Kevin Gholston

The International Trade Administration (ITA) has released the 2025 Defense Export Handbook to provide an overview of U.S. trade laws governing the export of defense products.  This handbook also gives guidance to new-to-market exporters on evaluating international markets and includes contact information for export control, trade promotion, and licensing. 

The publication describes U.S. statutes that control defense trade between the United States and its foreign allies such as the Arms Export Control Act (AECA) and the Foreign Assistance Act (FAA).  It then provides a brief description of the International Traffic in Arms Regulations (ITAR) which are administered by the Directorate of Defense Trade Controls (DDTC) under the State Department, and the Export Administration Regulations which are administered by the Bureau of Industry and Security (BIS) under the Department of Commerce.

The handbook also provides important information regarding multilateral export regimes including the Missile Technology Control Regime, The Australia Group, and the Wassenaar Arrangement.

Defense Trade Transfer Types

The Defense Export Handbook defines and differentiates Foreign Military Sales (FMS) and Direct Commercial Sales (DCS).  These two modalities of sale require different methods of approval and licensing.  Generally, with DCS the foreign customer works directly with a U.S. company in acquiring the end item, technical data, of defense service, whereas with an FMS the customer must interface with the U.S. government.

Guidance in Identifying and Pursuing Opportunities

Perhaps, the most beneficial information for emerging defense businesses is a compilation of programs and services that provide marketing information.  This list begins with the author of the handbook, the International Trade Administration which can help defense exporters address challenges. Other resources include The U.S, Foreign Commercial Service which can assist businesses in finding potential customers and overseas partners.  Additionally, the U.S. government’s Advocacy Center can help in the procurement process by using overseas resources to meet with foreign decision-makers

Determination of Licensing Requirements

Exporters face an array of export licensing requirements based on the classification of the article, technology, or service of intended export.  Additionally, controls exist for various nations an entities sanctioned by the Department of Treasury.  The classification process begins by determining is the item is listed in the United States Munitions List (USML).  The USML enumerates defense articles regulated under the ITAR.  If the intended export does not fall under the ITAR then it must be classified under the Commerce Control List (CCL) which enumerates items regulated by the EAR.

If the classified item falls under the ITAR the business must register with the Directorate of Defense Trade Controls (DDTC) and then apply for the appropriate license, agreement or other authorization.  The handbook introduces readers to the this process and describes Commodity Jurisdictions (CJs) and other levels of interaction with the agency.

The handbook then provides guidance for businesses exporting items, services, training, and technologies that fall under the jurisdiction of the EAR.  This guidance includes license submissions to the Bureau of Industry and Security and Commodity Classification Requests.  It also explains how to file for license exceptions.

Export Management and Compliance Plan (EMCP)

The handbook then explains the importance of establishing and maintaining effective Export Management systems to establish a culture of compliance and prevent export control violations.  It then provides links to recommended elements of an EMCP as defined by the DDTC and BIS.  Links are also provided to other associated agencies involved with export regulation such as the Department of Treasury and the Department of Justice.

Conclusion

The 2025 Defense Export Handbook is a good primer for businesses that are considering entrance in to defense export.  It provides a good overview of how to navigate the regulatory environment and informs businesses about certain governmental resources for business promotion and market evaluation.  It does not however, address the complexities in creating a tailored export compliance program that meets all the requirements of the U.S. government and the exporting business.

CVG Strategy Export Compliance Management Programs

The 2025 Defense Export Handbook provides an overview of the export compliance challenges facing businesses in the defense industry.  Failure to comply with these export regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

Export Compliance Management Programs establish clearly defined policies and procedures for all departments within an organization.  They ensure that registration, item classifications, license applications, denied part screening, and security measures are taken that will prevent violation.  They also ensure that training, auditing, and record keeping are maintained according to requirements.

CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help. 

