All products exported from the U.S. are subject to U.S. export controls, including goods not typically considered sensitive or restricted. Exporters who fail to understand and comply with applicable laws and regulations can be subject to damaging penalties, restrictions on their business, and harm to their reputations. This is particularly true in the current environment where export enforcement efforts by federal agencies are continuing to increase.
Exported goods are subject to either the Export Administration Regulations administered by the Department of Commerce’s Bureau of Industry and Security, which focus primarily on dual-use goods that can be used for military or civilian use, or the International Trafficking in Arms Regulations administered by the State Department’s Directorate of Defense Trade Controls, which focus primarily on defense-related products.
These regulations are designed to restrict exports of sensitive goods and services to countries and entities of concern (including individuals), so they are most often a concern for technology companies, manufacturers, and government contractors. However, it is important to understand that they cover all products, even those not typically subject to restriction such as food, medicine, and clothing, and apply to all companies and individuals exporting from the U.S.
Whether or not authorization is required to export a specific product is determined by its export classification, destination, end-user, and/or end-use. The majority of U.S. commercial exports are free of restrictions, but the first step in verifying that for your particular product is determining its correct export control classification under the EAR or ITAR.
Every item exported from the U.S. is classified under either a five-digit export control classification number set forth in the EAR’s Commerce Control List or a category designation under the ITAR’s U.S. Munitions List. Among other things, the specific ECCN or ITAR category and subparagraph associated with an item dictate the applicable export compliance requirements. Companies can self-classify or ask BIS or DDTC to do it for them, and if they’re unsure which agency to involve they can request a commodity jurisdiction determination.
(It should be noted that export classification under the EAR or ITAR is completely different than the classification of imports under the Harmonized Tariff Schedule of the U.S. and there is no relationship between the two sides at all.)
The ”reasons for control” associated with a specific ECCN, when read in conjunction with the Commerce Country Chart (which lists destinations to which shipments are subject to varying levels of restriction), dictate whether an export license is required for a product. However, there are also a number of potentially applicable license exceptions that may waive an applicable license requirement. Under the ITAR, if an item is controlled under the USML it almost always requires an export license (though there are some exceptions here as well).
Where the item is being shipped, who will use it, and how it will be used can also impact an exporter’s obligations under the EAR or ITAR; e.g., whether an export license is required or a license exception is available. Both sets of regulations restrict exports to specified entities and types of entities, as well as exports intended for specified uses, so both should be consulted.
The end-use and end-user can also subject a shipment to rules on sanctions, restricted parties, and similar issues administered by the Treasury Department’s Office of Foreign Assets Control.
Exporters who fail to comply with applicable license or other export requirements can be hit with both criminal and civil penalties that are assessed on a per-shipment basis and can thus quickly increase into the millions of dollars. Violators can also have their export privileges denied or suspended. However, self-disclosures filed before federal officials get involved can significantly mitigate these punitive actions. Effective export compliance programs can also help exporters lessen the impact of any missteps.
Sandler, Travis & Rosenberg’s export professionals have decades of experience both administering and helping companies comply with U.S. export control laws and regulations. For more information on the requirements that apply to your business, please contact Kristine Pirnia (at 9202) 730-4964 or via email) or Joshua Rodman (at (305-894-1012 or via email).
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