Export Control Regulations in an Age of Worldwide Terrorism
By Michael C. Dennis M.B.A.,
Most export transactions do not require specific approval from
the U.S. Government, but for certain export transactions to take
place lawfully an export license is required. Generally speaking,
licenses are required when the product intended for export affects
or could affect:
Aid in the development of chemical and biological weapons,
Crime control, or
Control of international terrorism
Four U.S. Government agencies have primary export licensing responsibilities.
They are:  the Department of Commerce,  the Department of Energy, 
the State Department, and  the U.S. Treasury Department.
The majority of exports that require a license are either on the Commerce Control
List (CCL) administered by the Commerce Department, or the U.S. Munitions List
(USML) administered by the State Department. The CCL is used to regulate the
export and re-export of dual use items. These are items that have legitimate
commercial uses as well as possible military applications. The USML is used
to control the export of defense articles [e.g. guns and grenades] as well
as certain services and related technologies.
The U.S. Defense Department is actively involved in the inter-agency review
of those items controlled on both the CCL and the USML. The agencies work together
when there is a question about whether a proposed export is controlled on the
CCL or the USML. The Energy Department controls exports of nuclear technology,
nuclear materials and technical data.
The Treasury Department is responsible for economic and trade sanctions against
targeted foreign countries and their agents, as well as terrorists and terrorism-sponsoring
organizations, and international narcotics traffickers.
The federal government controls exports [and re-exports] on a
case-by-case basisreviewing the following factors:
The country of ultimate destination,
The ultimate end-user,
The type of product intended to be exported
Its ultimate end-use, and
The persons or entities arranging for the export to be made
including banks, brokers, buyers, expediters, freight forwarders,
The key to classifying an item for export is the Export Control
Classification Number [the ECCN]. ECCNs are found in the Commercial
Control List. The ECCN is an alphanumeric code that describes a
particular item and lists the export controls placed on it.
ECCNs are based on ten broad categories of exports, which are:
Nuclear materials, facilities and equipment
Materials, chemicals, microorganism and toxins
Telecommunications and information security
Sensors and lasers
Navigation and avionics
Propulsion systems, space vehicles, and related equipment
Currently, exports and re-exports are generally prohibited to
Cuba, Iran, Iraq, Libya, Sudan, or to the Unita faction in Angola.
[This list is subject to change without notice]. In some cases,
special licenses will be issued for exports of agricultural goods,
medicines, and medical equipment to countries under U.S. sanction
on humanitarian grounds.
Exporters are required to screen all parties involved in an international
transaction against the "Prohibited Parties Lists." This
is a term used to describe the four lists of entities with which
an exporter is prohibited from doing business under most circumstances.
Those lists are:
The Specially Designated Nationals List. SDNs are individuals
and entities throughout the world that are barred from receiving
U.S. exports as a result of various sanctions. U.S. persons are
prohibited from engaging in any transactions with SDNs.
In the aftermath of the September 11 terrorist attacks, the
federal government created a new category of SDNs called "Specially
Designated Global Terrorists" (SDGTs) resulting in a significant
expansion of the SDN list.
The Denied Persons List contains the names of persons who have
been issued a denial order by the Commerce Department's Bureau
of Industry and Security (B.I.S.) either because they have violated
export controls in the past, or pose a serious risk of doing
so. U.S. exporters are prohibited from dealing with denied parties
in transactions involving U.S. items. [Generally speaking there
are no exceptions to the prohibitions concerning denied persons
The B.I.S. also maintains a Denied Entities List comprised
of foreign end-users engaged in proliferation activities. Since
these entities pose proliferation concerns, exports to them are
usually prohibited - and if not will almost certainly will require
a specific export license.
A Debarred Parties List is maintained by the State Department.
It lists the names of individuals denied export privileges under
the International Traffic in Arms Regulations (ITAR).
If a party is not a prohibited entity falling into any of these
four categories, the ultimate end-user will become an important
factor in determining if an export license is required. The licensing
body will need to review the foreign customer's history, and examine
any prior violations of U.S. laws or placement on any of the lists
Exporters must also screen the parties involved in facilitating
the sale. For example, an otherwise legitimate trade transaction
may be a violation of sanctions if one of the banks involved in
the financing is on the SDN List. Since the SDN List contains the
names of banks, insurance companies, shipping lines, and freight
forwarders throughout the world, exporters must remember to examine
all parties to an export transaction, not just the buyer or the
If you remember nothing else, remember this: It is up to the exporter
to determine whether its products [or which of its products] require
an export license. The first step is to determine which federal
department or agency has jurisdiction over the item the company
wants to export in order to find out if a license is required.