AUKUS Pillar I and Pillar II

ITAR developments continue as the U.S. responds to national security threats with strategic trade controls and security partnerships. In recent news, AUKUS Pillar II has greatly eased the transfer of defense articles and technologies between Australia, the United Kingdom, and the United States. This trilateral security partnership was created to address Indo-Pacific threats from China.  

The agreement between AUKUS partners initially pertained to the transfer of nuclear propulsion technology.  Under Pillar II, it now includes cyber capabilities, quantum technologies, artificial intelligence, and additional underwater capabilities.  Licensing requirements have been greatly reduced for the transfer of defense articles between parties registered in the Defense Export Control and Compliance System (DECCS). 

The resulting International Traffic in Arms Regulations (ITAR) exemption as defined in 22 CFR part 126.7 applies to transfers within the physical territories of the three countries to authorized users that are registered with the Directorate of Defense Trade Controls (DDTC).  These exemptions came about as Australia and the UK reformed their export control regimes to align with U.S. requirements and add key restrictions and enforcement mechanisms.

As detailed in the Journal of Strategic Trade Control October 2024 report this security partnership could result in the creation plurilateral export control regime that could rival the Wassenaar Arrangement and serve to augment U.S. geopolitical security interests.

Revisions to Reexports and Requirements for Foreign Companies

The DDTC is planning to redefine the export and reexport of technical data to foreign nationals such that any release in or outside the United States is deemed to be an export or reexport to all countries to which the recipient holds citizenship or permanent residence.  The ITAR is extraterritorial in that any reexport of a controlled article, service, or technology requires relicensing and providing detailed information concerning end-users.

This revision further calls for end-users or consignees to have in place adequate processes for screening employees for intra-company, intra-organization, and intra-governmental transfers.  This screening must include a risk assessment that considers a foreign person’s substantive contacts with contacts with restricted or prohibited countries.

Revisions to Defense Services

This proposed revision of the ITAR would change the definition of Defense Service (22 CFR 120.32) to include items currently specified in design, engineering and manufacturing definitions.  It also includes clarification that the disrupting a nation’s military capability by the disabling or degradation of defense articles is to remain a controlled activity.  The term training is proposed to include the term consulting.

Category IX of the USML is proposed to include two now entries and the entire category is to be renamed “Military Training Equipment, Intelligence Defense Services, and Military Defense Services”.  The proposed new text states that defense services pertaining to intelligence assistance do not necessarily include defense articles.  This is to further stipulate that the ITAR does regulate intelligence services including “assistance on tactics, techniques, procedures, and other types of training that enables the intelligence activities a foreign government, unit, or force, or their proxy or agent”.

Further ITAR developments with regards to defense services deal with catch and release functions as they pertain to U.S. persons drafted into the armed forces of a foreign nation.  This is to clarify that the Department of State intends to regulate the activities of such draftees.

Revisions to the USML

The United States Munitions List (USML), which is part of the ITAR, enumerates articles, services, and technologies that are defense or space related and therefore fall under export regulations.  Numerous areas with Categories IV, V, VIII XI, and XV will be revised to provide more concise descriptions of regulated items and address comments received.

Many of the proposed changes will involve circuit boards and semiconductors that could be utilized in launch vehicles, ballistic missiles, night vision equipment, spacecraft, or nuclear weapons.

CVG Strategy Export Compliance Management Programs

ITAR developments are continuing to add complexity for businesses engaged in sales of items that are intended for international sales international sales.  Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

Export Compliance Management Programs establish clearly defined policies and procedures for all departments within an organization.  They ensure that registration, item classifications, license applications, denied part screening, and security measures are taken that will prevent violation.  They also ensure that training, auditing, and record keeping are maintained according to requirements.

CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help. 

The Bureau of Industry and Security (BIS) has amended the Voluntary Self Disclosure (VSD) process in the Export Administration Regulations (EAR).  The newly released amendment to CFR 15 Section 764.5 and Supplement No. 1 to part 766 provides guidance for settlement determinations of penalties for administrative enforcement cases.  This action evolved from a series of policy changes that began in 2022 to encourage organizations to report potential violations.

