Who Must Register With Ddtc

Is My Visitor Required to Register Under ITAR?

A frequently asked compliance question amid government contracts firms is whether they are required to register under the International Traffic In Arms Regulations (ITAR).

ITAR are the State Department controls that regulate defense products, technical data and services.  Under ITAR 22 CFR §122.1, parties that manufacture, export or temporarily import "defence force articles" or furnish "defense services" are required to annals with the Directorate of Defence Trade Controls (DDTC) within the State Department.  It is important to note that even parties that engage solely in domestic manufacturing of defence articles that exercise not appoint in any exporting or importing are required to register.  Under §122.1, engaging in such activity "requires only i occasion of manufacturing or exporting, or temporarily importing, a defense force article or furnishing a defense service" to trigger this registration requirement.  In improver, parties that appoint in defense "brokering" (run across below) and freight forwarders that perform services under the Strange Military Sales program are also required to register under ITAR.

Defence Articles.  "Defence force articles" are whatsoever items that are listed on the U.South. Munitions Listing.[1]  The USML is a list of 21 categories of items covering a wide array of products, parts, components, technical data, software and services that are useful in defense force applications.  These include products in the aerospace, maritime, communications, It/computer/software, electronics, optical, toxicological/biological and other industries.  To assess if a company is required to register, information technology must start by reviewing the USML to determine if products or services with which information technology is involved are listed.

Companies that oft are required to register under ITAR include:

• Federal contractors involved in defense, intelligence, security, homeland security and energy contracts;
• Subcontractors and second- or third-tier suppliers of parts, components, subsystems, accessories and attachments used in such contracts;
• IT, computer, software, data security and similar firms involved in defense applications;
• Companies engaged in projects involving classified information (USML Category XVII is "Classified Articles, Technical Data and Defense Services");
• Companies engaged in the repair, refurbishment and maintenance of defense products and systems, and logistics activities related to such items;
• Companies that perform military training or provide military advice;
• Companies that receive research grants and contracts from the DOD including under SBIR and similar programs;
• Manufacturers of firearms, ordinance and related equipment, gunsmiths;[2]
• Universities (especially those that receive enquiry grants and contracts from defense agencies); and
• Firms involved in applied science and technical services related to defense projects.

Since the USML covers non just end items just too certain subsystems, parts and components, many second- and third-tier suppliers that practise not consider themselves to be in the defence industry are nonetheless required to annals.  In addition, firms that merely perform services and practise not supply any products may be required to register in sure circumstances.

DFARS §225.79 and 252.225-7048.  Information technology has become common for federal prime number contractors involved in defense projects to crave their subcontractors to register nether ITAR, and this has created meaning confusion among subcontractors and suppliers.  This requirement is due in part to DFARS §225.79 and 252.225-7048[iii] which use to many federal defense contracts.[4]  Based on these requirements, prime contractors are increasingly concerned that if their subcontractors commit ITAR violations (such as failing to register), the prime contractors could also have liability.  Consequently, prime contractors are frequently requiring that their subcontractors register nether ITAR and adopt ITAR compliance programs.  If a prime contractor is registered, this does not salve the subcontractor of the responsibility to register separately – each firm must bear its ain cess and register individually if required.  Subcontractors that are registered and take ITAR compliance programs in place oft create less compliance risk for prime number contractors and thus are often more desirable candidates for subcontract awards.

ITAR registration is a machinery for the U.S. authorities to track firms involved in the U.S. defense industry.  In addition, registration is a prerequisite for a company to apply to DDTC for licenses, Technical Assistance Agreements (TAAs) and other authorizations.  Since information technology takes upwards to 60 days for a registration to become effective, failure to register can result in significant delays in obtaining licenses, TAAs and authorizations.  DDTC also advises that registration is required for a company to rely on ITAR exemptions.

Registration Process.  As function of the registration procedure, the registrant is required to submit documentation that demonstrates that it is incorporated or otherwise authorized to practise business organisation in the U.Due south.  The registration documents must include a certification past an authorized senior officeholder stating if the registrant, its affiliates and officers, directors and principals (i) have e'er been indicted, charged or bedevilled of violating certain criminal laws; or (ii) are ineligible to contract with or receive export/import licenses from the U.S. government.  In add-on, the registrant must identify if information technology is owned or controlled past a strange party, and if and then provide an explanation of such buying or command, including the identities of the foreign person or persons who ultimately own or control the registrant.

Penalties.  Penalties for ITAR violations include civil and criminal fines of upwards to $1 million per violation and xx years' imprisonment, including personal liability for the company's officers, directors and employees.  Failure to register is listed every bit an ITAR violation in 22 CFR §127.ane(b)(ii) and (b)(3).[v]

Exemptions and Broader ITAR Requirements.  At that place are certain exemptions from the registration requirement.[half-dozen]  Even so it is important to note that even if a visitor is exempt from the ITAR registration requirement, it may still be subject to other requirements under ITAR and this exemption does not relieve information technology of the responsibleness for complying with these other requirements.  Such requirements include:  the requirement to obtain export and temporary import licenses for the export/import of defence force articles, the requirement to obtain authorizations for the transfer/disclosure of ITAR-controlled technical data and software to foreign nationals in the U.S. (including foreign national employees of the U.S. contractor), the requirement to enter TAA's authorized past DDTC for the performance of defense services, restrictions on reexports and retransfers and reporting and recordkeeping requirements.  A more detailed list of requirements under ITAR are prepare along in ITAR For Government Contractors.

