The business of exporting from the United States to a foreign country can be both exciting and profitable, but legally complex. This article will provide a brief overview of three key regulations controlling exports from the US to a foreign country: the Export Administration Regulations (EAR), the International Traffic in Arms Regulations (ITAR), and the Foreign Trade Regulations (FTR).
Each of these regulations is designed to prevent US goods from supporting groups or activities that the US does not support, including terrorist groups and certain foreign governments. If you’re in the export business, the importance of understanding these laws can’t be understated. This list is not exhaustive, but it will give you an introduction to federal export regulations.
Export Administration Regulations (EAR)
What it is:
The EAR controls the transfer, export, and re-export of commercial items (including software and technology), dual-use items, and some military items. The EAR is administered by the Bureau of Industry and Security (BIS) of the US Department of Commerce.
How to comply:
- Determine the Export Classification Control Number (ECCN) applicable to your product(s). What is the item’s intended final destination? Who is the ultimate recipient, or “end-user,” of the item? What is the intended end-use of the item?
Consult the Commerce Control List in conjunction with your analysis of the above questions to determine whether an export license is required.
- Determine if any license exceptions apply (e.g. certain shipments of limited value, civil end-users, personal baggage accompanying a traveler, etc.).
- Apply for a BIS License.
If you believe a violation of the EAR has occurred, you should engage counsel to analyze the potential violation and determine whether you should submit a voluntary disclosure to BIS. A voluntary disclosure may be considered a mitigating factor by BIS in determining administrative penalties relating to the EAR violation.
Violations of the EAR can result in penalties of up to $250,000 per violation.
International Traffic in Arms Regulations (ITAR)
What it is:
ITAR is administered by the Directorate of Defense Trade Controls (DDTC) of the US Department of State. ITAR applies to exports, reexports, temporary imports, and brokering of defense articles and services classified under the US Munitions List unless a specific exception applies. ITAR also applies to the release of ITAR-controlled information to a foreign person, whether such a foreign person is located abroad or in the United States.
How to comply:
- Determine whether your products or services are subject to ITAR and the US Munitions List and determine applicable license requirements based on the intended end-user and end-use. Submit a Commodity Jurisdiction to DDTC to obtain an official determination regarding whether your product is classified under the US Munitions List.
- If any of your products or services are subject to ITAR and the US Munitions List, you should establish an ITAR compliance program to ensure compliance with the strict requirements of ITAR.
If you believe a violation of ITAR has occurred, you should engage counsel to analyze the potential violation and determine whether you should submit a voluntary disclosure to DDTC. Timely, voluntary disclosure and full cooperation may be considered mitigating factors by DDTC in determining administrative penalties relating to an ITAR violation. Similarly, failure to take these steps may be considered aggravating factors by DDTC.
Violations of ITAR can result in penalties of up to $1,000,000 or imprisonment of up to 20 years.
Foreign Trade Regulations (FTR)
What it is:
The FTR is administered by the Census Bureau and enforced by US Customs and Border Protection (CBP).
It requires Electronic Export Information filings for physical shipments that apply with both (A) and (B) below.
(A) From the US to:
(1) foreign countries, Puerto Rico, or the US Virgin Islands;
(2)Puerto Rico to: the US, foreign countries, or the US Virgin Islands;
(3) US Virgin Islands to foreign countries; and
(4) US Foreign Trade Zones to: Puerto Rico, US Virgin Islands, or foreign countries.
(B) And where the shipment applies to one of the below:
(1) the value of the goods is over $2500;
(2) the items subject to ITAR, regardless of value;
(3) the items classified under an ECCN other than EAR99 regardless of value;
(4) the items subject to DEA restrictions regardless of value;
(5) the items that are destined for Cuba, China, Iran, North Korea, Russia, Sudan, Syria, and Venezuela regardless of value;
(6) the items that are subject to export license by another federal agency regardless of value;
(7) the items are rough diamonds regardless of value,
(8) the items are classified in a 600-Series ECCN on the CCL of the EAR; or
(9) the exports are made under the Strategic Trade Authorization license exception of the EAR.
Deadlines for submitting EEIs change based on whether the items are subject to the ITAR or EAR, and what the mode of transportation is. EEIs are not required for exports of non-physical items.
How to comply:
Ensure the timely, accurate submission of required EEIs. FTR violations often go hand-in-hand with the EAR or ITAR violations, and it is recommended that companies also submit voluntary disclosures to other agencies as appropriate relating to violations.
If you believe a violation of the FTR has occurred, you should engage counsel to analyze the potential violation of FTR and determine whether you should submit a voluntary disclosure to DDTC. Voluntary disclosure under FTR is often required where there is an underlying violation of the EAR or ITAR.
Violations of the FTR can result in civil penalties between $1,100 and $10,000 per violation for each day of delinquency.