International Traffic in Arms Regulations

1. - 1 -  International Traffic in Arms Regulations/Export Administration RegulationsNadcapExport Control Trainingfor Auditors

2. - 2 - Required Training for All Nadcap Auditors The following presentation is required reading for all Nadcap Auditors. This information is provided here to keep you abreast of Federal regulations that may impact your audits. It is essential that you be aware of this law to assure compliance. Please review the following information, print out the training affirmation page of the presentation and sign and return to PRI. Following review of this information, should you have additional questions, contact Ericha McLaughlin - ericham@sae.org

3. - 3 - What is ITAR & EAR? International Traffic in Arms Regulations Code of Federal Regulations Parts 120 – 130 EAR Export Administration Regulations Full text of the Federal Law available at (http://pmdtc.org/reference.htm)

4. - 4 - “I am an Auditor -- Not an Arms Trafficker!” How Does this Impact Me? We have two classifications of personnel (auditors & PRI Staff) in the system: Unrestricted and Restricted. Unrestricted people are U.S. citizens or green card holders (permanent resident aliens). Restricted persons are those who are not US citizens or green card holders. This designation applies to all PRI Staff, auditors & consultants. All personnel directly employed or associated with PRI must know their status in the system. All auditors shall follow the requirements in NIP 7-07 and all issued auditor advisories.

5. - 5 - Nadcap Internal Procedure 7-07 NIP 7-07 has been issued to address Nadcap requirements with regard to ITAR and EAR. Nadcap subscribers have the responsibility to clearly identify to their suppliers any material or information which is Export Controlled. Suppliers are responsible for properly identifying and controlling any material, hardware, technical data, and/or documentation subject to the applicable Export Control regulations and laws. PRI Staff is responsible for ensuring that proper auditor resources are scheduled in accordance with identified Export Control regulations and laws. Prior to, and at the beginning of the audit, suppliers shall identify “ auditable material” which are restricted under ITAR / EAR

6. - 6 - Nadcap Internal Procedure 7-07 PRI staff is responsible for notifying supplier re : auditors restricted / unrestricted status. Supplier shall be aware of auditor / PRI staff status and restrict access of these individuals as per the appropriate Export Control regulations and laws which apply to their auditable material. Suppliers are responsible for safeguarding all Export Controlled auditable material. No Export Controlled material should be posted in eAuditnet Auditable material, identified as Export Controlled, shall not be copied, memorized, or utilized in any manner which could result in the unauthorized use of the information. If an Export Control issue arises before or during an audit, PRI staff person will provide instruction to auditor and supplier concerning the continuation of the audit.

7. - 7 - What is the Impact to Me? The technical data of many Nadcap participating prime contractors, is maintained by suppliers under these laws and regulations. As you audit their parts, you must be aware of the requirements of this law should you encounter any ITAR/EAR hardware. The law provides for penalties including fines, jail, and civil penalties under U.S. criminal statutes for those violating the regulations.

8. Penalties 1. Administrative (vs. Criminal) 2. Fines 3. Debarment from exporting activities 4. Imprisonment Penalties can be applied to both companies and individuals Maximum Penalties EAR Civil penalties may be the greater of $250,000 or twice the value of the transactions. Criminal violations may be up to $1,000,000 and/or 20 years imprisonment. ITAR Civil penalties up to $500,000 per violation Criminal fines up to $1,000,000 per violation and/or 10 years imprisonment - 8 -

9. - 9 - Technical Data is an Exportable Commodity Technical data is included as an export under the ITAR regulations (http://pmdtc.org/reference.htm) Information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles. This includes information in the form of blueprints, drawings, process specifications, photographs, plans, instructions, and documentation.

10. EC-LR/Restricted The term used by PRI when dealing with Export Control is EC-LR/Restricted. The definition for this term is: All Defense Articles and Technical Data controlled by the ITAR; any dual-use or civil items or Technology controlled by the EAR under any ECCN except EAR99. EC-LR/Restricted “Item”: a term which includes parts, materials, software, other technical information or technology which requires licenses or has any other restriction by the laws and regulations (ITAR/EAR). - 10 -

11. - 11 - Export The definition of Export includes Sending restricted product to non US source Disclosing (including oral or visual disclosure) or transferring technical data to a foreign person whether in the U.S. or abroad or Performing a defense service on behalf of, or for the benefit of, a foreign person, whether in the U.S., or abroad

12. - 12 - Nadcap Auditor Responsibilities Nadcap Auditors shall be thoroughly familiar with the requirements of NIP 7-07. Nadcap Auditors shall comply with the requirements NIP 7-07. Nadcap Auditors shall be aware of the ITAR/EAR regulations and understand the impact of these regulations. Nadcap Auditors shall know their status as restricted or unrestricted and the roles and responsibilities of that status.

13. - 13 - Nadcap Auditor Responsibilities (Continued) Auditable material restricted by ITAR/EAR shall not be posted on eAuditNet or removed from the supplier facility by the Auditor. Contact the Staff Engineer for direction if objective evidence is necessary to support audit.

14. - 14 - Recognizing ITAR/EAR Material May be identified as ITAR/EAR Control Export Control Identification may be on: Face of drawing First sheet of specification or embedded in text Purchase Order May not be identified as such, but is on the covered Munitions List NOTE: Nadcap auditors are not to scan data presented to you for audit for these designations - knowing the EC status is the responsibility of the supplier.

15. - 15 - Applicable at Non-U.S. Suppliers Suppliers located outside of the U.S. may be licensed under this legislation and may be processing ITAR/EAR material. NOTE: there currently are NO licenses available which authorize Nadcap auditors to audit EC-LR/Restricted items (if a license is required). As Auditors for PRI and Nadcap, Restricted Auditors must be especially vigilant to comply with this U.S. law and avoid review of any ITAR/EAR material.

16. - 16 - Overview of ITAR/EAR An overview of the ITAR/EAR Law follows. http://www.pmddtc.state.gov/regulations_laws/itar_official.html / The US State Department website includes overviews of all definitions as well as information on the US Munitions List. Following review of this information and NIP 7-07 at the end of this presentation please print out the following page, sign and return via fax to the Auditor Staffing & Training Dept., +1 614-635-2836.

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