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ITAR: What is it, and why do I need to pay?

Written by Jason M. Wong Wednesday, 19 September 2007 00:00

A great deal of confusion and misinformation regarding ITAR exists within the U.S. firearms industry. In an attempt to clearly explain the requirements of ITAR and the registration requirements, this article will address the ITAR registration requirement.

What is ITAR?
Before answering what ITAR is, an understanding of international arms control is first required. In response to international calls to govern the international trade in firearms and other implements of war, the Arms Export Control Act of 1976 (AECA) was passed as law by Congress. ITAR is an abbreviation for International Traffic in Arms Regulations. Simply, ITAR is the regulation that governs the export of firearms and other items controlled by the AECA. The AECA is Federal law, no different that the National Firearms Act (NFA). The regulation that governs the AECA is ITAR; there is no comparable regulation within the NFA.

Within ITAR is the United States Munitions List (USML), a listing of items controlled by the AECA. The USML can be found at 22 USC 121. As expected, the USML controls firearms (automatic and semiautomatic) as well as ammunition. The USML also governs explosives, artillery, and technological data, but for purposes of this article, the focus will be placed on firearms and ammunition.

It is through the AECA that ATF governs the import of firearms. Similarly, the State Department governs the export of firearms and other munitions from the U.S., for sale on the international market. This distinction is important; ATF governs domestic licensing of firearms dealers and manufacturers, but the U.S. State Department also has an interest in domestic activities related to firearms and ammunition. Within the State Department, the Office of Defense Trade Controls and Compliance oversees compliance of ITAR requirements.

OK… How does ITAR affect ME?
ITAR section 122.1 requires the registration of all manufacturers and exporters engaged in the firearms industry. The text is deceptively simple:

“Any person who engages in the United States in the business of either manufacturing or exporting defense articles or furnishing defense services is required to register with the Directorate of Defense Trade Controls.”
There is no definition for manufacturing within ITAR. Nevertheless, a definition from the Merriam-Webster Dictionary defines manufacturing as “to make into a product suitable for use,” or “to make from raw materials by hand or by machinery.” An 02/07 FFL/SOT is engaging in manufacturing activity by submitting a Form 2 to ATF. Are only individuals and businesses licensed as an 02/07 FFL/SOT required to register? No. Recall the italicized section of ITAR section 122.1. An individual or business that furnishes “defense services” is also required to register under ITAR.

What are “defense services?”
For an understanding of what constitutes defense services, an examination of the USML is required. Providing a service to an item listed in the USML will constitute defense services. Recall that USML section 1 governs automatic and semiautomatic firearms, while USML section 3 governs ammunition. Any business that engages in providing gunsmithing services or the commercial sale of ammunition is also required to register under ITAR.

How does one register?
An applicant must submit State Department Form DS-2032, certify that the individual or business registering meets the requirements of the law, and pay a $1750 annual fee. More information regarding the details of registration can be found online, at the State Department website.

You registered… now what?
For the majority of manufacturers, the ITAR registration will be an annual (or semiannual) ritual. Registration is no different than applying and renewing licenses to operate as an FFL. Unlike an FFL, ITAR registration grants no benefit, no special access, and no privileges. Why bother? Registration is required by Federal law, no different than the application for an FFL. Simply, payment of the ITAR fee is another cost of doing business within the firearms industry. In addition, in the event that a product is exported from the U.S., an ITAR registered manufacturer may apply to the State Department for export approval of their goods or services. Failure to register will prevent an export application from being considered or approved.

You’re not a firearms manufacturer. Do you need to register?
ITAR only applies to firearms, right? WRONG. ITAR applies to all items deemed to be significant military equipment. The guidance system in a Boeing 777 airplane? It’s governed by ITAR. Night vision manufactured by ITT? Also governed by ITAR. Remember – ITAR applies to technical data, in addition to arms and equipment. ITT learned this the hard way when the State Department levied a $100 Million dollar fine against the company for not following the requirements of ITAR.

You didn’t register. What are the risks?
Unfortunately, the penalties for not registering under ITAR are severe. Similar to the stiff penalties of the National Firearms Act, the AECA imposes a civil penalty of $500,000 per violation, and criminal penalties including a $1,000,000 fine per violation, or 10 years imprisonment. Think it can’t happen to you? Think again. During the period of 2004 through 2006, the DDTC levied $60 Million in fines. Of note, there were also 283 arrests, leading to 198 indictments, and 166 convictions within the same period. It should go without saying that a conviction for an AECA violation would likely be a felony, resulting in a prohibition to possession of firearms.

Bottom line: If you think ITAR might affect you, seek competent legal advice. It just might save you from an expensive lesson later.

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Originally posted by xausa: logically defensible.