Small Businesses: Take Heed of Export Regulations.

• Author: McVey, Thomas
• Position: Viewpoint

A recently announced enforcement case involving a supplier of military spare parts sends a valuable message to small- and mid-sized defense contractors regarding compliance with the International Traffic in Arms Regulations.

ITAR are the State Department controls that regulate defense products, technical data and services. This case involves Bright Lights USA Inc., a small New Jersey defense manufacturer. According to a State Department charging letter, the company's business primarily consists of manufacturing minor spare parts--including rubber stoppers, seals assemblies and grommets--for both private- and public-sector customers. Many of these parts transitioned off of the more restrictive U.S. Munitions List beginning in October 2013 as a result of the Obama administration's efforts to reform the export control regime.

When supplying military parts, the company periodically sought to obtain components from foreign suppliers. According to the charging letter, when ordering foreign-made parts the company sent drawings of export-controlled components to foreign suppliers to obtain quotations without obtaining the requisite export licenses.

The State Department also said the company posted drawings of controlled items online to solicit quotations, including posting on a manufacturing sourcing website where the drawings could be accessed by foreign persons. State also claimed that the company misclassified certain components.

The directorate of defense trade controls concluded that Bright Lights had "significant training and compliance program deficiencies" and charged the company with a number of violations including: the exporting of ITAR-controlled technical data to foreign suppliers without a license--including to China and India; exporting defense articles without a license to persons in the United Kingdom, Spain, Portugal, Turkey and the United Arab Emirates; and violating the recordkeeping requirements of ITAR-related activities for a five-year period.

While the government can pursue criminal, civil and administrative enforcement for ITAR violations, in the current case Bright Lights was only required to pay a $400,000 civil penalty.

Government contracting firms frequently ask questions about the application of ITAR requirements, including how it is applied to small- and midsized companies. The Bright Lights case squarely addresses many of these questions.

For example, does the State Department expect small companies to comply with...