Washington Post Jumps On The “ITAR-Certified” Bandwagon
Posted by Clif Burns at 3:23 pm on January 4, 2013
Category: DDTC • Part 122
Buried among all the articles on the recent events on the Hill, the Washington Post snuck in an article on the White House’s export control reform initiative and on export controls in general. Unfortunately, but not surprisingly, the reporter gets tangled up in the complexities of the current export control regime and muffs a few things.
The worst of these errors was the simplest one to avoid. As regular readers of this blog know, we have spilled several million gallons of digital ink (or should I say illuminated millions of computer screen pixels?) decrying and ridiculing the concept that the required registration under the International Traffic in Arms Regulations (“ITAR”) for manufacturers of defense articles represents some kind of “certification” of the manufacturer. Instead, registration signifies nothing more than that the manufacturer filled out a brief form disclosing certain corporate information and paid the required fee. It is not, by any stretch, an “ITAR certification.”
But now this “certification” canard has wriggled its way into the august pages of Washington’s paper of record:
Building the boards in the United States costs Kincaid “100 to 400 percent” more, he says, but he did not hesitate to fill out the paperwork five years ago and pay the fee, which is now more than $2,000, to become an ITAR-certified manufacturer because he appreciated the made-in-the-United-States sentiment and thought that it might “bring some of the work back.”
And then there’s this:
So a defense contractor sending equipment for U.S. military use on a battlefield abroad must obtain its authorization to “export” its product to a foreign country.
No. If the manufacturer sells the equipment to the U.S. military and they take it abroad, the manufacturer doesn’t need a license.
As Abrams sees it, the trouble for businesses like Kincaid’s isn’t compliance with export controls but the uneven application of the controls. For instance, her organization has seen identical bid requests “with one stamped ITAR and one not stamped ITAR,” she says. So if one company complies and the other does not, then the noncompliant manufacturer seizes a significant competitive advantage, assuming no one comes calling from the departments of State, Commerce or Treasury — three agencies with different computer systems, missions and cultures, but all with responsibilities in export controls.
Again, no. Neither Commerce nor Treasury would have any responsibilities or jurisdiction over the unauthorized export of ITAR-controlled items.
I spent some time speaking with the reporter on this story and, apparently, did not do a good enough job communicating to him some export control basics, so I take part of the blame for these last two errors. But, I made a big deal with him about “certification” versus “registration,” so there was no excuse for that mistake.
The third citation raises a slightly different issue for me. This citation suggests that a manufacturer enjoys a competitive advantage because it is not informed that the ITAR apply and thus that manufacturer is not equally encumbered by the regulations. This requires one to infer from the absent notice that the ITAR do not apply. If this is true then the manufacturer is not actually noncompliant. However, if the ITAR are enforceable against the manufacturer even though the manufacturer has not received notice that the ITAR apply then that manufacturer actually is noncompliant but receives no competitive advantage because the option of noncompliance is available to all manufacturers willing to risk the serious consequences. Can you please address which position is accurate? Is it possible for an individual to release something, e.g, technical data released by the independent inventor working in his basement, into the public domain that might otherwise be ITAR-controlled if linked in some way to a government contract? Thanks.
Actually, the statement made in the article that suggests that a manufacturer that is unaware that an OEM product is ITAR-controlled is under no obligation to comply with export requirements is inaccurate. Even if the manufacturer does not know that the item is ITAR-controlled, it could be subject to civil penalties if it, say, sent the drawings to China or participated in the export of the item outside the United States. Criminal penalties would require some affirmative knowledge, but civil penalties do not.
The military doesn’t always “take it abroad”. They may do so for obvious items, such as tanks and fighter aircraft. But for lesser items that are still ITAR controlled, private companies sometimes involved in the export. This may be a contractor shipping via a freight forwarder, or even the DOD themself shipping via a freight forwarder.
I believe that the DOD is supposed to follow the ITAR even when they are the exporter. But they usually don’t and State usually looks the other way. Then, based on that “experience”, the DOD will often tell contractors and freight fowarders, “We’re the military. There’s no license required.” And that’s where the contractors and forwarders get into trouble.
DOD shipments from the U.S. to a U.S. battlefield weren’t intended to be covered by the AECA and are clearly exempted by section 126.4 of the ITAR. In short, DOD didn’t need export licenses to take military vehicles and armaments to Iraq. And private exporters don’t need export licenses to ship to the military in the United States USML items that the military itself takes abroad. If a commercial carrier delivers the USML item to the military abroad, a government bill of lading must be used or an export license must be obtained.
I own the company and with out me going to off shore we would be out of business,what don;t you understand. Do you think i even want to deal with off shore
While it may be true, insofar as it goes, that “If the manufacturer sells the equipment to the U.S. military and they take it abroad, the manufacturer doesn’t need a license”; if the U.S. military purchase order requires the manufacturer to deliver to the OCONUS location, DDTC takes the position that it requires a license, even though that is clearly contrary to the last clause of Section 38(b)(2) of the Arms Export Control Act. There appear to be a number of folks at DDTC who believe that DDTC’s compliance with statutes passed by Congress is voluntary at their discretion.
I don’t doubt that some folks at DDTC may have taken that position, but I haven’t had anyone there take that position with me. As I noted below, it seems to me that — in addition to 38(b)(2) of the AECA, section 126.4 of the AECA would apply.
I agree that the company sending a purchase order “not marked ITAR” for a part subject to State jurisdiction enjoys a competitive advantage over others. In my opinion, a company seeing that should contact Immigration and Customs Enforcement immediately to level the playing field. Why should any company be able to reap an advantage by committing a felony.