Preparing Your Defense Related Exports…Understanding ITAR and EAR and what it means to you!
Although the occupation of Iraq and the war in Afghanistan are winding down and drastic cuts in military expenditures and exports loom on the horizon, the global demand for U.S. built security vehicles remains high. Highly popular products such as the HUMVEE, MRAP, armor-plated SUV’s and their accessories including light bars, heavy-duty push bumpers and the parts to keep them running will continue to be exported at high levels for the foreseeable future.
Despite the high volume of defense-related exports over the last decade, many dealers and exporters, especially those new to the industry, remain unaware of the regulations governing the export of defense-related products and are at risk of harsh penalties and sanctions.
Exporters are most likely to run afoul of the two main sets of U.S. regulations covering defense trade, the International Traffic in Arms Regulations (ITAR) administered by the Directorate of Defense Trade Controls (DDTC) under the auspices of the U.S. Department of State, and the Export Administration Regulations (EAR) under the jurisdiction of the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. ITAR governs the export of items specifically intended for military use while EAR covers so called dual-use items that can be used for either civilian or military purposes.
Logistics providers have no control over the issuance of licenses to exporters under ITAR or EAR. However logistics specialists must have a thorough knowledge of and operate in strict adherence to the regulations to ensure their clients remain in compliance. For example, ITAR contains regulations intended to prevent the unloading of military goods in countries other than their intended destination, or from being diverted in other ways to unintended parties. Logistics providers are responsible for advising their clients on ITAR compliant shipping routes and transit procedures. Another example would be freight forwarders who are responsible for filing Shipper’s Export Declarations to the U.S. Department of Commerce. These filings must be in complete compliance with their regulations to protect their clients from costly penalties. Exporters depend heavily on these logistics specialists for their expertise and knowledge of this sometimes cumbersome and complicated regulatory process.
Exporters and dealers who are licensed to operate under the provisions of either ITAR or EAR should be aware that they are required to add any freight forwarding agent they intend to use to their license before they can carry out any transactions. This is intended to ensure that all responsible parties involved in handling a shipment are on record with the relevant authorities. However, compliance with this regulation also ensures that the exporter takes more care in their choice of forwarder and chooses one with experience and a track record of compliance with the regulations. This requirement doesn’t put an undue burden on the exporter because it is neither a complicated process nor a lengthy one, but it is the law and it protects both the shipper and the forwarder.
Exporters often find it tempting to hire the services of a logistics provider based on the lowest cost, but they should be aware that this can place them at risk of regulation violations that can result in expensive fines and penalties and even the permanent loss of their license to export defense-related products.