Title 15, Code of Federal Regulations, parts 730-774

Determining Jurisdiction

The U.S. Government maintains controls on the export and reexport of commodities, software, technology, and services from the United States. As several agencies of the federal government regulate the exports and reexport of these items, the first step an exporter must take is to determine which government agency oversees the export and reexport of its products for licensing purposes.

Part 734.3 of the Export Administration Regulations (15 CFR Parts 730-744) provides a listing of all items subject to the licensing authority of the Bureau of Industry and Security. In brief, those items include:

• all items in the United States;
• all U.S. origin items wherever located;
• all U.S. origin parts, components, materials or other commodities incorporated abroad into foreign-made products;
• U.S. origin software commingled with foreign software;
• U.S. origin technology commingled with foreign technology;
• certain foreign-made products of U.S. technology or software; and
• certain commodities produced by any plant or major component of a plant located outside the U.S. that is a direct product of U.S. origin technology or software.

Part 734.3 also lists items not subject to the EAR. Chief among those are items exclusively controlled for export or reexport by the Department of State (defense articles and services), the Department of the Treasury (economic and trade sanctions), the U.S. Nuclear Regulatory Commission, the Department of Energy, and the Patent and Trademark Office.

If an exporter’s item is not subject to the exclusive licensing authority of one of these agencies or is not one of the other minor items described in 734.3 (see box), then it is subject to the EAR.

Licensing Determination

The first step in determining an item’s licensing requirements under the EAR is to match its particular characteristics and functions to a specific Export Control Classification Number (ECCN) heading in the Commerce Control List (CCL).

If the item is described in one of the ECCN headings, the exporter should undertake the following steps.

1. Examine the List of Controlled Items contained in the ECCN entry to determine whether the item is subject to the export controls set forth in the entry.

2. Examine the Reason for Control entry to determine which export controls apply to the item.

3. Identify the Country Chart column heading for each applicable Reason of Control.

4. Examine the Country Chart to determine if an “X” is in the row next to the country where the item is to be exported under any of the Country Chart column headings identified in step three. If any cells are marked with an “X”, a license application must be submitted to the U.S. Department of Commerce -- unless a license exception applies.

License Exceptions

The terms and conditions for using license exceptions are set forth in part 740 of the EAR. If a check of the Country Chart indicates that a license is required for export, an exporter should examine part 740 to determine whether a transaction-based license exception or a list-based license exception - if shown in the ECCN entry - may be used to export the product without an actual export license.

Items for which a license exception is applicable may be shipped under the exception only if the exporter is then able to make the shipment in compliance with the EAR’s General Prohibitions 4-10 (see below).

EAR99 Items

The above guidelines assumed that an exporter seeking to determine the license requirements for an item to be exported would successfully match an ECCN entry in the CCL to the item. Indeed, all commodities, technology or software listed in the CCL have an ECCN. However, not all items (commodities, technology, and software) subject to the EAR are specified in the CCL. Items subject to the EAR but not specified in the CCL are designated EAR99.

Items classified as EAR99 may be freely shipped abroad without an export license as long as the exporter is able to make the shipment in compliance with the EAR’s General Prohibitions 4-10, a listing of which is contained in part 736 of the EAR. Upon shipment, EAR99 items are cleared under the “NLR” designator.

The General Prohibitions

The General Prohibitions 4-10 are laid out as follows:

Four. Engaging in actions prohibited by a denial order. An exporter may not take any action that is prohibited by a denial order issued under part 766 of the EAR. Denial orders prohibit many other actions than just exports by (or to) the person denied privileges. Exporters must ensure that any transactions they undertake involving an individual subject to a denial order do not violate the terms of the order. Supplement 2, part 764 of the EAR contains both the terms of a standard denial order and the names of individuals subject to denial orders, as published in the Denied Persons List (DPL).

Five. Export or reexport to prohibited end-uses or end-users. An exporter may not, without a license, export or reexport any item subject to the EAR to an end-user or end-use prohibited by part 744. In general, part 744’s end-use and end-user restrictions are presented as follows.

1. The export of any item subject to the EAR to any entity included on the Entity List without a license to the extent specified in the list is prohibited.

2. The export or reexport of any item subject to the EAR for use in nuclear explosion activities, safeguarded nuclear activities and unsafeguarded nuclear activities, without a license, to any destination other than the countries listed in Supplement 3 of part 744, is prohibited if, at the time of the transaction, the exporter knows or has reason to know that the item is so destined.

