International Traffic in Arms Regulations - Enforcement

Enforcement

The U.S. Government has substantially increased action against organizations and individuals responsible for breaches of ITAR since 1999. The most notable enforcement action was the $100M penalty applied to ITT as a result of the unauthorized Retransfer of night vision technology to the PRC in 2007. Other major U.S. defense contractors penalized for alleged breaches of ITAR in recent years include (among others) Lockheed Martin, Motorola, Boeing, L-3 Communications, and Northrop Grumman.

In most cases, penalties against corporate entities involve a mandatory compliance component requiring the entity to spend funds on compliance measures, including the appointment of “Internal Special Compliance Officers.” Penalties may also require the party to submit to external audit. In serious cases, a party may be debarred from future exporting for a period of time.

U.S. Government policy also imposes a positive obligation on U.S. companies to fully disclose any breaches of ITAR to the U.S. Government. Failure to do so can significantly increase penalties applied by the U.S. Government.

The U.S. Government:

• will also penalize U.S. companies for breaches of ITAR caused by their overseas subsidiaries;
• is critical of companies that have not implemented effective export compliance programs; and
• treats breaches of ITAR as a strict liability offence and will penalize a successor or purchaser of a company that has breached ITAR as though it was responsible for the breaches.

The U.S. Government will also take action against individuals responsible for breaches of ITAR and such action can involve criminal penalties. Actions are often initiated by U.S. Immigrations and Customs Enforcement and include:

• the prosecution of Dr J Reece Roth of the University of Tennessee in 2008 for breaches of ITAR as a result of access to USML items by a PRC graduate student;
• the prosecution of Yen Ching Peng, a Taiwanese national, in the U.S. in 2008 for breaches of ITAR as a result of attempts to export night vision technology and laser sights without the appropriate export authorizations;
• the indictment of 3 men, 2 U.S. nationals and a Vietnamese national, in 2008 on charges of illegally exporting night vision technology to Vietnam; and
• the prosecution of Chi Mak in 2007 as a result of (among other things) the attempted export of USML items to the PRC (Chi Mak was subsequently sentenced to 24 ½ years in Federal prison).

Since 1990, the U.S. Government has also operated the “Blue Lantern” end-use monitoring program. Blue Lantern “monitors the end-use of commercially exported defense articles, defense services, and related technical data subject to licensing or other authorizations under section 38 of the AECA.” Blue Lantern checks are conducted following a careful selection process to identify transactions that appear most at risk for diversion or misuse. Unfavorable Blue Lanterns are reviewed by DTCC’s Enforcement Division. Where appropriate, parties involved in unfavorable Blue Lantern cases may be subject to civil enforcement actions or referred to law enforcement for criminal investigation.