Arent Fox LLP has published an article saying that, in February 2019, Darling Industries Inc entered into a $400,000, 18-month consent agreement with the State Department’s Directorate of Defence Trade Controls (DDTC) to settle 6 alleged violations of the International Traffic in Arms Regulations (ITAR). The key issue in the case was that the company’s ITAR official was neither empowered nor an expert. Under the consent agreement, the DDTC is said to be sending a message to the industry – an empowered official must have both sufficient familiarity with the ITAR to determine the legality of a transaction and sufficient authority to stop a transaction if need be. In fact, in the case itself violations at issue were not of particular national security concern because the unauthorised exports had been made to US allies, such as Canada and the UK. However, it was found that the company lacked a documented export compliance programme; did not have a qualified and empowered official; and the failure to address unauthorised exports and compliance programme deficiencies lasted for nearly 2 years after a third-party auditor had identified the issues. Indeed, the audit had also revealed not only the unauthorised exports and compliance programme deficiencies, but also found that there was no formal jurisdiction and classification process and no additional personnel trained in ITAR compliance. The audit described “decades of systematic, reoccurring violations”, but even then the company did not file a voluntary disclosure until 22 months after the audit. Arent Fox rightly concludes that –
- even in smaller companies, and even if it is necessary to use existing personnel to serve in export compliance roles, companies must ensure that these employees receive sufficient training on the ITAR and export compliance requirements;
- those employees must have sufficient authority to take action when necessary; and
- violations must be disclosed in a timely manner after discovery.
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