The Department of State’s Directorate of Defense Trade Controls (DDTC) recently announced several changes to the U.S. International Traffic in Arms Regulations (ITAR), including to its country policies and embargoes and its civil penalties. These new policies may require corresponding changes to your company’s export compliance program and ITAR risk assessment analyses.
First let’s start with the changes that are favorable for U.S. exporters. In accordance with U.S. and United Nations (UN) arms embargoes, as well as U.S. national security and foreign policy interests, most license applications for exports of munitions items to countries identified in section 126.1 of the ITAR (i.e., ITAR-prohibited countries) are subject to a policy of denial. Over the past few weeks, DDTC has announced several changes to its policy on exports of munitions items to four of these ITAR-prohibited countries, as follows:
- Vietnam: The United States terminated DDTC’s policy prohibiting the sale or transfer of lethal weapons to Vietnam. The lifting of this decades-long ban is part of an effort by the Administration to normalize relations with Vietnam. As such, DDTC will now review licenses for exports or temporary imports of ITAR-controlled items to Vietnam on a case-by-case basis.
- Liberia: In light of the fact that the UN Security Council sanctions against Liberia were lifted in May, DDTC announced that it will review all ITAR license applications for the country on a case-by-case basis, rather than the former general policy of denial for most applications.
- Cote d’Ivoire: Similarly, and consistent with the recent UN Security Council Resolution terminating UN sanctions, DDTC will review all licenses for exports and temporary imports of ITAR-controlled items to Cote d’Ivoire on a case-by-case basis going forward.
- Sri Lanka: DDTC also will now review all ITAR license applications for Sri Lanka on a case-by-case basis. Previously, and as a result of provisions in the Consolidated Appropriations Act that were not carried forward this year, it was the policy of the United States to deny all ITAR licenses and approvals involving Sri Lanka, except for those related to humanitarian demining and aerial or maritime surveillance.
These changes open up several new avenues for U.S. defense trade. On the flip side, however, DDTC also announced hikes to its civil penalties for ITAR violations. Characterizing the changes as a “catch-up” inflation adjustment mandated by Congress, DDTC increased its maximum civil penalties for violations of the Arms Export Control Act (the statutory authority for the ITAR) from $500,000 per violation to between $795,445 and $1,094,010 per violation, depending on the nature of the transgression. While DDTC can and does issue penalties lower than the maximum amounts, this change nonetheless is not welcome news to the U.S. export community.