Defense Export Compliance: The Importance of Knowing End Use and End Users

Exporting products and services to a foreign government or an overseas company can be very lucrative, but it’s important to know the rules and regulations involved in such transactions in order to have defense export compliance. Non-compliance can be extremely costly and can quickly ruin a business.

One of the most important things to know is who is ultimately going to be the end user of your products, and to what use they will be put. This is vital for you to be compliant with the International Traffic In Arms Regulations and the Export Administration Regulations, the two major treaties governing foreign sales.

Defense Export Compliance

Prohibited Or Restricted Products And Technology

The goal is to prevent weapons or technology that can be used in weapons from falling into the hands of terrorist organizations or hostile governments such as North Korea or Iran. Specifically, any product designated a ‘weapon of mass destruction’ or can be used to deliver such a weapon is subject to strict export control. Also controlled are products that have a nuclear-related end use as well as microprocessors and other high technology.

The U.S. Department of State and the U.S. Department of Commerce both maintain lists of foreign parties who are either prohibited from receiving such products or are strictly regulated, meaning you will need an export license before shipping them any goods or services.

Look For The Red Flags

They also have a list of certain ‘red flags’ that you should be aware of before agreeing to do business with any foreign entity. If they have a history of sponsoring terrorist organizations or even just a record of corrupt business dealings, they’ll probably be found on the lists. In short, any organization or individual, government or private, that the government has determined might pose a threat to the national security of the U.S. will be controlled or prohibited from buying certain products and services.

DXL Has The Experience And Solutions to Get Defense Export Compliance

DXL provides compliance solutions to make sure you don’t unwittingly run afoul of these sometimes complicated rules and regulations. We have the expertise and knowledge of export licensing practices to ensure you’re fully in compliance with the law. We can assist you with Technical Assistance Agreements of Manufacturing License Agreement from beginning to end.

We are your ‘boots on the ground’ in the countries you want to do business in, assessing both end use and end users and all other details necessary for compliance. We also offer comprehensive training programs to export companies, everything from a short 30-minute briefing on compliance awareness to all-day seminars for more advanced executive training.

Our Turnkey Program does it all for companies that don’t have an existing defense export compliance program, from the initial analysis through full program development of procedures and policies.

Defense export compliance can be complicated and difficult to navigate, and mistakes can be very costly. Let DXL show you how to do it right, the first time and every time.

Why You Need Export Compliance Professionals To Navigate FTR, EAR, ITAR

U.S. companies and manufacturers who are planning to do business overseas with foreign governments, militaries, or law enforcement agencies can certainly enjoy very lucrative and mutually advantageous relationships with their clients, but they should be aware that the benefits of foreign trade come at a price. The export of many types of goods and services will introduce the U.S. vendor to a maze of laws, rules, and regulations that can be incredibly complicated, even impossible, to navigate. Too many companies just getting into the export business assume that their products are innocuous enough that they won’t be subject to stringent controls, but that can be a costly assumption, both in terms of money and industry reputation. Strict compliance with government regulations is essential to foreign export success.

ExportComplianceProfessionals

FTR, EAR, and ITAR

The U.S. government regulates foreign trade in military and commercial under three basic systems of control and monitoring, as follows:

  • FTR – Foreign Trade Regulations– These are administered under the jurisdiction of the U.S. Census Bureau’s Foreign Trade Division. The purpose of these regulations is to gather statistics on trade through the Automated Export System (AES) and provide that data to other regulatory agencies. They also set the definition of valuation, record-keeping requirements, and powers of attorney.
  • EAR – Export Administration Regulations– These fall under the authority of the U.S. Bureau of Industry and Security (BIS). Their purpose is to control the export of dual-use goods, or commercial goods that can also be used for military or other undesired applications, or in countries that are embargoed, and all other products that aren’t addressed by other regulations. These can include technology and even certain business services.
  • ITAR- International Traffic in Arms Regulations – Administered by the Directorate of Defense Trade Controls (DDTC) of the U.S. State Department, these enforce the restrictions on export of defense-related products as required by the Arms Export Control Act.

A Constantly Changing Situation

These regulations are just the beginning. There are many other regulatory agencies involved in the exportation of goods to foreign entities. In addition, the rules are constantly changing. In 2010, President Obama launched the Export Control Reform Initiative, a plan to comprehensively overhaul existing regulations that is still ongoing. It has experienced significant roadblocks and problems causing confusion and penalties for U.S. companies.

The Solution to Bureaucratic Complexity

International export regulations are a tangled web that’s always changing its pattern. Non-compliance can result in considerable fines and other penalties, as well as damage to corporate reputation that can lead to a significant loss of market share. The answer is to partner with export compliance professionals who already have many years of experience navigating the bureaucracy.

DXL makes the process simple by providing turnkey solutions, from licenses and initial agreements, to ongoing assessment and training. Defense Export Logistics can ensure that foreign business transactions run smoothly and trouble-free. Contact them today learn more.

What is Direct Commercial Sales Process to Sell to Foreign Militaries?

The U.S. Government directly, and indirectly, benefits from the transfer of military systems or technologies to end users and foreign governments. The transfers of defense technology equip the country’s allies and international friends with the ability necessary to address both global and regional security issues. Also, foreign sales help to boost the United States industrial base by providing capital for innovation, lowering the overall defense systems, and maintaining productivity.

The Directorate of Defense Trade Controls is responsible for issuing and administering the licenses that permit vendors in the U.S. to sell any type of defense item to a foreign end user. It is the role of the Bureau of Industry and Security to issue the necessary export licenses for the sales of certain and dual-use defense items.

In the export approval process, the department of Defense is required to review the proposed transfers for issues related to national security concerns and then provide one of the following recommendations:

  • Approval
  • Return for additional information
  • Approval with additional measures that help to manage the risk of misuses or diversion by any foreign party
  • Denial

The recommendation from the Department is then forwarded to the licensing agency and is one of the USG Interagency positions Commerce and State consider when deciding whether or not a license will be issued.

DTSA, which is the lead agency of the Department of Defense related to export license reviews will conduct an in-depth national security review of any export license requests for a transfer of defense-related goods from Commerce and State. Also, DTSA works very closely with the International and Industry counterparts prior to licenses being requested to find any possible foreign disclosure or technology security problems.

The recommendations for license distribution is assessed by many different departments and offices throughout the government. Also, DTSA even has an in-house staff of technologists, information security specialists, and foreign affairs specialists that offer technology security recommendations. This ensures the license is only issued to companies proven to accept and meet all regulations and requirements for exporting goods – of any type – to foreign militaries.

In some cases, the DTSA Licensing Specialists have opposing positions regarding the issuance of the licenses. This results in the DoD having the final say-so to ensure that the U.S. technological edge held by the military is maintained and protected.

If you plan to export goods to a foreign military then going through the licensing process to do so, is a must. While it may seem intensive, it is only because it is in an effort to protect sensitive data and information and ensure it does not fall into the wrong hands. There are also countless agencies and services that can help those who have goods to export acquire the needed licensing and then meet all requirements for acquiring goods.

Need assistance in navigating Direct Commercial Sales rules and other export compliance programs? Contact DXL Solutions, your international defense sales turn-key partner.