BIS Training Module 1 Slide 1:…

                                 BIS Training Module 1


Slide 1:
Thank you for joining the Bureau of Industry and Security's Slide Presentation Series on
Commerce Export License Requirements.


This series is designed to give people who are new to exporting, and, in particular, new to
export controls, a general understanding of our Export Administration Regulations and
how to use them. However, nothing provided here can substitute for consulting the
Export Administration Regulations.


Slide 2:
This series offers six slide presentation modules that will take you through the process of
determining your export control requirements under the Export Administration
Regulations. In this series, we will refer to the Export Administration Regulations as the
"EAR" or "the regulations".


The first module will focus on the big picture, providing you with an overview of the
regulations and the steps involved in determining whether your transaction is subject to
the EAR and if it requires an export license. It will also provide an overview of export
clearance requirements.


The second module will delve further into the process for classifying your item to
determine if you need an export license.


The third module will focus on end-user and end-use export restrictions and other
prohibited activities.


The fourth module will explain License Exceptions.


The fifth module will describe the license application and support documentation process.
The sixth and final module will cover export clearance and recordkeeping requirements
under the EAR.


Slide 3:
Before you can begin to determine what your export control requirements are for your
transaction, you first need to have four pieces of information on hand ­ what is the item,
where is it going, who will receive it and what will be the end-use.


While a relatively small percentage of total U.S. exports and reexports require a license
from the BIS, this information must be considered in reviewing your export control
obligations in every export transaction.


Slide 4:
Let's take a moment to cover some important terms.


Generally, any item subject to the EAR that is shipped or transmitted from the United
States to a foreign destination is an export. The method of sending the item outside of the
United States does not matter in determining export license requirements. For example,
an item can be sent by regular mail or hand-carried on an airplane. A set of schematics
can be sent by email to a foreign destination, software can be uploaded to or downloaded
from an Internet site, or technology can be transmitted via e-mail or during a
conversation. Regardless of the method used for the transfer, the transaction is considered
an export for export control purposes.


An export may also include the release of source code or technology subject to the EAR
to foreign nationals in the United States.


A reexport is when an item subject to the EAR is shipped or transmitted from one foreign
destination to another.
A reexport may also occur when source code or technology subject to the EAR are
released to foreign nationals outside of the U.S.


An "item" may be a commodity, software or technology, such as clothing, building
materials, circuit boards, automotive parts, blue prints, off the shelf software, and
technical information.


Slide 5:
In Module 1 we will provide an overview of the steps that you should take to determine
your export license requirements under the EAR. These determinations include which
federal agency has jurisdiction over your item; if your item is subject to the EAR; the
item's classification; the reason for control, and using the country chart to obtain the
license requirement. It also includes determining if a license exception is available,
screening the parties to the transaction, and ensuring there are no prohibited end-uses or
activities. Finally, it includes using the information to export under the proper
authorization.


Slide 6:
The Export Administration Regulations do not control all goods, services, and
technologies. BIS is responsible for implementing and enforcing the Export
Administration Regulations, which regulate the export and reexport of most commercial
items. We often refer to the items that BIS regulates as "dual-use" - items that have both
commercial and military or proliferation applications - but purely commercial items
without an obvious military use are also subject to the EAR.


Other U.S. government agencies regulate exports of other types of items as well as
services in some instances. For example, the U.S. Department of State has authority over
defense articles and defense services.
Besides the Department of State, other Federal Agencies which regulate exports or
reexports include the Department of Treasury, Nuclear Regulatory Commission and
Department of Energy.


BIS provides a link on its homepage to other agencies involved in exports. Look for
"Resource Links" on the homepage.


