2014 Export Control Forum

The dates and event location for the 9th Annual Export Control Forum have been made public by the BIS. The 9th Annual Export Control Forum will take place February 24th through the 25th in Newport Beach, CA.

 

The following is to be addressed at the Forum:

-Updates regarding the regulatory process

-Reviews of the Export Compliance

-Relevant recent changes and potential future changes

-Export documentation

-Embargoes and Sanctions

-Census Regulatory Reviews

 

A special networking reception will take place on the first day of the Forum. Guests are encouraged to attend.

Definitive interpretation of “Routed Transactions” to be established

Because of the undefined terminology of “routed transactions,” the BIS has proposed a ruling to clarify the issue. This stems from the potential of miscommunication between the EAR (Export Administration Regulations) and the FTR (Foreign Trade Regulations) who currently both posses differing definitions as to what constitutes “routed transactions.” The proposed solution is to change “routed export transactions” to the defined “Foreign Principal Part Controlled Export Transactions.”

 

The BIS is accepting comments on the matter until April 7th, 2014.

Foreign License Requirements

Trade agencies in Asia have asked the BIS to remind those exporting to the U.S. to adhere to the local license requirements.

A press release from the BIS was issued on Jan. 2nd of 2014 as a reminder to foreign exporting customers.

 

The report stresses that:

– U.S. exporters need to note any license requirements or obligations

– U.S. exporters need to provide Export Control Classification Numbers

– copies of licenses and ECCNs need to be requested/obtained

– those failing to provide copies of licenses to be “red flagged.”

Press release found at:
http://www.bis.doc.gov/index.php/component/content/article/9-bis/carousel/615-foreign-import-export-license-requirements-hong-kong-singapore

Routed Export Transactions

What are Routed Export Transactions?

According to the Foreign Trade Regulations, a routed export transactions is “an export transaction in which the foreign principal party in interest (FPPI) authorizes a U. S. agent to facilitate the export of a shipment from the U. S. and to prepare and file electronic export information (EEI).”

This means that when a foreign party is exporting via the U.S., the FPPI has control over the shipment. In a Routed Export Transactions, the item(s) being shipped are not imports to the U.S.; however, they are passing through with authorization from the FPPI to a U.S. agent (such as a license freight forwarder). This U.S. agent is in charge of completing and filing the EEI.

What are the implications of Routed Export Transactions?

Routed Export Transactions come with in inherit risk considering that though the FPPI is in control of the item(s), the USPPI is in charge of the filing. The USPPI’s information (name, address, etc.) is still attached to the shipment being sent abroad.

What are “Foreign Principal Part Controlled Export Transactions?”

Though the current term is still “Routed Export Transactions,” the BIS (Bureau of Industry and Security) has proposed to change the terminology in order to provide a standard definition. If changed, the practice described above would then be addressed as “Foreign Principal Part Controlled Export Transactions.”

Where can I find additional information about Routed Export Transactions?

Resources can be found at:

http://www.census.gov/#

 

5 year maintaining practice on export records

January 16, 2014
Federal Register notice.

The BIS is allotting until March 17, 2014 for both the general public and Federal agencies to address the 5 year maintaining practice on export records regarding “memoranda, correspondence, contracts, invitations to bid, books of account, financial records, restrictive trade practice or boycott documents and reports.”

The BIS is asking that the following be considered:
-Whether the practice is necessary and practical
-Whether the projected burden, hours, and cost of the practice is accurate and how the burden could be reduced
-Ideas on bettering the content and information being collected

The Federal Register notice found at:
http://www.gpo.gov/fdsys/pkg/FR-2014-01-16/pdf/2014-00707.pdf

Final Rules of the ECR implementation process

As issued by the Dept. of Commerce Federal Register in their original notice, the following is to be regarded in the first two Final Rules of the ECR implementation process effective Oct. 15, 2013:

-Added “structure and related provisions to control munitions items that the President has determined no longer warrant export control on the USML on the CCL.”
– New ‘600 series’ Export Control Classification Number on items moving from the USML to the CCL.

Concurrent final rules:
– Term “specially designed” given common definition
– Observation of transition and implementation process on good between the USML and CCL.
– Bureau of Industry and Security license validity defaulted to 4 years
– Updated ITAR Destination Control Statement
– Creation and regulation of Export Admin. Regulation Country Groups

The Final Ruling by the Dept. of State found at:
http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08351.pdf

The Final Ruling by the Dept. of Commerce found at:
http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08352.pdf

Additional information regarding ECR found at:
http://export.gov/ECR/

ITAR Compliance

The phrase “ITAR Compliance” gets thrown around a lot by defense contractors, ITAR exporters and other regulated businesses, but they’re not always using the same definitions. If your exports are controlled by the Department of State and are subject to ITAR regulations (meaning that your product, service, or technology is listed on the United States Munitions List, USML), here’s something to be aware of:

The International Traffic in Arms Regulations do not list a definition for the term ITAR compliance, nor do they list one for ITAR certified.

The term ITAR compliance is loosely used by Federal employees to denote a company that is registered with the DDTC, is aware of the ITAR export regulations that apply to their products and services, and makes a continuing effort to abide by those regulations. Essentially, this is a self-certifying process.

