What are export control regulations?
Export control regulations are federal laws that prohibit the unlicensed export of certain commodities or information for reasons of national security or protections of trade. … The nature of the export has actual or potential military applications or economic protection issues.
The Export Administration Regulations (EAR) are a set of regulations found at 15 C.F.R. § 730 et seq. They are administered by the Bureau of Industry and Security, which is part of the US Commerce Department. In general, the EAR govern whether a person may export a thing from the U.S., reexport the thing from a foreign country, or transfer a thing from one person to another in a foreign country. The EAR apply to physical things (sometimes referred to as “commodities”) as well as technology and software.
Scope of the Export Administration Regulations
The EAR have very broad application. With only the exceptions noted below, the EAR apply to the following categories of things:
- All items in the United States, including in a U.S. Foreign Trade Zone or moving intransit through the United
- States from one foreign country to another;
- All U.S. origin items wherever located;
- Foreign-made commodities that incorporate controlled U.S.-origin commodities, foreign-made commodities that are ‘bundled’ with controlled U.S.-origin software, foreign-made software that is commingled with controlled U.S.-origin software, and foreign-made technology that is commingled with controlled U.S.-origin technology in certain quantities (see the “de minimis” rules found at 15 CFR part 734);
- Certain foreign-made direct products of U.S. origin technology or software, as described in 15 CFR §736.2(b)(3); and
- Certain commodities produced by any plant or major component of a plant located outside the United States that is a direct product of U.S.-origin technology or software, as described in §736.2(b)(3) of the EAR.
Exceptions to EAR Applicability
The EAR do not apply, however, to the following:
- Items that are exclusively controlled for export or reexport by the following departments and agencies of the U.S. Government which regulate exports or reexports for national security or foreign policy purposes:
- Department of State. The International Traffic in Arms Regulations (22 CFR parts 120-130) administered by the Directorate of Defense Trade Controls relate to defense articles and defense services on the U.S. Munitions List (22 CFR part 121). Section 38 of the Arms Export Control Act (22 U.S.C. 2778). (Also see paragraph (b)(1)(vi) of this section).
- Treasury Department, Office of Foreign Assets Control (OFAC). Regulations administered by OFAC implement broad controls and embargo transactions with certain foreign countries. These regulations include controls on exports and reexports to certain countries (31 CFR chapter V). Trading with the Enemy Act (50 U.S.C. app. section 1 et seq.), and International Emergency Economic Powers Act (50 U.S.C. 1701, et seq.)
- U.S. Nuclear Regulatory Commission (NRC). Regulations administered by NRC control the export and reexport of commodities related to nuclear reactor vessels (10 CFR part 110). Atomic Energy Act of 1954, as amended (42 U.S.C. part 2011 et seq.).
- Department of Energy (DOE). Regulations administered by DOE control the export and reexport of technology related to the production of special nuclear materials (10 CFR part 810). Atomic Energy Act of 1954, as amended (42 U.S.C. section 2011 et seq.).
- Patent and Trademark Office (PTO). Regulations administered by PTO provide for the export to a foreign country of unclassified technology in the form of a patent application or an amendment, modification, or supplement thereto or division thereof (37 CFR part 5). BIS has delegated authority under the Export Administration Act to the PTO to approve exports and reexports of such technology which is subject to the EAR. Exports and reexports of such technology not approved under PTO regulations must comply with the EAR.
- Department of Defense (DoD) and Department of State Foreign Military Sales (FMS) Program. Items that are subject to the EAR that are sold, leased or loaned by the Department of Defense to a foreign country or international organization under the FMS Program of the Arms Export Control Act pursuant to a Letter of Offer and Acceptance (LOA) authorizing such transfers are not “subject to the EAR,” but rather, are subject to the authority of the Arms Export Control Act
- Prerecorded phonograph records reproducing in whole or in part, the content of printed books, pamphlets, and miscellaneous publications, including newspapers and periodicals; printed books, pamphlets, and miscellaneous publications including bound newspapers and periodicals; children’s picture and painting books; newspaper and periodicals, unbound, excluding waste; music books; sheet music; calendars and calendar blocks, paper; maps, hydrographical charts, atlases, gazetteers, globe covers, and globes (terrestrial and celestial); exposed and developed microfilm reproducing, in whole or in part, the content of any of the above; exposed and developed motion picture film and soundtrack; and advertising printed matter exclusively related thereto.
- Information and “software” that:
- Are published, as described in 15 CFR §734.7;
- Arise during, or result from, fundamental research, as described in 15 CFR §734.8;
- Are released by instruction in a catalog course or associated teaching laboratory of an academic institution;
- Appear in patents or open (published) patent applications available from or at any patent office, unless covered
- by an invention secrecy order, or are otherwise patent information as described in 15 CFR §734.10;
- Are non-proprietary system descriptions; or
- Are telemetry data as defined in Note 2 to Category 9, Product Group E (see supplement no. 1 to 15 CFR part 774).
The EAR contain a list called the Commerce Control List (CCL). The CCL is a limited list of items within the scope of the EAR which merit particular attention because they could potentially have a military use in addition to a commercial use. CCL-listed items are therefore often referred to as “dual use.” The CCL, however, is not an exhaustive list of things that are within the scope of the EAR; to the contrary, the overwhelming majority of things that fall within the scope of the EAR are not listed on the CCL; instead, they are given the designation “EAR99.”
Items that are listed on the CCL are organized according to alpha-numeric designations called “Export Control Classification Numbers” (ECCNs).
The 10 General Prohibitions
The EAR contain a list of rules called the 10 General Prohibitions, which provide as follows:
General Prohibition 1.
