COMMODITY JURISDICTION AND U.S. EXPORT TRANSACTIONS · 2019-07-24 · U.S. Export Commodity...

COMMODITY JURISDICTION AND U.S. EXPORT TRANSACTIONS

Kate Alessi – Ankura Consulting Group, LLC

Robin Grover – Amber Road, now part of E2open

Joshua L. Rodman – Sandler, Travis & Rosenberg, P.A.

U.S. Export Commodity Jurisdiction –Pools, Rules and Tools

• POOLS (of products) – the agencies having export control jurisdiction over products, and at times, services - ROBIN

• RULES – the guidelines you follow as a prospective exporter to determine agency jurisdiction and classification – KATE

• TOOLS – the classification aids you can use to determine the agency that controls your product and how it classifies it for export control purposes - JOSHUA

Pools: Overview of U.S. Export Control

Regimes and Agencies

Robin Grover – Amber Road, now part of E2open

About Amber Road, Now Part of E2open

Cloud-Based Global Trade Management (GTM) Software, Content & Training

We help companies all over the world create value through their global supply chain by improving margins, achieving greater agility and lowering risk.

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Amber Road’s Global Trade Academy mission is to turn you and your employees into a team of experts in international trade.

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Our team includes highly experienced personnel with solid credentials in the Customs arena, including licensed Customs Brokers, former Customs Officials and Attorneys.

We offer trade advisory services in the following areas:

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▪ Focused Assessments

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▪ Development of Manuals –

‒ Imports, Exports, Crisis manuals, FCPA, C-TPAT

Faculty Bio

Robin W. Grover, Esq.Amber Road’s Global Trade AcademyRobin is an international trade lawyer with over 37 years' experience handling all aspects of export-import issues. Robin is admitted before the U.S. Court of International Trade and has represented clients before:

• Customs and Border Protection

• Bureau of Industry and Security (formerly the Bureau of Export Administration)

• Office of Foreign Assets Control

• Directorate of Defense Trade Controls

• Office of the U.S. Trade Representative

• U.S. International Trade Commission

• Census BureauRobin is also a consultant with Amber Road/Global Trade Academy and is a licensed Customs broker.

Types of “Exports” Subject to U.S. Jurisdiction

The usual concept: containerized or bulk cargo shipped from

a U.S. port

“Export” also covers:– Provision of certain services to foreign countries or foreign nationals

– Hand carry out of the country

– Temporary displays at foreign trade shows

– Foreign access to internet or intranet sites

– Electronic or paper data transmission

– Providing sensitive product information electronically via internet or intranet

– DEEMED Exports

© 2019 Amber Road, Inc. All rights reserved. Proprietary and Confidential.

Reasons for U.S. Export Controls

Strategic

Tactical

Economic

Humanitarian


Several Federal Agencies Have Product Jurisdiction Over U.S. Export Controls

• Products of U.S. origin or of whatever origin to be shipped from the U.S. fall under the jurisdiction of a U.S. export control agency

– Almost all products, much technical data and some services have an agency “home” where they reside (are classified) and is key to the applicability of agency export controls

– Nonetheless, a prospective exporter will not always need a license, in many cases not


The Agency “Homes” for Export Control Purposes• Commerce Department, Bureau of Industry and Security

• State Department, Directorate of Defense Trade Controls

• Bureau of Alcohol, Tobacco, Firearms & Explosives

• Nuclear Regulatory Commission

• U.S. Department of Energy

• Environmental Protection Agency

• Drug Enforcement Administration


The Product Classification Series of the Bureau of Industry and Security of the Commerce Department15 CFR 730 ET SEQ

• EAR99

• ECCNs – Dual-use items, capable of civilian and military uses

• ECCN “600” Series – primarily items formerly on the U.S. Munitions List as “defense articles”, transferred to BIS jurisdiction due to Export Control Reform


Classification Under an ECCN Does Not Necessarily Mandate Obtaining an Export License

• By one estimate, 95 percent of products exported from the U.S. do not need an export license

• Commerce Control List, ECCN designation makes licensing more likely mandated but not automatic

• A need for an export license depends on the product’s classification by the agency, and:

– What, where, who, why, when and how

– Potential license exceptions may apply


BIS Classification under EAR99

• Three scenarios under which a product categorized under EAR99 will require an export license:

– Shipments to embargoed countries, including Iran, Cuba, Syria, North Korea, and Russian occupied Crimea

– Persons, businesses, organizations and other entities designated on any US Prohibited Party list

– Otherwise, the exporter knows or has reason to know of WMD-related uses


Directorate of Defense Trade Controls (DDTC)22 CFR 120 ET SEQ.