If we’re self-certifying, when does ITAR compliance matter?

Your ongoing effort to remain in compliance with the ITAR will be a huge mitigating factor in the event of an audit. A company actively striving to operate within regulations is viewed in a different light than one that is unaware of, or unwilling to follow the rules. These audits happen and your level of ITAR compliance will factor into the final outcome – whether it’s a green light, a general warning, fine, or total revocation of your export privileges.

$50,000 in ITAR fines

Last Thursday the Department of State issued a press release detailing charges and penalties levied against Alpine Aerospace Corporation and TS Trade Tech Incorporated of New Jersey. Both companies share common ownership and provide replacement parts to the aerospace industry.

Violations:

  • Failure to obtain proper export licenses
  • Improper citation of existing licenses
  • Failure to obtain non-transfer and end use certifications

Penalties:

  • Alpine civil penalty: $30,000
  • TS Trade Tech Civil penalty: $20,000

An interesting note – the civil penalites will be suspeneded on the condition that they are used to bolster compliance measures for the companies.

ITAR Exemption Codes

Here’s a list of ITAR exemptions that may apply to your product. Please note the date of this article when using the table.

DDTC ITAR Exemption Codes

Code Description
123.4A1 22 CFR 123.4 (a) (1) Temporary import of U. S. – origin defense items for servicing, inspection, testing, calibration, repair, overhaul, reconditioning, or one-to-one replacement of defective items.
123.4A2 22 CFR 123.4 (a) (2) Temporary import of U.S. – origin defense item to be enhanced, upgraded, or incorporated into another item which the permanent export has been authorized by Directorate of Defense Controls.
123.4A3 22 CFR 123.4 (a) (3) Temporary import of U.S. – origin defense items for demonstration or marketing.
123.4A4 22 CFR 123.4 (a) (4) Temporary import of U.S. – origin defense items which have been rejected for permanent import by Treasury.
123.4A5 22 CFR 123.4 (a) (5) Temporary import of U.S. – origin defense items approved for import under Foreign Military Sales Program.
123.4B 22 CFR 123.4 (b) Temporary import but not subsequent export of item incorporated into another article.
123.6 22 CFR 123.6 From the United States to foreign trade zone or Customs bonded warehouse.
123.9E 22 CFR 123.9 (e) Re-export or retransfer of U.S. – origin items incorporated into foreign defense article to a government of a NATO country or the governments of Australia or Japan.
123.11B 22 CFR 123.11 (b) Vessel or aircraft does not enter territorial waters or airspace if no defense articles are carried as cargo.
123.12 22 CFR 123.12 Shipments between U.S. possessions.
123.13 22 CFR 123.13 Defense article on domestic air shipment via foreign country.
123.16B1 22 CFR 123.16 (b) (1) Defense articles in support of agreements.
123.16B2 22 CFR 123.16 (b) (2) Components or spare parts less than $500.
123.16B3 22 CFR 123.16 (b) (3) Packing cases for defense articles.
123.16B4 22 CFR 123.16 (b) (4) Models and mock-ups.
123.16B5 22 CFR 123.16 (b) (5) Temporary export for public exhibition, trade show, air show or related event if that article was previously licensed for public exhibition.
123.16B9 22 CFR 123.16 (b) (9) Temporary export of unclassified component, part, tool or test equipment to affiliate or facility owned or controlled by the U.S. person.
123.17A 22 CFR 123.17 (a) Components and parts for Category I (a) firearms not exceeding $100 wholesale.
123.17B 22 CFR 123.17 (b) Non-automatic Category I (a) firearms manufactured in or before 1898 or replica.
123.17C 22 CFR 123.17 (c) Temporary export of no more than three non-automatic Category I (a) firearms and no more than 1,000 cartridges.
123.17D 22 CFR 123.17 (d) Firearms for foreign persons brought in under 27 CFR 178.115 (d).
123.17E 22 CFR 123.17 (e) Not more than 1,000 cartridges of ammunition for non-automatic firearms for personal use.
123.17F 22 CFR 123.17 (f) Temporary export of one set of “Body Armor” for personal use without a license from the United States by an individual (U.S. person). Companies cannot use this exemption.
123.17G 22 CFR 123.17 (g) Temporary export of one set of “Body Armor” for personal use without a license going to Afghanistan and to Iraq. Companies cannot use this exemption.
123.18A1 22 CFR 123.18 (a) (1) Non-automatic firearms for servicemen’s clubs for members of U.S. Armed Forces.
123.18A2 22 CFR 123.18 (a) (2) Non-automatic firearms for personal use by member of U.S. Armed Forces or civilian employee of Department of Defense.
123.18A3 22 CFR 123.18 (a) (3) Non-automatic firearms for personal use by U.S. Government employees.
123.18B 22 CFR 123.18 (b) Not more than 1,000 cartridges of ammunition for personal use by U.S. Government employees.
123.19 22 CFR 123.19 Canadian and Mexican border shipments.
124.2A 22 CFR 124.2 (a) Training in basic operation and maintenance of defense articles authorized for export to the same recipient.
124.2B 22 CFR 124.2 (b) Defense services performed by U.S. persons drafted into military force of a foreign nation.
124.2C 22 CFR 124.2 (c) Maintenance training or performance training to NATO countries, Australia, Japan, and Sweden.
