Export of Commercial or Dual-Use items (EAR)

The Department of Commerce Bureau of Industry and Security (“BIS”) regulates the export of commercial products and technology under the Export Administration Regulations, 15 C.F.R. §§ 730-774 (“EAR”). While there are some parallels to the ITAR, there are also some major differences in how the regulations and the relevant agencies function.

They are similar in that both agencies focus on “technology transfer” and have been increasingly focused on enforcement. They differ in that the EAR covers a wider range of products and technology, the product classification process is highly technical, and most importantly, the need for a license depends not only on the type of product but also on the people involved and the destinations of the export.

A. Items Controlled Under the EAR

Generally, all items of U.S origin or physically located in the United States, are subject to classification under the EAR. Foreign manufactured goods are exempt from the EAR re-export requirements if they contain less than a "de minimis" level of U.S. content by value. Such "de minimis" levels are set in the regulations relative to the ultimate destination of the export or reexport. Fortunately, most items classified under the EAR do not require a license for export or reexport.

The EAR requires a license for the exportation of a wide range of items with potential “dual” commercial and military use, or otherwise of strategic value to the United States (but not made to military specifications). However, only items listed on the Commerce Control List (“CCL”) require a license prior to exportation. Items not listed on the CCL are designated as EAR99 items and generally can be exported without a license, unless the export is to an embargoed country, restricted party, or for a restricted end-use.

B. The Commerce Control List

In classifying an item under the export control regulations, it is important to first determine which U.S. government control list applies. The U.S. Munitions List (USML) and the Nuclear Equipment and Materials List (NEML) both take precedent over the Commerce Control list. For example, if an item appears on both the USML and the CCL, the USML would govern the item. When searching for the correct classification of an item, it is important to consider all export regulations and understand the order of precedence among them.

The Directorate of Defense Trade Controls (DDTC) has jurisdiction to decide whether an item is ITAR or EAR controlled. DDTC encourages exporters to self-classify the product. If doubt exists, an exporter may submit a Commodity Jurisdiction request to DDTC to determine whether an item is ITAR or EAR controlled.

The CCL provides a list of very specific items that are controlled. The CCL is similar to the "dual-use" list adopted by other countries under the Wassenaar Arrangement, although the CCL has additional items. The CCL is divided into ten broad categories and is available online on the BIS website.

C. ECCN Classification

Once it is established that an item is EAR controlled, the second step for the exporter is to determine the Export Control Classification Number (“ECCN”) for the item. BIS encourage self-classification of products and technologies. However, when the ECCN classification or licensing requirements are uncertain, BIS has two assistance procedures. To determine EAR’s applicability and the appropriate ECCN for a particular item, a party can submit a “Classification Request” to BIS. To determine whether a license is required or would be granted for a particular transaction, a party can request that BIS provide a non-binding “advisory opinion.” While BIS provides assistance with determining the specific ECCN of a dual-use item listed on the CCL, if doubt exists as to whether an item is ITAR- or EAR-controlled, BIS will stay its classification proceeding and forward the issue to DDTC for jurisdiction determination.

The ECCN is a 5 character alpha numeric code. The first character is a number that describes the category of the item. The second character is a letter which indicates the subcategory. The last 3 numerical digits are used for numerical ordering of the item.

Ten CCL Categories:

0. Nuclear related items & miscellaneous items

1. Chemical compounds, microorganism and toxins

2. Materials processing

3. Electronics

4. Computers

5. Part 1 Telecommunications Part 2 – Information security (encryption)

6. Sensors and lasers

7. Navigation and avionics

8. Marine (vessels, propulsion, and equipment)

9. Propulsion systems, space vehicles (includes aircraft & aircraft engines)

Five Sub-categories:

A. Specific systems, equipment, and components

B. Test, inspection and production equipment

C. Materials

D. Software

E. Technology

For example, most civil computers would be classified under ECCN 4A994. The "4" refers to Category 4, Computers, and the "A" refers to the sub-category Equipment. Generally, if the last three digits begin with a 'zero' or 'one' (e.g., 4A001), the product is subject to stringent controls, whereas if the last three digits are a "9nn" (e.g., 4A994), then generally there are fewer restrictions on export.

Note: 600 Series ECCN (nX6nn)
The “600 series” includes military items that were transferred from the ITAR to the EAR. Items included in a “600 series” ECCN supersede other ECCNs on the CCL. Thus, the first step in conducting a classification analysis of an item “subject to the EAR” is to determine if it is captured in a “600 series” ECCN paragraph.

