By: Jenny Hahn, President, FD Associates, Inc.
THE DEVIL’S IN THE DETAILS
As Meggitt, Aeroflex and Raytheon have learned this year in a costly way, when it comes to export compliance, often the devil is in the details. All three of these corporations have entered into consent agreements with the Department of State due violations of the ITAR and have received multimillion dollar fines (ranging from $8M to $25M). While some of the violations related to significant matters such as misclassification of articles subject to the ITAR, the majority of the violations involved failures to properly administer agreements or licenses. Some examples:
- Failure to obtain a Non-Disclosure Agreement by a foreign sublicensee to an ITAR agreement for the transfer of technical data from the foreign licensee to the sublicensee. This failure caused the retransfer by the sublicensee to other non-approved foreign parties
- Providing services and technical data after the expiration of the agreement
- Failure to renew an expiring agreement within 60 days of the expiration date
- Failure to provide annual sales reports for MLAs and Warehousing Distribution Agreements
- Failure to reference an agreement authorization in a related hardware license (DSP5)
- Failed to provide DOS with executed amendments within 30 days
- Failure to return equipment temporarily exported on DSP73 licenses prior to expiration
- Using an unauthorized freight forwarder
- Failure to return expired licenses
- Failure to notify DOS of the status of the execution of the agreement
- Failure to novate agreement s to reflect a change in ownership
For each ITAR license or agreement, you should have an internal plan assigning responsibility for the management of the license, that includes vetting exports of hardware and technical data for compliance with scope; monitoring collection of signatures on agreements and amendments; obtaining all required non-disclosure agreements and sales reports and submitting required reports or documents to the State Department; maintaining records of all exports of hardware, technical data and defense services. Hardware exported under a temporary license (DSP-73) should be monitored for return in accordance with license provisos and expiration.
Audits of these administrative and non-administrative obligations should be part of your internal compliance program. If you need assistance with developing an internal audit plan, call FD Associates!