3. The export or reexport of an item subject to the EAR, without a license, for use in listed missile development projects in China, India, Iran, North Korea, and Pakistan is prohibited. In addition, an item subject to the EAR may not be exported or reexported without a license if the exporter knows or has reason to know that the item will be used in the design, development, production, or use in missiles in or by a state listed in Country Group D4.

4. The export or reexport, without a license, of an item subject to the EAR for use in the design, development, production, stockpiling, or use of a chemical or biological weapon in or by a state listed in Country Group D3 is prohibited.

5. The export or reexport, without a license, of any technology relating to maritime nuclear propulsion plants, their land prototypes, and special facilities for their construction, support, or maintenance, including any machinery, devices, components, or equipment specifically developed or designed for use in such plants or facilities is prohibited.

6. Exports of items subject to the EAR destined to or for the use of a foreign aircraft or vessel are prohibited, unless the shipment may be made to: (1) the country in which the vessel or aircraft is located; (2) the country in which the vessel or aircraft is registered; and (3) the country which is controlling, leasing, or chartering the vessel or aircraft under a License Exception or the NLR designator.

7. The export or reexport of parts and accessories identified under ECCNs 6A008, 6A108, 6A998, 7A001, 7A002, 7A003, 7A004, 7A006, 7A101, 7A102, 7A103, 7A104, 7A994, 9A001, 9A003, 9A018.a, 9A101, and 9A991 is prohibited to all destinations if they are intended for the manufacture, overhaul, or rehabilitation in any country of aircraft that will be exported or reexported to Libya or Libyan nationals.

8. No export may be made, without a license, of an item subject to the EAR that is destined to any Russian entity published on the Entity List.

9. U.S. persons may not, without a license, export and reexport any item subject to the EAR to a Specially Designated Terrorist (SDT). In addition, the export and reexport of items on the CCL, without a license, to a SDT is prohibited.

10. U.S. persons may not, without a license, export and reexport any item subject to the EAR to a Foreign Terrorist Organization (FTO). In addition, the export and reexport of items on the CCL, without a license, to a FTO is prohibited.

11. A license is required for the export and reexport of items listed on the CCL that are destined to Shaykh Hamad bin Ali bin Jaber Al-Thani and entities related to or controlled by him, as follows: Gulf Falcon Group, Ltd. located Doha, Qatar; Air Gulf Falcon located in Sharjah, U.A.E.; Falcon Aircraft Maintenance Center located in Sharjah, U.A.E.; and Falcon Air Leasing located in Sharjah, U.A.E.

12. U.S. persons may not, without a license, export and reexport any item subject to the EAR to a person designated on the Specially Designated Nationals List (SDNL) as an [FRYM]. (FRYM is used to designate former Yugoslavian president Slobodan Milosevic; individuals closely associated with him; persons under open indictment by the International Criminal Tribunal for the former Yugoslavia; and persons who have sought or are seeking to maintain or reestablish illegitimate control over the political processes or economic resources of the Federal Republic of Yugoslavia.)

Six. Export or reexport to embargoed destinations. An exporter may not, without a license or License Exception authorized under part 746 of the EAR, export or reexport any item subject to the EAR to a country that is the object of a U.S. embargo or multilateral sanction of which the United States is a participant.

Seven. Support of Proliferation Activities.

1. U.S. persons may not export, reexport, or transfer, without a license, items they know or have reason to know are destined for use in the design, development, production, stockpiling [CBW only], or use of nuclear explosive devices, missiles, chemical and biological weapons in or by a state listed in Country Group D2 (nuclear explosives), D4 (missiles), and D3 (chemical and biological weapons).

2. U.S. persons may not, without a license, knowingly undertake an action (including the financing, transportation, and freight forwarding) to facilitate an export, reexport, or transfer that does not have a license as required above.

3. U.S. persons may not, without a license, perform any contract, service, or employment that they know or have reason to know will directly assist in the design, development, production, stockpiling [CBW only], or use of missiles, and chemical and biological weapons in or by a state listed in Country Group D4 (missiles) and Country Group D3 (chemical and biological weapons).

4. U.S. persons may not, without a license, participate in the design, construction, export, or reexport of a whole plant to make chemical precursors identified in ECCN 1C350, in countries other than those of Country Group A3.

5. U.S. persons may not export a Schedule 1 chemical listed in Supplement 1 of part 745 without first complying with the provisions of 742.18 and 745.1 of the EAR.

