US Export Control
US export controls do not differ significantly from EU rules in that there are three key export control programmes just as in the EU:
- Dual-use controls – the dual-use List
- Arms controls – the Military List
- Economic sanctions
The three US Export Control Programmes are oversighted by these departments:
- US Department of Commerce, Bureau of Industry and Security (BIS) oversees the Export Administration Regulations (EAR) controlling dual-use via the Commerce Control List (CCL).
- US Department of State, Directorate of Defense Trade Controls (DDTC) controls defense articles, defense services, and related technical data via the International Traffic in Arms Regulations (ITAR) managing the US Munitions List.
- US Department of the Treasury, Office of Foreign Assets Control (OFAC) oversees US trade embargoes and manages the Specially Designated Nationals List (SDN).
US Export compliance controls export, re-export, transit and brokering of hardware, software and technology. Further, the US has added so-called Deemed Exports and extraterritorial regulations. Deemed exports are rules regarding disclosure of certain information and types of services to foreign nationals inside the US. The extraterritorial rules involve US regulations prohibiting export of US controlled technology between two foreign entities outside the US. I will come back to this issue later where the “de minimis” rules are also touched. The de minimis rules prevents the US extraterritorial regulations from applying when the amount of US controlled content is less than a certain limit.
Deemed Export controls cover transfers of goods and technology within the US to a foreign national who is not a US citizen or permanent resident (“green card” holder). Deemed Export controls apply to technology transfers under the EAR and ITAR’s technical data and defense services. There are potential impacts on sharing of technology, digitally transmitting technology, storing data electronically (the “cloud issue”), US companies hiring foreigners, and many other issues.
The consequences for illegally exporting US origin technology may be severe:
Criminal: USD 50K to USD 1M or 5 times the value of the export, whichever is greater, per violation, 10 years imprisonment
Civil: Revocation of exporting privilege, fines USD 10K to USD 120K per violation
Criminal: Up to USD 1M per violation and 10 years imprisonment
Civil: Seizure and forfeiture of article, revocation of exporting privilege, up to USD 500K fine per violation
Criminal: Up to USD 1M per violation and 10 years imprisonment
Civil: USD 12K to USD 55K per violation
Other common US export compliance measures involve:
- Export Compliance Programme
- Technology Control Plan
- Technical Assistance Agreement
- Ongoing oversight
- Training and awareness
- Reporting requirements
In export compliance, certain terms are important – yet quite a few of them are poorly defined by the authorities authoring the rules. Many terms are left open for interpretation by industry. Below are some of the terms you should familiarise yourself with when exporting from the US or exporting US components outside the US.
|Broker||“Broker” means any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers or defense articles or defense services in return for a fee, commission or other consideration.
As defined by: International Traffic in Arms Regulations 2011, U.S. Department of State, Directorate of Defense Trade Controls.
|Brokering||“Brokering activities” means acting as a broker as defined in §129.2(a), and includes the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import or a defense article or defense service, irrespective of its origin. For example, this includes, but is not limited to, activities by U.S. persons who are located inside or outside the United States or foreign persons subject to U.S. jurisdiction involving defense articles or defense services of U.S. or foreign origin which are located inside or outside of the United States. But, this does not include activities by U.S. persons that are limited exclusively to U.S. domestic sales or transfers (e.g., not for export or re-transfer in the United States or to a foreign person). For the purposes of this subchapter, engaging in the business of brokering activities requires only one action as described above.