Slide 7:
This chart summarizes the steps to determine your export license requirements. The first
step in the flow chart ,which is highlighted in the yellow diamond, is determining if an
item is "Subject the Export Administration Regulations". Note that if an item or activity
is not subject to the EAR, you have no obligations under the EAR. Let's take a closer
look at what is subject to the EAR


Slide 8:
Items and activities that are subject to the EAR include:
All U.S. origin items, wherever located;
Certain foreign made items containing U.S. origin items;
Certain foreign made direct products of U.S. origin technology or software;
Certain activities of U.S. persons including those in support of proliferation related
activities; and
Releases of source code and technology subject to the EAR to foreign nationals in the
U.S. or abroad ­ also know as Deemed exports and reexports.


Slide 9:
An export or reexport is "deemed" to take place when technology or source code is
released to a foreign national within the United States or abroad. This release is
considered to be an export or reexport to that person's home country. Note that this does
not apply to U.S. citizens or certain other individuals such as those who hold green cards.
You can release source code or technology to foreign nationals when you make the
source code or technology available for visual inspection such as reading technical
specifications, plans, or blueprints; when you have a verbal exchange; or when you
provide guidance to a foreign national through practice or application.


Slide 10:
Now that we have looked at what is Subject to the EAR, let's take a look at what is not
Subject to the EAR.


Besides items that are under the jurisdiction of another agency, certain other items are not
Subject to the EAR


These include literary publications which are artistic and non-technical in nature such as
printed books and newspapers.


It also includes publicly available technology and software such as information that is
published or will be published, information arising during or as the result of fundamental
research, educational information provided in a catalog course and certain patent
applications.


In addition, foreign made items with less the de minimis percentage of controlled U.S.
content is not subject to the EAR.


Slide 11:
As you can see, most items in the United States are subject to the EAR.
Keep in mind that while the scope of items subject to the EAR is broad, the export
licensing requirements for these items is very narrow. Consequently, a relatively small
percentage of total U.S. exports and reexports require an export license from BIS.


Slide 12:
Once you have determined that your item is subject to the EAR, the next step is to
determine if an export license is required for your transaction.
An export license requirement can be triggered two different ways.
The first way a license may be required is based on the item and the country of ultimate
destination ­ in other words, what the item is and where it is being exported. You must
know the Export Control Classification Number (ECCN) of the item to make this license
determination.


The second way a license may be required is based on the end-user and end-use of the
item ­ in other words, who is involved in the transaction and what the item will be used
for.


We will now go into more detail in determining license requirements based on the first
two questions "What is my item and where is it going?"


Slide 13:
A key in determining whether an export license is needed from the BIS is knowing
whether the item you are intending to export has a specific Export Control Classification
Number, also known as ECCN.


The ECCN is an alpha-numeric code, such as 3A001, which describes a particular
commodity, software or technology and the related technical parameters. The ECCN also
indicates the types of controls placed on that item.


ECCN entries make up the Commerce Control List, also referred to as the CCL.
If your item falls under Commerce jurisdiction and is not specifically described on the
CCL by an ECCN, it is designated as EAR99.


EAR99 items generally consist of low-technology commercial goods and do not require a
license in many situations. We will further discuss EAR99 in a few minutes.


Slide 14:
Above is a portion of an ECCN for polygraph and other equipment under ECCN 3A981.
This entry shows the reason for control of the ECCN and the corresponding control
column on the Commerce Country Chart.


Slide 15:
In this example, Crime Control, identified by CC, applies to all the items that may be
listed under 3A981 and "CC Column 1" is the corresponding control column on the
Country Chart.


Note that while this example shows only one reason for control, other ECCNs may have
more than one reason for control.


Slide 16:
Once you know your item's reason or reasons for control, the next step is to review the
Commerce Country Chart. The Country Chart contains license requirements based on
destination and reason for control. In combination with the reason for control of an item,
the Country Chart allows you to determine whether a license is required for an item on
the Commerce Control List to most countries in the world.


Slide 17:
The first column of the Country Chart lists all the countries in alphabetical order


Slide 18:
Stretching out to the right are horizontal headers identifying the various Reasons for
Control.


Slide 19:
To use the Commerce Country Chart, you match the country of destination with the
specific Reason for Control of the item. If there is an "X" in the box, a license is required
based on that Reason for Control. If there is no "X" in the box, a license is not required
based on the Reason for Control.
In the example of 3A981, if an item were controlled for CC Column 1 Reason for
Control, a license would be required to Albania as there is an X in the box.


