Exporting – US Government Restrictions

In my last post, I kept the conversation pretty high level.  Now I want to bring it down a notch or two to get into more detail on the issues that you face as an exporter.  Today’s topic is the restrictions put on exporting by our government. 

The US government regulates all goods and services that are shipped out of the country.  Of course, because different parts of the bureaucracy are have different agendas, you may find that your products are acceptable for export in one departments regulations, but require a license or may be completely prohibited in another.  Exports are regulated not only by the type of product, but also to where that product is headed, who will receive it, and what it will be used for. 

For example, no products (with some minor exceptions such as humanitarian aid) can be exported to Cuba.  In fact, you are not permitted to export to Cuba either directly or through a third country such as Canada or Mexico.  The regulations prohibit any person subject to US jurisdiction from dealing in any property which Cuba or a Cuban national has or has had any interest. 

Just as an aside here, that means that not only can’t you export to Cuba, you can’t import from there either.  You are even precluded from buying Cuban cigars when you are outside the US much less bringing them back to share with me L.

Where to Begin?

As the Good Witch told Dorothy, “It’s always best to begin at the beginning…”

Department of Commerce - ECCN

The US Department of Commerce’s Bureau of Industry and Security is responsible for implementing and enforcing the Export Administration Regulations (known affectionately as EAR). 

Most products and destinations do not require a license to export.  In order to determine if you need a license, you should start by classifying your product by figuring out its Export Control Classification Number or ECCN (Hey, it’s the Federal government, everything has an acronym).  The ECCN is an alpha-numeric code that describes the item and indicates licensing requirements.  They are listed on the Commerce Control List (CCL). 

The first digit of the ECCN is the category:

0 = Nuclear materials, facilities and equipment (and miscellaneous items)

1 = Materials, Chemicals, Microorganisms and Toxins

2 = Materials Processing

3 = Electronics

4 = Computers

5 = Telecommunications and Information Security

6 = Sensors and Lasers

7 = Navigation and Avionics

8 = Marine

9 = Propulsion Systems, Space Vehicles, and Related Equipment

The second character of the code is the product group:

A. Systems, Equipment and Components

B. Test, Inspection and Production Equipment

C. Material

D. Software

E. Technology

So, if you want to export polygraph equipment to aid in law enforcement, you would chose 3- Electronics and A- equipment.  Next you would need to read through the CCL under 3A to find if there is a specific licensing restriction.  In this case, you will find that 3A981 (Polygraphs) is on the list.  The CCL then tells you the reason the item is controlled (in this case Crime Control) and that Country Chart column 1 applies.  You would then lookup the country you are exporting to in order to check if an export license is required.  If you want to export this product to Iceland – no license is required.  However, if you want to export to Hong Kong – you need a license from the Department of Commerce

Department of State - ITAR

Some products and services are controlled by the State Department Directorate of Defense Trade Controls (DDTC).  The DDTC regulates defense articles covered by the US Munitions List and subject to the International Traffic Arms Regulations (ITAR).  These regulations allow US companies to sell arms to our friends but not our enemies.  To learn more about ITAR – check out this site:

http://pmddtc.state.gov/regulations_laws/itar_official.html

Other US Government Agencies that Control Exports

·         Department of the Treasury, Office of Foreign Assets Control (OFAC):
OFAC administers and enforces economic and trade sanctions against targeted foreign countries, terrorism sponsoring organizations, and international narcotics traffickers. The OFAC Web site provides information on these sanctions as well as the complete list of Specially Designated Nationals and Blocked Persons (the "SDN list"). 

·         Nuclear Regulatory Commission, Office of International Programs:
Licenses nuclear material and equipment.

·         Department of Energy, Office of Arms Controls and Nonproliferation, Export Control Division: 
Licenses nuclear technology and technical data for nuclear power and special nuclear materials.

·         Department of Energy, Office of Fuels Programs: 
Licenses natural gas and electric power.

·         Defense Technology Security Administration:
The Defense Technology Security Administration (DTSA) administers the development and implementation of Department of Defense (DoD) technology security policies on international transfers of defense-related goods, services and technologies.

·         Department of the Interior, U.S. Fish and Wildlife Service:
Import and Export of wildlife and endangered and threatened species.

·         Drug Enforcement Administration, Office of Diversion Control, Import-Export Unit:
Oversees the export of controlled substances and the import and export of listed chemicals used in the production of control substances under the Controlled Substances Act.

·         Food and Drug Administration, Office of Compliance:
For the Export of Unapproved Medical Devices

·         Food and Drug Administration, Import/Export: 
Licenses drugs.

·         Patent and Trademark Office, Licensing and Review:
Oversees patent filing data sent abroad.

·         Environmental Protection Agency, Office of Solid Waste, International and Transportation Branch
Regulates hazardous waste exports 

If all of this hasn’t left your head spinning, I don’t know what will.  The message here is clear.  There is a lot of homework to do before you can move forward with your exporting plans.  Even after you finish, the rules keep changing so you need to make certain you are regularly reviewing them and stay in compliance.