- The Department of State, Section 38 of the Arms Export Control Act (22 U.S.C. §2778), and the International Traffic in Arms Regulations ("ITAR") (22 CFR Part 121)
The International Traffic in Arms Regulations, or "ITAR", regulates the export and re-export of defense articles and services. Goods and technology subject to the ITAR are defined under ITAR §120.3, as:
Any article specifically designed, developed, configured, adapted, or modified for a military application, and
- Does not have a predominant civil application, or
- Does not have a performance equivalent (defined by form, fit and function) to those of an article or service used for civil applications
Technical data is defined in the ITAR §120.10 as:
Information that is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles. This includes information in the form of blueprints, drawings, photographs, plans, instructions and documentation.
The intended use of the article or service after its export (i.e., for a military or civilian purpose) is not relevant in determining whether the article or service is subject to ITAR controls.
Like the EAR, the ITAR has a control list, which is referred to as the "Munitions Control List", or just the Munitions List (the "ML"). The Munitions List identifies military items under control based on their specific military function, application, or end use. For example, Category XI of the Munitions List covers certain types of military electronics. Any item covered by the U.S. Munitions List must be within the categories of the U.S. Munitions List. Subparagraph (c) of Category XI provides for:
(c) Components, parts, accessories, attachments, and associated equipment specifically designed or modified for use with the equipment in paragraphs (a) and (b) of this category, except for such items as are in normal commercial use.
Similar provisions for parts and components exist for other categories of goods that are on the Munitions list, such as category XII, which covers Fire Control and Range Finders, Optical and Guidance and Control Equipment.
Under the ITAR, the term "component" is defined as (§121.8(b))
(b) A component is an item which is useful only when used in conjunction with an end-item. A major component includes any assembled element which forms a portion of an end-item without which the end-item is inoperable.... A minor component includes any assembled element of a major component.
Under the ITAR, the term "part" is defined as (§121.8(d))
(d) A part is any single unassembled element of a major or a minor component, accessory, or attachment which is not normally subject to disassembly without the destruction or the impairment of design use. (EXAMPLES : Rivets, wire, bolts, etc.)
Generally speaking, semiconductor devices and passive components will be considered either a component or a part of the end-item they are used in. The device will only fall within the export control coverage of the end-item with which it is used if it is specifically designed or modified for use with that end-item, or it is not in "normal commercial use ".
- Registration For Exporters' ITAR Controlled Goods
While both the ITAR and EAR can require a license before an export transaction occurs, ITAR goes a step further and requires that the manufacturer or exporter of defense goods separately register as a Manufacturer/Exporter of ITAR controlled goods, even if they do not export. Section 122.1 provides:
§122.1 Registration requirements.
(a) 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 Office of Defense Trade Controls. Manufacturers who do not engage in exporting must nevertheless register.
Registration can cover multiple related entities, or each entity can register separately. Additional information on the registration process shall be provided separately.
- Licensing Of ITAR Exports
The licensing of ITAR goods for export is less complex than it is for EAR control goods, but this is because there is less flexibility built into the process. Once it is determined that article or technology is ITAR-controlled, it will require an export license.
There are various types of ITAR export licenses. The most common export license is the DSP-5 application for permanent export of unclassified defense articles and related technical data.
A DSP-5 typically covers a single order or grouping of orders, meaning it covers the export of a specified number of items with a specific dollar value to a single identified user. It can, however, cover multiple shipments of the same product. Thus, maintaining, updating and amending licenses can become time-consuming if there are numerous and continuous shipments involved.
A DSP-61 covers the temporary import of unclassified defense articles.
A DSP-73 covers the temporary export of unclassified defense articles.
There are also circumstances when the Office of Defense Trade Controls will authorize offshore Manufacturing License Agreements. Authorized Manufacturing License Agreements allow for the furnishing of ITAR-controlled technical data described in §120.10 of the ITAR (previously referred to above). Once approved, the defense services described in the agreements may be generally provided without further licensing requirements.
A variation to the offshore Manufacturing License Agreement is the offshore procurement agreement or Technical Assistance Agreement. This process authorizes the export of unclassified technical data to foreign persons for procurement of defense articles. This type of agreement restricts the delivery of the defense-related goods to the U.S. party which ordered them, and limits the export of technical data of U.S. origin to be used in the foreign manufacture of defense articles to that required for bid purposes on a build-to-print basis (build-to-print means producing an end-item [i.e., system, subsystem or component] from technical drawings and specifications [which contain no process or know-how information] without the need for additional technical assistance). Release of supporting documentation (e.g., acceptance criteria, object code software for numerically controlled machines) is permissible. Build-to-print does not include the release of any information that discloses design methodology, engineering analysis, detailed process information, or manufacturing know how. Additional conditions and restrictions apply which we can review separately in more detail.
Depending on the amount and type of technical data to be transferred in order to build the component, an offshore procurement agreement or Technical Assistance Agreement may be more appropriate than the offshore Manufacturing License Agreement.