Registration and compliance under the International Traffic in Arms Regulations (ITAR) are a necessary but widely misunderstood aspect of international defense sales. We previously covered the basics of ITAR. Now let’s look at some myths around ITAR registration.
Myth: Registering with ITAR is too complicated.
Reality: It’s actually not as bad as you might think. The process is mostly completed online and DDTC has lots of helpful info about how to register. You need to register and then update your registration once a year; brokers have to file a compliance report each year at the end of January. Manufacturers and exporters need to apply for a license for each new sale.
Myth: I don’t need to register because I’m not selling weapons.
Reality: You must register if your product is listed on the U.S. Munitions List. It is not up to your discretion as to whether your product qualifies as a defense article. The Munitions List covers a wide range of products, so the only way to know whether your item is covered is to check the list. If you check and are still unsure whether your product qualifies, you can submit a jurisdiction request to DDTC.
If it’s on the U.S. Munitions List and you’re planning to export it, you must register with ITAR.
Myth: I don’t need to register because I’m not selling to the military.
Reality: Again, you must register with ITAR if your product is listed on the U.S. Munitions List and you’re planning to sell overseas.
Myth: I don’t need to register because I haven’t made a sale yet.
Reality: You must register with ITAR before you enter into talks with foreign clients.
Some of the confusion here may arise from the ITAR registration vs. license requirements. ITAR registration is for an entire company for the duration of one year; it’s a blanket registration to enter into negotiations for international sales.
After you register under ITAR, you’ll submit an export license request for every sale. For the license request, you’ll have to submit information about the particular purchaser and the details of the product being sold. A new export license is required for each new sale.
While some companies try to put off registering under ITAR, I think they’re doing themselves a disservice. It’s better for the company to be registered early, before they seek to enter the international market. You never know when an opportunity may arise, and you don’t want to have to cut off talks because you haven’t yet filed your ITAR paperwork. This recently happened with a client of mine – they were negotiating the sale of a non-USML product when the client asked to add a defense article to the package. The company hadn’t yet registered with ITAR, so they couldn’t pursue the deal.
Really, as with all legal matters, it’s better to be safe than sorry – get the ITAR registration done up-front, as soon as you have an inkling that you might like to enter the international market.
Myth: I can get a consultant (or assistant, or part-time legal counsel) to do my ITAR compliance.
Fact: You must assign a full-time employee as your ITAR compliance officer, and only certain levels of employees qualify. For example, an assistant or part-time employee doesn’t qualify because they may not have the authority within the company to implement effective compliance policies.
DDTC also has helpful guidance on the elements of an effective compliance program (pdf file).
What other “myths” have you heard about ITAR registration? What’s your experience with registration and compliance?