At the beginning of December, the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) published new guidelines on corporate compliance procedures for the International Traffic in Arms Regulations (ITAR). The ITAR regulate the export from the US and the reexport abroad of sensitive military and space technology and products. Violations of the ITAR can have serious consequences and it is regarded by the State Department as essential that all businesses involved with ITAR controlled transactions have suitable compliance procedures in place.

The new guidelines provide US exporters with a clear and concise overview of the ITAR and the compliance process, including the roles and responsibilities of various stakeholders within organizations, including senior management, personnel responsible for ITAR compliance oversight, personnel actively involved in export and related activities covered by the ITAR and the rest of the workforce. They also outline the key elements of an effective corporate compliance program, including the development of written policies and procedures, employee training, and the establishment of internal controls and compliance audits to ensure compliance with the ITAR.

One of the main goals of the new guidelines is to help companies better understand their obligations under the ITAR and to provide them with the necessary tools and resources to ensure compliance with these regulations. The guidelines also highlight the consequences of failure to comply with the ITAR, including significant criminal and administrative fines and penalties and long prison sentences that can be imposed by DDTC. Exporters can be debarred from receiving further export licenses for a set period of time, are required to invest a great deal of time and expense in improving compliance programs and will also likely suffer damage to their reputation and business relationships.

The DDTC has made it clear that it expects companies to take proactive measures to ensure compliance with the ITAR. This includes conducting regular risk assessments to identify any potential compliance issues and taking timely and appropriate corrective action to address any issues that are identified.

Foreign recipients of ITAR controlled products and technology must also ensure that they comply with the ITAR’s requirements and restrictions. Foreign recipients may not transfer or export ITAR controlled items and technology to any party that has not been prior approved by DDTC. Even changing the approved end-use of an item, including by its destruction, requires DDTC’s prior approval. Furthermore, foreign items that incorporate any parts, components or materials controlled by the ITAR or that are developed or adapted with ITAR controlled technology, will also be controlled by the ITAR, regardless of how small the proportion of ITAR content may be. Foreign businesses that use ITAR controlled items in their products must therefore understand the consequences of that, including having to obtain DDTC approval for their exports in addition to any approval from their own government required under their own country’s export control laws.

DDTC has investigated and prosecuted non-U.S. entities and persons who have been found to be in violation of the ITAR on many occasions and ignorance is no defense. It is therefore equally important for any non-U.S. business that deals with ITAR controlled items and technology to adopt suitable compliance procedures to guide their personnel and to avoid accidental or deliberate violations. When determining what sanctions, if any, to impose on a party for ITAR violations, DDTC takes into account factors such as whether the violator had appropriate procedures in place and the violation occurred due to unfortunate circumstances or arose due to the violator’s negligence and lack of due consideration to the ITAR. While DDTC’s guidelines on ITAR compliance procedures are primarily aimed at the US exporters, foreign entities that are engaged in ITAR activity will also find the guidelines to be useful for making and adopting their own tailor made procedures.

Gil Rosen, Joseph Shem Tov & Co.’s partner in charge of the firm’s Defense and Homeland Security department has over two decades of experience in advising Israeli businesses on US export control compliance, including ITAR compliance. Gil advises Israeli businesses on the development of suitable compliance procedures and the provision of suitable training programs for management and personnel. Our compliance programs are generally titled US Export Compliance Procedures, because they also incorporate compliance procedures for the U.S.’ Export Administration Regulations (EAR), which control the export of U.S. commodities and technology, including military and space commodities and technology, that are not controlled by the ITAR.

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