Brokers and FMS Freight Forwarders.  Registration is also required for ITAR "brokers" under ITAR §129.iii.  Brokers are parties that facilitate the auction or transfer of ITAR-controlled products, services and technical data by others, even if they are non direct principals in the transaction.[7]  Brokers are besides subject to other requirement under ITAR including the requirement to obtain accelerate authorization from DDTC for certain transactions, reporting requirements, recordkeeping requirements and restrictions on engaging in transactions involving countries identified in 22 CFR §126.i.  In improver, as referenced to a higher place, pursuant to ITAR §126.half-dozen(c)(6)(i), U.South. freight forwarders performing services nether the Foreign Armed services Sales (FMS) plan are required to annals with DDTC.

Empowered Official.  As part of the registration process registrants are required to appoint an "empowered official."  This is a U.S. person directly employed by the registrant that has a position of say-so for policy and management inside the company and is: (i) legally empowered by the registrant to sign license applications; (ii) understands the requirements of the export laws and penalties for violating them; and (iii) has the independent authority to inquire into whatsoever aspect of a proposed transaction, verify the legality of the transaction and refuse to sign any license applications without adverse recourse from the visitor.

Other Requirements.  Other obligations under the ITAR registration requirement that frequently apply to government contractors include:

• Amendments.  If in that location are changes in the primal information submitted in the registration statement, the registrant is required to notify DDTC of such changes in writing inside v days of the event.
• Annual Renewal.  The registration must exist renewed annually, provided that the company continues to appoint in activities that trigger the registration obligation.
• ITAR Recordkeeping Requirements.  Registrants are required to maintain records of their ITAR activities for a five-year period (and longer in certain instances) pursuant to 22 CFR §122.5.

Registration is only role of the broader obligations that may apply to government contractors under ITAR.  Contractors should understand the specific requirements that may ascend in their particular activities and use care to comply with these in their business operations.  For a more detailed discussion of these requirements see ITAR For Government Contractors.

To be placed on our list to receive additional articles on export and import law please contact Thomas McVey at tmcvey@williamsmullen.com or (202) 293-8118.  Boosted articles on ITAR, EAR and U.Due south. sanctions programs are available at: "Export Articles."

Note:  This article contains general, condensed summaries of actual legal matters, statutes and opinions for information purposes.  It is non intended and should not be construed as legal advice.

[1] The U.S. Munitions List is set along at 22 CFR §121.1.

[3] DFAR 252.225-7048(b) and (e) provide in pertinent function:

      (b)  The Contractor shall comply with all applicable laws and regulations regarding export-controlled items, including, but not limited to, the requirement for contractors to annals with the Department of Country in accord with the ITAR. The Contractor shall consult with the Department of State regarding whatsoever questions relating to compliance with the ITAR and shall consult with the Department of Commerce regarding any questions relating to compliance with the EAR.

* * *

      (e)  The Contractor shall include the substance of this clause, including this paragraph (e), in all subcontracts.

[4] These provide that contractors are required to comply with ITAR and the Export Assistants Regulations in performing the relevant contracts and are required to "flow down" this requirement to their subcontractors.

[5] 22 CFR §127.ane(b)(three) provides as follows: "(b) It is unlawful:  * * * (3) To engage in the Us in the business of either manufacturing or exporting defense articles or furnishing defense services without complying with the registration requirements. For the purposes of this subchapter, engaging in the business of manufacturing or exporting defence force articles or furnishing defense services requires only one occasion of manufacturing or exporting a defence article or furnishing a defence force service."

22 CFR §127.i(b)(2) provides every bit follows: "(b) It is unlawful:  * * *(2) To engage in the business organisation of brokering activities for which registration and a license or written approval is required by this subchapter without first registering or obtaining the required license or written blessing from the Directorate of Defence Trade Controls. For the purposes of this subchapter, engaging in the business of brokering activities requires only one occasion of engaging in an activity every bit reflected in §129.ii(b) of this subchapter."

[six] 22 CFR §122.1(b) provides every bit follows: "(b) Exemptions. The registration requirements of paragraph (a) of this section do not apply to:(i) Officers and employees of the U.South. Government interim in an official chapters; (two) Persons whose pertinent business activity is confined to the production of unclassified technical data only; (iii) Persons all of whose manufacturing and export activities are licensed under the Diminutive Energy Act of 1954, as amended; or (4) Persons who engage in the fabrication of articles solely for experimental or scientific purposes, including research and development."  See also 22 CFR §129.3(b) for exemptions for registration by brokers.

[7] See 22 CFR §129.2.

Source: https://www.williamsmullen.com/blog/my-company-required-register-under-itar

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