Slide 20:
However, if the export were to Australia, a license would not be required based on the
Reason for Control, as there is no X in the box.


Slide 21:
If you find an "X" in the box for any reason for control and the country of destination, a
license is required for your transaction, unless the transaction is eligible for a License
Exception and no other restrictions apply, such as an export to an end-user or end-use of
concern.


If there is no "X" in the box for any of the reasons for the country of destination, a license
is not required, unless other restrictions apply, such as an export to an end-user or end-
use of concern.


Slide 22:
A License Exception is an authorization which allows you to export or reexport under
stated conditions, items that would otherwise require a license based on the Reason for
Control and country of destination.


When using a License Exception, you are certifying that the terms, provisions and
conditions for use of the License Exception have been met. In most cases, nothing is
required from BIS prior to using a license exception.


There are many License Exceptions contained in part 740 of the EAR which we will
cover further in Module 4.


Slide 23:
If your item falls under Commerce jurisdiction and is not listed by an ECCN on the CCL,
it is designated as EAR99. EAR99 is a designation for items not specified under any
CCL entry and it appears at the end of each Category on the CCL.


EAR99 items generally consist of low-technology commercial goods and do not require a
license in many situations. However, if your proposed export of an EAR99 item is to an
embargoed country, to an end-user of concern or in support of a prohibited end-use, you
may be required to obtain a license.


Slide 24:
It's important to note that most items Subject to the EAR are not on the Commerce
Control List and are designated as EAR99.


Slide 25:
We have just covered determining your export license requirements based on what your
item is and where it is going. We looked at the Commerce Control List, Export Control
Classification Numbers, Reasons for Control and the Commerce Country Chart.


Slide 26:
Now, let's take a closer look at the second way a license may be required ­ specifically
end-user and end-use controls.


Slide 27:
End-user and end-use controls may apply to any item under the jurisdiction of the
regulations. These controls require an exporter to submit an export license application if
the exporter "knows" or "is informed" that an export is for end-uses involving nuclear,
chemical, and biological weapons, or related missile delivery systems including certain
rocket systems and unmanned air vehicles, in destinations listed in Part 744 of the
regulations.
It is important to understand that these export license requirements apply to both items on
the CCL as well as items that are EAR99. Also, these export license requirements apply
to transactions that otherwise meet the eligibility for export under a License Exception or
No License Required designation.


We will further discuss these controls, including limited military end-use restrictions, in
Module 3.


Slide 28:
Certain individuals and organizations are prohibited from receiving U.S. exports. Others
only may only receive goods if they have been licensed, even for items that do not
normally require a license based on the ECCN and Commerce Country Chart or based on
an EAR99 designation.


For example, the Denied Persons List is a list of individuals and entities that have been
denied export privileges. Any dealings with a party on this list that would violate the
terms of its denial order is prohibited.


The Entity List is a list of individuals and entities whose presence in a transaction can
trigger a license requirement under the EAR. The list specifies the license requirements
that apply to each listed individual or entity. This is primarily a compilation of end-users
that have been determined to present an unacceptable risk of diversion to the
development of Weapons of Mass Destruction or their means of delivery. These license
requirements are in addition to any license requirements imposed on the transaction by
other provisions of the regulations.


The above lists may be relevant to your export or reexport transaction ad will be
discussed in more detail in Module 3.


Slide 29:
BIS's Know Your Customer and Red Flag guidance helps you identify and avoid
situations that might violate the EAR.


Abnormal circumstances indicating that the export may be destined for an inappropriate
end-use, end-user, or destination are referred to as "red flags." Examples of a red flag is
an order for items which are inconsistent with the needs of the purchaser or a customer
declining installation and testing when included in the sales price.


