Over the last several years, the regulatory framework for export controls and economic sanctions in the U.S. has undergone significant changes. At the same time the risk of enforcement in the event of non-compliance has grown.Most products and technologies contemplated for export from the U.S. fall under the requirements of the Export Administration Regulations EAR. Determining how a product is classified, the controls associated with a classification and eligibility for license exceptions involves a step-by-step process.
Export Administration Regulations
Export Administration Regulations (EAR) are found in 15 CFR Parts 730 to 744. These are administered under International Economic Emergency Powers Act by the Commerce Department’s Bureau of Industry and Security. EAR regulates exports including re-exports and deemed exports of commercial or dual-use goods, software and technology.
Definitions
- Export
An export is a shipment or transmission of items out of the U.S.
- Re-export
Re-export is a shipment of items subject to EAR from one foreign country to another.
- Deemed Export
Deemed export is a release of technology or software source code to a foreign national in the U.S.
- Dual use items
Dual use items are the one that have both commercial and military or proliferation applications.
- Commerce Control List
Commerce Control List (CCL) is a list of EAR controlled items. It is found in Part 774 of the EAR and is used to determine export control classification and license requirements. CCL is divided into ten broad categories and these are:
= Nuclear Materials, Facilities and Equipment (and miscellaneous items)
1 = Materials, Chemicals, Microorganisms and Toxins
2 = Materials Processing
3 = Electronics
4 = Computers
5 = Telecommunications and Information Security
6 = Sensors and Lasers
7 = Navigation and Avionics
8 = Marine
9 = Propulsion Systems, Space Vehicles, and Related Equipment
Each category is further subdivided into five product groups:
A: Systems, Equipment & Components
B: Test, Inspection & Production Equipment
C: Materials
D: Software
E: Technology
Export Control Classification Number
Each entry in CCL is called an Export Control Classification Number (ECCN). It is an alpha-numeric code used in the CCL to classify items for determination of export licensing requirements.
Reasons for Control
The reason for control may vary according to the sub-category in the specific ECCN. Here are the various reasons for control (one or more may apply to a specific ECCN):
- AT- Anti-Terrorism
- CB-Chemical & Biological Weapons
- CC- Crime Control
- CW- Chemical Weapons Convention
- EI- Encryption Items
- FC- Firearms Convention
- MT- Missile Technology
- NS- National Security
- NP- Nuclear Nonproliferation
- RS- Regional Stability
- SS- Short Supply
- UN- United Nations Embargo
- SI- Significant Items
- SL- Surreptitious Listening
LICENSE REQUIREMENTS
In general, license requirements depend on product classification (ECCN), destination and end user. For goods and technology listed on the CCL, a license will be required for export, unless an exclusion or exemption applies. The combination of reasons for control and the country of end user will determine whether a license or exception applies. No license is required when:
- The item to be shipped is not on the CCL (i.e. it is EAR99).
- The item is on the CCL but there is no “X” in the box on the country chart under the appropriate reason for control column and on the row for the country of destination.
Some Common License Exceptions
If a license is required for your transaction, a license exception may be available. License exceptions and the conditions for their use are set forth in part 740 of the EAR. Some of the common licensing exceptions are:
- LVS – Limited Value Shipment
- TMP – Temporary Exports
- CIV – Civil end Users
- RSL – Servicing and Replacement Parts
- TSU – Technology and Software Unrestricted
- TSR – Restricted Technology and Software
Key Points to Consider for Complying with EAR
- Know your jurisdiction – what agency controls your product?
- Have your tools ready: (1) the regulations and CCL (2) information about the product (3) a technical person who can help.
- Pay attention to the sub-categories in the CCL – which one covers your product?
- Start with the highest level of control, and then use process of elimination to classify.
- Pay attention to the notes at the beginning of a CCL listing.
- What is the true country of end use of the export? Use that country for export control purposes.
- Many license exceptions are available – but read the fine print.
- If you need to apply for a license, make sure you have all the information you will need.
PENALTIES FOR NON-COMPLIANCE WITH EAR
Penalties for non-compliance with EAR are quite severe. It can bring civil penalties of up to $250,000 per violation or twice the amount of the transaction whichever are greater and criminal penalties of up to $1 million per violation along with up to 20 years imprisonment. There are severe sanctions, in addition to the criminal and civil penalties, that may be imposed for violations, including:
- termination of export privileges,
- suspension and/or debarment from federal government contracting and,
- loss of federal funds.