MYTH BUSTERS --
COMMON MISCONCEPTIONS ABOUT
PART 1 OF 2
It's a regular refrain, but one worth repeating - export controls are not always intuitive. We see time and again a regular misunderstanding of certain standard export control requirements. Whether you are new to the game, or a long-time player, it is always good to refresh yourself on the basics.
I DO NOT NEED TO REGISTER UNDER THE ITAR BECAUSE
I DO NOT EXPORT ANYTHING
False! The requirement to register with the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) pursuant to the International Traffic in Arms Regulations (ITAR), 22 C.F.R. Pts. 120-130, isn't dependent exclusively on whether one engages in export activities.
The ITAR requires two types of registrations: (1) registration with DDTC as a manufacturer or exporter of defense articles; or (2) registration with DDTC as a broker of defense articles. The regulations at 22 C.F.R. § 122.1 outline the registration requirements for persons engaged in the business of manufacturing, exporting, or temporarily importing defense articles, or engage in furnishing a defense service. The regulations at 22 C.F.R. § 129.3 outline the registration requirements for persons engaged in the brokering activities. Under the ITAR, a "person" includes a natural person as well as a corporation, business association, partnership, society, trust, or any other entity, organization or group, including government entities.
Fundamental Rule: A U.S. person engaged in the business of manufacturing ITAR-controlled defense articles (refer to the U.S. Munitions List in 22 C.F.R. § 121.1 for articles that are currently controlled as defense articles), must register with DDTC, regardless of whether that business engages in export activities. Pursuant to the registration regulations, it only requires one occasion of a listed activity to trigger the registration requirement. Additional information on registration, as well as step-by-step instructions is available on DDTC's Registration homepage . Please also refer to DDTC's guidance on the Applicability of the ITAR Registration Requirement to Firearms Manufacturers and Gunsmiths.
Important Note: There are no corresponding registration requirements under the U.S. Department of Commerce regulations known as the Export Administration Regulations (EAR).
I AM REGISTERED UNDER THE ITAR, SO NOW I CAN EXPORT, TEMPORARILY IMPORT OR BROKER DEFENSE ARTICLES OR DEFENSE SERVICES
False! The regulations state that an applicant must be registered with DDTC pursuant to Part 122 of the ITAR prior to submitting an application. Specifically, 22 C.F.R. §122.1(c) states in part, "[r]egistration does not confer any export rights or privileges. It is generally a precondition to the issuance of any license or other approval under [the ITAR], unless an exception is granted by [DDTC]."
Similarly, the regulations covering registration for brokers make it clear that, with few and limited exceptions, "any person who engages in brokering activities (see §129.2) is required to register with the Directorate of Defense Trade Controls. Registration under this section is generally a precondition for the issuance of approval for brokering activities required under this part 129 or the use of exemptions." (22 C.F.R. § 129.3(a)).
Fundamental Rule: Being registered with DDTC is not a license or authorization to engage in any sort of exporting, temporary imports, or brokering activity under the ITAR, nor is it identification of a certain skill-set. Being registered under the ITAR is just the first step, and once registered with DDTC, a person may apply for an authorization or utilize an exemption (more on this below) to engage in an export, temporary import, or brokering activity subject to the ITAR.
A PERSON DOES NOT NEED TO BE REGISTERED WITH DDTC
TO UTILIZE A LICENSE EXEMPTION UNDER THE ITAR
This one is a bit tricky. Generally speaking, as outlined in the discussion above, you must be registered with DDTC to use an ITAR exemption. In fact, many ITAR exemptions invoke the eligibility requirements of 22 C.F.R. §120.1 as a precondition for their use. For example, see Sections 123.4 (temporary import license exemptions), 123.16 (exemptions of general applicability), and 125.4 (exemptions for technical data exports). However, the ITAR does contain a few exemptions that can be used without being registered. For example, unregistered individuals may use certain exemptions found in §123.17 (exports of firearms, ammunition, and personal protective gear).
Fundamental Rule: Most ITAR license exemptions require registration with DDTC, and all ITAR exemptions contain conditions for use. When utilizing an ITAR license exemption, be sure to read the entire section to confirm the proposed transaction meets all the eligibility requirements of the particular exemption.
IF A LICENSE EXEMPTION OR EXCEPTION APPLIES,
THE ITEM IS NOT EXPORT CONTROLLED
A license exemption under the ITAR, or a license exception under the Commerce Department regulations known as the Export Administration Regulations (EAR), only relieves the requirement for obtaining approval for a particular export, temporary import, or brokering activity from the agency with jurisdiction over the activity. Use of a license exemption or exception does not remove an item from government control for export, whether it is under the ITAR or the EAR. In fact, it is important to note that items and information exported under a license exemption or exception are nevertheless subject to the same restrictions on re-exports and re-transfers as those items shipped under a license. In other words, just because a license number is not associated with a transaction doesn't mean it is no longer subject to U.S. export controls. This is an excellent example of how use of exemptions/exceptions can be more complex than obtaining an export license. Because there is no license number attached to a shipment, and no prior government review of the transaction, it is vital that U.S. exporters conduct adequate due diligence of their customers and proposed end-use, and make their customers aware of the limitations associated with the shipment.
Fundamental Rule: All items in the United States are controlled for export in some manner. It is incumbent on the U.S. exporter to determine which rules apply. An exemption or exception simply alleviates the requirement from getting a license from the controlling U.S. government agency.
"COMMERCIALLY AVAILABLE" MEANS IT IS NOT EXPORT CONTROLLED
We suspect this misconception is due to confusion over the word "commercial" as it relates to export controls. Just because something is available in the civilian marketplace does not mean that it is exempt from U.S. export controls, specifically the ITAR. A prime example of this is firearms. As many of our readers know, firearms have both military and civilian end-uses. However, firearms are specifically enumerated in USML Category I and, as such, are ITAR-controlled regardless of their civilian or commercial uses. If an item is listed on the USML, then it is ITAR controlled, commercial or civilian availability notwithstanding.
Fundamental Rule: As noted above, all items in the United States are controlled for export in some way. Just because an item is widely available for civilian use, it does not mean it is free from U.S. export controls.
Stay tuned next week for Part 2 of this Myth Busters installment.
The above alert is for informational purposes only and is not intended to be construed or used as legal advice. Receipt of this alert does not establish, in and of itself, an attorney-client relationship.
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