Is Your Company Subject to Federal Export Laws and Regulations
Federal Export Laws and Regulations: What You Need to Know
Exporting is a multi-trillion-dollar business, with U.S. companies exporting approximately $2.5 trillion in goods worldwide in 2018 alone. While larger corporations export tens or hundreds of millions of dollars worth of goods annually, smaller businesses also contribute significantly to this figure. However, many small business owners and executives are unaware that their operations subject them to federal export laws and regulations.
Are you one of these business owners? If so, it’s essential to determine whether your company is obligated to comply with federal export compliance requirements as soon as possible.
At Spodek Law Group, we represent businesses nationwide regarding federal export compliance – regardless of size or industry sector. Our team can help you assess your company’s needs and create a custom-tailored program designed specifically for your organization.
What Defines an “Export”?
According to federal law, an “export” occurs when a physical item ships outside the United States or when there is an oral, written, electronic or visual disclosure transferred from the United States to another country. This definition applies not only tangible items but also intangible ones such as software code and other forms of intellectual property (IP).
There are five primary ways in which a company can “export” an item:
1) Shipment of Products
2) Hand Carrying Products
3) Transferring Data
4) Re-Exporting Products/Data
5) Furnishing Defense Services
Under each category above exists several formats that could raise questions about compliance with export control regulations.
How Does the US Government Regulate Exports?
While not every product requires pre-approval from the US government before being exported overseas; virtually all products fall under some form of regulation by Federal Export Laws & Regulations.
The specific items subject to government approval are referred to as “controlled exports,” which involve unique compliance obligations requiring licenses from agencies like:
– U.S. Department of Commerce (DOC) Bureau of Industry and Security (BIS)
– The State Department (U.S. Department of State, DOS)
– The Office of Foreign Assets Control (OFAC)
The majority of commercial exports fall under the oversight of BIS, which administers the federal Export Administration Regulations (EAR). These regulations apply to physical products as well as transmittable data and technology assets.
One critical aspect is the Commerce Control List (CCL), where all exports are assigned an Export Control Classification Number or ECCN – a five-digit alphanumeric code that identifies the category and tangible/intangible nature of the product. There are 11 categories under CCL with their respective five product groups.
If an item does not come under any CCL category or product group, it is given an ECCN or “EAR 99.” In most cases, EAR99 items are low-tech consumer goods that do not require licensing obligations from BIS, OFAC or DOS.
Another primary set of legislation governing US exports is International Traffic in Arms Regulations (ITAR), which applies to defense articles, technical data & defense services supplied for military use. Companies involved in manufacturing/distributing technologies/weapons/defense assets must treat compliance with ITAR critically important.
Does Your Company Require a License to Export?
Businesses have three primary options available when exporting items/data from the United States:
1) Get a license
2) Depend on a license exception
3) Export under No License Required provisions
Under EAR & ITAR exist several classifications subject to licensing through BIS/DDTC respectively.
For example: AT-Anti-Terrorism/CB-Chemical & Biological Weapons/CC-Crime Control/CW-Chemical Weapons Convention/EI-Encryption Items/FC-Firearms Convention/MT-Missile Technology/NS-National Security/NP-Nuclear Nonproliferation/RS-Regional Security/SS-Short Supply/XP-Computers/SI-Significant Items.
If an item or electronically-stored information comes under one of these classifications, the Commerce Country Chart in 15 C.F.R. § 738 Supplement 1 must be checked to determine if a license is necessary based on the country it will be exported to.
Under EAR, there are licensing exceptions for LVS (Shipments of limited value), GBS (Shipments to Country Group B countries), CIV (Civil end-users), TSR (Technology and software under restriction), APP (Computers), TMP (Temporary imports, exports, re-exports & transfers – in-country) RPL(Servicing and replacement of parts/equipment); GOV(Governments/international organizations/international inspections); GFT(Gift parcels/humanitarian donations); TSU(Technology/software-unrestricted); BAG(Baggage); AVS(Aircraft/vessels/spacecrafts);
APR(Additional permissive exports) ENC(Encryption commodities/software/technology) AGR(Agricultural commodities)
CCD(Consumer communications devices)
STA(Strategic Trade Authorization license exceptions)
SCP(Support for the Cuban People)
Conclusion
In conclusion, federal export laws and regulations apply not only to large corporations but also small businesses that contribute significantly to this multi-trillion-dollar industry. It’s essential for business owners/executives to understand their obligations regarding compliance with federal export control regulations.
At Spodek Law Group, we can help you assess your company’s needs and create a custom-tailored program designed specifically for your organization.