Overview of United States Export Controls
The United States imposes strict regulations on the export of certain goods, technologies, and services to safeguard its national security, support foreign policy goals, and prevent the proliferation of weapons of mass destruction.
The Bureau of Industry and Security (BIS), a division within the U.S. Department of Commerce, is at the heart of these efforts.
BIS is responsible for overseeing and implementing U.S. export controls, particularly through the administration of the Export Administration Regulations, 15 C.F.R. Parts 730-774 (EAR). Violating these rules can result in steep fines, criminal charges, and possible prison time, underscoring the critical importance of compliance.
15 CFR 730.1, which covers these regulations, says, "In this part, references to the Export Administration Regulations (EAR) are references to 15 CFR chapter VII, subchapter C. The EAR is issued by the United States Department of Commerce, Bureau of Industry and Security (BIS) under laws relating to the control of certain exports, reexports, and activities.
In addition, the EAR implements antiboycott law provisions requiring regulations to prohibit specified conduct by United States persons that furthers or supports boycotts fostered or imposed by a country against a country friendly to the United States.
Supplement no. 1 to part 730 lists the control numbers assigned to information collection requirements under the EAR by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995."
The related statute, 730.6 control purposes, says, "The export control provisions of the EAR are intended to serve the national security, foreign policy, nonproliferation of weapons of mass destruction, and other interests of the United States, which in many cases are reflected in international obligations or arrangements.
Some controls are designed to restrict access to items subject to the EAR by countries or persons that might use such items for purposes inimical to U.S. interests."
The Bureau of Industry and Security (BIS)
The BIS plays a pivotal role as the primary U.S. government entity responsible for regulating the export of dual-use items-goods and technologies with both commercial and military applications, a key aspect of U.S. export controls.
Its mission includes ensuring that exports from the United States do not undermine national security or U.S. foreign policy objectives. Dual-use items cover a wide range of products, including electronics, software, encryption technologies, and advanced materials.
BIS implements export controls through several mechanisms, including the following:
- Licensing Requirements: Exporters must determine whether their products, technology, or software fall under EAR jurisdiction and if a license is required for export. Certain countries, entities, and individuals may be subject to more stringent restrictions, particularly those related to arms embargoes, terrorism, or nuclear non-proliferation concerns.
- The Commerce Control List (CCL) is acrucial tool maintained by BIS. It identifies specific items subject to export controls and categorizes products according to the reasons for control, such as national security, regional stability, or anti-terrorism. Exporters must consult the CCL to understand whether their item requires a BIS license before export.
- End-User and End-Use Restrictions: In addition to product controls, BIS imposes restrictions based on the end-user or the intended use of the exported item. For instance, goods destined for prohibited end-users (such as entities involved in nuclear proliferation) or those intended for military purposes in restricted countries may be subject to stricter licensing requirements or outright bans.
- Export Control Classification Number (ECCN): Items subject to the EAR are categorized under ECCN, which helps determine whether a license is required for export to specific destinations and under certain circumstances. Items not specifically listed on the CCL may still be subject to the EAR's "catch-all" provisions if they could potentially contribute to military or weapons-related activities.
These measures are designed to ensure that U.S. exports are closely monitored and only those that align with national interests are permitted to leave the country.
The Export Administration Regulations (EAR)
The EAR, codified in 15 C.F.R. Parts 730-774, is a comprehensive set of rules and procedures that govern the export and re-export of dual-use items and certain less-sensitive military goods. It provides a thorough framework for compliance with U.S. export controls.
- Licensing Procedures: The EAR sets out detailed procedures for applying for and obtaining export licenses. Depending on the item and destination, an exporter may need to apply for a license from BIS, which will review the request based on national security, foreign policy, and proliferation concerns.
- The EAR also governs "deemed exports," a concept where the release of controlled technology or source code to a foreign national within the U.S. is considered an export. This provision is critical for businesses engaged in research and development or technology sharing with foreign employees.
- License Exceptions: While certain exports require a license, the EAR provides for a range of license exceptions, which allow for exports without a license under specific conditions. Exporters must carefully review these exceptions to determine whether they apply to their products and transactions.
- Recordkeeping and Reporting: Compliance with the EAR also includes recordkeeping requirements. Exporters must maintain accurate records of their transactions, including export documentation and license applications, for five years. Additionally, they may be required to file electronic export information through the Automated Export System (AES).
What are Related Federal Statutes?
15 CFR Subchapter C, Export Administration Regulations, has several related federal statutes, including the following:
- Part 730 - General information.
- Part 732 - Steps for using the ear.
- Part 734 - Scope of export administration regulations.
- Part 735 - General Prohibitions.
- Part 738 - Commerce control list and county chart.
- Part 740 - License exceptions.
- Part 742 - Control policy, CCL-based controls,
- Part 743 - Special reporting and notification.
- Part 744 - Control policy, end-used based.
- Part 745 - Chemical weapons convention requirements.
- Part 746 - Embargoes and other special controls.
- Part 748 - Applications, classification, and license.
- Part 750 - Application processing and issuance.
- Part 754 - Short supply controls.
- Part 756 - Appeals and judicial review.
- Part 758 - Export clearance requirements.
- Part 760 - Restrictive trade practices and boycotts.
- Part 762 - Recordkeeping.
- Part 764 - Enforcement and protective measures.
- Part 766 - Administrative enforcement proceedings.
- Part 766 - Foreign availability determination.
- Part 770 - Interpretations.
- Part 772 - Definitions of terms.
- Part 774 - The commerce control list.
What are the Penalties for Violating the ECAR?
The Export Control Reform Act of 2018 (ECRA), codified in 50 U.S.C. 4801-4852, provides the statutory authority for enforcing the EAR. The ECRA significantly strengthened BIS's enforcement capabilities, increasing both civil and criminal penalties for violations of U.S. export controls.
Under the ECRA, BIS can impose significant civil and criminal penalties for EAR violations.
Civil penalties may include fines up to $300,000 or twice the transaction value, denial of export privileges, which can severely impact businesses, and exclusion from U.S. government contracts.
For severe violations, individuals may face up to 20 years in prison and criminal fines reaching $1 million per violation, particularly in cases related to national security or the proliferation of weapons of mass destruction.
In some cases, companies or individuals suspected of violating the EAR may benefit from self-disclosure to BIS.
Voluntary self-disclosures, where a company reports its violations to BIS, are often viewed as a mitigating factor and can result in reduced penalties.
If you are under investigation for allegedly violating the ECAR, contact our federal criminal defense lawyers to review the details to determine a strategy to obtain the best possible outcome. Eisner Gorin LLP is based in Los Angeles, California.
Related Content: