Defense Manufacturing in the Crosshairs

Manufacturing products or providing services for defense applications may trigger International Traffic in Arms Regulations.

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 Whether large or small, surface finishing operations, chemical suppliers and contractors that manufacture products (including plating parts) used for defense applications may be subject to federal regulatory requirements. In accordance with the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR), the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) implements and enforces export control requirements. The following activities trigger export controls for U.S. facilities:

  • manufacturing of defense articles (including plating parts),
  • furnishing defense services,
  • brokering sales of defense articles or services,
  • selling U.S. products and services abroad,
  • offshore procurement of parts,
  • having foreign nationals work or visit U.S. facilities, and
  • collaborating or joint developments with foreign partners.
As such, ITAR could be broadly applicable to many surface finishing operations and other companies that provide defense services. 
Companies that manufacture defense articles (including plating parts for defense applications) or furnish defense services must register with the State Department, even if the company does not export. Activities that include brokering sale of defense articles or services require a separate registration with the State Department. The registration process provides the State Department with information about the defense industry supply chain and helps validate the credentials of the U.S. companies engaged in defense trade. Registrants are charged an annual fee of $2,250 – $2,750 to help fund the defense export control functions.
ITAR requires some additional compliance program elements, including compliance and management support plans; screening, monitoring and auditing; training; record keeping; and reporting. Some activities, such as exports or the presence of foreign nationals at the site as employees or visitors, also trigger the need for a license pursuant to ITAR.
Consequences of noncompliance with ITAR can be significant, including civil penalties up to $500,000 per violation, criminal penalties up to $1,000,000 per violation and 10 years 
imprisonment, debarment for activities subject to ITAR, denial of export privileges, and customs seizure.
If you have questions about how requirements may impact your operations, contact Jeff Hannapel.