• Defense articles

• Defense services

• Technical data


DDTC Export Control Over Exports and Imports of Defense Articles, Defense Services, Tech Data on the USML

• Permanent exports

• Temporary exports

• Temporary imports


Bureau of Alcohol, Tobacco Firearms & Explosives (BATFE) Controls27 CFR PART 445

• Permanent imports of defense articles described on a separate, US munitions import list

• Exports of items covered by National Firearms Act

• Requires permits, not licenses


Nuclear Regulatory Commission10 CFR PART 110

• Controls imports and exports of civilian nuclear “hard” goods used in civilian nuclear energy projects

• Valves, materials, reactors, etc.


U.S. Department of Energy

• Exports of Technical Assistance to foreign atomic energy projects

10 CFR PART 810


U.S. Environmental Protection Agency

• Advance export notification requirements for certain classes of chemicals regulated under Section 12(b) of the Toxic Substances Control Act

• Chemical may be otherwise controlled for export by ECCNs or US Munitions List


Drug Enforcement Administration

• Export and import permit requirements for controlled substances

• 21 CFR Sec. 1312


Census Bureau of the Commerce Department

• Census responsible for AES filings on which classification and export licensing requirements will be indicated

• Also Schedule B classification which is not export control-related


Office of Foreign Assets Control, U.S. Treasury Department

• Bans U.S. exports, reexports to embargoed countries Syria, North Korea, Iran, Cuba and Russian-occupied Crimea

• General or Specific license may permit otherwise banned transactions


Divided Agency Commodity Jurisdiction for Product Groups

Nuclear

• Certain types of uranium can be under the Commodity Jurisdiction of:

– BIS (ECCN 1A290 – specified depleted uranium)

– DDTC (USML Cat. V – certain fabricated explosives from uranium)

– NRC (10 CFR Part 110, Appendix M – types of enriched uranium)


Divided Agency Commodity Jurisdiction

Chemicals

• BIS – ECCN 1C350 Toxic chemical precursors

• DDTC – USML Categories V (Explosives, Incendiary Agents, Propellants) and XIV (Toxicological agents/Chemical agents)



Personal Protective Equipment

• BIS ECCN 1A613 - Soft body armor and protective garments manufactured to military standards or specifications, or to their equivalents, that provide ballistic protection equal to or less than NIJ level III

• DDTC USML Category X (Body armor providing a protection level equal to or greater than NIJ Type IV)



Shotguns

• BIS ECCN 0A984, Shotguns with a barrel length of 18 inches or greater

• DDTC USML CAT. I(b) – Shotguns with a barrel length of less than 18 inches


Key Points to Remember in Agency Commodity Jurisdiction

• Even with Export Control Reform, agency product jurisdiction often bifurcated

• Never assume that based on the product’s nature or functions, it will be under a particular agency’s export control jurisdiction

• There are rules and tools available to make your decision easier and with a greater chance of accuracy


Questions?

Robin W. Grover, Esq.Amber Road’s Global Trade Academy

[email protected]

For Course Schedule: 609 865 5208

Get Certified?Come to our Booth for info -Certified Classification Specialist (CCLS ™)Drawback Specialist (DBS ™)Export Control Specialist (EXCS ™)

Contact Amber Road:

www.AmberrRoad.com/Solutions/Training

[email protected]

[email protected]

[email protected]

609 865 5208

GTM Best Practices Group

Amber Road’s Global Trade Academy

@GTMBestPractice

mailto:[email protected]



Rules:U.S. Export Jurisdiction and

Classification Order of Review

Kate Alessi – Ankura Consulting Group, LLC

• A Director at Ankura with 13 years of in-house export and import compliance experience with focus ondesigning, implementing, leading, and sustaining U.S. export/import, technology control, and data securitycompliance programs and solutions for both U.S. and non-U.S. companies

• Extensive experience developing and enhancing compliance policies and procedures; creating and providingtraining; assessing and implementing critical technology controls; drafting and managing export authorizations;implementing automated compliance solutions; and operating under a government-imposed consentagreement.