BIS Policy Changes Leading Up to Amendment

In 2023 the BIS announced policy updates encouraging voluntary disclosures of potential violations of the EAR.  These announcements also stated that when these disclosures are conducted in a timely and comprehensive manner with full cooperation, that the BIS would substantially reduce civil penalties.  This would include cases where controlled items, technology, had been transferred or transactions that have involved boycott violations.

The BIS also announced a dual-track system whereby minor or technical infractions would be processed within 60 days of final submission.  This would include an issuance of a warning or a no-action letter from the Office of Export Enforcement (OEE).  The agency announced that it considers a deliberate nondisclosure an aggravating factor when determining severity of penalties.  Additionally, the BIS considers the existence of an adequate and engaged export compliance program a factor in case settlements.

Changes in BIS Penalty Guidelines for Administrative Actions

The BIS is making it clear in these revisions to the EAR that the submission on a VSD is a mitigating factor in the consideration of penalties.  In such cases it is the OEE’s preference to bolster an organization’s compliance program to ensure that such violations do not reoccur.  The revisions also provide guidelines for the calculation of penalties so that penalties are more appropriate to the nature and seriousness of the offense.

Previously Section 764.5 had not included non-disclosure of violations an aggravating factor.  Now however, a non-disclosure not only bypasses mitigation credits but incurs a possibility of increase in penalties.  This reflects the serious consequences to United States national security that occurs when the government is prevented from taking mitigation.  

Dual Track Processing of VSDs

Section 764.5 of the EAR had previously only one method for the processing of VSDs.  The final rule now in place creates two tracks, one for minor or technical violations and another for significant violations.  The track for minor or technical violations includes where and how to submit an abbreviated narrative for the VSD.  This revision is intended to reduce the workload of organizations in submitting notification of minor violations.

The process for filing Voluntary Self-Disclosures for significant violations remains for the most part unchanged.  The BIS has however, defined a significant violation as one that involves one or more aggravated factors as detailed in the BIS Penalty Guidelines.  If an organization is unsure as to whether a violation is minor or significant it should file as required for a significant violation.

The new general policy for the BIS is to resolve minor or technical violations within 60 days.  This is to be accomplished by informing the organization that the BIS intends to take no action or by submitting a warning letter.  For significant violations the agency will conduct an investigation and take appropriate action as quickly as circumstances permit.

Under the revised regulations, parties in possession or with an interest in an illegally exported item can notify the OEE that a violation has occurred and request permission for the item to be returned to the United States without being in violation of 15 CFR 764.2(e).  Previously this was limited to parties filing submitting the Voluntary Self-Disclosure.

Changes to BIS Penalty Guidelines

This rule makes several changes to the BIS Penalty Guidelines in supplement no. 1 to part 766 regarding penalty calculations, mitigating factors, and aggravating factors.  It also adds a list of non-monetary settlements the BIS may take as actions against violations.  The change also removes the applicable schedule amount definition and the base penalty matrix in an effort to make administrative penalties more in line of the overall transaction value.

Non monetary actions include warning letters or non action letters to parties involving non-egregious conduct that has not resulted in a compromise to national security.  These actions also include sanctions requiring an organization to implement improvements to its compliance program.

CVG Strategy Export Compliance Expertise

The DDTC, the BIS, and the OFAC, along with international partners have greatly increased their activities in the generation and enforcement of regulations.  This increases the likelihood of a non-egregious violation occurring even in a company with a well-run export compliance program.  CVG Strategy can assist organizations through the Voluntary Self Disclosure process and guide you through these difficult procedures.  

If you are part of a large corporation or a small company with a part-time compliance person, CVG Strategy has the compliance and training programs to help you meet International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) rules and requirements.  As the BIS place controls on a growing number of technologies it becomes increasing difficult for smaller businesses to stay abreast of regulatory developments.  Because of this, we provide Export Compliance Management Programs (ECMP) for businesses of all sizes.  

