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On a regular basis, MK Technology will answer a question of interest to the exporting community. This page offers exporters an opportunity to pose a question which may be addressed on this website in the following weeks.
The answers to the questions set forth in this section are for illustrative purposes only and do not constitute MK Technology Trade Consulting, LLC's regulatory guidance for any specific transactions. Each transaction should be evaluated on an individual basis. Please contact one of our experts if you wish to obtain the firm's advice regarding any specific transaction.
Q:
My company manufactures civil aircraft in various locations in Europe. All of our planes incorporate a QRS 11 sensor that is now subject to Commerce Department licensing jurisdiction. This is the only U.S. part that we use in our aircraft. Since the value of this sensor is far less than 10% of the value of the aircraft, I assume that it is not subject to U.S. re-export licensing controls to any country?
A:
The rule published by BIS on November 7, 2007
clearly states that there is no de
minimis provision for foreign manufactured
civil aircraft that incorporate the
specified QRS11 sensors. U.S. re-export
licensing controls apply.
The regulation states: “There continues to be
no de minimis level for
foreign-made systems that contain
QRS11-00100-100/101 or QRS11-00050-443/569
Micromachined Angular Rate Sensors, or for
foreign-made aircraft that
incorporate systems that have
QRS11-00100-100/101s or QRS11-00050-443/569s
integrated (see Sec. 734.4(a) of the EAR).
The instrument
systems, the automatic
flight control systems, and the aircraft
remain subject to the EAR regardless of
their percentage, by value, of U.S.
content."(emphasis added)
Q:
I am planning a business trip to Mexico and want to take my laptop computer with me. The computer is a standard commercial off-the-shelf model purchased from a retail outlet. Based on my reading of the Export Administration Regulations (EAR), I can take my computer with me under the provisions of License Exception Baggage (BAG) - - Section 740.14. Do you agree?
A:
Maybe. To qualify for the baggage exception,
the computer must be owned by you
or a member of your immediate family, be
intended solely for your personal use
while outside the country, and ultimately be
returned to the United States.
However, these are not the only requirements
that apply. Just as important as
the computer itself, are the files you have
loaded on the computer. Computers
are, in effect, filing cabinets and not just
equipment, and export controls may
apply not only to the computer itself but also
to the information contained on
electronic files on the computer and related
media (disks, thumb drives, etc.)
For example, you could need a license from the
Department of State, if your
computer files contain technical data subject
to the International Traffic in
Arms Regulations (ITAR).
Furthermore, any release or transfer of the
computer or technical
data/technology it contains to foreign
nationals while in Mexico, or in any
other countries you may visit, may constitute
re-exports subject to the ITAR,
Export Administration Regulations (EAR) or
Office of Foreign Assets (OFAC)
regulations. For example, a release of
controlled technical data or technology
to a Mexican national would be considered an
export no longer subject to the
baggage exception.
Moreover, any release of the computer or
data/technology to 3rd country
nationals while in Mexico, could constitute a
re-export subject to the ITAR, EAR
or OFAC requirements. For example, release of
the computer/files to an Iranian
national in Mexico would be an export outside
the scope of the baggage exception
and would be subject to applicable provisions
of the ITAR, EAR or OFAC regulations.
Before taking any computer with you on a trip,
always consider what data it
contains and determine if there are export
controls that could override the
provisions of License Exception BAG.
Q:
Some entries on the Commerce Control List (CCL) have a notation "n.e.s." What is "n.e.s." and how should it be interpreted?
A:
The term n.e.s. is defined in Part 772 of the
Export Administration Regulations
(EAR) as “not elsewhere specified". Some
entries on the CCL refer to parts that
are not elsewhere specified (n.e.s) without
giving any further description or
guidance.
For example, ECCN 0A984 reads as follows:
“Shotguns, barrel length 18 inches (45.72 cm)
inches or over; buckshot shotgun
shells; except equipment used exclusively to
treat or tranquilize animals, and
except arms designed solely for signal, flare,
or saluting use; and parts,
n.e.s."(Emphasis added)
This ECCN does not define what parts not
elsewhere specified are included. Based
on the text of this ECCN, BIS could assert
that common screws used in shotguns
were "parts" if it so chose and an exporter
would have no regulatory basis to
refute such a position. Accordingly, it would
be prudent to take an expansive
view of what is subject to this control and to
consider any part (no matter how
apparently insignificant) as included under
ECCNs with n.e.s.provisions.
Q:
May I export EAR 99 items for military end-uses in China without a license? The final rule published by the Department of Commerce on June 19, 2007 imposes a licensing requirement on the export of items under 31 Export Control Classification Numbers (ECCNs) when destined for military end-uses in China. So it would appear that exports of EAR 99 items are permitted.
A:
The June 19, 2007 rule also contains a
provision (see Export Administration
Regulations Section 744.21), that imposes a
licensing requirement for the
export, re-export or transfer of any items, if
BIS informs you (individually or
by notice in the Federal Register), that a
license is required because there is
an unacceptable risk of use in or diversion to
a military end-use in China.
Additionally, there are restrictions on the
export of EAR 99 items for certain
military end-uses in China beyond those
described in the June 19, 2007 rule.
For example, you may not export any items
subject to the EAR to sensitive
nuclear applications in China as described in
Section 744.2, to certain missile
and unmanned air vehicle applications as
described in Section 744.3 or to
chemical or biological weapons activities as
described in Section 744.4.
There are additional restrictions on exports
by and activities of U.S. Persons
(as defined in Section 744.6) that apply to
certain of China’s military
activities. There are also entities in China
that may not receive EAR 99 items
without a license from the Department of
Commerce.