• Previously a co-creator of interactive workshops to train personnel outside of trade compliance in the disciplineof export jurisdiction and classification, as well as the identification of export controlled technicaldata/technology

485 Lexington Avenue 10th FloorNew York, NY 10017

+1.443.201.6314 mobile

[email protected]

Kate Alessi

U.S. Export Jurisdiction and Classification

Military Controls Dual-Use Controls

Overseeing US AgencyDepartment of State, Directorate of Defense Trade Controls (DDTC)

Department of Commerce, Bureau of Industry and Security

Legal Basis Arms Export Control Act (1976)Export Administration Act (1979)Export Control Reform Act (2018)

RegulationsInternational Traffic in Arms Regulations (ITAR)22 C.F.R. Part 120–130

Export Administration Regulations (EAR)15 C.F.R. Part 730-774

Scope

Permanent and temporary exports, and temporary imports, of:- Defense articles- Defense services- Technical data

Permanent and temporary exports, reexports, and retransfers (in-country) of:- Commodities- Software- Technology

Control List United States Munitions List (USML) Commerce Control List (CCL)

RestrictivenessMost restrictive, but relatively straightforward in application

More permissive, but more complex in application

U.S. Export Jurisdiction and ClassificationOrder of Review

ITAR – USML- Enumerated - In a “catch all” using “specially designed”

EAR – CCL - Legacy CCL

1Export Control Classification Number

EAR – CCL - “600 Series” and 9x515 ECCNs1

- Enumerated (i.e., paragraphs .a through .w, and .y)- “Catch-all” (i.e., paragraphs sub-paragraph .x)

EAR – CCL - EAR99

Most Restrictive

Least Restrictive

U.S. Export Jurisdiction and ClassificationOrder of Review – ITAR

• Per ITAR §120.3, an item/service is subject to the ITAR if it either:

– Meets the criteria of a defense article (ITAR §120.6) or a defense service (ITAR §120.9); or

– Provides equivalent performance capabilities of a defense article on the USML

• How to determine? (ITAR §121.1(b))

1. Identify potentially applicable USML Category(ies)

2. Identify potentially applicable entry(ies)

3. Perform “specially designed” analysis (see ITAR §120.41), if applicable

Note: If multiple entries could apply to the item:

- Enumerated takes precedence over “catch-all”

- SME or MT takes precedence over non-SME or non-MT

1SME: Significant Military Equipment; MT = Missile Technology Control Regime designation

https://www.ecfr.gov/cgi-bin/text-idx?SID=70e390c181ea17f847fa696c47e3140a&mc=true&node=pt22.1.120&rgn=div5#se22.1.120_13



https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=70e390c181ea17f847fa696c47e3140a&mc=true&r=PART&n=pt22.1.121#se22.1.121_11


U.S. Export Jurisdiction and ClassificationOrder of Review – EAR

• Is the item/service “subject to the EAR” (EAR §734.2(a); §734.3)?

– Not subject to the exclusive jurisdiction of another agency; and

• Physically located in the United States (including in transit);

• Of U.S. origin, wherever located;

• Foreign-made and exceeding the applicable de minimis threshold in EAR §734.3 ;

• Foreign-made direct product of U.S. origin technology or software, as described in EAR §736.2(b)(3); or

• Produced by a foreign plant that is a direct product of U.S. origin technology or software, as described in EAR §736.2(b)(3)

U.S. Export Jurisdiction and ClassificationOrder of Review – EAR

• If “subject to the EAR”, how to classify? (Supplement No. 4 to Part 774):

1. Identify potentially applicable CCL category(ies)

2. Identify the applicable product group

3. Review relevant “600 Series” ECCN and/or 9x515 ECCN paragraphs1

i. Paragraphs .a through .w, and .y (enumerated paragraphs)

ii. Paragraph .x (“catch-all” paragraph)

4. Review each ECCN in the relevant product group of the relevant CCL category(ies)1

5. If the item is not described under any ECCN on the CCL, then it is designated as EAR99

1Note: If a potentially relevant paragraph uses “specially designed” as a control parameter, perform analysis in “specially designed” definition in Part 772

U.S. Export Jurisdiction and ClassificationBest Practices

• Classify items as early on in the design process as practicable for your organization’s business model

• Partner with the people who design/create what you are classifying (e.g., your organization’s engineers, software developers, researchers, etc.)

• Contact the manufacturer/producer/developer of the item to see if they have already export classified the item – perform a sanity check

• Maintain records (e.g., a databases) of classification determinations and associated rationale

• Implement a change management procedure for maintaining the records and making reclassifications, as necessary

Questions?

