Failure to Comply – Civil and Criminal Penalties

The State Department works with various other agencies (e.g., US Customs, Department of Defense) and with foreign governments and their agencies to ensure compliance, both before and after shipment, through extensive monitoring programs. If there is an ITAR violation – for example, if the arms export is transferred to a prohibited end-user – then you may be subject to significant civil and criminal penalties. As such, it is crucial that you extensively research your customers to ensure that the actual end-user is your intended end-user, and that no diversions will be made after the sale (barring appropriate approvals, of course).

Criminal penalties
For each violation, you may be subject to fines of up to $1M, and up to 10 years imprisonment.

Civil Penalties
Civil penalties are much more varied. If a delivery in violation of applicable law is attempted, then the vector for delivery (truck, airplane, ship, etc.) may be seized. For each violation, you may also be subject to fines of up to $500K and further, you risk debarment of your arms exporter business.

Debarment could result in the destruction of your export business as a whole, even if your business exports other products unrelated to arms and defense. When your business has been debarred, you lose all export privileges, and all export licenses will be revoked. You are also no longer allowed to do business with the government.

Diversions by end-users cannot always be prevented, however. What should you do if there has been an unintended compliance violation?

In the event of an unintended compliance violation, the ITAR provides for a Voluntary Disclosure Program that may result in the mitigation of the penalties. The violation must be reported within 60 days of its discovery, and a plan must be set in place to reduce the likelihood of its re-occurrence.

Arms exportation is a heavily-regulated business with strict compliance requirements. As the penalties are so severe, full and consistent compliance is necessary to the success of any arms exportation business. Further, the development of a well-structured compliance plan may help attract high-end, discerning customers.

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