The U.S. Department of Commerce’s Bureau of Industry & Security (BIS)
At the last Export Control Seminar in Salt Lake City, Secretary Penny Pritzker addressed why export controls are necessary for safety and national competitiveness. The duty of how to address proliferation and keep the most sensitive goods and technologies out of dangerous hands falls to the BIS. The BIS is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and re-export of most commercial items, often referred to as dual-use items. Here’s the rub: dual-use items may have both commercial and military applications.
The EAR does not control all goods, only a small percentage of exports under BIS require a license. What matters are the end user, destination country and technical characteristics. Goods and services with more specialized and sensitive uses are covered by specific government agencies. However, determining dual-use items is not as straight forward as you might suppose. Even purely commercial items without any apparent military use are also subject to the EAR.
An EAR for All
Export compliance applies to exporters big and small and the penalties are applied equally for each export violation. According the BIS, fines for export violations can reach $1 million per violation in criminal cases and 20 years behind bars, while for administrative cases it can result in penalties of up to $250,000 and a denial of export privileges. The U.S. small business exporter represents 97 percent of the roughly 300,000 companies that export and are often unaware of U.S. export regulations. Oftentimes, they think they compliance screening is unnecessary and a waste of money. In an effort to dissuade the small business exporter from any such illusions, the BIS produced a guide titled “Don’t Let This Happen to You”, with real life examples of penalties and punishments.
So What is an Export?
The method of transportation outside the U.S. has no bearing on determining export license requirements. If an item is sent by plane, mail, hand-carried, faxed, uploaded or downloaded or even mentioned in a phone conversation, if it left U.S. borders, it is considered an export and subject to license requirements. Perhaps it is machinery going to a wholly-owned U.S. subsidiary—same rules apply. Even foreign origin items shipped or transmitted through the U.S. are considered exports.
Knowing the What, Where, Who, and How
You must first determine whether your product has a five character Export Control Classification Number (ECCN) by checking your product against the EAR. The EAR will list reasons why the particular product falls under BIS control. You will use this to determine if you need an export license, depending upon the where your product is being shipped. Any product that does not have and ECCN is designated as an EAR99, which usually do not need an export license, unless exported to an embargoed country or in support of a prohibited end-use.
Once you know if your product is controlled you will need to compare the ECCN against the Commerce Country Chart in the EAR to determine if a license is required. This is the “where” part of it you then need to need to determine the “who”.
The U.S. and other governments and international organizations, such as the United Nations and the European Union, maintain lists of restricted parties. These are persons or entities that you are prohibited from exporting to without a license. This may include EAR99 items that otherwise don’t require a license based on the country of export. All exporters should check the parties on every export transaction if they believe they may be on the restricted parties list, particularly the U.S. lists.
“How” your product will be used at the end destination is just as important. Even the most harmless product might be intended for uses not envisioned by the exporter but clearly prohibited or requiring an export license.
One Last Caution
If you accept a foreign trade delegation’s visit to your plant or permit visual inspection of plans or blueprints, this is considered a “deemed export”. You must follow the same procedures outlined above to determine EAR restrictions as if you were shipping the product outside of the U.S.
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