D. Definition of Export and Re-export Under the Ear

Export: Export is defined as the actual shipment or transmission of items subject to the EAR out of the United States. The EAR is similar to the ITAR in that it covers intangible exports of “technology,” including source code, as well as physical exports of items.
Deemed Export: Under the EAR the release of technology to a foreign national in the United States is "deemed" to be an export, even though the release took place within the United States. Deemed exports may occur through such means as a demonstration, trade show, conference, oral briefing, or plant visit, as well as the electronic transmission of non-public data.
Re-export: Similar to the ITAR, the EAR attempts to impose restrictions on the re-export of U.S. goods, i.e., the shipment or transfer to a third country of goods or technology originally exported from the United States.
Deemed Re-export: Finally, the EAR defines "deemed" re-exports as the release of software and technologies to “third country nationals” outside the United States. For example, ECCN 5E001 technology may be exported to a university in Ireland under the license exception for technology and software, but might require a deemed re-export license authorization before being released to a Russian foreign national student or employee of that university in Ireland.

E. Authorization to Export

Once an item has been classified under a particular ECCN, the third step is to determine if a license is required for export to a particular country or if the export is NLR (No License Required) eligible. Unlike the ITAR, there is no requirement for formal registration prior to applying for export authorization.

Determine Reason for Controls. The "License Requirements" section provides notations as to the reasons for control. These reasons include: Anti-Terrorism (AT), Chemical & Biological Weapons (CB),Crime Control (CC), Chemical Weapons Convention (CW), Encryption Items (EI), Firearms Convention (FC), Missile Technology (MT), National Security (NS), Nuclear Nonproliferation (NP), Regional Security (RS), Short Supply (SS), Computers (XP), Significant Items (SI). The most commonly used controls are Anti-Terrorism and National Security, while other controls only apply to limited types of articles.
Apply Country Chart. Once an item is identified as meeting the criteria for a particular ECCN, the user can refer to the chart found at 15 C.F.R. § 738, Supp. 1. The Commerce Country Chart includes the countries having no controls. Items may be sent to these countries as NLR due to the absence of controls. If a particular control applies to a country that will receive an export, a license will be required. It is important to note that the ECCN and Country Chart only indicates if an item is eligible for NLR to a specific country, but it does not indicate whether an export is eligible for NLR. To determine if an export is eligible for NLR, the transaction should be reviewed for:

Prohibited parties
Nuclear, missile, chemical/biological weapons activities
Embargoed Countries
Red Flags

3. Exceptions. The EAR contains a number of exceptions. Therefore, if the item is not eligible for NLR, before applying for a license, the fourth step is to check for any license exceptions that may apply. Determining whether a particular exception applies requires
review of the specific application as detailed in 15 C.F.R. § 740, as well as review of the notes on applicable license exceptions following the ECCN entry.

There are 2 types of license exceptions:
1. ECCN-based license exceptions:
  1. LVS Items of limited value (value is set under each ECCN)
  2. GBS Items controlled for national security reasons to Group B countries
  3. CIV Items controlled for national security reasons to particular countries where enduser is civilian.
  4. TSR Certain technology and software to certain countries
  5. APP Computer exports to certain countries (based on Adjusted Peak Performance)
  6. KMI Encryption exemption for key management
  7. STA Strategic Trade Authorization
  8. AVS Aircraft, vessels and spacecraft
  9. ENC Certain encryption devices and software – This is a hybrid ECCN-based and situation-based license exception.
  10. CCD Consumer Communications Devices – limited to specific commodities to Cuba or Sudan
  11. SCP Support for the Cuban People – limited to specific commodities to Cuba
2. Key-situation based license exceptions:
  1. TMP Certain temporary export, re-exports, or imports, including items moving through the US in transit. This category is very broad. It includes, for instance: TMP tools of trade and TMP Kits of replacement which allow exporter or employees to take some items with them under certain conditions (e.g. those items are returned in the US at the end of the operation); TMP exhibition and demonstration (the exporter must maintain “ownership” and “effective control” while the items are abroad)
  2. RPL Certain repair and replacement parts for items already exported
  3. GFT Certain gifts and humanitarian donations
  4. GOV Exports to certain government entities.
  5. TSU Certain mass-market technology and software
  6. BAG Baggage exception
  7. APR Allows re-export from certain countries
  8. AGR Agricultural Commodities – agricultural commodities to Cuba