Contact Ankura:

https://ankura.com/

More about Ankura’s International Trade Controls Practice:https://ankura.com/expertise/international-trade-controls/

https://ankura.com/

https://ankura.com/expertise/international-trade-controls/

Additional Information

USML CategoriesItems Organized into 21 Categories: EXAMPLE - CATEGORY VII—GROUND VEHICLES

*(a) Armored combat ground vehicles as follows:(1) Tanks; or(2) Infantry fighting vehicles.

*(b) Ground vehicles (not enumerated in paragraph (a) of this category) and trailers that are armed or are specially designed to be used as a firing or launch platform to deliver munitions or otherwise destroy or incapacitate targets (e.g., firing lasers, launching rockets, firing missiles, firing mortars, firing artillery rounds, or firing other ammunition greater than .50 caliber) (MT if specially designed for rockets, space launch vehicles, missiles, drones, or unmanned aerial vehicles capable of delivering a payload of at least 500 kg to a range of at least 300 km).

…

*(e) Armored support vehicles capable of off-road or amphibious use specially designed to transport or deploy personnel or materiel, or to move with other vehicles over land in close support of combat vehicles or troops (e.g., personnel carriers, resupply vehicles, combat engineer vehicles, recovery vehicles, reconnaissance vehicles, bridge launching vehicles, ambulances, and command and control vehicles).

…

(h) Technical data (see§120.10 of this subchapter) and defense services (see§120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (g) of this category and classified technical data directly related to items controlled in ECCNs 0A606, 0B606, 0C606, and 0D606 and defense services using the classified technical data. (See§125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)

Category I Firearms, Close Assault Weapons and Combat Shotguns

Category II Guns and Armament

Category III Ammunitions/Ordnance

Category IVLaunch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, Mines

Category VExplosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents

Category VI Surface Vessels of War and Special Naval Equipment

Category VII Ground Vehicles

Category VIII Aircraft and Related Articles

Category IX Military Training Equipment and Training

Category X Personal Protective Equipment

Category XI Military Electronics

Category XII Fire Control, Laser, Imaging, and Guidance Equipment

Category XIII Materials and Miscellaneous Articles

Category XIVToxicological Agents, Chemical Agents, Biological Agents, Associated Equipment

Category XV Spacecraft and Related Articles

Category XVI Nuclear Weapons Related Articles

Category XVIIClassified Articles, Technical Data and Defense Services Not Otherwise Enumerated

Category XVIII Directed Energy Weapons

Category XIX Gas Turbine Engines and Associated Equipment

Category XX Submersible Vessels and Related Articles

Category XXI Articles, Technical Data and Defense Services Not Otherwise EnumeratedReturn to “Order of Review –ITAR”

CCL Categories and Product Groups

500+ Entries Organized into 10 Categories:Category 0 - Nuclear Materials, Facilities & Equipment

(and Miscellaneous Items)

Category 1 - Special Materials and Related Equipment, Chemicals, Microorganisms & Toxins

Category 2 - Materials Processing

Category 3 - Electronics

Category 4 - Computers

Category 5 (Part 1) - Telecommunications

(Part 2) - Information Security

Category 6 - Sensors and Lasers

Category 7 - Navigation and Avionics

Category 8 – Marine

Category 9 – Aerospace and Propulsion

Product Groups

A – Equipment, Assemblies and Components

B – Test, Inspection and Production Equipment

C – Materials

D – Software

E – Technology

Example Export Control Classification Number (ECCN)

2B007 “Robots” having any of the following characteristics described in the List of Items Controlled and “specially designed” controllers and “end-effectors” therefor.

Items: a. [Reserved]

b. “Specially designed” to comply with national safety standards applicable to potentially explosive munitions environments;

NOTE: 2B007.b does not apply to “robots” “specially designed” for paint-spraying booths.

c. “Specially designed” or rated as radiation-hardened to withstand a total radiation dose greater than 5 × 103 Gy (silicon) without operational degradation; or

TECHNICAL NOTE: The term Gy (silicon) refers to the energy in Joules per kilogram absorbed by an unshielded silicon sample when exposed to ionizing radiation.

d. “Specially designed” to operate at altitudes exceeding 30,000 m.

