(Article appeared in the 1998 Official Export Guide)
All Rights Reserved
Export controls imposed on U.S. exporters by the United States government can take a variety of forms. They can take the form of prohibitions (blockades, embargoes, boycotts, sanctions) or they can take the form of limitations (licensing requirements). Likewise, export controls can be product-specific or they can be based on end-use, end user or ultimate destination. This article presents an overview of the U.S. export controls currently in effect and attempts to give guidance to U.S. exporters as they maneuver their way through the allegedly streamlined, albeit still confusing, U.S. government-imposed export control maze.
Product-Specific Export Controls
Product-specific export controls are primarily in the domain of the U.S. Department of State and the U.S. Department of Commerce.
The product-specific export controls prescribed by the U.S. Department of State are contained in the International Traffic in Arms Regulations (ITAR), whereas the product-specific export controls prescribed by the U.S. Department of Commerce are contained in the Export Administration Regulations (EAR).
In accordance with Part 734.3 of the Export Administration Regulations (EAR) and Part 120.1 of the International Traffic in Arms Regulations (ITAR), the U.S. Department of State has exclusive jurisdiction over the export of defense items, i.e. defense articles, defense services and related technical data. Articles, services and related technical data designated as defense items by the Department of State are grouped together as defense items in the Munitions List (Part 121 of the ITAR). The State Department is guided in its designation of defense items by a policy statement outlined in Part 120.3 of the ITAR which makes it clear that it is not the intended use (i.e. military or civilian) of an article, a service or technical data after export which is relevant for determining whether the article, service or technical data is a defense item. Instead, it is an item. s inherent capabilities and design which are considered in determining whether or not an item should be given defense item status. The policy statement further guides the State Department in defense item designation by presenting a two-part test for defense item status. According to this two-part test, articles, services and related technical data may be designated as defense items and placed on the Munitions List if they:
- are specifically designed, developed, configured, adapted or modified for a military application; and (a) do not have a predominant civil application; and
- do not have performance equivalent to that of an article or service used for civil applications; or
- are specifically designed, developed, configured, adapted, or modified for a military application and have significant military or intelligence applications, such that control by the Department of State, Office of Defense Trade Controls is necessary.
Items which meet either or both of these tests are considered to have defense item status and, as result, can not be exported from the U.S. without a State Department export license, unless a license exception applies. Alternatively, items, which do not meet either of these tests are not considered to have defense items status. As a result, they are not controlled by the State Department for export purposes and default instead to the export control of the Commerce Department, unless otherwise excluded from Commerce Department control in accordance with the provisions of the EAR.
The EAR defines the scope of Commerce Department control over exports in Part 734.3 by indicating those items which are subject to Commerce Department control and those items which are excluded from Commerce Department control. A term which is often used to distinguish the types of items that are controlled by the Commerce Department from those items that are controlled by other U.S. government agencies is the term "dual use items". In general, the term dual use items refers to items that have potential for both military and civilian commercial uses, i.e., items which do not meet either test for defense items status and which as a result, are not controlled for export by the State Department. The use of this term to refer to items controlled for export by the Commerce Department is not entirely appropriate, however, as the Commerce Department also controls items that have solely civil or commercial uses.
Unlike items subject to the export control of the State Department, items controlled for export purposes by the Commerce Department do not automatically require an export license. Indeed, only a very small percentage (estimated at 5% or less) of items subject to the export control of the Commerce Department are currently licensable in the case of export. These licensable items are distinguished from other items subject to Commerce Department export control in that they are assigned a specific Export Commodity Control (ECCN) by the Commerce Department and in that the export controls, to which such licensable items are subjected, are outlined in Commerce. s Commodity Control List (CCL). The fact that an item subject to the export control of the Commerce Department has a specific ECCN and is listed in the CCL does not, however, presume the need for a Commerce Department export license, as there are many exceptions to Commerce Department licensing requirements and as Commerce Department licensing requirements are not applicable in any event to all exports to all countries. Exporters must therefore first ascertain if any license exceptions apply to their proposed export of items subject to Commerce Department control and then consult Commerce. s country chart to determine if a license is needed for a particular export.
Determining if an item is controlled for export purposes by the Department of State or by the Department of Commerce is not always easy. Likewise, it is not always easy to determine if a particular product has a specific ECCN. These problems are not insurmountable, however, in that an exporter can submit to the State Department a written Commodity Jurisdiction Request to resolve a State Department vs Commerce Department jurisdictional dilemma and in that an exporter can submit a Commodity Classification Request to the Department of Commerce to resolve an ECCN classification dilemma.
Export Controls based on End Use, End User and Ultimate Destination
In addition to the product-specific export controls described above, there are series of export controls that are based on end use, end user and ultimate destination.
End use export controls are prescribed by the Commerce Department in EAR Part 744 which clearly prohibits or otherwise restricts exports for certain end uses. Such prohibited or otherwise restricted end uses currently include nuclear end uses, missile end uses, chemical and biological weapon end uses, maritime nuclear propulsion end uses, and foreign vessel and aircraft end uses.
Unlike end use export controls which are imposed only by the Commerce Department, end user export controls and ultimate destination export controls are much broader in scope.
End user export controls are prescribed by the Department of State, the Department of Commerce and the Department of Treasury. Each of these agencies produces one or more lists of restricted persons. These lists currently include the State Department. s list of "debarred persons. , the Commerce Department's list of denied persons, the Commerce Department. s Entity List and the Treasury Department's list of specially designated nationals. All U.S. exporters must screen the names of their buyers and the names of their end users against each of these restricted persons lists before completing a proposed export transaction for the purpose of determining if such buyers and or end users are prohibited buyers or end users (i.e. buyers or end users to whom an export sale can not be made); or restricted buyers or end users (i.e. buyers or end users to whom an export sale can be made only under an export license). The screening done by exporters in this regard must be done in the fullest sense, i.e. it must include a screening of all parties: (a) involved in carrying on negotiations concerning any item exported or to be exported from the U.S.; (b) involved in ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing or otherwise servicing in any way any item exported or to be exported from the U.S.; (c) benefiting in any way from any transaction involving any item exported or to be exported from the U.S..
Ultimate Destination export controls are also prescribed by the Department of State, the Department of Commerce and the Department of Treasury. Each of these agencies produces one or more lists of restricted or embargoed destinations. All exporters must screen the ultimate destination of their exports against the range of embargoed destinations prescribed by State, Commerce and Treasury for the purpose of determining if such ultimate destinations are subject to any general export prohibitions or to any general export license requirements.
Nothing Stays the Same
Even though a U.S. exporter has determined the relevancy to a particular export of certain product-specific export controls or certain export controls based on end use, end user or ultimate destination, such exporter should never assume that the US Export Controls found to be relevant to a particular export at any one time will remain relevant forever. US Export Controls result from Congressional action related to concerns over national security, foreign policy and short supply. Consequently, as Congressional concern over these matters shifts, export controls will likely be subject to change. Change, unfortunately, is not a stranger to the field of U.S. export controls. Looking back over the past several years, changes to U.S. export controls have been made on many occasions, including: changes with the implementation of the revised EAR, changes that shifted items from the export control of the State Department to the export control of the Commerce Department, changes with the implementation of the Wassenaar Arrangement, changes with relaxation of the sanctions on Yugoslavia, changes with the imposition of sanctions against India and Pakistan and changes with periodic revisions to the various restricted persons lists and the Entity list.