Department of State 2023 Civil Monetary Penalties Inflationary Adjustment and New Maximum Penalty for Violation of Section 38 of the AECA
On January 11, 2023, the Department of State published a final rule to adjust the civil monetary penalties at section 127.10 of the International Traffic in Arms Regulations (ITAR) as part of a larger rule amending penalties for all regulatory provisions maintained and enforced by the Department of State. In addition, the rule amends the maximum penalty for violation of section 38 of the Arms Export Control Act (22 U.S.C. 2778) in accordance with section 9708 of the 2023 National Defense Authorization Act (NDAA) (Pub. L. 117-263).
The new statutory maximum penalty for violations of section 38, as amended by section 9708 of the 2023 NDAA, is the greater of $1,200,000 or the amount that is twice the value of the transaction that is the basis of the violation with respect to which the penalty is imposed. ITAR section 127.10(a)(1)(i) is amended to reflect the statutory language of AECA section 38(e) and will be subject to future annual inflationary adjustments. The new amounts for violation of section 38 will apply only to those penalties assessed for violations occurring on or after December 27, 2022.
ITAR section 127.10(a)(1)(ii) and (iii) providing maximum penalties under sections 39A (22 U.S.C. 2779a) and 40 (22 U.S.C. 2780) of the AECA, respectively, are adjusted for inflation in accordance with the December 2022 guidance from the Office of Management and Budget. The revised amounts for violations of those sections will apply only to those penalties assessed on or after January 11, 2023, regardless of the date on which the underlying facts or violations occurred.
DDTC has updated its ITAR Reorg I – Redline document to reflect amended section 127.10.