Do you want to increase your defense firm's overseas sales? ITAR compliance provides not just legal, but also business development benefits.
This guest post is by Tom McVey, the Chair of the International Section at the Williams Mullen law firm in Washington, D.C. Mr. McVey focuses his practice on international business law, including the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations, U.S. sanctions programs administered by the Office of Foreign Assets Control, the Foreign Corrupt Practices Act, the anti-boycott laws and CFIUS.
Most defense industry executives realize that failure to comply with the International Traffic In Arms Regulations (“ITAR”) can result in serious liability for their company.
However they often overlook that compliance can also be an important part of a company’s marketing strategy as well – strong ITAR compliance can strengthen a company’s credentials and give it a leg up in a competitive business environment. Here’s how.
1. Competitive Advantage Over Other Firms
Many of the products and services that government contractors provide are integral to our country’s national security. Government customers are keenly aware of the importance of ITAR compliance to further this goal. If your company demonstrates a sophisticated knowledge of ITAR, contracting officers will consider this a valuable asset and a differentiating factor when comparing you to other firms. If your company lacks basic ITAR skills however, contracting officers will view this as a disaster waiting to happen. Companies that are organized for ITAR compliance have a competitive advantage over other firms that give them a leg up in acquiring and retaining defense business.
2. More Attractive To Prime Contractors
Under DFARS 252.225-7048, prime contractors are obligated to comply with ITAR requirements in performing their government contracts. In addition, they are also required to “flow down” these requirements to their subcontractors. If a subcontractor commits an ITAR violation, such as improperly handling ITAR-controlled technical data or failing to obtain a TAA, the prime contractor can also be liable. As a result, primes have become extremely sensitive to the compliance capabilities of their subcontractors. Simply put, subcontractors with demonstrated capabilities in ITAR compliance are safer and more desirable for the primes – those without this capability present greater risk. Thus being organized in ITAR compliance will dramatically improve your capability in the eyes of your prime contractors and create expanded business opportunities.
3. International Markets Can Compensate For Declining Domestic Sales
While the defense industry is shrinking in the United States, it is a growth market overseas. Many foreign military organizations want to acquire the top tier defense products and services that are provided by U.S. firms – for deployment in Europe, Eastern Europe, the Middle East, Asia and Latin America. But the export of defense products and services is regulated under U.S. export laws and approaching these markets without the right compliance expertise can result in significant legal risk. However if your company has developed ITAR compliance capabilities, it can pursue this business aggressively – it will have the tools to go after these opportunities where many others may not. Once again, a strong compliance infrastructure will provide your company a serious advantage over other firms in pursuing defense business opportunities.
ITAR compliance is important for both offense and defense. On defense, strong compliance procedures prevent violations, legal problems and lost contracts. On offense, it provides a competitive leg up in a challenging market environment. The best govcon firms have both.
ITAR For Defense Executives
I have developed a free, pre-recorded webinar to help defense executives understand ITAR in their businesses. This program provides a clear, non-technical overview of the basic principles of ITAR, including the new export control reform. It is suitable for senior executives, compliance personnel and in house corporate counsel, and is excellent for corporate ITAR training. It can be viewed by one person or an entire group and you can play it at any time. I encourage you to share it with others in your company.
Below are the presentation slides.
UPDATE (2 JAN 2015): New Export Control Requirement For Electronics Manufacturers In Defense And Aerospace Industries