CVG Strategy, LLC is recognized the world over as the premier provider of Export Compliance Consulting and Export Compliance Programs for businesses involved in export in the U.S. and Canada.  We also provide the essential training that ensures that your team is up to date on governmental regulations, including the Export Administration Regulations (EAR), the International Traffic in Arms Regulations (ITAR), the Canadian Controlled Goods Program, and Office of Foreign Asset Controls (OFAC) and other regulatory agencies and more.

The Bureau of Industry and Security (BIS) has released guidance on improving academia research export compliance programs. This guidance is based on recent trends in Voluntary Self-Disclosures conducted by academic institutions where Export Administration Regulations (EAR) violations occurred .

Voluntary Self-Disclosures

A Voluntary Self-Disclosure (VSD) is conducted when an organization recognizes that violations or suspected violations of United States export regulations have occurred.  It is the responsibility of the organization to report such findings in a timely and transparent manner to the appropriate federal agency.  The three major sets of U.S. regulations for export compliance are, the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), and the Office of Foreign Assets Control (OFAC).  

The BIS encourages voluntary disclosures of potential violations of the EAR. When these disclosures are conducted in a timely and comprehensive manner with full cooperation, the BIS will substantially reduce civil penalties. This includes cases where controlled items, technology, have been transferred or transactions that have involved boycott violations.

Unauthorized Export of Biohazards

Several unauthorized exports of biohazards have occurred at universities due to a lack of knowledge of specific requirements of export control requirements detailed in the Commerce Control List.  A variety of microorganisms and toxins were thus exported including Dengue-2 virus, pseudorabies virus strains and genetically modified viruses.

Unauthorized Export to Parties on Entity List

Genetic materials and modified organisms were exported along with an element commonly used in nuclear reactor control rods to parties on the Entity List.  The Entity List is a list of parties ( persons, entities, and governments) for which trade restrictions are in place.

Deemed Export Violations

Academic institutions disclosed that unauthorized releases of EAR controlled technologies had occurred in the areas of aerospace propulsion, telecommunications, and electronics.  Analysis of the incidents pointed to a lack of awareness of deemed export regulations and insufficient controls.  

Temporary Imports, Export, Reexports, and Transfers

Two voluntary self-disclosures involved improper use of TMP licenses involving the hand-carrying of infrared cameras out of country.  TMP licensed are used for temporary imports, exports, reexports of controlled items and have a limit of one year before which, the article must be returned.  Again analysis showed a lack of understanding regarding the use of TMP licenses.

Electronic Export Information

A number of academic institutions reported that they had failed to file exports in the Automated Export System and had listed values of exports below actual cost.  A lack of documented procedures and insufficient training were cited as causes for the incident.

Recordkeeping

Three incidents involved failure to maintain accurate records of exports.  Export records are to be maintained for a minimum of five years though seven years is often recommended as a conservative measure.  Insufficient training on the importance of recordkeeping practices was cited as the cause of the violations.

The Importance of Proper Training

Regular training is a requirement by the Directorate of Defense Trade Controls (DDTC) and the BIS for all persons involved in an export compliance program.  Export compliance is not just the responsibility of a few team members.  In order to avoid violations of export regulations, every individual having access to or involved in the export of a regulated article or technology must aware of these regulations and their responsibility to adhere to them.  

CVG Strategy Export Compliance Management Programs

The BIS guidance on academia research export compliance illustrates the increasingly dynamic nature of export regulations. Organizations involved in export activities must therefore develop more substantive export compliance programs Keeping in step with these changes. 

Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. Aggravating factors for export enforcement include the lack of a documented and executed export compliance management program.

CVG Strategy can help you in understanding the International Traffic in Arms Regulations (ITAR) and the EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help you develop robust solutions.