Return to “Order of Review – EAR”

Tools:Classification Aids and

Implications

Joshua L. Rodman – Sandler, Travis & Rosenberg, P.A.

Bio: Joshua L. Rodman, Esquire, MBA• International Trade Lawyer (Customs, Import and

Export) with international law firm of Sandler, Travis & Rosenberg, P.A. in Miami, Florida

• Previously worked for international law firm of Womble Bond Dickinson (US) LLP in Tyson’s Corner, Virginia and Lockheed Martin Corporation in Manassas, Virginia

• University of Maryland: Juris Doctor and Master of Business Administration (JD/MBA) joint-degree program in law and finance

• Princeton University

• Originally from Potomac, Maryland

Basic Regulatory Structure

International Agreements and Treaties

U.S. National Security & Foreign Policy

International Traffic in Arms Regulations

(“ITAR”)

Department of State

Directorate of Defense Trade

Controls

22 C.F.R. Part 120-130

Export Administration

Regulations (“EAR”)

Department of Commerce

Bureau of Industry and Security

15 C.F.R. Part 730-774

Office of Foreign Assets Control

(“OFAC”) Sanctions

Department of Treasury

31 C.F.R. et. seq

ITAR: What is Controlled?

• Applies to:

– Inherently military items

– Some spacecraft and systems

• Controlled items (“defense articles”) appear on the U.S. Munitions List

• Controls extend to technical data required for the design, development, production, etc. of a defense article

• Commercial good that is “specially designed” or modified for a military application could be subject to the ITAR

United States Munitions List (“USML”)• Category I – Firearms, Close Assault Weapons and Combat Shotguns

• Category II – Guns and Armament

• Category III – Ammunitions/Ordnance

• Category IV – Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, Mines

• Category V - Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents

• Category VI – Surface Vessels of War and Special Naval Equipment

• Category VII – Ground Vehicles

• Category VIII – Aircraft and Related Articles

• Category IX – Military Training Equipment and Training

• Category X –Personal Protective Equipment

• Category XI – Military Electronics

• Category XII – Fire Control, Laser, Imaging, and Guidance Equipment

• Category XIII – Materials and Miscellaneous Articles

• Category XIV – Toxicological Agents, Chemical Agents, Biological Agents, Associated Equipment

• Category XV – Spacecraft and Related Articles

• Category XVI – Nuclear Weapons Related Articles

• Category XVII – Classified Articles, Technical Data and Defense Services Not Otherwise Enumerated

• Category XVIII – Directed Energy Weapons

• Category XIX – Gas Turbine Engines and Associated Equipment

• Category XX – Submersible Vessels and Related Articles

• Category XXI – Articles, Technical Data and Defense Services Not Otherwise Enumerated

Defense Articles: ITAR; CJ; Classification• Any item or technical data designated on the U.S. Munitions List

– Enumerated on the USML

– Some “catch-all” controls still apply (specially designed)

• Classification of an item requires careful evaluation against factors set forth in the ITAR

• Self-Classification vs formal Commodity Jurisdiction (CJ)

– ITAR classification requires a good hard look; although the list of ITAR items is much shorter than the EAR side, there are still some tricky areas. (Category XI) Military Electronics, for instance, has some difficult to classify items.

– Depending on the situation many items are self-classified, either by the manufacturer/supplier or the exporter or a coordination effort takes place and the export classification is determined without going to the US Government.

– There is also a formal process to obtain an export classification when you have reason to believe an item is ITAR-controlled – Commodity Jurisdiction or “CJ”

• No need to be registered with DDTC, anyone can apply for a CJ

• All CJ requests have to be filed online though a system called DECCS (Defense Export Control and Compliance System). Inputs include unique characteristics of the item, proposed classification, development, funding, etc.

CJ Final Determinations Database

ITAR: Technical Data

• Information required for the design, development, production, manufacture, assembly, operation, repair, testing maintenance or modification of defense articles.

• Software directly related to defense articles.

• Classified information relating to defense articles/services.

• Information covered by an invention secrecy order.

Activities That May be Subject to ITAR• Export:

– Transferring a defense article out of the U.S. in any manner;

– “Release” (including orally/visually) or transfer of technical data to a foreign person, whether in the U.S. or abroad (“deemed export”); or

– Performing a defense service on behalf of, or for the benefit of, a foreign person whether in the U.S. or abroad.

• Temporary Import:

– Bringing a defense article into the U.S. then back to same country.