As defined by: International Traffic in Arms Regulations 2011, U.S. Department of State, Directorate of Defense Trade Controls
|Category||The Commerce Control List (CCL) is divided into ten categories: (0) Nuclear Materials, Facilities and Equipment, and Miscellaneous; (1) Materials, Chemicals, “Microorganisms”, and Toxins; (2) Materials Processing; (3) Electronics Design, Development and Production; (4) Computers; (5) Telecommunications and Information Security; (6) Sensors; (7) Navigation and Avionics; (8) Marine; (9) Propulsion Systems, Space Vehicles, and Related Equipment. See §738.2(a) of the EAR.|
|CCL Group||The Commerce Control List (CCL) is divided into 10 categories. Each category is subdivided into five country groups, designated by the letters Country Group A through Country Group E: (A) Equipment, assemblies and components; (B) Test, inspection and production equipment; (C) Materials; (D) Software; and (E) Technology. See §738.2(b) of the EAR.|
|Commodity||Any article, material, or supply except technology and software.|
|Controlled country||Countries designated controlled for national security purposes under authority delegated to the Secretary of Commerce by Executive Order 12214 of May 2, 1980 pursuant to section 5(b) of the EAA. The controlled countries are: Albania, Armenia, Azerbaijan, Belarus, Cambodia, Cuba, the People’s Republic of China, Georgia, Iraq, Kazakstan, Kyrgyzstan, Laos, Macau, Moldova, Mongolia, North Korea, Russia, Tajikstan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam. All of the controlled countries except Cuba are listed in Country Group D:1 of the EAR. Cuba is listed in Country Group E:2. This definition does not apply to part 768 of the EAR (Foreign Availability), which provides a dedicated definition.|
|Cooperating country||A country that cooperated with the former COCOM member countries in restricting strategic exports in accordance with COCOM standards. The “Cooperating Countries” are: Austria, Finland, Hong Kong, Ireland, Korea (Republic of), New Zealand, Sweden, and Switzerland.|
|Country Chart||A chart, found in Supplement No. 1 to part 738 of the EAR, that contains certain licensing requirements based on destination and reason for control. In combination with the CCL, the Country Chart indicates when a license is required for any item on the CCL to any country in the world under General Prohibition One (Exports and Reexports in the Form Received), General Prohibition Two (Parts and Components Reexports), and General Prohibition Three (Foreign Produced Direct Product Reexports). See part 736 of the EAR.|
|Deemed export||An export of technology or source code (except encryption source code) is “deemed” to take place when it is released to a foreign national within the United States. See §734.2(b)(2)(ii) of the Export Administration Regulations (EAR).|
|Dual-use items||Items that have both commercial and military or proliferation applications. While this term is used informally to describe items that are subject to the EAR, purely commercial items are also subject to the EAR (see §734.2(a) of the EAR).|
|Dual-use list||Commerce Control List (CCL). A list of items under the export control jurisdiction of the Bureau of Industry and Security, U.S. Department of Commerce. Note that certain additional items described in part 732 of the EAR are also subject to the EAR. The CCL is found in Supplement No. 1 to part 774 of the EAR.|
|Export||Export means an actual shipment or transmission of items out of the United States. (See §734.2(b) of the EAR.)|
|Exporter||The person in the United States who has the authority of a principal party in interest to determine and control the sending of items out of the United States. Note that the Foreign Trade Statistics Regulations have a different definition for the term “exporter”. Under the FTSR, the “exporter” is the U.S. principal party in interest (see Foreign Trade Statistics Regulations title 15 part 30).|
|Export Control Classification Number – ECCN||The numbers used in Supplement No. 1 to part 774 of the EAR and throughout the EAR. The Export Control Classification Number consists of a set of digits and a letter. Reference §738.2(c) of the EAR for a complete description of each ECCN’s composition.|
|Foreign government agency||For the purposes of exemption from support documentation (see §748.9 of the EAR), a foreign government agency is defined as follows:
(a) National governmental departments operated by government-paid personnel performing governmental administrative functions; e.g. Finance Ministry, Ministry of Defense, Ministry of Health, etc. (municipal or other local government entities must submit required support documentation); or
(b) National government-owned public service entities; e.g., nationally owned railway, postal, telephone, telegraph, broadcasting, and power systems, etc. The term “foreign government agency” does not include government corporations, quasi-government agencies, and state enterprises engaged in commercial, industrial, and manufacturing activities, such as petroleum refineries, mines, steel mills, retail stores, automobile manufacturing plants, airlines, or steamship lines that operate between two or more countries, etc.
|General prohibitions||The 10 prohibitions found in part 734 of the EAR that prohibit certain exports, reexports, and other conduct, subject to the EAR, absent a license, License Exception, or determination that no license is required (“NLR”).|
|Government end-user (as applied to encryption items)||A government end-user is any foreign central, regional or local government department, agency, or other entity performing governmental functions; including governmental research institutions, governmental corporations or their separate business units (as defined in part 772 of the EAR) which are engaged in the manufacture or distribution of items or services controlled on the Wassenaar Munitions List, and international governmental organizations. This term does not include: utilities (including telecommunications companies and Internet service providers); banks and financial institutions; transportation; broadcast or entertainment; educational organizations; civil health and medical organizations; retail or wholesale firms; and manufacturing or industrial entities not engaged in the manufacture or distribution of items or services controlled on the Wassenaar Munitions List.|
|Item||“Item” means “commodities, software, and technology.” When the EAR intend to refer specifically to commodities, software, or technology, the text will use the specific reference.|
|Knowledge||Knowledge of a circumstance (the term may be a variant, such as “know,” “reason to know,” or “reason to believe”) includes not only positive knowledge that the circumstance exists or is substantially certain to occur, but also an awareness of a high probability of its existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person and is also inferred from a person’s willful avoidance of facts. This definition does not apply to part 760 of the EAR (Restrictive Trade Practices or Boycotts).|
|License||Authority issued by the Bureau of Industry and Security authorizing an export, reexport, or other regulated activity. The term “license” does not include authority represented by a “License Exception.”|
|Military commodity.||As used in §734.4(a)(5), Supplement No. 1 to part 738 (footnote No. 3), §740.2(a)(11), §740.16(a)(2), §740.16(b)(2), §742.6(a)(3), §744.9(a)(2), §744.9(b), ECCN 0A919 and ECCN 6A003 ( Related Controls ), “military commodity” or “military commodities” means an article, material or supply except software or technology that is described on the United States Munitions List (22 CFR Part 121) or on the Munitions List that is published by the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, but does not include any item listed in any Export Control Classification Number for which the last three numerals are 018.|
|Munitions List||The U.S. Munitions List. (See 22 CFR parts 120 through 130.) is under the Directorate of Defense Trade Controls (DDTC), the office at the Department of State, formerly known as the Office of Defense Trade Controls and before that as the Office of Munitions Control, responsible for reviewing applications to export and reexport items on the U.S. Munitions List.|
|Person||A natural person, including a citizen or national of the United States or of any foreign country; any firm; any government, government agency, government department, or government commission; any labor union; any fraternal or social organization; and any other association or organization whether or not organized for profit. This definition does not apply to part 760 of the EAR (Restrictive Trade Practices or Boycotts).