The Bureau of Industry and Security (BIS) has issued guidance that recommends using a new export screening list as additional due diligence to prevent diversion risks.  This new database, The Trade Integrity Project has been released by the Open Source Center, which is based in the United Kingdom.  This list focuses on entities involved in the diversion of goods related to the Common High Priority Items List (CHPL).

Common High Priority Items List

Since Russia began its invasion of Ukraine in January of 2022, the Department of Commerce has implemented stringent export controls through the Export Administration Regulations (EAR) to restrict Russian access to certain technologies.  CHPL items include items designated in the CCL certain EAR99 designated electronic component parts and assemblies.  These Common High Priority Items include:

• Tier 1:  Items critical to the production of precision-guided weapon systems.
• Tier 2:  Dual-use electronic components associated with regeneration of voice, images, or other data, radar and radio navigation apparatus, tantalum capacitors, ceramic dielectric multilayer capacitors, and electrical parts.
• Tier 3A:  Electrical parts, certain passive components, antennas, cameras, transducers, photosensitive semiconductors, transistors, crystals, and components.
• Tier 3B: Mechanical components used in Russian weapon systems
• Tier 4A:  Equipment for the production, manufacturing, or quality control of electrical components, modules, or circuit boards.
• Tier 4B:  Computer Numerically Controlled (CNC) equipment, and components.

Other Screening Lists

The United States Government maintains the Consolidated Screening List (CSL) as an online consolidation of multiple export screening lists.  The CSL is updated daily and includes tools that can optimize results such as a “fuzzy name search”.  These tools allow for searches without knowing exact spelling of names.  The CSL provides downloadable files that are date stamped to allow accurate record keeping.

The CSL includes screening lists from the Department of State, the Department of Commerce, and the Department of Treasury.  These lists are updated daily and include “fuzzy name search” capabilities that can generate searches for variations in spelling or for names translated into English from non-Latin alphabets.  Lists specific to the EAR include:

• Denied Persons List – This is a list of entities and individuals that have been debarred from export transactions by the BIS.
• Unverified List – End-users on this list have are entities that the BIS has been unable to verify in previous transactions.  If a party to a potential transaction is found on this list it should serve as a “Red Flag” that indicates a level of risk that should be addressed before proceeding with a transaction.
• Entity List – If a party is found on this list it indicates that license requirements under the EAR.
• Military End User (MEU) List – Parties on this list indicate license requirements under supplement number 2 to part 744 of the EAR.

While the CSL provides some benefits to an organization it does not provide automation or easy implementation into business systems and databases.  Private vendors supply Restricted Party Screening solutions that are affordable and modular. They can provide these screenings automatically and alert users to changes in status.  They also provide more thorough searches across wider sets of list than the CSL.

CVG Strategy Export Compliance Management Programs

This new export screening list is yet another example of the increased level of complexities involved for organizations involved in export.  Export compliance remains a dynamic concern for businesses engaged in international trade.  Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

CVG Strategy can help you in understanding the International Traffic in Arms Regulations (ITAR) and the EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.  

AUKUS eases export restrictions under ITAR and EAR for certain defense related articles and technologies between the United States, Australia, and the United Kingdom.  This strategic initiative has been taken to enhance the defense capabilities of all three nations to respond to national security threats posed by the Peoples Republic of China (PRC) and Russia.

AUKUS is now instituting its pillar 2 objectives to enable Australia to defend its borders and interests in the Indo-Pacific.  This involves implementation of operational and regulatory frameworks to drive collaboration in governmental, academic, and industrial sectors to bolster and modernize Australian defense capabilities.

AUKUS History

AUKUS is a trilateral security partnership between Australia, the United Kingdom, and the United States that was initiated in 2021.  Its initial priority was to facilitate the Royal Australian Navy’s acquisition of nuclear-powered submarines.  The strategic partnership has also involved information sharing, counter-hypersonic technologies, cyber capabilities, artificial intelligence quantum technologies and additional undersea capabilities.  

