Our Finance Department has passed me an invoice from a US supplier on which there is a Diversion Warning"; and reference to ITAR. The statement reads that these goods are licensed for supply to the UK and diversion contrary to US law is forbidden. There is more but this is the gist of it. I am out of my depth on this one, can you help because I’m not sure if I’m supposed to do anything?

This tells us one thing at least – that is the item supplied must be caught under ‘Military’ regulations. ITAR stands for International Traffic in Arms Regulations which is the United States of America Military List - in other words a list of goods controlled for export under the administration of the US Department of State, Office of Defense Trade Controls. If a ‘good’ (ie product) is specially designed or modified for military purposes then it cannot be freely exported from the USA without being authorized by an export license or by a ‘Licence Exception’ contained within the ITAR set of rules. When an ITAR item is licensed to a particular named destination, eg the UK, it cannot then be transferred (diverted or re-exported) to another destination without the approval of the Department of State. So, if you are the end-user of this item shipped under licence from the USA then there is nothing to do except ensure it is used on the project for which it has been licensed. You do have a problem, though, if you intend to move the goods on to another party – especially if that party is outside the UK. Any re-export of products caught under this control needs to be licensed by the US State Department (as well as getting licence approval from the UK Department of Trade to export from the UK). There is also a concept referred to as the “Chain of Custody” which means any other party in the supply chain who can have custody of the goods however briefly, for example testing houses and sub-contractors must be named on the license issued in the USA or the goods cannot be transferred to them. You might need to promote awareness of this within your company. You often hear that this US Re-export legislation does not have the force of law in the UK, which is true but you would be well advised to take it seriously in that non-compliance could result in your company name being published in the US Federal Register and having your export/import privileges suspended for a period of time during which it would be an offence for any U.S. company to deal with you. This could have a seriously damaging effect on a company’s activities if US technology is important to their business. A final word, if you are not working on a military project then you might want to find out why your purchasing department has ordered a military list part. If a military designed part is not required then it is better to ensure your US suppliers know otherwise you get caught under the weight of the ITAR regulations.

 

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