Post 9/11, the legal stakes have gone up for both exporting and importing. Who you do business with, what you trade, and how you control it through a global supply chain are just a few areas where the government has introduced new requirements with which companies must comply. This article is going to focus on what is traded and how that relates to the concept of “Dual Use.”
Dual use is when a product can have both commercial and military or proliferation applications. Unfortunately for many companies, the list of these products is quite extensive. All exporters must determine whether an Export Control Classification Number (ECCN) exists for their product. Even firms selling products in the United States but to foreign buyers need to consider this because those sales are considered “deemed exports” under the law.
An ECCN is five digits. For those already exporting, this is different from the Schedule B number that the Census Bureau uses to collect trade statistics. The ECCN categorizes the nature of the product and its technological parameters. There are ten broad categories for determining whether a product has an ECCN, which include electronics, computers, and telecommunications devices to name just a few. Each category has five product groups. The majority of products traded are not listed within the ECCN classifications and are designated EAR99. These do not require an export license unless the export is to an embargoed or sanctioned country, to a party of concern or for an end use that is prohibited. So while the nature of the export may be outside the concern of ECCN, exporters still have to be cautious about with whom they do business and the nature of the ultimate use.
You can request an official ECCN classification or you can search the list yourself. Visit the Bureau of Industry and Security website, part of the U.S. Department of Commerce, at www.bis.doc.gov to get started. All exporters, large or small, have to comply with this law. And again, in most cases the ECCN will wind up being EAR99, meaning no license is required under most circumstances. And if a different ECCN exists for the product, it does not mean that it can’t be exported. It means a license may be required depending on where the product is going and who is buying it.
The Office of Exporter Services has counselors available in Washington DC at (202) 482-4811 or in California at (949) 660-0144 or (408) 998-8806. They cannot classify your product’s ECCN over the phone, but they can help you understand self-classification or help you with the process of submitting an official request to obtain an ECCN.
If this all sounds boring and perhaps like a detail not worth attending to, it may raise the stakes to know that the penalties for doing trade in restricted items or with restricted parties can include million dollar fines and 20 years in prison. Someone I know in industry was sent for trade training by his company. After training, as he looked over the company’s past practices he realized that it had been in noncompliance for dual use issues for years. The firm was in the lighting industry, and I’m sure didn’t consider its products to have military applications. The company then self-disclosed the problems to regulators, and was able to have a million dollar fine set aside, partly due to its demonstrated commitment to improve practices as evidenced by sending an employee to be better trained.
The stakes are higher now, and every exporter has a role to play in keeping our world safe, even while growing business. Knowing your product’s ECCN number and any restrictions that may impose is just one step on the journey to a more secure future.
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