International Traffic in Arms Regulations – Understanding ITAR Regulations in the UK

The US government uses legislation controlling trade in defence articles, known as ITAR (International Traffic in Arms Regulations), to control exports of sensitive goods and technology. As close strategic allies, Australia, Canada, and the UK apply elements of US controls in their own exports – to enable close cooperation with US defence and aerospace industries.

Administered by the DDTC (Directorate of Defense Trade Controls), new updates to ITAR regulations reflect the general feeling towards cross-border cooperation within the US government. They indicate US willingness to conduct defence trade and investment with its international partners. ITAR legislation also provides the DDTC with a robust and efficient ability to monitor the movement of sensitive goods, technology, and software around the globe.

But what exactly are ITAR regulations, and what do they mean for UK-based traders?

That’s what this blog post aims to answer. Here at clearBorder, our specialist team leads the way with expert training courses and bespoke consultancy to make sure our clients’ cross-border operations are streamlined, up-to-date and risk-managed.

What is ITAR? What UK Companies Need to Know

International Traffic in Arms Regulations (ITAR) is a comprehensive regulatory regime created by the United States government to oversee the export and import of defence articles, services, and related technical data. The purpose of ITAR is to ensure that sensitive defence-related technologies do not fall into the wrong hands, which could jeopardize national security or harm U.S. foreign policy objectives. This regulatory framework governs not only the export of weapons and military equipment but also many other sensitive technologies, such as encryption software and space-related technologies. The ITAR is a critical component of U.S. national security and helps to maintain a strategic advantage in an increasingly complex and competitive global environment.

ITAR implements provisions contained in the Arms Export Control Act (AECA), and is overseen and enforced by the DDTC, who, along with the Bureau of Industry and Security (BIS), aim – in part – to control international movements and handling by ensuring permission is sought prior to exporting or transferring military sensitive goods, software or technical data to any non-US citizen, entity or government. BIS is concerned with the control of items listed on the Commerce Control List (CCL). These are commercial items that could potentially also have military applications (often referred to as ‘dual use’). Under the scope of the Department of Commerce, BIS administers the Export Administration Regulations (EAR). More sensitive articles are governed by ITAR for which the process of review and approval of licences granting permissions for export activities involves the Department of Defense. The United States Munitions List (USML) contains all of the items subject to ITAR ranging from handcuffs and body armour to firearms, explosives, tanks and spacecraft.

The idea behind ITAR is to protect US national security, and bolster foreign policy efforts, by tightly limiting access to such defence articles among foreign business entities and/or foreign governments. According to US government legislation, these items “provide a critical military or intelligence advantage or, in the case of weapons, perform an inherently military function and thus warrant export and temporary import control.”

2022 updates

On July 19 2022, the DDTC published new rules to assist with compliance measures; this took the form of two Open General Licenses (OGL; No. 1 and No. 2). Under these OGLs, re-exports to or re-transfers within the UK, Canada and Australia of specific categories of defence articles, services and data are authorised without the need to obtain prior approval from the United States government.

This was met with a broadly positive reaction; international trade compliance between organisations in these closely-allied nations can be ensured, and cross-border operations involving sensitive items can be streamlined. Moreover, these ITAR provisions have received praise for being pragmatic and simple. Both OGL No. 1 and OGL No. 2 are valid for one year, from August 1 2022 – July 31 2023.

Limitations

With that said, there are a number of important limitations to these OGLs that businesses active in this type of trade should be aware of. These OGLs:

• Only apply to unclassified technical data and items – not anything classified.
• Are limited in terms of technical data transfer for activities involving maintenance, repair or storage of a defence article.
• Only apply to defence articles originally authorised by the DDTC for export. Items exported under Foreign Military Sales (FMS) are not included.
• Authorise only the governments of Australia, Canada and the UK, members of the Australian and UK communities and people registered in Canada.
• Limit the end users of hardware to Australian, Canadian and UK governments.
• Stipulate that any trade must occur entirely within the physical territories of these nations.
• Exclude certain unclassified defence articles. This includes those listed on the Missile Technology Control Regime (MTCR) Annex, and items subject to ITAR Missile Technology (MT) controls.
• Outline further limitations on major defence equipment with a value in excess of $25,000,000 and any article/training/service with a value of or above $100,000,000.
• Require traders to keep detailed records of transactions for at least five years and make these records available to the DDTC on request.
• Do not supersede or render obsolete any destination control statements and other ITAR compliance measures.

Who Administers the Export Control – Directorate of Defense Trade Controls (DDTC)

The DDTC is a US government entity that exists to ensure “commercial exports of defence articles and defence services advance US national security and foreign policy objectives” (DDTC website). The DDTC is mandated to oversee and control exports along with temporary imports of defence articles and services as stated on the United States Munitions List (USML), and in alignment with the American European Community Association (AECA) and ITAR.

Ultimately, the raison d’etre of the DDTC is to streamline and facilitate legitimate trade with genuine US allies, whilst obstructing and denying international “adversaries” access to sensitive and potentially-harmful US technology.

What Items are Controlled and What are the Arms Regulations?

The US government requires export licensing issued by the United States State Department for the trade of any item, service or data which appears on the United States Munitions List (USML). These export controls are in place to help protect and maintain US military/tactical advantages in the international arena. However, as part of ITAR, international organisations or entities may have an easier time conducting trade of USML items if they are recognised as operating within Australia, Canada or the UK, since the US government deems these nations to be close strategic allies, and of low risk in terms of trading opportunities.