In general, the Commerce Department focuses primarily on dual-use
items, i.e., items that have both military/strategic uses as well
as commercial applications. Exporters should consult the Commerce
Department's B.I.S. and find out if the items or services they
are planning to export are classified on the Commerce Control List
(CCL). If a product appears on this list, it may require a license.
When in doubt, an exporter can request a "commodity jurisdiction" determination
to resolve any uncertainty regarding the export licensing requirements
for an item or service. One common question is this: With all of
these rules, how do we ensure that we are in compliance with federal
export control laws and regulations? Here is an overview of the
Start by considering the country to which a product is to be
exported. Potential transactions should be checked for compliance
with the sanctions [including embargoes] administered by the
U.S. Treasury and Commerce Departments. Generally, embargoes
prohibit the export of all items, including items listed on the
CCL and other goods and services that would otherwise not require
an export license.
Obtain information about the customer and how that customer
will use your product. Information about the customer's location,
including complete street address and phone number, the nature
of its business, ownership and control, and information with
regard to the final destination and use of the product is necessary
for determining if the export requires a license or is lawful.
Check all parties against the Prohibited Parties Lists, including
Treasury, Commerce, and State Department lists. Don't forget
freight forwarders, consignees, banks, shipping lines, brokers,
Determine whether a license is needed to export a particular
product or service by classifying the item using an Export Control
Classification Number, a five digit alphanumeric code.
When in doubt about agency jurisdiction, the exporter can contact
the B.I.S. The B.I.S. will route the inquiry/application to other
agencies for a determination of its licensing requirements.
Remember that even if the intended export item does not appear
on the CCL, it could be controlled for export purposes by another
Exporters should keep in mind that millions of dollars in civil
penalties are imposed each year for violations of export control
laws. In cases where there is criminal intent to violate export
control laws, criminal penalties can be imposed, resulting in significant
corporate or personal fines and/or imprisonment.
Tips for Exporters:
Recognize that any item that is sent from the United States
to a foreign destination is an export. How an item is "transported" outside
of the U.S. does not matter. This means an export could be a
file attached to an email message, or an item sent by fax, regular
mail or overnight delivery, by plane or by sea.
Properly classify the item you intend to export using the CCL.
[This may be done with or without the assistance of the B.I.S.,
but the exporter is responsible if it fails to properly classify
If you find that the item intended for export is on the CCL,
using the Export Control Classification number in combination
with the country chart, you can determine if a license is required.
[One note of caution: Items controlled on the basis of short
supply are not governed by the country chart. Another section
of the EAR contains license requirements relating to items subject
to short supply controls].
If you find a license is required, apply for it as soon as
you have an order. Don't delay the application process, or you
may have to delay the shipment.
Whenever possible, apply for licenses and classifications electronically
rather than by mail.
Fill out the application form completely, sign it, and attach
all required supporting documentation including complete technical
information about the product in question.
If a license is required and is issued, the license number
and expiration date must appear on all applicable shipping documents.
[Licenses are usually, but not necessarily, valid for two years.]
Be alert for red flagsabnormal circumstances associated with
an export transaction. One example would be an order from a foreign
buyer that is inconsistent with the purchaser's stated line of
business. [An example would be an order for precision machine
tools received from a foreign garment manufacturing company].
Instruct every employee of their affirmative obligation not
to ignore red flags. For example, it would be a violation of
the EAR to instruct your sales department not to ask about the
ultimate destination or intended use of the item you intend to
Attend Export Administration seminars and workshops to make
certain someone understands the Export Administration Regulations
[the EAR] governing exports of your company's goods and services.
Remember that records concerning exports and re-exports must
be maintained for five years.
When in doubt, use the Decision Tree [Supplement No. 1 to Part
732 of the Export Administration Regulations] published by the
Department of Commerce to determine the license requirements
for your proposed export.
Companies have an important role to play in preventing exports
that are contrary to the national security and foreign policy interests
of the United States. Exporters are not required to implement any
specific export management system in order to comply with U.S.
export control lawsbut exporting companies should have in place
some process or system to ensure compliance with all federal laws
and regulations controlling exports.
Disclaimer: The information provided is not legal advice and is not a
substitute for legal advise. Readers are encouraged research these issues
carefully, and to contact their attorney to clarify any of the issues raised
in this article.
Reprinted in the April 2003 Edition of Business