(Reuters) - Airbus AIR.PA says it has discovered and reported to U.S. authorities certain inaccuracies in past declarations to the State Department over the sale of defense goods and services under the International Traffic in Arms Regulations (ITAR).
ITAR is the official name for a 40-year-old set of rules governing the export of defense goods and data perceived to have implications for U.S. national security.
The rules were conceived in the Cold War mainly to prevent sensitive U.S. arms technology being sold or re-exported to countries deemed to be a risk, or covered by arms embargoes.
Countries currently on the ITAR blacklist include Belarus, China, Cuba, Iran, North Korea, Syria and Venezuela.
A further set of countries including Afghanistan and Iraq generally face restrictions, but may have ITAR-friendly export licenses issued on a case-by-case basis.
Aside from this main function, the ITAR rules impose secondary requirements for transparency and disclosure.
Companies dealing in ITAR-controlled goods must declare the use of sales agents or the payment of political contributions over $5,000 or commissions over $100,000 to the State Dept’s Directorate of Defense Trade Controls (DDTC).
These are set out in Part 130 of the ITAR regulations, the section of the rules that Airbus says it may have breached.
Civil penalties for breaking the ITAR rules - usually as the result of an error - can reach $500,000 per violation but are typically relatively small and rarely make headlines, said Reid Whitten, managing partner and expert on international trade controls at the London office of U.S. law firm Sheppard Mullin.
There are bigger penalties for criminal or wilful violations of the ITAR rules.
Criminal penalties can involve fines up to $1 million or up to 20 years’ imprisonment, or both, for each violation. But experts say sanctions in cases that do not involve a breach of national security were unlikely to be nearly as severe.
Violations can also lead to a company being debarred from all export from the United States of goods covered by ITAR, usually for at least three years.
For a foreign company like Airbus this could cause significant disruption to its business, because it would deprive it of access to U.S.-supplied parts for a range of platforms.
Unlike France’s Dassault Aviation, which avoids key U.S. technology to market its warplanes as “ITAR-free”, Airbus uses sensitive U.S. components across its non-civil business from small transport planes to helicopters, fighters and satellites.
“The penalty that a company like Airbus would be most concerned about would be the possibility of debarment,” Whitten said.
Airbus said it had brought the ITAR issue to the attention of the State Dept. ITAR rules say the State Dept may consider a voluntary disclosure as a “mitigating factor” in determining the administrative penalties, if any, that should be imposed.
An Airbus spokesman said the company submitted its initial notification of potential issues in November 2016.
An internal review led to a formal voluntary disclosure and results of Airbus’s investigation at the end of July 2017.
The anti-corruption portion of the ITAR regulations differ from the main U.S. anti-bribery legislation, the Foreign Corrupt Practices Act, in the consequences.
Aside from maximum penalties, which are broadly similar, the FCPA allows for the “disgorgement” of past profits related to corruption, which can significantly raise the financial burden.
In 2008, Siemens agreed to pay $350 million in disgorgement and a $450 million fine to settle U.S. bribery charges.
By contrast, large-scale enforcement of the Part 130 rules under ITAR is relatively rare, Whitten said.
Reporting by Tim Hepher
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