When are items subject to US Export Controls (Export Administration Regulations)?
United States (US) export control law imposes licensing requirements on items (including goods, software and technology) controlled by the US Export Administration Regulation ('subject to the EAR'). Items are ‘subject to the EAR’ when:
a. Located in the US, including in a US Foreign Trade Zone or moving in transit through the US from one foreign country to another;
b. Of US origin (i.e. made or created in the United States), irrespective of location (i.e. if items are of US origin then they are 'subject to the EAR' in any subsequent foreign country following export from the US).
c. A foreign made item containing more than the de-minimis amount of controlled US origin content. The general de-minimis rule is 25% controlled US origin content by value, but less in certain circumstances.
d. A foreign made item is the direct product of US technology or software controlled for national security (NS) reasons in the US Commerce Control List (CCL), and the foreign made item is also classified in the CCL and controlled for NS reasons;
e. A foreign made item is the direct product of a complete plant or any major component of a plant, when that plant or component is the direct product of US origin technology or software that is controlled for NS reasons in the CCL, and the resulting items are also controlled for NS reasons;
f. A foreign made item is the direct product of US technology or software, or a complete plant or any major component of a plant, when that plant or component is the direct product of US origin technology or software of specified Export Control Classification Number's (ECCN’s) in the categories of Electronics, Computers and Telecommunications when destined for specially designated entities as described in footnote 1 to Supplement No. 4 to Part 744 of the EAR (Entity List). Huawei Technologies Co. Ltd. and 114 of its non-US affiliates are currently the only entities specially designated in footnote 1.
As an example: Basic electronic components (EAR99) purchased from a distributor in the US by a UK reseller could not be supplied to a manufacturer located in the UK, where that manufacturer is a listed US denied party and shown on the US Entity List, unless with prior licence approval from US BIS. However, it is highly unlikely that US BIS would grant a licence for a listed entity, as there is a general policy of licence denial for nearly all Entity List entries.
These controls may therefore result in foreign (non US) exporters having to consider export control laws and licensing requirements of the United States, as well as those laws of their own country.
Failure to comply with US sanctions and export control laws may result in criminal or civil penalties as well as denial of export privileges, revocation of US export licenses, secondary sanctions etc....
Criminal penalties can include up to 20 years of imprisonment and up to $1 million in fines per violation, or both.
Civil penalties for failing to comply with the Export Administration Regulations (EAR) can reach the greater of $300,000 in fines, or twice the transaction value, per violation.
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