How Does ITAR Apply to My FFL?
(I don’t even export firearms)
Did you know that firearms manufacturers, component suppliers and even engineering firms may need to register as a manufacturer with the U.S. Department of State and comply with the export rules of the U.S. International Traffic in Arms Regulations (ITAR) even if they never ship product outside the United States? The requirement to register depends on whether a business manufactures components for firearms listed on the United States Munitions List. If this applies to you, you are required to:
- Register Your Federal Firearms License (FFL) with the U.S. Department of State;
- Designate an “Empowered Official” who is personally responsible for the company’s compliance with ITAR;
- Train the Empowered Official in ITAR requirements;
- Institute appropriate processes and systems in your business to ensure ITAR compliance;
- Train employees in ITAR requirements;
- Maintain certain records for five years; and
- Comply with all applicable ITAR rules.
The ITAR regulates the delivery of certain firearms components, technology (blueprints, machines, measurements, repair manuals, know-how, etc.) and services to “foreign persons” outside or within the United States. The rules pertaining to technology and services can be challenging to understand and follow. Understanding the applicability of the ITAR to your business, however, and designing the systems to ensure compliance, is essential.
It’s not uncommon for simple mistakes like these to be made, but each one is a violation of the ITAR if the appropriate license is not in place:
- Sending engineering prints to foreign-owned suppliers for little things like tooling – covered by ITAR;
- A conference call with your U.S. supplier is joined by one employee from their German HQ division – covered by ITAR;
- Need IT support? Do you permit programming firms in India access to your production data (ex: Bill of Materials) – covered by ITAR;
- Hired a third party cleaning crew with foreign labor to clean the engineering department? Your customer sends in its team, including two foreign student-interns, for a pre-order factory audit? Covered by ITAR.
- And the list goes on . . . .
Violations of the ITAR are Punishable by Civil and Criminal Sanctions
The objective of the ITAR is to limit the export of defense products and technology from the United States. As a result of the important national security and foreign policy purposes underlying the ITAR, intentional violations are subject to serious civil and potentially criminal sanctions.
Fines and contracts lost in early 2014 due to ITAR and related violations totaled $182 million dollars, according to one source.
The U.S. State Department and the Bureau of Alcohol, Tobacco, Firearms and Explosives have both indicated that they are increasing outreach/enforcement efforts to industry to encourage voluntary registration. The U.S. Government maintains an active enforcement program directed at willful violators of the ITAR.
Who is at Risk of Non-Compliance with Firearm Export Rules?
- ITAR violations expose all of the following stakeholders in a business to potential legal and reputational risk:
- Companies producing firearms and firearms components for military and non-military use
- Responsible officers
- Responsible employees
What is the impact of non-compliance with Firearm Export Rules?
- Disruption to current contracts
- Debarment from future contracts
- Repayment of profits from prior contracts
- A court-imposed monitor located inside your facility.
How can FFLs Comply with ITAR and Firearm Export Rules?
The steps you must take if you are required to register under ITAR are listed in the first paragraph above. In addition, U.S. State Department guidance states that an adequate compliance program also includes the following:
- An Export Compliance Manual;
- Means for staying current with the regulations;
- Annual re-training of employees; and
- Periodic self-audits with corrective action to remedy weaknesses.
Orchid Advisors assists firearms manufacturers, distributors and retailers in achieving compliance and operational excellence through education, technology, software and consulting solutions that reduce risk, cut costs, and provide expert guidance to make our client’s business more successful and efficient.
Other Firearm ITAR / Firearm Export Articles
- Five Common Firearm Itar / Export Violations You Might Not Know About
- Former DDTC Comments on Firearms Export Compliance
- Firearm Export Licensing 101 and What is DTrade?
- What is ITAR and How Does It Relate to Firearm Exports
- What Features Should Your Firearm Itar Compliance Program Contain
- Does ITAR Apply to My FFL Business