Export control compliance begins with understanding: the jurisdiction of commodities


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In the first of a five-part series, this article examines the first step in U.S. export compliance: determining the jurisdiction of an item acquired in the United States.

Why is jurisdiction and subsequent classification (think item identification) important? By acquiring US technology, you are obligated to adhere to US export controls for the life of the product; which means that approval is required for all subsequent transfers and end uses (including disposal).

Failure to properly determine jurisdiction upon acquisition will be compounded for all future export-related decisions.

The jurisdiction dictates the controlling agency, the registration requirement, licensing and brokerage responsibilities, and any applicable license exemptions / exceptions. US sanctions imposed for export control violations can include economic and embargo sanctions as well as the risk to individuals of imprisonment and fines.

There are two main agencies responsible for regulating US exports. These are the Defense Trade Controls Directorate (DDTC) within the US Department of State and the Bureau of Industry and Security (BIS) within the US Department of Commerce.

The DDTC implements the Arms Export Control Act that governs the export of military goods and technology on the United States Ammunition List (USML) through the administration of the International Traffic in Arms Regulations (ITAR). In 2009, then-President Obama led a broad interagency review of export controls that culminated in the Export Control Reform Act (2018) (ECRA) and the refinement of USML to only articles considered to be essential to national security. This initiative was billed as “building a taller fence around a smaller yard”, reflecting DDTC’s broad licensing powers but its narrow scope of control.

Defense items that do not meet this standard as well as dual-use items (i.e. that can be used in military or civilian applications) are recorded in the Commercial Checklist (CCL) and controlled by the BIS. The CCL is regulated by ECRA and administered by the Export Administration Regulations (EAR).

The first step in determining the jurisdiction and classification of products begins with a thorough understanding of the capabilities and end uses of the product or service. This will allow you to undertake a court order review assessment that sequentially examines whether the item is screened under USML, not specifically listed (i.e. listed) but captured in a “specially designed” for military purposes, or if it is submitted to the CCL of the AEOI. DDTC provides an online tool to assist you in this decision-making process that guides you through classification under USML or directs you to exit and access the CCL Order of Review decision tool.

Fortunately, ECRA has dramatically improved the definitions of USML categories, so that “aircraft” which were previously described as “specifically designed, modified or equipped for military purposes” are now divided into functional categories including bombers, fighters, drones, etc. In ECRA parlance, this was intended to create a “clear line” between USML and CCL jurisdiction.

The identification of your article on the USML then denotes its classification in one of the 21 categories. If an item is to be inspected on the CDC, its classification reflects its category, product group and type of inspection in a five-digit Export Control Classification Number (ECCN). Ultimately, if self-determination is not possible and there is still doubt, you can submit a product jurisdiction determination request to the DDTC or a classification request to the BIS using their online portals.

Recently there has been a debate about the competence of firearms and parts produced in 3D. The DDTC specified that these articles were subject to the control of the USML, effectively prohibiting their free sale on the Internet and probably the proliferation of these weapons in the wrong hands. This underscores the importance of having correct commodity jurisdiction, as the first step in ensuring your compliance with US export controls.

Note: Debbie Richardson is a Senior Consultant at Goal Group.

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