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STATUTORY AUTHORITIES Why does America have Export Control Laws? Simply put, export controls implement U.S. national security and foreign policies, protect U.S. interests at home and abroad, and enforce other internationally mandated economic and trade sanctions. These interests, covered in such laws as the Homeland Security Act and the USA Patrioit Act, include protection against the threat of terrorism, military action, and nuclear, chemical, and biological warfare, as well as disruptions due to the short supply of critical goods. There are export controls on certain goods and services (such as technology transfer) that apply to any destination world-wide. There are also controls that apply only to specific countries, whatever the goods and services supplied, and others that apply to certain goods to some countries. As well, there are export control orders against particular individuals, organizations, and entities, such as those named on the Restricted Party Screening (Denied Party Screening) lists. A key example of export controls is the Commerce Control List [Part 738 of the Export Administration Regulations (EAR)]. This list details sensitive goods, giving one or more of fourteen different Reasons for Control for each classified good. These reasons are:
Under the Commerce Control List, exports require an export license if one of these Reasons for Control is in force for the goods to the exporter's country of destination. In addition, some Reasons for Control are in some cases not regulated by the Country Chart, usually naming a particular restricted country such as North Korea. What's the definition of an exporter? The U.S. principal party in interest is the exporter, except in certain routed transactions (EAR §758.3). Note that freight forwarders are not generally the principle party in interest. Under the Foreign Trade Statistics Regulations (15 CFR Part 30) the "exporter" will always be the U.S. principal party in interest. What are an exporter's legal responsibilities? In addition to complying with all laws and regulations, the exporter must determine the licensing authorities governing its goods, and obtain the appropriate license or other authorization. The exporter may hire forwarding or other agents, but doing so does not generally relieve the exporter of compliance responsibilities. All parties that participate in transactions subject to the EAR must comply with the EAR (EAR §758.3). What does the EAR say? The principal statutory authority for the Export Administration Regulations is the Export Administration Act of 1979 (in effect under the International Emergency Economic Powers Act, awaiting the forthcoming ratification of the EAA of 2001). It is administered by the Bureau of Industry and Security (BIS) — formerly the Bureau of Export Administration (BXA) — of the Department of Commerce. The EAA is "An Act to provide authority to regulate exports, to improve the efficiency of export regulation ...." Section 2 of the Act contains the following policy statements:
In addition to the EAA, export controls are put into effect through regulations, sanctions and embargoes, Executive Orders, and Federal Register notices. These regulations and orders spell out your rights and your responsibilities as an exporter. In short, what you must do, what you must not do, and what will happen if you fail to comply. What other government departments or agencies are involved in controlling exports? In addition to the Bureau of Industry and Security (BIS), which regulates the export of sensitive goods and technologies, enforces export control, antiboycott, and public safety laws, and monitors the viability of the U.S. defense industrial base, there are 15 main departments or agencies making regulations and adding to the lists of controlled goods and entities. Included among them are:
I know what an export is, but what is a "reexport" and why is it important? "Reexport" doesn't mean export again, as one might think. "Reexport" is a term defined in the EAR meaning the shipment or transmission of items subject to the EAR from one foreign country to another foreign country. What this means is, for purposes of the EAR, the export or reexport of any items subject to the EAR that will transit through a country, be transshipped from one country to a new country, or are intended for reexport to the new country, are deemed to be exports to the new country (see EAR §734.2(b)). That means that the exporter is responsible for the controlled item and its transportation, regardless of changes in ownership over the course of time anywhere in the world. What is "technology"? As stated in Part 772 of EAR, "technology" is the specific information necessary for the "development," "production," or "use" of a product. The General Technology Note states that the "export of technology ... is controlled according to the provisions of each Category." It further states that "[t]echnology required for the development, production, or use of a controlled product remains controlled even when applicable to a product controlled at a lower level." The terms "required," "development," "production," "use," and "technology" are all defined in Part 772 of the EAR. Controlled technology is that listed on the Commerce Control List. What technologies are subject to government controls? Generally, technologies subject to the EAR are those which exist in the United States, or are of U.S. origin, in whole or in part. Most are proprietary. Technologies which require licensing for transfer to foreign nationals are often dual-use (that is, they have both civil and military applications) and are subject to one or more control regimes, such as National Security, Nuclear Proliferation, Missile Technology, or Chemical and Biological Warfare. Note that foreign technology which includes a de minimus level of U.S.