It is important that your screening of
transactions involving China include
checking all of the lists and other available
information provided by BIS, to
ensure your full compliance with all
applicable requirements.
Q:
My company in India has purchased parts from a U.S. supplier that are properly classified as EAR 99. We want to resell some of these parts within India to several manufacturers of unmanned air vehicles (UAVs). These UAVs were not developed with U.S. origin technology and will be used for civil purposes only. Our export compliance department informed me that we require a license from the U.S. Department of Commerce for this transaction within India since the UAVs we intend to support have a range of more than 300 kilometers. Can this be true since we are not proposing to export, only to transfer EAR 99 items within India?
A:
Yes. A license from the Department of Commerce
would be required since the U.S.
origin EAR 99 parts will be used in a UVA
capable of a range of 300 kilometers.
This requirement applies regardless of
payload, end-use or the origin of
technology upon which the UAV is designed and
manufactured.
Section 744.3 of the Export Administration
Regulations (EAR) imposes the
following licensing requirement:
“In addition to the license requirements for
items specified on the CCL, you may
not export, reexport, or transfer (in-country)
an item subject to the EAR,
without a license if at the time of the
export, reexport or transfer you know
the item:
(1) Will be used in the design, development,
production or use of rocket systems
or unmanned air vehicles capable of a range of
at least 300 kilometers in or by
a country listed in Country Group D:4 of
Supplement No. 1 to part 740 of the EAR.
Since India is a country listed in Country
Group D:4, a license is required for
the in-country transfer of U.S. origin EAR 99
parts to all UAVs capable of a
range of 300 kilometers.
Q:
My firm in Canada wants to re-export U.S. origin EAR 99 parts to ammonia plants throughout the world. Do I need a license for such transactions?
A:
You could need a license from the Bureau of Industry and Security (BIS) for many such transactions.
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Q:
I want to send a gift parcel to my family in Cuba. The parcel is worth about $350 and contains clothing (pajamas, shirts, and sweaters) as well as personal hygiene items (soap, shampoo, shaving crème.) May I export this parcel under a license exception?
A:
No. An export license issued by the Bureau of
Industry and Security (BIS) would
be required for this shipment.
The Export Administration Regulations (EAR)
impose very specific restrictions
for exports to Cuba. Only certain gift parcels
may be exported to Cuba under
license exception GFT (Gift Parcels and
Humanitarian Donations – Section 740.12
of the EAR.)
Under GFT, you may ship gift parcels to
authorized recipients in Cuba of
eligible commodities, subject to certain
limitations.
Under GFT for Cuba:
Authorized recipients are limited to a
grandparent, grandchild, parent, sibling,
spouse or child of the donor. GFT also places
restrictions on gifts to such
parties that are officials of the Cuban
Government or Communist Party.
Eligible commodities are food (including
vitamins), medicines, medical supplies
and devices (including hospital supplies and
equipment and equipment for the
handicapped), receive-only radio equipment for
reception of commercial/civil
AM/FM and short wave publicly available
frequency bands, and batteries for such
equipment.
Donors may make unlimited shipments of gift
parcels of food. For non-food items,
shipments of gift parcels are limited to one
per month per household (defined as
all individuals living in common at a unique
address), with a value of no more
than $200.
The parcel you describe does not meet the
criteria for export under GFT. None of
the contents of the parcel are food or other
eligible commodities under the
license exception. Therefore, GFT may not be
used for the export of these items
to Cuba.
Q:
Foreign acquisition of U.S. high-technology companies is frequently in the news. What is the relationship between the Government's process to review and approve such acquisitions, the Committee on Foreign Investment in the United States (CFIUS), and export compliance?
A:
The CFIUS process is intended to ensure that
foreign investment in U.S.
business, particularly in firms that involve
national defense or critical
infrastructure, does not threaten the national
security. CFIUS, chaired by the
U.S. Department of the Treasury and staffed
with representatives from key U.S.
departments and agencies, including State,
Commerce and Defense, may approve or
deny foreign investment in or acquisition of
critical companies (including
acquiring a controlling interest in a firm as
well as outright purchase) based
on the national security implications of a
given transaction.
There is a direct linkage between the CFIUS
process and export compliance. Even
though a U.S. company may be owned or
controlled by foreign interests, all U.S.
export controls continue to apply to the
company's products and technology. This
includes not only tangible exports but also
technology transfers and deemed
exports. CFIUS will seek assurances that the
company to be acquired has
effective export compliance programs in place
to ensure that no unauthorized
exports of items or technology, including
deemed exports, occur either during
the foreign acquisition process or in the
subsequent management of the
now-foreign-owned company.
A U.S. company's management of an effective
export compliance program can be a
significant factor considered by CFIUS in
approving a foreign acquisition of
that company.
Companies that may face foreign investment
leading to a controlling interest in
the firm, or outright acquisition by foreign
parties, may file a voluntary
notice with CFIUS. A general, though not
exclusive, rule of thumb for
determining if CFIUS review may apply to your
company would be if your firm's
product, technology or service would be
subject to export license controls under
the International Traffic in Arms Regulations
or Export Administration
Regulations; or if your firm makes up a
significant segment of U.S. production
capability for your product in your business
sector. Examples of transactions
that may be subject to CFIUS review and
procedures for notice can be found in
the Code of Federal Regulations at 31 CFR 800.
Such companies should also ensure
they have an effective export compliance
program and procedures in place to
prevent unauthorized exports to foreign
parties during the acquisition process
and when under foreign management, direction
or control.