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
An export is a shipment or transmission of items out of the U.S.
Re-export is a shipment of items subject to EAR from one
foreign country to another.
Deemed export is a release of technology or software source
code to a foreign national in the U.S.
Dual use items are the one that have both commercial and
military or proliferation applications.
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.