Traffic in Arms Regulations (ITAR) Violations = 100k fine

In Drone Import/ Export Issues, Drone Law Blog, Drones & Components by Casey Butler

The US Department of State recently released a consent agreement with a Massachusetts based company in which the company agreed to pay in fines a civil penalty of $100,000 for violating International Traffic in Arms Regulations (ITAR) and the Arms Export Control Act. This violation further encourages drone manufacturers and suppliers to always be aware of potential export compliance laws when working with foreign nationals.

The company, Microwave Engineering Corporation (MEC), designs and manufactures components for radio frequency microwave and communication systems. The large majority of their revenue is generated from custom-designed parts and research and development services for both military and commercial applications. MEC violated export compliance laws by repeatedly provided a foreign national employee with ITAR-controlled technical data without first obtaining a license or other authorization.

Under US export compliance laws, technical data is considered exported to the nationality of whoever has access to the data. In this case, the foreign national was a Chinese engineer, which means all technical data released to the employee was considered exported to China, which was in violation of export compliance laws for the technology being exported.

According to the consent agreement MEC “Acknowledged that relevant staff did not understand either the ITAR definition of “foreign person” or that the ITAR § 120.10 definition of “technical data” did not except technical data related to a product in its preliminary evaluation phase. The company attributed these issues to deficiencies in its ITAR compliance program.”

In this situation, MEC staff was not fully trained and export compliance best practices were not fully implemented into every day activities. The deficiencies in the program lead to a misunderstanding of export compliance laws and a civil penalty of $100,000. Avoid this fate by having a fully integrated export compliance plan that includes hiring practices, annual training and export compliance officer sign off on all project plans.

Drone manufacturers and component suppliers that are hiring or contracting with foreign individuals or companies should perform an export compliance analysis of the technology being developed or utilized. For instance, a major technology of concern is encryption technology, which is often times export controlled and should not be shared with individuals of concern.

Please review relevant documents for the case above at: https://www.pmddtc.state.gov/compliance/consent_agreements/mec.html

Contact DroneLaw.com if you have any questions or need assistance with export compliance.