• Brokering Activities:

– Action on behalf of another to facilitate the manufacture, export, permanent import, transfer, reexport of a U.S. or foreign defense article or service.

Who is a “Foreign Person” Under the ITAR?

• Any entity or group that is not incorporated in the United States or organized to do business in the United States, as well as international organizations, foreign governments and any agency or subdivision of a foreign government (e.g., diplomatic mission).

• Any individual who is not:

– A U.S. Citizen;

– A U.S. lawful permanent resident;

– A person granted asylum;

– A refugee

• Foreign Person includes persons with status such as H-1B, H-3, L-1, J-1, F-1 Practical Training, L-1, etc.

Examples of Activities That Are Subject to ITAR• Hardware/Tech Data Export:

– Sending or taking a defense article out of the U.S.

– Release of technical data to a foreign person, in the U.S. or abroad

• Email of tech. Data to U.K.

• Fed-Ex to Canada

• Presentation to foreign person visitors

• Technical discussions with foreign facilities

• Providing Defense Service:

– Furnishing technical assistance to foreign persons

– Providing know-how to foreign persons

– Training

• Design co-development

• Technical training

• Providing manufacturing processes

• Temporary Import:

– Bringing into the U.S. any defense article that is to be returned to the country from which it was shipped or taken

• Items temporarily imported for testing/evaluation

• Brokering Activities:

– A third-party facilitating the French purchase of a U.S. manufactured ITAR-controlled airborne surveillance cameras

ITAR Licensing Determination

• First, any manufacturer or exporter of a defense article generally must be registered with Directorate of Defense Trade Controls (DDTC)

• Export license is generally required to export ITAR-controlled items

• Some license exemptions exist, but are limited in scope and purpose

• Export license applications are submitted to the U.S. Department of State, DDTC, through D-Trade

Types of Licensing Authority• Hardware/Tech. Data Export:

– Permanent Export: DSP-5 (30+ days processing time)

– Temporary Hardware Export: DSP-73 (30+ days processing time)

– Warehouse/ Distribution Agreement: (4++ months processing time)

• Providing Defense Service:

– Technical Assistance Agreement (TAA): (30 days to 4 months processing time)

– Manufacturing License Agreement (MLA): (2+ months processing time)

• Import:

– Temporary Import: DSP-61 (5 to 30 days processing time)

Limited Exemptions Available • Hardware/Technical Data Exemptions:

– Tech. data disclosed per written request from DoD

– Packing cases specially designed to carry defense articles

– Certain defense articles to “Canadian-registered persons” for end-use in Canada

– Transfers within the same foreign company

• Defense Service Exemptions:

– To NATO, Australia, Japan and Sweden for purpose of responding to a DoD quote or bid proposal

– Certain defense services to “Canadian-registered persons” for end-use in Canada

• Import Exemptions:

– Temp. import for basic servicing

– Temp. import for “repair” and “replace

– Temp. import for exhibition/ demonstration

Common ITAR Pitfalls• Not knowing item is ITAR-controlled

– Unlicensed export

– Unlicensed retransfer or reexport

• Exceeding the scope of a license

– Limited authority

– Proviso considerations

• Documentation

– Failure to properly file EEI

– Statutory language missing

Consequences of Non-Compliance• Civil Monetary Penalties:

– Up to $1,134,602 fine per violation

– Temp. suspension or denial of export privileges

– Debarred from USG contract

• Criminal Prosecution:

– Up to 20 years in prison

– $1 million per violation

• Types of Responses to ITAR violations:

– Warning Letters

– Administrative Enforcement Cases

– Criminal Prosecution

EAR vs ITAR – Key Differences

What Activities Are Subject to the EAR?

• Export and re-exports of “items subject to the EAR”

• “Deemed exports “of U.S. origin technology and source code

• U.S. persons’ assistance related to the nuclear explosive devices, chemical or biological weapons, missile technology as described in §744.6 of the EAR

What Items Are Subject to the EAR?