6. U.S. persons may not export a Schedule 3 chemical listed in Supplement 1 of part 745 to a destination not listed in Supplement 2 of part 745 without complying with the End-Use Certificate requirements in 745.2 of the EAR that apply to Schedule 3 chemicals controlled for CW reasons in ECCN 1C350, 1C355, and 1C395.

7. U.S. persons may not, without authorization for the BIS, provide technical assistance to foreign persons with the intent to aid in the manufacture outside the United States of encryption commodities and software that would be controlled for encryption (EI) reasons under ECCN 5A002 or 5D002.

Eight. In transit shipments and items to be unladen from vessels and aircraft.

Exports and reexports may not transit through the following countries unless a License Exception or license authorizes such an export or reexport directly to the country of transit, or unless such an export or reexport may be shipped to the country of transit without a license.

Nine. Violation of any order, terms, and conditions.

Exporters are prohibited from violating any terms or conditions of a license or License Exception issued under or made a part of the EAR. In addition, any order issued under or made a part of the EAR may not be violated.

Ten. Proceeding with transactions with knowledge that a violation has occurred or is about to occur.

Exporters may not sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transfer, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is intended to occur in connection with the item.

The EAR’s knowledge standard is defined in part 772 and reads, in part: “Knowledge of a circumstance (the term may be a variant, such as “know,” “reason to know,” or “reason to believe”) includes not only positive knowledge that the circumstance exists or is substantially certain to occur, but also an awareness of high probability of its existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person and is also inferred from a person’s willful avoidance of facts.”

As such, exporters must examine their transactions to determine whether any abnormal circumstances exist that indicate that their export may be destined for an inappropriate end-use, end-user, or destination. If no indications exist, they may proceed with their transactions based on the information they have received. The EAR do not impose a duty upon exporters to confirm or verify the representations of their buyers. Nonetheless, if information is received that indicates something is amiss, an exporter is required to inquire about the export’s intended end-use, end-user, and destination to satisfy itself that the transaction does not involve a proliferation activity or otherwise violate the EAR.. Exporters are cautioned to not “self-blind” or take steps to limit the type of information received.

In this regard, exporters should screen their transactions against the Unverified List. Entities identified on the Unverified List were parties to transactions for which either a pre-license check or a post-shipment verification could not be done for reasons beyond the control of the U.S. Government. The inability of the U.S. Government to conduct these checks raises concerns about the suitability of these end-users to receive shipments of U.S. items. As such, the BIS has warned U.S. exporters to be vigilant in any dealings they might have with parties identified on the Unverified List. The inclusion of an end-user on the Unverified List does not mandate the use of an export license, but it does require that the exporter verify the particulars of the transaction with the goal of determining whether the export is destined for proliferation uses or is otherwise in violation of the EAR.

Export Clearance

Federal law requires the filing of the Shipper's Export Declaration (SED) (Filing Requirements & Exemptions) or AES record prior to the export of all items from the United States to any foreign country or area, subject to certain exemptions. The SED and AES record are export control documents. When presented to the U.S. Government, the exporter is certifying that:

• the shipment is authorized for export under the terms and conditions of the license issued by the appropriate governmental agency; or
• the shipment is being made in accordance with the terms and conditions of a license exception; or
• no license is required for the export.

The above certifications are accomplished by the entry on the AES record or SED of either: an export license number (and the license expiration date for SED filings) for licensed shipments; a three-letter license exception code for an export shipment moving under a license exception; the license designator NLR for shipments requiring no licenses; or a federal regulation citation for non-licensed or general license exports not controlled by the EAR.

For items subject to the EAR, there is an additional mandate that exporters record the ECCN for the product being exported on the SED or AES record for all licensed shipments; shipments moving under license exceptions; and NLR shipments of items having a Reason of Control other than anti-terrorism.

A destination control statement (DCS) must be entered on the invoice and on the bill of lading, waybills, or other export control documents that accompany the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad. The DCS is required for all exports from the United States of items listed on the CCL, unless the export may be made under License Exception BAG or GIFT. At a minimum, the DCS must state:

These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.

The Export Administration Regulations is a lengthy, complex body of law. Nonetheless, most exporters in the United States are subject to its provisions. The Montana Department of Commerce’s Trade and International Relations Bureau has helped many companies with export licensing issues and is willing to assist all Montana exporters with ECCN classification issues, EAR licensing provisions, and export clearance requirements. Our assistance is provided free of charge. We can be contacted at the following telephone numbers: 406-841-2753 and 406-841-2754.