Legal compliance with ITAR requires that your business follows all regulations, and you also need to keep updated on amendments and updates to regulations. Even though most people think of physical goods when shipping USML items, compliance also covers a broad range of technical data and services as well.
ITAR carries heavy repercussions for each violation, and your business could receive criminal penalties and civil fines if you fail to comply with any part of those regulations. While violations vary based on severity, type, and scope, there are some general guidelines that you should know when it comes to ITAR violations:
- Business Fines: Violators can be fined up to $1 million per violation. These fines will be addressed by the business entity, and this substantial fine can have a significant impact on company’s ability to compete in the market.
- Personal Civil Penalties: The Secretary of State can choose to apply civil penalties up to $500,000 per violation to an individual.
- Personal Criminal Penalties: Criminal penalties are often applied to violators who knowingly violate ITAR regulations.
- Debarment or Loss of Export Licenses: In addition to monetary loss through fines, you could lose your ability to conduct business by losing your export license. If you violate ITAR regulations then you could lose your ability to conduct business as a government contractor.
- Business Disruption: Receiving sanctions and penalties for ITAR violations is a scary time for company leaders. Not only do you risk severe civil and criminal penalties, but violating the ITAR can also lead to disruptions across your business. Delayed shipments and damage to your brand’s reputation can lead to long-term impacts.
As an exporter of defense articles, you will be required to have sufficient organizational infrastructure to maintain compliance and have the resources to ensure you do not conduct a single violation whether willful or unintentional.
Potential ITAR Violations Penalties
Export compliance is a complex and often overlooked element of any export business. However, from a strategic position, your company has nothing to gain and everything to lose if you intentionally (or unintentionally) violate the rules.
The State Department puts an exceptional amount of resources to monitor export control laws, and they partner with many other U.S. Government agencies that monitor businesses just like yours to follow each step of the export process.
ITAR-controlled items are closely monitored, and as a result, the State Department applies severe penalties for any company found to be in non-compliance. Criminal penalties can reach $1 million and 10 years in jail, but ITAR violations most commonly result in civil penalties.
Yet, civil penalties can enter into the millions of dollars per violation, so a company found in non-compliance could face hundreds of individual charges.
Most large export companies can absorb fines, but in severe cases, debarment can ruin a defense exporter of any size. Debarment results in the loss of ITAR export privileges, plus the company will lose all government contracts and have a permanent “blackball” on their record so no other companies who have government contracts can do business with that company. This could spell the end of any business.
Why Is ITAR Important For Your Business?
The International Traffic in Arms Regulations (ITAR) is a complex set of rules that govern the export/import of defense articles and defense-related services.
ITAR is implemented by the State Department’s Directorate of Defense Trade Controls (DDTC). It places a heavy burden on companies that export commodities to foreign countries or foreign persons.
Compliance can be very complicated depending on some variables, and due to the dynamic nature of ITAR regulations, your company could be subjected to severe civil and criminal repercussions for ITAR violations.
What Are The Most Common Compliance Violations?
It is almost impossible to list all actions that could cause your company to become non-compliant since ITAR undergoes significant changes each year and export controls often change. However, over the years we have found a handful of violations that many companies commit.
Willful Failure To Comply With ITAR
If your company is knowingly in violation of various ITAR provisions, then you are at a high risk to receive criminal and/or civil penalties. Both of these willful violations often receive the harshest penalties that can amount to millions of dollars and may result in imprisonment.
If any of your employees become aware of an ITAR compliance issue, then your company needs to have a system in place to communicate that infraction to appropriate officials.
Unintended Mistakes Or Oversight
Violations of the ITAR can be made by your company without you even knowing it is taking place. Given the breadth and complexity of regulations, it can be easy for a company of any size to fall victim to the civil and criminal penalties of non-compliance.
However, it is important to note that ITAR provides a voluntary disclosure process that can substantially reduce your fines or penalties … or even mitigate them down to nothing … when you are forthcoming and cooperative, and when you undertake a serious effort to improve.
Misrepresentations and Omissions
One aspect that many companies get confused about is that noncompliance does not just require a violation of specific elements of ITAR. If you are an exporter and make the factual omission of information, licensing, or reporting, then you could receive criminal and civil penalties.
ITAR requires absolute honesty and accuracy, so your company needs to make sure that all information is disclosed about each export.
How Can You Avoid ITAR Violations?
If you love your export business and the thought of steep penalties scares you (which they should), then you simply can’t risk the chance of non-compliance. There is just too much to lose if you are caught intentionally (or unintentionally) violating ITAR.
Any infraction, no matter the size, can spell disaster for you and your business, and the best way to ensure your ongoing success is by partnering with the ITAR consultants at Export Solutions.
Take the first steps to secure your business and prevent unnecessary headaches so you and your employees can focus on your business. Our ITAR specialists are standing by and ready to talk with you today!