The United States Government Has Some New Rules

THE UNITED STATES
GOVERNMENT HAS SOME
RULES….
Actually these are Laws, Regulations,
Rules, Provisions, Requirements and
more that must be complied with!

Copyright 2004-2008 James G. Shaw III cscp 1

The Department of Commerce
• The EXPORT ADMINISTRATION
REGULATIONS are know by the acronym
“EAR”
• Businesses must be aware of these rules
as they can apply to “domestic” business
as well as “export” or “international”
business activities
• “Ignorance is not excused”


The Export Administration
Regulations
• There are a large number of elements of
control that apply to various activities
• A good place to start is to become familiar
with the regulations in general terms
• Identify if your business comes under the
provisions of the Export Administration
Regulations (EAR)
• The answer is probably YES.

THE EAR PROCESS
• Learn the terminology and the terms and
what their definitions are so you are clear
as to the meaning of the work to be
performed.
• Learn about all the agencies, not just the
Department of Commerce, that have
impact and controls over the conduct of
international trade
• DOD, Treasury, State, and more…..

IF THE EAR APPLIES….
• Identification and classification of the
products is a critical first step in
compliance
• The responsibility falls to the EXPORTER,
also known as the PRINCIPAL PARTY OF
INTEREST (PPI), and it also impacts the
IMPORTER, the TRANSPORTATION
SERVICES COMPANIES, and most
importantly THE ULTIMATE
CONSIGNEE.

Classify The Product
• The “Commerce Control List” is the
cornerstone
• The items must receive a clear
determination of the EXPORT CONTROL
CLASSIFICATION NUMBER
• Commonly referred to as the “ECCN”
Number
• This Number Directs Further Activities

Classify The Product
• The “Commerce Control List” is to be
referenced early in the development of
new technology or science-related
activities because there may be a number
of elements of control that will need to be
complied with……….and……….
• “Ignorance is not excused”


The Commerce Control List
• The government provides a web site to
assist in the classification activity:
• http://w3.access.gpo.gov/bis/ear_data.htm
l


• This lists items that are subject to
licensing under the authority of the Bureau
of Industry and Security (BIS)
• Each Export Control Classification
Number (ECCN) is a 5 (or more) character
string that is alpha-numeric. If significant
control elements exist they will be in
characters 6 thru 10.


• Items are listed in terms of the technical
parameters or nature of the commodity
• First Character: Category
• Second Character: Product Group
• Third Character: Reason For Control
• Fourth Character: Relates to Reason For
Control (e.g. third & fourth Characters)
• Fifth Character: Used for Numerical Ordering

• The Commerce Control List is divided into
Ten Categories
• 0 Nuclear Materials, Facilities and
Equipment, and Miscellaneous
• 1 Materials, Chemicals, Microorganisms
and Toxins
• 2 Materials Processing
– See Following Pages

• Ten Categories (Continued)
• 3 Electronics Design, Development and
Production
• 4 Computers
• 5 Telecommunications and Information
Security
• 6 Sensors and Lasers
– See Following Pages for Additional Categories

• Ten Categories (Continued)
• 7 Navigation and Avionics
• 8 Marine (ships & vessels)
• 9 Propulsion Systems, Space Vehicles,
and Related Equipment
• And EAR99
– See Following Pages for Additional Categories


• PRODUCT GROUPS
• Identified in the second (alpha) character
in the ECCN number:
• A Equipment, Assemblies and
Components
• B Production, Test and Inspection
Equipment
• C Materials (raw)
– See Following Pages for Product Groups

• PRODUCT GROUPS
• D Software
• E Technology
• Then the specific identification of the
article is made with careful consideration
of the following details (3+ characters)


Establishing the ECCN
• First, look at the Commerce Control List’s
alphabetical index to get some
approximate identification options for
consideration
• Carefully review the general
characteristics of the items under
consideration to arrive at the Category and
Product Group first


Establishing the ECCN
• Identify and confirm the major
characteristics of the item with the ECCN
listing and review all sub-paragraphs
• “The devil is in the details” so do this
carefully and do not rush this portion of the
identification process
• Select the final, most applicable
characters to finalize the ECCN Number

More Rules To Know About
• The United States Government has
established a listing of “GENERAL
PROHIBITIONS” that must be noted:
• Review Part 736 of the EAR and become
familiar with “The 10 General Prohibitions”
• The 10 General Prohibitions prohibit certain
exports, re-exports, and other trade conduct
without a license, license-exception or
determination that no license is required

• The 10 GENERAL PROHIBITIONS apply to
items having a specific ECCN number
• General Prohibitions 4 Through 10 apply to
items that are EAR99 (or otherwise not
found on the Commerce Control List)
• The designation “EAR99” was formerly
known (prior to 1996) as “G-DEST”


• General Prohibitions 1 through 3 apply only
if the item is classified under a specific
ECCN
• Prohibition 1 applies to the Export and re-
Export of controlled items to listed countries
• Prohibition 2 applies to re-Export and
Export from abroad of foreign-made items
incorporating more than a de minimis
amount of controlled U.S. Content

• The General Prohibitions should also be
applied to avoid “self blinding” (also known
as “looking the other way”)
• Prohibitions 4 through 10 apply if the item is
classed under a specific ECCN or is
identified as “EAR99” (meaning items not
found on the Commerce Control List –
Which generally means that No Export
License Is Required……

