Aerospace
The aerospace industry is one of the most dynamic sectors in international trade, encompassing everything from commercial aviation and defense systems to space exploration and advanced technology solutions. Global demand for aerospace goods and services drives significant economic growth, fostering cross-border partnerships, enhancing trade networks, and spurring innovation across multiple industries. From manufacturing commercial aircraft to launching satellites and developing defense systems, companies in aerospace must navigate a complex landscape of export controls, trade agreements, and national security policies.
Aerospace products and technology often fall under strict export control regimes. In the U.S., the International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) regulate exports, ensuring that sensitive technologies do not end up in the hands of adversaries. These controls cover a wide array of aerospace products, including aircraft components, satellite technology, and missile systems. Compliance with the ITAR and the EAR is essential. Additionally, the aerospace industry is affected by the economic sanctions regime administered by the Department of the Treasury Office of Foreign Assets Control (OFAC) in its quest to achieve U.S. foreign policy and national security goals across the globe. Companies must maintain robust internal compliance programs and stay up to date on regulatory changes to successfully operate across borders.
Given its ties to defense and critical infrastructure, aerospace is closely monitored for national security concerns. Governments prioritize safeguarding aerospace technology to maintain strategic advantages. Foreign investment in aerospace often triggers reviews by U.S. federal interagency bodies such as the Committee on Foreign Investment in the United States (CFIUS), which can block or impose mitigation requirements on deals that pose unacceptable risks to national security.
Representative Experience
The Torres Trade Law team is deeply familiar with the aerospace industry and has assisted several aerospace companies navigate the international trade and national security law landscape, including the following representative experience:
- Preparing and implementing export control and sanctions compliance programs for multiple aerospace companies, including publicly traded multinational companies.
- Investigating violations and submitting voluntary disclosures to the Department of State Directorate of Defense Trade Controls (DDTC) and the Department of Commerce Bureau of Industry and Security (BIS) on behalf of numerous aerospace companies.
- Successfully submitting protests to U.S. Customs and Border Protection (CBP) to obtain duty-free treatment for civil aviation parts.
- Classifying hundreds of aerospace parts pursuant to the ITAR and EAR to determine export control authorization requirements.
- Successfully obtaining export control licenses and ITAR license agreements for numerous aerospace clients.
- Conducting due diligence on transaction parties to determine implications of economic sanctions and export control regulations on aerospace imports and exports.
- Advising on the application of Foreign Ownership, Control, or Influence (FOCI) regulations administered by the Defense Counterintelligence and Security Agency.
INSIGHTS
DDTC Goes Back-To-Basics in Boeing Settlement
On February 28, 2024, the U.S. Department of State and The Boeing Company (Boeing) agreed to an administrative settlement regarding 199 violations by Boeing of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). As a result of that settlement, Boeing was fined $51 million ($27 million to be paid over the next 3 years, plus $24 million suspended but required to be applied internally to consent agreement conditions). Boeing will also be subject to a plethora of other conditions over the next three years, including government monitoring via a Special Compliance Officer, which will oversee Boeing’s adherence to the conditions of the settlement.
When CFIUS Mitigation Agreements and FOCI Reviews Overlap: A Critical Balancing Act
On June 9, 2021, Momentus Inc., a U.S. commercial space company offering in-space transportation and infrastructure services, as a condition to its acquisition by a foreign-owned company, entered into a National Security Agreement with the Department of Defense (“DoD”) and Department of Treasury. Under this agreement, Momentus was required to “implement increased security measures, hire key positions to provide additional oversight and appoint a [Committee on Foreign Investment in the United States (“CFIUS”)]-approved director to its board of directors.”1 In doing so, Momentus agreed to mitigate the national security risks associated with its foreign ownership.
Safeguarding Technical Data: A Lesson from the Honeywell Consent Agreement
Safeguarding technical data and preventing unauthorized exports of controlled technical data is a challenge for most companies. As demonstrated by the Honeywell consent agreement, the U.S. Government (“USG”) will not take violations involving unauthorized exports of controlled technical data lightly. Therefore, industry should carefully assess their compliance programs to ensure that technical data is safeguarded properly. This article provides an overview of the Honeywell consent agreement and discusses general recommendations for safeguarding technical data.
Important Takeaways for Exporters from Honeywell’s Consent Agreement with DDTC
On April 27, 2021, Honeywell International, Inc. (“Honeywell”) entered into a consent agreement with the U.S. Department of State Directorate of Defense Trade Controls (“DDTC”) for alleged violations of the Arms Export Control Act (“AECA”) and the International Traffic in Arms Regulations (“ITAR”). Specifically, Honeywell, a defense contractor based in Charlotte, North Carolina, allegedly exported and retransferred ITAR-controlled technical data without required authorization.
U.S. Government Imposes Additional Export Controls on China Trade
Towards the end of its term, the Trump Administration continues to strengthen regulation of trade with China, even when it means leaving implementation of the new controls to the Biden Administration.
For companies doing business in and with China, the increased export controls and economic sanctions – a recent executive order prohibiting transactions with popular Chinese mobile payment apps, a new ‘Military End Use’ list that tightens export licensing for designated items, and a ban on securities investments in Chinese military entities – call for enhanced due diligence to ensure compliance.
When Federal R&D Funding meets U.S. Trade Controls: Proceed with Caution
If your company is fortunate enough to receive federal R&D funding, it is important to remember that these grants do not relinquish responsibility for compliance with trade regulations.