Performance of export control classifications is a requirement for businesses conducting sales of products and services, even if the sale is conducted within the United States, because the customer may be a non-U.S. person. Classification of products provides a determination that a proposed transaction is allowed under federal regulations, is prohibited, or requires licensing or other such authorizations.
Performance of Due Diligence
It is ultimately the responsibility of the exporter to be aware of, and remain in compliance of all export transactions. A classification should therefore be performed even if the exporter is distributing a product not created by the company. While referencing the manufacturers classification is a good starting point, the exporter should perform their own classification to ensure that that classification is correct and that the classification reflects current regulations.
Sequence of Operation in Product Classification
When classifying a product or service it is often advisable to obtain insight from someone with specific technical expertise.
When performing a classification, the first step is to determine if the product, service, or technical information falls under the jurisdiction of the International Traffic in Arms Regulations (ITAR). The ITAR are regulations stipulated by the U.S. Department of State and regulated by the Directorate of Defense Trade Controls (DDTC). Defense articles controlled under the ITAR are enumerated in the United States Munitions List (USML).
Export Administration Regulations (EAR) control the export of commodities enumerated as described in15 CFR §730. The EAR are administered and enforced by the Bureau of Industry and Security (BIS) under the auspices of the Department of Commerce. These regulations are in place to advance the national security and foreign policy objectives of the United States Government. Items controlled under the EAR are listed in the Commerce Control List (CCL) and identified by a unique Export Control Classification Number (ECCN).
If a classification has been found there will often be an associated classification for the technical data for that item. This classification should also be performed. If no classification has been found the item is classified as EAR99. All classifications should be approved by the organization’s Export Control Officer.
CVG Strategy Export Compliance Management Programs
Export Compliance is an important subject for businesses engaged in sales of items that are intended for international sales or could result in international sales. Failure to comply with regulations can result in criminal prosecution including imprisonment and fines. It can also result in civil penalties and disbarment from export activities.
CVG Strategy can help you in understanding the ITAR and EAR, and help you establish a coherent and effective export compliance program. We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team. Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.