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SPIE Professional January 2009

Beware ITAR

More and more companies and educational institutions must be sensitive to the possible uses for their photonics devices, technologies, and research projects.

By Beth Kelley

It’s not just missile sensors. It’s not just night-vision goggles. It’s also display panels and lenses. And it even influences which employees get which projects.

Optics and photonics professionals are becoming more aware of just how much ITAR can affect their business.

ITAR is the United States’ International Traffic in Arms Regulations, and it deals with the import and export of defense-related technologies and information. The U.S. government uses ITAR to keep sensitive technologies and technical data from getting into the wrong hands.

In the last few decades, these regulations have become wider-reaching due to several outside factors such as the transition of satellites from commercial to state jurisdiction in the 1990s, concern over national security after the September 11 attacks, and the spread of dual-use devices and technologies that have both defense and commercial applications. As more commercial technologies are being applied to defense purposes, more defense technologies are also moving into commercial uses, creating confusion for manufacturers about whether or not their products fall under ITAR regulations.

“There has been a very significant increase in penalty authority since 9/11, coupled with a corresponding increase in enforcement focus by a newly coordinated group of federal agencies,” says Kerry Scarlott, partner at Posternak Blankstein & Lund in Boston (USA). Scarlott is teaching a course on complying with ITAR at SPIE Photonics West, 27 January 2009.

Since September 11, 2001, the U.S. military and defense contractors like Raytheon and Lockheed Martin have also increased their reliance on new technologies. Because these technologies are usually produced by relatively small companies, an increasingly wide range of businesses are being exposed to ITAR regulations for the first time.

There are 21 categories of items and technical data that fall under ITAR jurisdiction, including a miscellaneous category that covers items not specifically mentioned under ITAR regulations but with potential for defense applications.

“While you won’t see a particular device listed, you have these catch-alls in the categories, and those catch-alls speak to any part, component, or attachment to a defense article that’s specifically designed, modified, configured, or adapted for that defense article,” Scarlott says. Scarlott also points out that even non-U.S.-sourced technologies and goods can be subject to ITAR if they have the same attributes as items that are covered by the U.S. munitions list.

“In the world of international trade, it’s what you don’t know that can hurt you,” he says.

Photo by Master Sgt. Lance Cheung, courtesy of U.S. Air Force.
ITAR Impacts

Increased enforcement of regulations and the wider reach of the ITAR have made many companies fearful, and many European nations have turned away from doing business with U.S. companies. Some European companies are working to produce “ITAR-free” components or refusing to purchase U.S. items that might fall under ITAR jurisdiction.

“Our national security is the number one issue, of course. However, sometimes overreaching regulation can make our companies and their products less competitive,” says Mathew Woodlee, director of the Office of International Trade, New Mexico Economic Development Department.

One example is the transferring of satellite jurisdiction from commercial to government control in the 1990s. Now, because of the difficulty in purchasing satellite components from U.S. companies, European companies have produced satellites using entirely non-U.S. components. This commercial ostracism not only leads to stunted U.S. growth of international trade, but also to exclusion from new technologies and information created elsewhere.

“It’s a really unfortunate outgrowth” of the ITAR regulations, Scarlott says.

Another section of ITAR that is not well known covers transferring information to foreign nationals.

In the summer of 2008, Professor Emeritus J. Reece Roth of the University of Tennessee was found guilty of illegally exporting sensitive information related to a U.S. Air Force research project concerning unmanned aerial vehicles. Roth and UT physicist Daniel Max Sherman, who pleaded guilty, shared information and received assistance on the project from one Chinese and one Iranian graduate student. They said they thought that ITAR only applied to existing products.

The “deemed export” rule, part of ITAR’s Export Administration Regulations, however, prohibits the sharing of technical data with foreign nationals, including students.

“If you convey technical data to a foreign person within the U.S., it’s really the same as if you export that technical data to that person’s home country,” Scarlott says.

In order to comply with this rule, foreign nationals must either receive a license to have access to defense technology, or not have access at all. Foreign nationals from countries such as China, Iran, and Venezuela, are restricted from receiving such licenses.

Navigating the waters of ITAR

All these regulations can be intimidating, but they don’t have to be.

“ITAR and export controls actually cover a very small amount of items produced and exported from the U.S.,” says Woodlee.

The first thing to do is become informed about the ITAR. Often businesses must self-educate.

The State Department’s Directorate of Defense Trade Controls (DDTC), Woodlee says, “historically has not conducted a lot of outreach in educating individuals and companies. Small businesses are faced with an additional burden, as they tend to not have the in-house expertise.”

(SPIE Professional inquiries to the State Department about ITAR were referred to the Office of Conventional Arms Threat Reduction, which did not respond to requests for an interview.)

Scarlott stresses the importance of companies knowing the rules and possible regulations. Large defense contractors do not have to specify that a modification to a device is for military applications, for instance, so the manufacturer must be the one to ask about possible modifications or adaptations to devices to determine if they fall under ITAR.

“The burden is on the manufacturer to know,” he says.

It is important for a company manufacturing defense items to register with ITAR even if the company itself is not exporting items, since the company they sell it to might.

Applications and Fees

It is also important to start the registration process as early as possible. Woodlee says the application process can take a few months or a few years, depending on the issue and case.

The ITAR fee schedule has recently been adjusted; for companies who have never applied for ITAR compliance before, the fee is $2250. Costs then go up on a scale depending on how many applications are submitted in a year. What can be even more expensive, however, is getting the outside help often needed to apply the first time to assure compliance.

However, as Scarlott points out, “The actual cost of compliance, the burden of compliance, is not all that substantial, and you weigh that cost and that burden against the benefits of increased business in any event. Companies usually decide to go forward.”

Armed with the right information, companies should be able to navigate the waters of ITAR and related defense regulations successfully.

ITAR 101 at SPIE Photonics West and at SPIE Defense, Security, and Sensing

SPIE Defense, Security, and Sensing SymposiumA Boston lawyer specializing in international trade and business law is the instructor for Complying with the ITAR at SPIE Photonics West in January and at SPIE Defense, Security, and Sensing in April. Kerry Scarlott specializes in advising technology-based companies on how to effectively and efficiently navigate U.S. export control laws and regulations.

Scarlott says he will discuss several of the lesser-known aspects of the International Traffic in Arms Regulations, including the “deemed export” rule that prohibits foreign nationals from working on defense projects in the United States.

“I think a lot of eyeballs are going to pop” regarding that subject, Scarlott says.

He will also discuss how to spot ITAR issues before they negatively impact business, as well as current enforcement trends and best practices for avoiding violations.

Registration for the three-hour course at SPIE Photonics West is $290 for SPIE members and $345 for non-members. Information: spie.org/pw.

Defense News in the SPIE Newsroom

The SPIE Newsroom offers dozens of free technical articles each month about defense and security developments in the optics industry in the Defense & Security technical community. This online news source also offers monthly e-alerts. spie.org/news-defense

Presentations at the SPIE Europe Security+Defence symposium in September highlighted the synergy of detection and data-processing software to identify potential threats in the air, on land, and in water. Read about the latest systems being developed for domestic disturbances and the military battlefield in a SPIE Newsroom article about the SPIE Europe Security+Defence symposium.

Read more about calls for reforming the ITAR in an online-only article in SPIE Professional, updated with new developments.

Have a question or comment about this article? Write to us at SPIEprofessional@spie.org.

Updated 4 March 2009.

Beth Kelley

Beth Kelley is an editor at SPIE.

DOI: 10.1117/2.4200901.03

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