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The Export Administration Regulations (EAR) subchapter of Federal Regulation Title 15 (15 CFR) lists out general prohibitions and factors for determination of applicability in Part 736.2. The factors that will alert an exporter of possible prohibitions of their transactions are the classifications of the cargo, cargo final destination, the end user, end use of the cargo and the conduct of how the transaction is effected. The following ten general prohibitions list out conduct that an exporter should not engage in without the appropriate license. License exceptions, only apply to general prohibitions 1, 2, 3 and 8. If a license exception conflicts with any of the other prohibitions, the prohibition overrides the exception unless there is special consideration or scenarios that are referenced in EAR Part 746.
General Prohibitions
Export and reexport of controlled items to listed countries
Reexports and export from abroad of foreign made items with more than a de minimis amount of controlled US content
Reexport and export from abroad of Foreign produced direct product of U.S. tech and software
Denial orders
Export or reexport to prohibited end users or end users
Export or reexport to embargoed destinations
Support of Proliferation activities
In transit shipments and items to be unladen from vessels or aircraft
Violation of any order, terms and conditions
Proceeding with transactions with knowledge that a violation has occurred or is about to occur
Most of the general prohibitions are straightforward and the title gives the necessary scope of the provision but if greater insight is needed, each prohibition has a description in EAR Part 736.2. Some of the prohibitions have information about their applicability to certain country groups or export types while also offering further definitions. Prohibition 4 prohibits businesses from conducting any type of export that falls under EAR due to an official order from the Bureau of Industry and Security revoking the business’s privilege to export. A denial order is issued for businesses that have committed regular or particularly egregious violations to the EAR. Prohibition 8 in part prohibits the interaction with cargo that is knowingly passing through one of the listed or prohibited countries found in the regulation.
Violations
EAR Part 764.2 explicitly states the actions that would constitute a violation of the general prohibitions. There are eleven actions ranging from failure to comply with recordkeeping to conspiracy. This list should be familiar to any exporter that regularly exports cargo that is subject to the EAR because violations do have a strict liability standard with BIS often holding businesses accountable for having reasonably constructive knowledge. EAR Part 764.3 describes how administrative, criminal and other sanctions can be imposed on an exporter that commits a violation. Codified under each type of sanction are classifications for actions that will lead to those violations and the extent of punitive action that will be taken given the circumstances.
BIS Compliance Activities
BIS offers general activities that should be done regularly by exporters to both comply with the EAR and avoid potential violations.
• Use watch list to review all license application parties
• Prepare “bona fides” reports on foreign transaction parties for licensing and law
enforcement support
• Review exports using the Automated Exports System (AES)
• Review and share with industry where possible, intelligence information
• Encourage voluntary self disclosures
• Check end users and end uses after export via post shipment verifications
• Leverage interagency partners in review of visa applications
• Maintain on-site “outreach” and license exception document reviews
• Uphold an Exporter compliance program of best practices, education and training
• AES edits and error messages created with Census to enhance compliance for AES
filers
The checklist of actions above are extremely helpful in understanding how to avoid committing sanctions violations while also keeping systems in place to avoid worsening the punitive action once a violation is discovered. All of these elements should be incorporated into a compliance program so that there are responsible individuals who not only know compliance regulations but understand the best actions to take in avoiding penalties.
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