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The Bureau of Industry and Security (BIS) under the US Department of Commerce is tasked with advancing national security, foreign policy and economic interests through developing export control policies, issuing export licenses and developing programs that build a defense industrial base. BIS enforces this mission through prosecuting businesses that fail to follow the imposed export regulations. Federal Regulation Title 15- Commerce and Foreign Trade (15 CFR) provides all of the information and empowering federal statutes for foreign trade regulation. The Export Administration Regulations (EAR) subchapter sets forth all of the relevant guidelines that BIS uses for their restrictions. These guidelines are screened using the Automated Export System (AES) where exporters file their Electronic Export information (EEI) detailing all of the information about their transaction. Generally, the three types of commerce exports are licensed, license exceptions or authorizations and no license required (NLR), all of which may apply to an export, reexport or in country transfer so it is important to understand the transaction in its entirety to comply with the EAR.
Determining Export Control Requirements
When an exporter is moving through the logistics of sending cargo the EEI report is a major gatekeeper that will notify BIS if the export is prohibited or has any regulatory problems. As an exporter, a business may be confused as to which type of export their goods fall under and the appropriate licensing but BIS offers four key questions for the exporter to explore in making their determination.
Who are the Parties to the Export Transaction?
Each party in the transaction should be specifically identified and verified. Parties to an export transaction include, but are not limited to, the US principal party in interest (USPPI), carrier, intermediate consignee, ultimate consignee and foreign principal party in interest (FPPI). All of the liability for inappropriate licensing falls upon the USPPI, who will also be the exporter in these transactions, so nearly all of the responsibility for party verification falls upon them.
Once all parties have been verified their information should be screened through all
of the restrictions lists set forth by export regulating entities. The Commerce Department manages the Denied Persons, Entity, and Unverified lists which are all aggregated in the Consolidated Screening list. The Office of Foreign Asset Control under the US Department of Treasury manages a variety of lists with the most prominent list being their Specially Designated Nationals and Blocked Persons List (SDN List). Lastly, the State Department has compiled their Nonproliferation and Debarred Parties lists. The information for each party involved should be checked against all of these lists for each transaction. BIS offers a completely consolidated list on their website as well as an integrated search tool on their site.
How is the Item Being Used?
Understanding how the cargo will be used falls upon information given by both the commodity description and written statements from the ultimate consignee. The commodity description provided by the exporter or initial holder of the cargo should be as detailed and technical as possible. This lends to identifying and classifying the cargo as well, which is further discussed below. The ultimate consignee should give a written description of their intended use of the cargo to the USPPI because some goods may have a wide array of end uses, some of which may require a special license to ship. BIS advises exporters to pay special attention to technology that is commonly used in both medical practices and weapons assembly as all technology that has a weaponized end use will require a special license.
What is the Item?
Exported goods regulated by the EAR fall under either Commerce Control List (CCL) or EAR99 classifications. The EAR99 classifies most common commercial items, many of which are NLR but as noted above the item’s end use or other factors in the transaction may prompt the need for a license. Goods that are classified under the CCL generally require a license unless an exception is granted. Each item is categorized by an Export Control Classification Number (ECCN) which breaks down the category, type of product and type of control for the given goods. To understand if an exception is in place for the transaction an ECCN can be used in conjunction with the EAR's Commerce Country Chart to determine if a license is needed when shipping to a specific country.
Where is the export destined to?
The final destination of the export can ultimately determine the export classification and which type of license is needed. The USPPI should be very clear as to who the ultimate consignee is and what country they are in. As noted above the US Commerce, Treasury and State departments all have lists of designated individuals and entities that exporters are prohibited from interacting with. On some of these lists are entire countries upon which heavy regulations and export guidelines are placed. The commerce department offers their Commerce Country Chart which allows an exporter to determine whether they need a license through identifying their destined country as well as the classification of their goods. Countries such as Cuba, Iran Sudan, Syria and North Korea with special designations and embargoes are regulated under part 742 and 746 of the EAR and will always need a license for export transactions.
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