-origin technology is also considered to be subject to the EAR. Technologies which may require an export license are those subject to the EAR, which are listed in the Commerce Control List. See EAR Parts 734, 738, and 774. Some technologies are under the exclusive jurisdiction of other agencies of the U.S. government and are not subject to the EAR. These include defense services, which are administered by the State Department, and technology related to the production of special nuclear materials, which is administered the Energy Department. Some technologies do not require any authorization because they are already "publicly available." These include patent applications; publicly available technology and software (other than software and technology controlled as encryption items) that are already published or will be published; technology which arises during or as a result of fundamental research; or technology which is educational. See EAR Part 734 for details. What is the "deemed export" rule? An export of technology or source code (other than encryption source code) is "deemed" to take place when it is released to a foreign national within the United States (see EAR §734.2(b)(2)(ii)). How do I know if a foreign national would be subject to the "deemed export" rule? Any foreign national is subject to the "deemed export" rule, except a foreign national who (1) is granted permanent residence, as demonstrated by the issuance of a permanent resident visa (i.e. a "Green Card"); or (2) is granted U.S. citizenship; or (3) is granted status as a "protected person" under 8 U.S.C. 1324b(a)(3). This includes all persons present in the U.S. as tourists, students, business people, scholars, researchers, technical experts, sailors, airline personnel, salespeople, military personnel, and diplomats. As noted, one exception to this general statement is a "protected person." "Protected persons" include political refugees and political asylum holders. Be aware that individuals seeking "protected person" status must satisfy all of the terms and conditions set forth in 8 U.S.C. 1324b(a)(3). It should be emphasized that although the deemed export rule may be triggered, this does not necessarily mean that a license will be required. What about shipments to Canada? Compliance with the EAR includes shipments to America's closest trading partner, Canada. In addition, CFR 15 [Commerce and Foreign Trade] requires a Shipper's Export Declaration (SED) for shipments:
What are violations under the EAA and/or the EAR? Section §764.2 specifies actions and omissions that constitutes a violation of the Export Administration Act (EAA) and/or the Export Administration Regulations (EAR), and the sanctions that may be imposed for these violations. References to the EAR are references to 15 CFR chapter VII, subchapter C. Antiboycott violations are described in part 760 of the EAR, and the violations and sanctions specified in part 764 also apply to conduct relating to part 760, unless otherwise stated. These violations include:
What are the penalties or sanctions for a violation under the EAA and/or EAR? There's a lot of detail in the regulations about penalties — mostly in EAR §764. A typical instance is in EAR §764.3(b)(2)(i), here reproduced right from the regulations:
The fines and prison terms have been highlighted. These fines for willful criminal convictions will be going up quite a bit when the new Export Administration Act is passed (to $10 million, or ten times the value of the export). Still, $1 million for the company, and $250,000 and 10 years in jail for an individual is still pretty hefty. And American businesses are convicted and fined, and American business people do go to jail. Here are some SAMPLE CASES. In short — while varying somewhat depending on the nature of the violation — large fines and prison terms. There's also administrative sanctions (including civil penalties, denial of export privileges, exclusion from practice), criminal sanctions (fines and imprisonment), statutory sanctions, seizure and forfeiture, and cross-debarment, denial of licenses or approvals, and suspensions of the right to contract with the United States Government. Call toll-free 1-877-328-7866 and talk to one of our global
trade compliance consultants. They'll help you analyze your requirements, evaluate
your options, and provide focused product demonstrations. Or send an email to
info@eCustoms.com. |
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