You may not, without a license or License Exception, export any item subject to the EAR to another country or reexport any item of U.S.-origin if each of the following is true:
(i) The item is controlled for a reason indicated in the applicable Export Control Classification Number (ECCN), and
(ii) Export to the country of destination requires a license for the control reason as indicated on the Country Chart at part 738 of the EAR.
General Prohibition 2.
You may not, without a license or license exception, reexport or export from abroad foreign-made commodities that incorporate controlled U.S.-origin commodities, foreign-made commodities that are “bundled” with controlled U.S.-origin software, foreign-made software that is commingled with controlled U.S.-origin software, or foreign-made technology that is commingled with controlled U.S.-origin technology if such items require a license according to any of the provisions in the EAR and incorporate or are commingled with more than a de minimis amount of controlled U.S. content, as defined in §734.4 of the EAR concerning the scope of the EAR.
General Prohibition 3.
General Prohibition 3 applies to certain items that are produced outside of the U.S. and that are the “direct product” of U.S. technology or software, or they are developed from a plat which is the “direct product” of U.S. technology or software.
Under General Prohibition 3, you may not, without a license or license exception, reexport any item that meets the direct product test to a destination in Country Group D:1, E:1, or E:2 (See supplement no.1 to part 740 of the EAR). Additionally, you may not, without a license or license exception, reexport or export from abroad any ECCN 0A919 commodities (foreign-made military commodities) that meet the direct product test to a destination in Country Group D:1, D:3, D:4, D:5, E:1, or E:2.
General Prohibition 4.
You may not take any action that is prohibited by a denial order issued under 15 CFR Part 766. These orders prohibit many actions in addition to direct exports by the person denied export privileges, including some transfers within a single country, either in the United States or abroad, by other persons. You are responsible for ensuring that any of your transactions in which a person who is denied export privileges is involved do not violate the terms of the order. Orders denying export privileges are published in the Federal Register when they are issued and are the legally controlling documents in accordance with their terms. BIS also maintains compilations of persons denied export privileges on its Web site at http://www.bis.doc.gov. BIS may, on an exceptional basis, authorize activity otherwise prohibited by a denial order. See 15 CFR §764.3(a)(2).
General Prohibition 5.
You may not, without a license, knowingly export or reexport any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR.
General Prohibition 6.
You may not, without a license or License Exception authorized under part 746, export or reexport any item subject to the EAR to any of the following countries:
- North Korea;
- Russia (with respect to Russian oil and gas industries);
- Crimea region of the Ukraine;
- Iran; and
General Prohibition 7.
U.S. persons may not perform certain activities relating to nuclear explosive devices, missiles, and chemical or biological weapons, as set out in 15 CFR § 744.6.
General Prohibition 8.
Under General Prohibition 8, if you export or reexport an item, it may not pass through any of the following countries without a license :
- North Korea
General Prohibition 9.
You may not violate terms or conditions of a license or of a License Exception issued under or made a part of the EAR, and you may not violate any order issued under or made a part of the EAR.
General Prohibition 10.
You may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item. Nor may you rely upon any license or License Exception after notice to you of the suspension or revocation of that license or exception.
Regulatory Agencies That Control Exports
New exporters are sometimes surprised that U.S. exporting is controlled by more than one set of regulations and more than one primary regulator. There are many regulatory agencies, all with differing regulations, to be aware of:
The Bureau of Industry and Security (BIS)
The Department of Commerce’s Bureau of Industry and Security administers the U.S. export control policy through the EAR. The EAR control the export of dual-use goods and goods that are not controlled by other regulations. The mission of the BIS is to advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.
Directorate of Defense Trade Controls (DDTC)
The U.S. State Department’s Directorate of Defense Trade Controls (DDTC) regulates the export of defense articles under the Arms Export Control Act (AECA). The details of this act are found primarily within the International Traffic in Arms Regulations (ITAR). Goods regulated by the ITAR are detailed within the munitions list and are subject to an export licensing requirement by the State Department. Logically this list includes weaponry and military equipment.
You can review the ITAR here. They include an expanded list of embargoed destinations that goes beyond the embargoes listed within the EAR and allows for a process of statutory debarment. This is administered by the DDTC through the debarred parties list, one of the primary export restricted parties lists.
U.S. Census Bureau
Within the Department of Commerce, the FTR are administered by the Foreign Trade Division of the U.S. Census Bureau. The FTR have a dual purpose. They allow for the collection of statistical trade data, and also provide the tactical information required by the Bureau of Industry and Security and Customs and Border Patrol to perform their export oversight roles.
The FTR are primarily concerned with the reporting of an export shipment. These regulations contain details about the Automated Export System (AES) reporting requirements and exemptions. You can read the FTR here.
Office of Foreign Assets Control (OFAC)
The OFAC of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries. They also enforce sanctions against regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.
There are additional regulatory agencies within the U.S. government that have a hand in exporting activity, including:
- Securities and Exchange Commission (SEC), which is responsible for enforcing the Foreign Corrupt Practices Act (FCPA).
- Department of Justice (DOJ), which enforces the FCPA, and monitors and enforces Restricted Parties Lists for specially designated nationals, including banks.
- Department of Agriculture (USDA) is involved in exporting via agencies like the Animal Plant Health Inspection Service (APHIS), which, among other things, certifies that wood pallets and packaging coming into the U.S. are bug-free.
- Department of Homeland Security—Customs and Border Protection (CBP)
- Department of Energy’s National Nuclear Security Administration, which controls exports related to advancing nuclear nonproliferation in addition to ensuring the integrity and safety of the nation’s nuclear weapons.
- Department of the Interior—U.S. Fish and Wildlife Service has an Office of Law Enforcement that oversees and enforces the import and export of wildlife or wildlife products.