As an exporter, you should be aware of US export control laws, which are designed to protect national security and foreign policy interests.
Various US departments and agencies manage these export controls. Currently, the Obama administration, through its Export Control Reform Initiative, is trying to bring all controls to the purview of a single agency, thus making it easier to monitor and enforce compliance. Until such reform occurs, the terrain of US export laws and government structure as outlined in this article constitutes the current situation.
Before we get into the discussion on export controls, let’s clarify a common definition that is relevant and widespread across all controls, namely the definition of a US person versus a foreign person. Under US export laws – ‘A “US person” Is any US citizen, permanent resident alien, or person admitted with a status of asylum in the United States; or a legal entity organized under United States law. Any person or entity that does not fit the aforementioned definition will be treated as a “foreign person”. ‘
Let us now briefly discuss the various types of export controls that prevail in US law.
Trade embargoes: The Office of Foreign Assets Control (OFAC) imposes trade embargoes on a list of countries, individuals and groups and is dictated by the imperatives of US foreign policy. The tax can take effect or be lifted quickly and will depend on unfolding world events. The OFAC website contains a country-by-country description of each embargo. The website also offers the Specially Designated Nationals (SDN) list that includes individuals and companies acting on behalf of the target countries. Also this list has groups and individuals who are terrorists, drug traffickers, nuclear proliferators, diamond traders. These entities are not specific to a nationality. Trading in SDNs is prohibited because they are detrimental to the national interests of the United States. It is recommended that trade restrictions be read carefully, because restrictions are not uniform in embargoed countries.
Dual-use products or technologies: There are a large number of technology and products, as well as services that have civil and military applications and are covered by the Export Administration Regulations (EAR) administered by the Bureau of Industry and Security (BIS). The BIS list of technologies that are designated as “dual-use” is known as the CCL or the Trade Control List. Reading the CCL in line with the EAR can help determine whether a particular technology would require a BIS export license. BIS also has an ‘Unverified List, which has entities that are categorized as suspicious; While no restrictions have been placed on them, it should raise a red flag and US businesses should proceed with caution when dealing with entities on the ‘Unverified List’. The determination of the license requirement under EAR is the generation of an Export Control Classification Number (ECCN) of the good / technology / service to be exported. The ECCN number must then be crossed with the country control table and if it is designated controlled, a license application must be submitted to the BIS Under the Considered Export rule, if an item that requires a license must be transferred to a Foreigner residing in In the US, a BIS license is required.
EAR 99 list: Items not listed in CCL are under the jurisdiction of the US Department of Commerce and do not require a license in most situations. They mainly included low-tech consumer goods. However, if EAR99 products are to be shipped to embargoed countries, or denied persons or sanctioned entities, a BIS license may be required.
Products and technical data from the “Ammunition List”: Technology, products, services and data that have a primary or exclusive use for military purposes and that are mentioned in the United States Munitions List (USML) are controlled by the International Traffic in Arms Regulations (ITAR) . The execution is in charge of the Directorate of Defense Trade Controls (DDTC). Affected exporters must register themselves as DDTC and will be assigned a DDTC code. The DDTC will have to approve any dealings under the USML before trading with a foreign person can take place, even for a foreign person residing within the United States. Therefore, any international transaction subject to ITAR must obtain a license. The license is done online through “D-Trade” and is issued only to companies registered with DDTC. No matter where you open your company in the US, company formation will always be a chore and you need to know the procedures. For example, if you are looking for a business registration in the British Virgin Islands, you need to know the necessary rules on how to do it.
Penalties: The consequence of the contravention of the export control laws includes civil penalties, criminal prosecution and also the possible disqualification from exporting goods or services. Export control agencies can audit or verify records to convince themselves that a company is not violating any of the provisions of export controls. It is imperative that exporting companies keep adequate records.