ITAR changes could spell problems for UK manufacturers

 ITAR is a set of US government regulations that control the import and export of defence-related articles and services. They dictate that information and material associated with defence-related technologies may only be shared with another party from a third country if authorisation from the US Department of State is received or a special exemption is used.

The Department of State has announced proposed changes to Part 129 of ITAR, which will affect the regulatory definitions of “broker” and “brokering activities”..

Under the current definition, a “broker” is any person/company who “acts as an agent for others” in arranging sales of defence articles in return for a fee, commission, or other consideration.

The new proposed rule defines a “broker” simply as someone who engages in brokering activities that “facilitate” deals, and removes the requirement that the person be acting as an agent or receive some form of consideration.

In other words, anyone involved in the sales of defence products could be treated as a broker, even if no money changes hands. Also, anyone purchasing ITAR-controlled components is then treated as a “broker” for any proposed onward sales of their final items, incorporating the US content.

Brinley Salzmann, ADS Director – Overseas and Exports, says it could have far-reaching consequences for the UK.

“If implemented as proposed, it would seem to mean that ALL non-US companies who are seeking to sell military equipment, and have a US company in their supply chain, would have to register as 'brokers',” Brinley said. “The registration fee for this currently costs $2,250, but it doesn't stop there.

“They would also have to provide a whole host of commercially-confidential information to the US State Department in annual reports - information that could breach the UK's Data Protection Act and be commercially confidential.

“Would you really want to submit details of your equipment's pricing structure, for example?” said Brinley. “Especially if you were in competition with an American company.

“The existing Part 129 of ITAR isn't terribly well defined, but its replacement is even worse,” he said.

ADS is currently in discussion with experts in other European countries to gather an industry-wide consensus on a response to the proposed changes.

“Because of the lack of definition, clarity and statement of intent in the proposed wording we are currently leaving ourselves open to subsequent US administrations interpreting the rules as they wish,” said Brinley.

“We understand that the State Department will only listen to the White House, Congress and allied governments, so they can happily ignore views from industry. We, therefore, need to make sure that our Government understands the issue and what the industry thinks about it.”

The US State Department is accepting comments on the proposed rule until February 17. Anyone interested in finding out more about ITAR and the rule changes should contact Brinley Salzmann (Brinley.Salzmann@adsgroup.org.uk).