• Commodities, software and technology physicallylocated in the U.S. (including items in-transit through the U.S. and items located in Foreign Trade Zones)

• All U.S. origin commodities, software and technology, wherever located in the world

• U.S. origin parts, components, materials incorporated abroad or commingled abroad with foreign software/technology where the US origin content exceeds de minimis levels

• Certain foreign-made direct products of U.S. origin technology or software

SNAP-R/CCATS for ECCN Classification Requests

• CCATS: Commodity Classification Automated Tracking System

• SNAP-R: Simplified Network Application Process – Redesign

“Exports” Defined• Export:

– An actual shipment or transmission of items from U.S. to foreign country

• Can include physical, electronic, verbal or visual shipment/transmission

• Items such as hardware, software, and/or technology

• Deemed Export:

– Release of technology or source code from U.S. national to foreign persons, whether in the U.S. or abroad

– Release is deemed to be an export to the individual’s home country

– Foreign Persons

• Any individual that is not a U.S. citizen or national, lawful permanent resident (‘green card’ holder), asylee or refugee

• Re-export:

– Shipment or transmission of items subject to the EAR from one foreign location to another (third country)

Key Steps to Determining Whether an Export License is Required

• WHAT IS IT?

• WHERE IS IT GOING?

• WHO WILL RECEIVE IT?

• WHAT IS IT BEING USED FOR?

Commerce Control List (EAR 15 CFR Part 774)

• Category 0 – Nuclear Materials, Facilities, and Equipment

• Category 1 – Materials, Chemicals, Microorganisms, and Toxins

• Category 2 – Materials Processing

• Category 3 – Electronics

• Category 4 – Computers

• Category 5 – Telecommunications, Information Security

• Category 6 – Sensors and Lasers

• Category 7 – Navigation and Avionics

• Category 8 – Marine

• Category 9 – Propulsion Systems, Space Vehicles and Related Equipment

EAR Licensing: Item (WHAT) + Destination (WHERE)

• There are “Reasons for Control” associated with each Export Control Classification Number (ECCN).

• Each item has only one correct ECCN.

• Each country on the Commerce Country Chart (CCC) has distinct licensing requirements based on a Reason for Control.

• If the item is controlled for a reason which requires a license to the proposed destination country, a license must be obtained.

• License exceptions may be listed under the ECCN or in Part 740 of the EAR

Commerce Country Chart

License Exceptions

1. If a license is required as determined by ECCN + destination country, and

2. No license exceptions apply,

3. A DOC license will be required.

TO RECAP:

WHO: End-User Assessment• There are various U.S. government lists that may prohibit dealings with

certain parties

• The prohibition will depend on the individual and the type of transaction

• It is important to assess each potential match separately

• Examples:

– BIS “Entity List”, “Unverified List”, and “Denied Persons List”

– OFAC Specially Designated Nationals List

– DDTC Debarred Parties List

– U.S. Department of State Nonproliferation Sanctions List

Practice Tip: Restricted Party ResolutionIf you get a “hit” or potential match when screening parties to your

transactions – it is important to know what list it is coming from, the extent of the prohibition, and what it means to comply.

WHAT: End-Use Inquiry

• General Prohibitions (“GP”)

– GP 1 – 3: Relate to items on the CCL – ECCN (WHAT) + destination (WHERE)

– GP 4 – 10: License requirements for enumerated prohibited end-users (WHO), end-uses (WHAT), and embargoed/sanctioned countries (WHERE)

His

tori

call

y– If you knew, or had

reason to know, your export could support a proliferation activity, including nuclear, chemical/biological, or missile proliferation in a country of concern, a license would be required.

No

w– However, end-use

restrictions continue to evolve and now include specific products

In addition to the GP, it is important to pay attention to the end-user and end-user based control policies in Part 744

Th

e F

utu

re – Expect end-user and

end-use restrictions to continue to evolve

Let’s Recap

WHAT is it? Hardware/software/technology, function, and technical parameters?

WHERE is it going?

License required per Commerce Country Chart?If so, is a license exception available?

WHO will receive it?

Is your end-user named on any U.S. government restricted party lists?

WHAT will it be used for?

Check Part 744 for specific end-user and end-use controls, either product and/or country specific

Consequences of Non-Compliance• Types of Responses to Apparent Violations:

– No Action

– Warning Letters

– Administrative Enforcement Cases

• Civil Monetary Penalties:

– Greater of $295,141 or

– Twice the amount of the underlying transaction

• Criminal Referral:

– Up to 20 years in prison

– $1 million in fines

• Other Administrative Sanctions or Actions:

– License revision, suspension, or revocation

– Denial of export privileges

– Exclusion from practice

Questions?

Date post:	12-Jul-2020
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COMMODITY JURISDICTION AND U.S. EXPORT TRANSACTIONS · 2019-07-24 · U.S. Export Commodity...

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