When red flags are raised, you have a duty to check out the suspicious circumstances and
inquire about the end-use, end-user, or ultimate country of destination. However, absent
red flags (or an express requirement in the EAR), there is no affirmative duty upon
exporters to inquire, verify, or otherwise "go behind" the customer's representations.
It's important not to cut off the flow of information that comes to your firm in the normal
course of business. This could be regarded as self blinding. For example, do not instruct
the sales force to tell potential customers to refrain from discussing the actual end-use,
end-user and ultimate country of destination for the product your firm is seeking to sell.


Slide 30:
To counter the proliferation of weapons of mass destruction, the EAR restrict the
involvement of U.S. persons anywhere in the world in exports of U.S. or foreign-origin
items, or in providing services or support, such as financing or forwarding, if the person
knows that the items or activity may contribute to such proliferation.
This means that even if you are involved in a transaction related to an item that is not
subject to the EAR, your activity may be subject to the EAR and require an export
license.


Note that the EAR also restrict technical assistance by U.S persons with respect to
encryption commodities or software.
A U.S. person includes any person in the United States; U.S. citizens, permanent resident
aliens, or protected individuals wherever located; and U.S. organized firms and their
foreign branches
Slide 31:
Although a relatively small percentage of all U.S. exports and reexports require an export
license, virtually all exports and many reexports to embargoed destinations and countries
designated as supporting terrorist activities require a license. These countries are Cuba,
Iran, North Korea, Sudan, and Syria.


Part 746 of the EAR describes embargoed destinations and refers to certain additional
controls imposed by the Office of Foreign Assets Control of the Treasury Department.


Slide 32:
Once you have determined that you can export using an export license issued by BIS, a
License Exception or under No License Required designation, and that no other
restrictions, such as end-user or end-use prohibitions apply, you will include this export
control authorization information on your shipping documents.


Slide 33:
Both the Foreign Trade Statistics Regulations of the Census Bureau and the EAR require
that the Shipper's Export Declaration or Automated Export System record be submitted
to the U.S. Government for many export shipments. The SED or AES record is used for
export clearance purposes. The U.S. government uses it to collect and generate the trade
data and as an export control document.


On the SED or AES record, there are blocks or fields that request the license
authorization and ECCN. In these fields you enter either your license # and ECCN, the
LE symbol and ECCN, or the designation NLR and the ECCN when it is required. Your
shipper will need this information if they are to complete your shipping documentation.
It is important to remember that the SED or AES record is a statement to the U.S.
Government. If you make false statements, you may be violating the EAR.
We will discuss further export clearance requirements from the EAR perspective in
Module 6.
Slide 34:
There are recordkeeping provisions under the EAR that you as an exporter should be
aware of and you may be asked to produce such records.


Records required to be retained include export control documents and other
documentation such as correspondence related to an export transaction.
All records required to be kept generally must be retained for five years from date of
export, reexport or other activity such as financing or transporting by a U.S. person in
violation of section 744.6 of the EAR.


Originals must be maintained unless you meet the conditions of reproduction of original
records.


We will further discuss recordkeeping requirements in Module 6.


Slide 35:
A variety of information is available on the BIS website, including links to the Export
Administration Regulations, the Commerce Control List and the "Lists to Check".
BIS also has exporter counseling staff available to assist you with your specific questions
through one-on-one telephone counseling. Additionally, BIS has enforcement offices
nationwide available to assist you.


In addition, Commerce's Bureau of Census maintains and AES support line and email
inquiry address for questions related to AES filings.


Slide 36:
Thank you for taking the time to view Module 1.


This module has provided you with an overview of the steps used in determining your
export license requirements. These include determining the jurisdiction of your item and
if it is subject to the EAR, classifying your item, identifying its reasons for control, using
the Country Chart to determine your license requirements. It also covered the concept of
License Exceptions, screening of parties to the transaction as well as prohibited end-uses
and activities. Finally it provided an overview of using the proper authorization for export
clearance and recordkeeping purposes.


Slide 37:
In Module Two, we will go into more detail on the structure and formatting of the
Commerce Control List, ways to classify your item, and using the Commerce Country
Chart.