Selling electronics overseas doesn’t have to be difficult

April 1, 2005
Military electronics manufacturers can gain faster access to the international market than they can today if they follow simple steps to improve their trade applications.

By Ben Ames

BOSTON - Military electronics manufacturers can gain faster access to the international market than they can today if they follow simple steps to improve their trade applications.

Federal regulators deny or amend 41 percent of company applications to export sensitive equipment, but companies can boost their chances of approval if they help the screeners by using new technology, says Gregory M. Suchan, deputy assistant secretary of state in the bureau of political military affairs, U.S. Department of State.

Suchan made his comments March 15 at the Military Technologies Conference in Boston, which was sponsored by Military & Aerospace Electronics magazine.

The International Traffic in Arms Regulations (ITAR) requires companies to gain permission before selling certain technologies to certain countries.

U.S. companies that make military electronics for the international market often complain that ITARs slows them down-particularly at a time when military leaders throughout the world increasingly are emphasizing fast time to market for components and subsystems.

ITARs influence more than just electronics; these regulations cover training, design, development, and integration- even if the information is already in the public domain.

“We regulate imports and exports by private entities of items on our munitions list, from firearms to the Joint Strike Fighter,” Suchan says. “That includes mostly military gear, though also rad-hard circuits and civilian communications satellite gear.”

American firms submit 50,000 to 60,000 applications each year, a number that has been growing at eight percent annually. Those applications come from a small pool 4,000 companies are registered with ITAR, and only one-third of them try to export electronics in any given year.

The task of grading applications falls on the shoulders of 120 regulators in the State Department’s Directorate of Defense Trade Controls. They process about 70 percent of the requests internally, and refer the remaining 30 percent to experts in other agencies, such as the Department of Defense and intelligence agencies.

The process takes longer when officials must ship paperwork between their Washington buildings. In January 2005, median processing time was 15 days if done in house (2,967 cases), or 54 days if staffed out (1,176 cases).

Speeding an ITARs review

Companies applying for export licenses can cut processing time in half by using new technologies such as online application forms, enterprise resource-planning software, and radio-frequency identification tags, Suchan says.

Companies should use D-Trade, the State Department’s electronic licensing system. Recent improvements mean that companies can submit all their specifications online. For more information, see

Second, many companies use enterprise resource-planning software to create a virtual conference room with their suppliers and customers. A company can offer State Department regulators enormous visibility into its business practices by inviting them into that community. And in return, regulators could extend ITAR license approvals from four years to as long as 10 years, Suchan says.

Third, Defense Department procurement officers require their suppliers to attach radio-frequency identification -RFID-tags to most equipment. If a company shares its RFID tracking information, State Department staff can ensure they are complying with ITAR laws. In return, regulators will expedite approval, he says.

ITAR regulations require enforcement as well as licensing. Under the State Department’s new Blue Lantern program, customs officials verify that military shipments arrive at their proper destination. Last year they completed 500 inspections on foreign soil, and found 90 violations, mostly military electronics and firearms, Suchan says.

Writing good applications

Another way to gain faster ITAR approval is to study the rules. Federal regulators issue blanket denials to just one percent of ITAR applications; the State Department posts a public list of banned countries on its Web site, so electronics manufacturers already know the countries to avoid.

“That’s our ‘Don’t even try’ list,” Suchan says. It lists 22 countries including Iraq, China, North Korea, Belarus, Burma, Haiti and Somalia. Those countries are defined in Section 126.1 of ITAR, and are summarized online at

Regulators grade another 10 percent of export applications as Returned Without Action, or RWA. That means the license is denied without prejudice, and the State Department usually offers advice on how the applicant can improve it.

Finally, regulators apply provisos or constraints to 30 percent of applications. The vast majority of those conditions are issued by the Defense Department, Suchan says.

Future challenges

Military technology is evolving more quickly than ITAR legislation. The law offers no advice on how to handle international trade in counter-MANPADS, the devices loaded on airplanes to deflect attack by man-portable air defense systems such as the shoulder-fired Stinger missile.

“Are we going to put that stuff in civilian Boeing and Airbus planes? If so, we will have to regulate it because those jets would carry that military technology into airports in banned countries around the world, from Beijing to Moscow,” Suchan says.

Likewise, if the Federal Aviation Administration requires the gear on all planes in American airspace, then foreign aircraft makers will need to purchase the equipment.

“How will we handle this? I haven’t any idea, and I have been working on this for two years with the FAA and Homeland Security,” he says.

Pentagon leaders’ reliance on private contractors in the Afghanistan and Iraq wars presents another ITAR conflict.

For the first time ever, State Department screeners have approved export licenses granting protected technology to private citizens abroad. They expedited ITAR approval to approve licenses within 48 hours to send night vision goggles and M4 automatic rifles to employees of companies like Halliburton and Blackwater.

The ITARs list of banned countries may suddenly include many U.S. NATO allies because the European Union’s embargo on arms trade with China is about to expire. If so, Congress will likely ban weapons trade with European countries, out of concern that sensitive equipment could end up in China, he says. Both the U.S. and the E.U. applied the embargo after the 1989 Tiananmen Square massacre, but the American rule is still in effect.

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