Key Terminologies of Export Compliance

Introduction to Export Compliance Key Terminology

Understanding key export compliance terminology is crucial for raising awareness among stakeholders within an organization. This knowledge ensures that businesses can navigate the complex landscape of export compliance effectively and responsibly.

Primary U.S. Export Regimes
The primary U.S. export control regimes include the Export Administration Regulation (EAR), International Traffic in Arms Regulations (ITAR), regulations administrated by the Office of Foreign Assets Control Regulations (OFAC), Foreign Corruption Practice Act (FCPA), and other agencies regulations.

Export Administration Regulations (EAR)
The U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) administers and enforces the EAR, codified at 15 C.F.R. Part 730-774. In general, the term “subject to the EAR” includes all Items in the United States, U.S.-origin Items outside of the United States, and certain foreign-origin Items outside the United States that incorporate, or were manufactured using, U.S.-origin Items. EAR controls commercial and military items that are not on the United States Munitions List (USML) or other export control lists such as the Nuclear Equipment and Materials List.

International Traffic in Arms Regulations (ITAR)
ITAR is the export control regulations adopted under the Arms Export Control Act. The U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”) administers and enforces the ITAR, regulating the manufacture, temporary import, and export of defense articles, and the export of defense services and technical data pertinent to defense articles and defense services. The ITAR list of controlled military Items is known as the United States Munitions List (“USML”). Technical data is generally considered to include information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of a defense article, including blueprints, drawings, photographs, plans, instructions, and documentation. Exporters who come within the DDTC’s jurisdiction must register with the DDTC. Under the ITAR, the DDTC must also approve contracts for technology transfers before such technology transfers can take place.

OFAC
The Office of Foreign Assets Control (OFAC) under the U.S. Department of Treasury administrates economic sanction programs against some foreign governments and individuals and “entities” who are engaged in or in support of terrorism or drug trade. OFAC makes it unlawful for U.S. persons and other persons within the jurisdiction of the United States to engage in Prohibited Transactions with sanctioned parties on the Specially Designated Nationals List (SDN) without appropriate authorization by OFAC or under an applicable statutory exemption. OFAC provisions cover U.S. persons outside the United States as well as its foreign branches and affiliates. Violations of OFAC will cause injury to the U.S. national and foreign policy interests. U.S. sanctions programs vary in scope. Some are broad-based and oriented geographically (i.e. Cuba, Iran). Others are “targeted” (i.e. counter-terrorism, counter-narcotics) and focus on specific individuals and entities. These programs may encompass broad prohibitions at the country level as well as targeted sanctions.

FCPA
The Foreign Corrupt Practice Act (FCPA), 15 U.S.C. §§78dd-1, et seq., prohibits U.S. Persons and certain foreign issuers of securities, whether acting on behalf of an organization or not, from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. Violations of FCPA may also violate other US statutes such as the mail and wire fraud statutes, 18 U.S.C. § 1341, 1343, and the Travel Act, 18 U.S.C. §1952. FCPA is not only relevant to multinational corporations, but it also applies to even the smallest companies who have contact outside the United States, and past compliance history does not guarantee future acts not to violate the laws.

Deemed export
The EAR defines Deemed Export as releasing or otherwise transferring “technology” or source code (but not object code) to a foreign person in the United States. Any Person who does not fall under the definition of a “United States Person” is a foreign person.
“Deemed Exports” is, strictly speaking, an EAR term. The same concept exists within the definition of Export under ITAR Section 120.17 (a)(1) where export includes (1) releasing or transferring technical data to a foreign person in the United States; (2) Releasing or transferring a defense article to an embassy or to any of its agencies or subdivisions in the United States; and (3) Performing a defense service on behalf of, or for the benefit of, a foreign person in the United States.

United States Person
The term “United States Person” means any United States citizen, permanent resident alien, and lawfully protected political refugees or political asylum holder; the term also includes any organizations established to do business under the laws of the United States.

CCL
The BIS has published a detailed list of products and technologies that are considered controlled, and that would require an export license for exports to certain destinations unless a license exception is applicable. This list is known as the Commerce Control List (“CCL”) and is found in Supplement No. 1 to EAR Part 774. The CCL is very precise and technically detailed. Using the CCL and the EAR’s Country Chart (found in Supplement No. 1 to EAR Part 738), one can determine whether a BIS export license is required to export a controlled Item to a particular end-user in a particular country. EAR requires a license based on the item’s classification, end-use, parties, countries, and red flags; there is a wide range of opportunities for export or reexport without a license as authorized by No License Required (NLR) or a license exception.
ECCN
The Export Control ClassificationNumber (ECCN) is an alpha-numeric code that consists of the item category, its product group and the primaryreason for control. The Commerce Control List (CCL) generally contains a list of sensitive products, technologiesand software, and the Commerce Country Chart (CCC) contains the reason for control and destination countries. TheCCC generally allows you to determine the export and re-export licence requirements for most items listed on theCCL, which are based on the reasons for control listed in the ECCN that applies to the item (see 15 CFR § 738.3(a)).
If an item falls within the jurisdiction of the EAR, but is not on the CCL, then it will be designated as EAR99.Exporting EAR99 items may not require a licence; however, a licence may be required if the item is exported tocertain countries, to an end user of concern, or in support of a prohibited end use.
Dual-Use Item
Dual-use items are commodities, software, or technology that have both commercial and military or proliferation applications. The BIS of DOC has the jurisdiction to control dual-use exports that have an influence on the national security of the countries.
Dual-use items are commodities, software, or technology that have both commercial and
military or proliferation applications. These include items related to supercomputing and exascale
computing, artificial intelligence, advanced manufacturing equipment and materials, quantum computing, and
biosciences, along with firearms and related materiel. Since they are items on the Wassenaar Arrangement
Munitions List (WAML) or were formerly on the U.S. Munitions List (USML), controlled items listed
under 600 series Export Control Classification Numbers (ECCNs) are enumerated on the Commerce
Control List (CCL). Likewise, certain satellite-related items formerly listed on the USML are now
enumerated on the CCL in the 9×515 ECCNs, while certain firearms and ammunition transferred to the
CCL from the USML are listed under the 0x5zz series ECCNs.
Commodity Jurisdiction
Determination of commodity jurisdiction is the first step for carrying out the compliance program. Whether an item is commercial or dual-use under the jurisdiction of the BIS or it is defense articles or technology under the jurisdiction of the DDTC must be determined before proceeding with any transaction. If any doubt exists for a particular item, the exporter shall submit a Commodity Jurisdiction (CJ) request to the Directorate of Defense Trade Controls (DDTC) of the Department of State according to the DDTC procedures. A CJ determination will only identify the proper licensing authority for an item and is not a license or approval to export.

Learn More About Export Compliance
TradeSmart USA LLC is a trade compliance consulting firm. Our experts can share more about export compliance information with you. Contact us today for more information.