In May of 2024 the partnership published proposed changes to defense trade controls to create license exemptions for billions of dollars of cutting edge defense technologies between the neighbor states.  This would effect both the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR).

AUKUS Revisions Affecting the EAR

The Bureau of Industry and Security (BIS) had published an interim final rule in April 2024 to remove license requirements for exports, reexports, and in-country transfers between the three countries.  In May 2024 the BIS made corrections to that publication to footnote 9. This change, while easing licensing and end use requirements for most items would leave in place license requirements for firearms-related items and other CC controlled items.

These items include ECCNs 0A501 (except 0A501.y), 0A502, 0A503, 0A504, 0A505.a, .b, and .x, 0A981, 0A982, 0A983, 0D501, 0D505, 0E501, 0E502, 0E504, 0E505, and 0E982. 

AUKUS Revisions Affecting the ITAR

The ITAR has often been viewed by many in the business community as a choke point for this shared defense innovation.  This has often been caused by a perceived disconnect of policy makers towards the challenges businesses face in dealing with in exporting defense technologies.  Many involved in the development, manufacture, and export of defense items find the greatest project delays have been because of ITAR licensing requirements.

The Directorate of Defense Trade Controls (DDTC) currently exempts permanent and temporary export of designated unclassified items to Canada.  This was created in part because the Canadian government has instituted a compliance control regime that is largely harmonized to that of the Arms Export Control Act of the United States.

While current levels exemption exist at present for Australia, they do not cover all technologies envisioned by AUKUS.  At present many transactions are occurring under Foreign Military Sales (FMS) which is a government to government transaction.  To move past these barriers, interim changes have been made to provide frameworks for Direct Commercial Sales (DCS).  

Further steps will be taken to identify programs specific to AUKUS, identify technologies not eligible, and identify which communities in each country would have access to technologies to prevent unwanted diversions.  The final approach to will be reached between the Department of State and congress.  Additionally, the Department will be seeking commitments from partners on shared standards for protecting exchanged materials and information.

Australian Initiatives for Breakthroughs

In 2023 Australian Deputy Prime Minister Richard Marles stated that Australia was innovation within their regulatory system while pursuing legislative change and international agreements.  The country has made progress in aligning its export and trade regulations to streamline processes.

CVG Strategy Export Compliance Management Programs

As AUKUS eases export restrictions between the nations of the trilateral security partnership, export compliance remains a dynamic concern for businesses engaged in international sales.  Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.  

President Biden signed H.R. 815 into law on April 24, 2024 to address specific foreign policy and national security issues.  This legislation includes an extension (Section 3111) for the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) from five to ten years.  This statute of limitations is applicable to criminal and civil violations of sanction regulations administered under multiple agencies.

The specific verbiage of the law is as follows:  “An action, suit, or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, under this section shall not be entertained unless commenced within 10 years after the latest date of the violation upon which the civil fine, penalty, or forfeiture is based“.  The law will also further harmonize United States sanctions specific to Russia with those imposed by the UK and EU.

This new legislation will affect nearly all existing U.S. Sanctions.  The IEEPA is the authority overseeing sanction programs enforced by the Department of Treasury’s Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS).  The law does not specify if this change is retroactive.  

Possible Concerns for Organizations Involved in Export

This change in export regulation enforcement poses numerous concerns for businesses involved in the export of regulated items with regards to this change in the statute of limitations. 

1. Moving forward businesses will likely be required to retain records for at least ten years. For conservative practices twelve years may be appropriate.
2. Businesses currently under investigation may experience increased scrutiny for export activities that overlap or proceed the previous five-year limitation.
3. Merger and acquisition activities currently underway or being planned should adjust the scope of their audit activities to reflect this increased liability.
4. Revisions of existing legal agreements between companies may need to be made.
5. Immediate adjustments will be required for organizations’ export compliance programs to ensure due diligence.