U.S. Person . (a) For purposes of §§744.6, 744.10, 744.11, 744.12, 744.13 and 744.14 of the EAR, the term U.S. person includes:
(1) Any individual who is a citizen of the United States, a permanent resident alien of the United States, or a protected individual as defined by 8 U.S.C. 1324b(a)(3);
(2) Any juridical person organized under the laws of the United States or any jurisdiction within the United States, including foreign branches; and
(3) Any person in the United States.
(b) See also §§740.9, 740.14 and parts 746 and 760 of the EAR for definitions of “U.S. person” that are specific to those parts.
U.S. subsidiary. As applied to encryption items, means
(a) A foreign branch of a U.S. company; or
(b) A foreign subsidiary or entity of a U.S. entity in which:
(1) The U.S. entity beneficially owns or controls (whether directly or indirectly) 25 percent or more of the voting securities of the foreign subsidiary or entity, if no other persons owns or controls (whether directly or indirectly) an equal or larger percentage; or
(2) The foreign entity is operated by the U.S. entity pursuant to the provisions of an exclusive management contract; or
(3) A majority of the members of the board of directors of the foreign subsidiary or entity also are members of the comparable governing body of the U.S. entity; or
(4) The U.S. entity has the authority to appoint the majority of the members of the board of directors of the foreign subsidiary or entity; or
(5) The U.S. entity has the authority to appoint the chief operating officer of the foreign subsidiary or entity
|Principal element . (Cat 4)||An element is a “principal element” when its replacement value is more than 35% of the total value of the system of which it is an element. Element value is the price paid for the element by the manufacturer of the system, or by the system integrator. Total value is the normal international selling price to unrelated parties at the point of manufacture or consolidation of shipment.|
|Re-export||“Reexport” means an actual shipment or transmission of items subject to the EAR from one foreign country to another foreign country. For purposes of the EAR, the export or reexport of items subject to the EAR that will transit through a country or countries, or be transshipped in a country or countries to a new country, or are intended for reexport to the new country, are deemed to be exports to the new country. (See §734.2(b)of the EAR.) In addition, for purposes of satellites controlled by the Department of Commerce, the term “reexport” also includes the transfer of registration of a satellite or operational control over a satellite from a party resident in one country to a party resident in another country.|
|Reasons for Control||Reasons for Control are: Anti-Terrorism (AT), Chemical & Biological Weapons (CB), Chemical Weapons Convention (CW), Crime Control (CC), Encryption Items (EI), Firearms Convention (FC), Missile Technology (MT), National Security (NS), Nuclear Nonproliferation (NP), Regional Stability (RS), Short Supply (SS), Significant Items (SI), Surreptitious Listening (SL) and United Nations sanctions (UN). Items controlled within a particular ECCN may be controlled for more than one reason.|
|Schedule B numbers||The commodity numbers appearing in the current edition of the Bureau of the Census publication, Schedule B Statistical Classification of Domestic and Foreign Commodities Exported from the United States. (See part 758 of the EAR for information on use of Schedule B numbers.)|
|Technology||(General Technology Note)—Specific information necessary for the “development”, “production”, or “use” of a product. The information takes the form of “technical data” or “technical assistance”. Controlled “technology” is defined in the General Technology Note and in the Commerce Control List (Supplement No. 1 to part 774 of the EAR).
N.B.: Technical assistance—May take forms such as instruction, skills training, working knowledge, consulting services.
Note: “Technical assistance” may involve transfer of “technical data”.
Technical data may take forms such as blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals and instructions written or recorded on other media or devices such as disk, tape, read-only memories.
|Transfer||A shipment, transmission, or release to any person of items subject to the EAR either within the United States or outside the United States. In-country transfer/transfer (in-country) . The shipment, transmission, or release of items subject to the EAR from one person to another person that occurs outside the United States within a single foreign country.|
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