• Prohibition 4 addresses the engaging in
actions prohibited by a denial order (Check
Denied Persons/Denied Entities Lists)
• Prohibition 5 applies to the Export or re-
Export to prohibited End Users or prohibited
End-Uses (e.g. chemical and biological
warfare-related)
• Prohibition 6 applies to Export shipments or
re-Export to embargoed or special
destinations

• Prohibition 7 addresses exports for the
purpose of supporting proliferation activities
• Prohibition 8 applies to freight movement,
in transit shipments and items to be
unladen from vessels or aircraft (enroute
diversion).
• Prohibition 9 covers violations of any order,
terms, and conditions issued by the United
States Government

• Prohibition 10 can be called the “be
watchful” rule;
• Proceeding with transactions with
knowledge that a violation has occurred or
is about to occur.
• Prohibition 10 requires brokers, carriers,
consultants, and other parties to report
activities to the United States Government if
activities appear to violate the EAR.

• If Prohibitions 1 through 10 don’t apply the
next step is to look for Allowed Exceptions
in the EAR.
• WHAT IS A LICENSE EXCEPTION?
• An exception is a provision identified in the
EAR ECCN with very specific conditions
that must be applied to enable the use of an
Export License Exception Code on the
Export Documentation

License or Exception Under EAR?
• Research the Commerce Control List to
check the reasons for export control;
• Look at the “Reason For Control” section
directly under the ECCN category heading
and License Requirements;
• Example; Reason for control NS, MT, AT
• Match specific controls to the Country
Chart column in the EAR

• Research additional elements of the
Commerce Control List to clearly identify if
the reasons for control apply;
• Look at the “Reason For Control”
• Match specific controls to the Country
Chart column in the EAR and look for an
“X” in the Commerce Control List for the
destination Country

• If an “X” is noted, look under the “License
Exceptions” category below the
“Control(s)” section
• It may be possible to qualify for an
exception to applying for a specific export
license,
• If no license exception is available then an
export license must be obtained (a 4 to 6
week long process.)

REASONS FOR CONTROL:
• AT = Anti-Terrorism
• CB = Chemical & Biological weapons
• CC= Crime Control
• CW = Chemical Weapons Convention
• EI = Encryption Item
• FC = Firearms Control
• MT = Missile Technology


REASONS FOR CONTROL:
CONTINUED REASONS FOR CONTROL
• NP = Nuclear Proliferation
• NS = National Security
• RS = Regional Stability
• SI = Significant Item
• SS = Short Supply
• UN = United Nations
• XP = Computers

COMMON LICENSE
EXCEPTIONS AVAILABLE
• LVS – Limited Value Shipments
– Pertain to Country Group B
– Identified by “LVS: $(value)” on the
Commerce Control List (e.g. LVS $5000)
• GBS – Group B Shipments
– Pertains to Country Group B
– Identified by “GBS: Yes” on the CCL
• CIV – Civil End-Users

COMMON LICENSE
• CIV – Civil End-Users
• Pertains to Country Group D-1
• Identified by “CIV: Yes” on the CCL
• National Security controlled items only
– Caution is urged and in numerous companies
secure confirmation documents from the End
User (and perhaps the government of the End
User)


COMMON LICENSE
• TSR – Restricted Technology and
Software
– Pertains to Country Group B
– Identified by “TSRL: Yes” on the CCL
– National Security Controlled items only
– Written Assurance – Letter can be written
stating software will not be released to
nationals of certain country groups (e.g. D:1
and E:2)

COMMON LICENSE
• TMP – Temporary Exports and Re-exports
– Tools of Trade
– Replacement Parts
– Exhibition and Demonstration
– Inspection and Calibration
– Assembly in Mexico
– To US Subsidiary, affiliate or facility in Country Group
B
– Beta Test Software
– Goods Returning to the USA within 1 year

DEEMED EXPORT EXCEPTIONS
• CIV: Civil End Use
– Applies to deemed exports for 3E001/3E002
technology
– Requires Foreign National Review (FNR)
• TSR: Technology/Software Under Restriction
– Applies to technology/software under national security
only for country group “B” nationals
– Requires Letter of Assurance
• APP: Computers
– Applies to deemed exports for 4D001/4E001 software
and technology (FNR required)

HOW ARE WE DOING? STILL
CONFUSED OVER U.S. EXPORT
REGULATIONS & EXCEPTIONS?
• Want to try a Classification Exercise?


EXPORT CONTROL LAW
• The preceding presentation pages are but
a small portion of the substantial amount
of controls that the United States places
over international commerce.
• Additional elements & topics include:
– Import Cargo Security (C-TPAT & 10+2)
– Classification for import duty calculations
– Dual Use Materials (Military and Civil)


ADDITIONAL RULES…
• The United States Government has
established a number of agencies with
authority over the conduct of international
business; Department of Commerce,
Bureau of Industry & Security, Department
of Homeland Defense, Customs & Border
Protection, Department of Defense,
Department of State, Food and Drug
Administration to name but a few.

Please Be Advised…..
• Professionals are available to assist you
with the compliant conduct of your
international trade. Even some domestic
commercial activities fall under these
“export regulations”, so please contact us
to help you navigate these ever-changing
rapids…..SOLUTIONSONE.COM
• (877) 223-0333 Toll Free or (562)
430-0333 or 24/7/365 at (714) 875-6546.


The United States Government Has Some New Rules

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