transmitted data which is material and false, or by any omission of information that is material.”
Understanding EAR Vs ITAR Certification and DOD ITAR Compliance Requirements is a Must: To meet DOD ITAR certification and ITAR compliance requirements, a business must register with the U.S. State Department’s Directorate of Defense Trade Controls (DDTC). Understanding ITAR vs EAR certification and DOD ITAR compliance laws are a must for all businesses subject to the rules.
The key for DOD contract companies seeking to decrease, or avoid fines for penalties and violations is to:
- Implement adequate internal administrative controls such as an ITAR compliance statement;
- Strengthen their oversight practices including voluntary audits.
- Develop rigorous training programs that withstand federal investigations and scrutiny.
Foreign employer ITAR compliance requirements and ITAR compliance statements: Under Section 126.18 of the International Traffic in Arms Regulations (lTARS) a foreign employer who is itself an authorized consignee or end user may allow a dual or third-country national who is a bona fide “regular employee” (as defined in Section 120.39 of the ITAR) to have access to unclassified defense articles (including technical data) without prior written approval if:
(a) the employer has in place a process as set forth in Section 126. I 8(c) of the ITAR to screen its employees for substantive contacts with restricted or prohibited countries listed in Section 126.1 of the ITAR and to have its employees execute a Non-Disclosure Agreement providing assurances that the employee will not transfer any defense articles to persons or entities unless specifically authorized by the employer; and
(b) the employer determines through that process that the employee does not have substantive contacts with a restricted or prohibited country listed in Section 126.1 of the ITAR.
Impacted Industries Under Import-Export Regulations: Understanding ITAR Regulations and the Export Administration Regulations (EAR Vs ITAR certification compliance) can impact industries involved in the manufacturing, sales and distribution of technology. Regulations focus on controlling the disclosure or transfer of sensitive information to a foreign national. This is why companies must submit an ITAR compliance statement. Find out more about eccn number ear99 requirements.
ITAR EAR Requirements & ITAR Compliance Penalties
The EAR primarily covers the exporting of “dual-use” commodities, software and technologies. Dual-use items are those that have predominantly commercial uses, but that may also have the potential for military application.
Section 734.2(b)(5) of the EAR states: “Any release of technology or source code subject to the EAR to a foreign national of another country is a deemed reexport to the home country or countries of the foreign national. However, this deemed reexport definition does not apply to persons lawfully admitted for permanent residence.”
When companies violate foreign import and export controls regulations and compliance laws, ITAR compliance requirements and penalties can be staggering. For example, if there is a mistake with EAR99 designations, EAR vs ITAR fines and penalties can be both civil and criminal.
- Assessments can include $500,000 per violation while criminal penalties include fines of up to $1,000,000 and ten years incarceration per violation.
- Under ITAR EAR laws, maximum civil fines can reach $250,000 per violation.
- Criminal penalties can be as high as $1,000,000 and 20 years incarceration per violation.
An example of the severe consequences in ITAR compliance violation cases is in 2010 when BAE Systems plc (BAES) pleaded guilty in U.S. District Court.
BAE conspired to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act (FCPA) compliance program, and to violate the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR EAR ). See information about US Export Control laws and the importance of conduct in litigation.
Other Court Decisions: With the recent Fourth Circuit Court decision in United States v. Brian Keith Bishop, No. 13–4356, 2014 WL 292695 (4th Cir. Dec. 11, 2013), the Fourth Circuit joined other circuits, holding that proof of general knowledge of the illegality of the conduct is sufficient to convict a person of a willful violation of US export laws. See information on the Mandatory Disclosure Rule.
Companies subject to DOD regulations should develop programs and solutions that not only meet the minimum legal ITAR requirements but also to save the corporation’s bottom line by reducing exposure.
For help with DOD contracts, applying the difference between ITAR and EAR requirementsns, and understanding EAR vs ITAR compliance statements, call our DOD ITAR certification and compliance lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.