124.3A 22 CFR 124.3 (a) Unclassified technical data within scope of an approved manufacturing license or technical assistance agreement.
124.3B 22 CFR 124.3 (b) Classified technical data in furtherance of an approved manufacturing license or technical assistance agreement.
125.2B 22 CFR 125.2 (b) Technical data for foreign filing of patent application not exceeding its domestic patent filing.
125.4B1 22 CFR 125.4 (b) (1) Technical data pursuant to official written request or directive of Department of Defense.
125.4B2 22 CFR 125.4 (b) (2) Technical data in furtherance of agreement approved under 22 CFR Part 124.
125.4B3 22 CFR 125.4 (b) (3) Technical data in furtherance of contract between exporter and U.S. Government agency that does not disclose design, development, production, or manufacture details of defense article.
125.4B4 22 CFR 125.4 (b) (4) Copies of technical data previously authorized for export to same recipient.
125.4B5 22 CFR 125.4 (b) (5) Technical data regarding basic operations, maintenance, and training to same recipient of lawfully exported defense article.
125.4B6 22 CFR 125.4 (b) (6) Technical data related to firearms not in excess of .50 caliber and ammunition not in excess of .50 caliber, not including design, development, production, or manufacturing details.
125.4B7 22 CFR 125.4 (b) (7) Technical data being returned to original source of import.
125.4B8 22 CFR 125.4 (b) (8) Technical data directly related to classified information which has been previously authorized for export to same recipient, not including design, development, production, or manufacturing details.
125.4B9 22 CFR 125.4 (b) (9) Technical data sent by U.S. corporation to a U.S. person employed by that corporation overseas or to a U.S. Government agency.
125.4B10 22 CFR 125.4 (b) (10) Unclassified technical data in U.S. by U.S. institution of higher learning to full-time foreign employee.
125.4B11 22 CFR 125.4 (b) (11) Exporter granted written exemption from Directorate of Defense Trade Controls for technical data pursuant to arrangement with Department of Defense, Department of Energy, or NASA.
125.4B12 22 CFR 125.4 (b) (12) Technical data exempt under 22 CFR 126.
125.4B13 22 CFR 125.4 (b) (13) Technical data for public release by cognizant U.S. Government agency or Directorate for Freedom of Information and Security Review.
125.4C 22 CFR 125.4 (c) Defense services and unclassified technical data to nationals of NATO countries, Australia, Japan, and Sweden for responding to written request from Department of Defense for quote or bid proposal.
125.5A 22 CFR 125.5 (a) Unclassified technical data during classified plant visit authorized by Directorate of Defense Trade Controls; approved government-to-government program; or U.S. Government agency having classification jurisdiction over classified defense article or classified technical data.
125.5B 22 CFR 125.5 (b) Classified technical data during plant visit approved by appropriate U.S. Government agency.
125.5C 22 CFR 125.5 (c) Unclassified technical data during plant visit approved by the Directorate of Defense Trade Controls.
126.3 22 CFR 126.3 Exceptional or undue hardship.
126.4A 22 CFR 126.4 (a) Temporary import or temporary export of defense article, technical data, or defense service by or for agency of U.S. Government.
126.4C 22 CFR 126.4 (c) Temporary import, temporary export, or permanent export of defense article, technical data, or defense service for end-use by U.S. Government agency in foreign country.
126.5A 22 CFR 126.5 (a) Temporary import and return to Canada of unclassified defense articles originating from Canada.
126.5B 22 CFR 126.5 (b) Permanent or temporary export of certain defense articles, related technical data, and defense services for end-use in Canada.
126.5C 22 CFR 126.5 (c) Defense service or technical data to Canada.
126.6A 22 CFR 126.6 (a) Defense article or technical data sold, leased, or loaned by Department of Defense to a foreign country or international organization.
126.6B 22 CFR 126.6 (b) Foreign military aircraft or naval vessel.
126.6C 22 CFR 126.6 (c) Defense article, technical data, or defense service sold, leased, or loaned by Department of Defense under Foreign Military Sales Program.
126.16E1 United States and Australian combined military or counter-terrorism operations
126.16E2 United States and Australian cooperative security and defense research, development, production, and support programs
126.16E3 Mutually determined specific security and defense projects where the Government of Australia is the end-user
126.16E4 U.S. Government end-use
126.17E1 United States and United Kingdom combined military or counter-terrorism operations
126.17E2 United States and United Kingdom cooperative security and defense research, development, production, and support programs
126.17E3 Mutually determined specific security and defense projects where the Government of the United Kingdom is the end-user
126.17E4 U.S. Government end-use

What is a Defense Service?

22 CFR §120.9 defines a Defense Service as furnishing of assistance including training, to foreign persons in the U.S. or abroad. A defense service encompasses the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles. Additionally includes military training of foreign units and forces which may involve public domain data or commercial hardware.