ITAR

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ITAR The Real World

• What Goes Wrong?

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Opportunities Challenges!

• The unregistered US supplier
• The undisclosed sub-licensee
• Outsourced IT admin, etc
• Foreign and dual-nationals
• Poor draftsmanship of agreements
• Ignorance (as ever, no excuse in law)
• The Self Imposed Penalty Scheme

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Supplier Selection - Registration

• Not all US suppliers understand ITAR
• This does not help you when things go wrong
• Supplier selection for US suppliers involving
  ITAR controlled goods/tech data/services MUST
  include a check that the supplier is DDTC
  registered iaw ITAR 121.1

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The Consequences

• UK exporter sends UKML parts to US supplier, who
  is not registered with DDTC
• Supplier cannot begin work until registered (6-8
  weeks and cannot work register in parallel)
• UK exporter has brainwave send the goods back
  and we can re-source youve spotted this one
  how can an unregistered party obtain a US export
  license?
• US supplier registers but requires technical
  exchanges to understand work scope needs a TAA
  (6 months). Naïve applicant is likely to suffer
  RWA of license and agreement without expert
  support

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Sub-Licensing

• Whole country sub-licensing no longer permitted
• Must specify all sub-licensees, which tech data
  to which s/l and why
• Think chain of custody who will have access
  to ITAR goods/data and why
• Effective communication with US applicant is
  obligatory
• The license/agreement MUST tell the whole story
• There are no exemptions for
• Government(s)
• EU Member States
• The MDs blood pressure passing 200/95 and still
  rising

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Outsourcing

• Think chain of custody
• Ousourced
• IT admin
• Reprographics
• Testing and inspection
• Agency staff (worse under DoC)
• Dont include them in the license/agreement and
  they cannot have access
• Tell the US applicant everything you need to do
  with their goods/data DO NOT expect them to
  know/guess
• There are always at least two parties to a
  license/agreement a bad agreement is usually
  the fault of both parties

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Foreign and Dual-Nationals

• An area fraught with problems and legal conflicts
• US and UK/EU laws in this area are currently
  irreconcilable and government intervention is
  required
• There is increasing uncertainty in this area at
  the moment and a trend towards greater
  bureaucracy and tighter restriction in some areas
• It is a commercial decision how to balance the
  competing legal risks but this should be at Board
  level because of directors fiduciary duties and
  the potential risks

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Agreements

• Think chain of custody
• Tell the story in words which both lay and
  technical assessors can understand
• Dont use jargon
• Dont assume knowledge of facts not in evidence
  they know only what you tell them, so make sure
  you tell them everything relevant
• Become the goods/data if necessary and walk
  through the plant taking the planned route

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Agreements (2)

• Think about your supply chain do they know
  exactly what they need to supply without access
  to any ITAR data OR do they need access?
• Think about sub-licensees who, what, why? (I
  know supply chain are sub-licensees I just wish
  everyone did!)
• Think upstream think downstream
• Engage with the US applicant as early as possible
  you dont need a TAA to talk about a TAA
  (provided you do not exchange controlled data or
  defense services)
• An effective, one sided agreement does not exist
  dialogue not monologue

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The Self Imposed Penalty Scheme

• Imagine the headline
• STATE DEPARTMENT OUTSOURCES DDTC ENFORCEMENT TO
  UK DEFENCE COMPANIES.
• This is not as ludicrous as it seems.
• Companies who mismanage US controls often impose
  very real financial and reputational penalties
  upon themselves, without waiting for DDTC to come
  along and do so.
• These are, in effect, Self-Imposed Penalty
  Schemes

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The Self Imposed Penalty Scheme (2)
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The Self Imposed Penalty Scheme (3)

• Delays cost money directly and indirectly
• In either case shown assume that, in addition to
  the disruption of relations with your customer,
  LDs kick in at week 12
• In one case, because of good procedures and
  practices, youre home and dry
• In the other, youre under pressure to get Badco
  to ship ASAP but read 127.3 first!

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Questions??
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