These USML “articles, services and related technology” are what ITAR is concerned with. The list is split into 21 categories; of those, many contain items of a military significance or for use in matters of warfare, hence the requirement for export licences.

USML categories include:

• Firearms, close assault weapons and combat shotguns
• Guns and armaments
• Ammunition and ordnance
• Launch vehicles, missiles, rockets, torpedoes, bombs, mines, etc.
• Explosives
• Surface vessels of war and special naval equipment
• Ground vehicles
• Aircraft
• Military training (and) equipment
• Personal protective equipment
• Toxicological agents, chemical agents and biological agents
• Spacecraft
• Nuclear weapons and related items
• Submersible vehicles
• Classified articles, technical data and defence services not otherwise enumerated

Licenses, Agreements, Exemptions and Exceptions

Items which fall under ITAR jurisdiction and appear on the USML are distinct in that they are designed, developed or modified specifically for military use. This differs from items subject to the Export Administration Regulations, which may (or may not) be used as a strategic weapon, including items such as microchips.

Under ITAR, USML items may only be shared with US persons (including organisations) unless specific authorisation has been agreed and a license granted to the foreign persons in question. With that said, there are certain exemptions which the US government may apply. This is typically because – in exceptional circumstances – it feels confident that the export of concerned items would not damage national security.

Types of exemptions can include:

• Technical data exemptions
• FMS (Foreign Military Sales) exemptions
• Retransfers
• Exemptions for temporary imports/exports

The various exemptions are scattered throughout ITAR legislation, especially in sections 123, 125 and 136. One notable example would include The UK-US Defense Trade Cooperation Treaty, which aims to streamline collaboration and interoperability between UK/US armed forces. Even in cases where ITAR exemptions apply, managing their use can be tricky and it may be necessary to notify the DDTC of their use.

It’s also worth knowing that ITAR regulations do change. For instance, until 1997, strong cryptography was subject to arms regulations. Similarly, following Space System’s and Loral’s conduct after the failed launch of the Intelstat 708 satellite in 1996, technology relevant to satellites and launch vehicles was subject to tighter scrutiny.

ITAR allows for an exception in the case of general information related to science, maths and engineering principles which are publicly known and taught in educational institutions. Moreover, ITAR does not apply to general marketing information and descriptions of basic systems. These exceptions and their definitions are open to interpretation, and the US government has in the past participated in legal proceedings following alleged breaches.

Key Challenges Faced by UK Companies

For companies whose operations rely on an international supply chain and may involve the transportation of USML items, one of the biggest challenges brought by ITAR is getting to grips with the legislation itself; to that end, clearBorder’s expert and dedicated trade consultants can help your business navigate complex and potentially costly processes.

If your business is caught out by one or more of the challenges we describe below, you may find your ability to operate and grow severely hampered. In a worst-case scenario, you might have an import/export licence revoked; in any case, failure to comply with ITAR regulations will see your business suffer a damaging loss of reputation and credibility that will mean closer, stricter inspections in the future. And that’s to say nothing of massive financial penalties and personal liabilities.

• Stringent security around US-origin content:  A UK business might be surprised to learn that non-US personnel could require authorisation to access a controlled article, or even to share technical data in person, by phone or by email. With the high level of regulation and scrutiny that USML items are subject to, some organisations sidestep this issue altogether by sourcing goods from alternative locations; others seek to get ahead of the process and begin preparation for ITAR controls early.
• USML-relevant items might be intended for use in pre-sale activities: Some UK importers face the challenge of needing to use ITAR-controlled items for certain pre-sale activities, such as demonstrations, or bidding events. In such cases, product classification is vital, and it’s always worth double-checking whether there are any extra licenses you may need to obtain.
• Ensuring Through Life Compliance: It’s often not enough to gain authorisation for only the purchase or import of controlled goods; Through Life Compliance involves ensuring relevant items adhere to necessary rules at all stages of the product life cycle, including disposal. Ongoing training, data security, good record-keeping and regular audits can help navigate this issue.
• ITAR ‘contamination’: It’s possible that ITAR-controlled goods may ‘contaminate’ lower-priority or lesser-controlled goods in a shipment. For example, a commercial item manufactured using  ITAR controlled components can  become subject to the regulations in its entirety. Furthermore, the use of US technical data in the design, development or production of a UK item can ‘contaminate’ the article and it’s associated technology. Similarly, a US employee may inadvertently introduce ITAR into your UK business.  With these complexities, it’s sensible to take good advice.

Keep Across All the Regulations with clearBorder

For operations that involve the import, export or re-export of ITAR data and items, ensuring ongoing compliance with the US government’s strict regulations can be something of an uphill battle. The success or failure of transactions may depend on the destination country, the nationality of item handlers, the specific nature of transported goods and, above all, the procurement of necessary authorisations and licensing requirements.

With so much legislation and legalese to battle through, it’s no wonder that many organisations find the prospect of wading through it alone a daunting one. If you find yourself in this situation, the clearBorder team is here to help. Our professional, impartial and expert trade consultancy services can give your business access to the guidance it needs, and our online training resources are the very best way of upskilling your team to ensure your organisation continues to comply, grow and thrive.

Contact us directly to discuss your needs and get your operations border-ready.