CVG Strategy Export Compliance Management Programs

As  these latest changes to the statute of limitation for sanctions violations illustrate, export compliance is a growing and dynamic concern for businesses engaged in sales of items that are intended for international sales or could result in international sales.  Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

Export Compliance Management Programs establish clearly defined policies and procedures for all departments within an organization.  They ensure that registration, item classifications, license applications, denied part screening, and security measures are taken that will prevent violation.  They also ensure that training, auditing, and record keeping are maintained according to requirements.

CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help. 

Nicaragua export restrictions have been increased by both the Directorate of Defense Trade Controls (DDTC) and the Bureau of Industry and Security (BIS) as of March of 2024.  These actions were taken in response to United States national security and foreign policy concerns regarding the continuing deterioration of the nation’s human rights, civil institutions, and Nicaragua’s increased cooperation with Russia.

DDTC Specific Regulatory Changes

The DDTC, which under the authority of the Department of State, administers the International Traffic in Arms Regulations (ITAR), has added Nicaragua to the list of countries for which it, by policy, denies approvals for export or import of defense articles and services.  Under this revision of ITAR, Nicaragua has been added to the list of countries detailed in 22 CFR 126.1 Prohibited exports, imports, and sales to or from certain countries. 

This policy of denial is applicable to all defense articles and services.  The only exception to this policy are imports or exports where military equipment are  intended solely for humanitarian assistance, including natural disaster relief.  These exceptions for license applications are issued on a case-by-case basis.   

Further restrictions were added under 22 CFR 129.7 Policy on embargoes and other proscriptions.  These action prohibits brokering activities to specific countries.  As the effect of this rulemaking is perceived to have minimal consequences for federal agencies or private organizations and groups, these restrictions do not require interagency analysis.

BIS Specific Regulatory Changes

The BIS, which administers the Export Administration Regulations (EAR), has moved Nicaragua from the Country Group B List to Country Group D5.  Group B countries are countries for which licensing is generally available.  Group D countries have fewer license exemptions and include around 50 countries such as Syria, Russia, Iran Yemen, and Venezuela.  This group is divided into five areas of concern: D: 1, National Security, D: 2 Nuclear, D:3 Chemical & Biological, D: 4 Missile Technology, and D: 5 U.S. Arms Embargoed Countries.

This new level of restriction effects the export, reexport, and transfer of items subject to the EAR including commodities, software and technology.  Previous actions taken by the BIS include the addition of the Nicaraguan National Police to the Entity List and restriction of items to the country’s security and military agencies.  The BIS has taken these actions as part of an ongoing effort to promote human rights and democracy.  

A Call to Actions for Businesses Involved in Export

Export regulations have been in a constant state of flux for the last decade as the Federal Government has used these powerful tools to pursue its national security and foreign policy objectives.

Enforcement activities have resulted in more severe civil and criminal penalties.  In 2023, these activities have resulted in a record number of convictions, and denial orders.  Additionally, numerous parties were placed on the Specially Designated Nationals, Blocked Persons, and Entity Lists, effectively ending their ability to conduct lawful business.

Businesses must ensure that they do not violate export regulations by enacting viable Export Compliance Management Programs (ECMP).   These programs are a requirement for both the Export Administration Regulations and the International Traffic in Arms Regulations (ITAR).  While most businesses involved with the ITAR have been proactive in compliance, many involved with the export of dual-use goods enumerated in the EAR have been less diligent.

Export Compliance Management Programs establish clearly defined policies and procedures for all departments within an organization.  They ensure that registration, item classifications, license applications, denied part screening, and security measures are taken that will prevent violation.  They also ensure that training, auditing, and record keeping are maintained according to requirements.

CVG Strategy Export Compliance Management Programs

As these latest Nicaragua export restrictions illustrate, export compliance is a growing and dynamic concern for businesses engaged in sales of items that are intended for international sales or could result in international sales.  Failure to comply with regulations can result in criminal prosecution including imprisonment and fines.  It can also result in civil penalties and disbarment from export activities. 

CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program.   We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team.  Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.