Is Your Company Subject to Federal Export Laws and Regulations?

Many company owners and executives do not realize that their operations subject them to federal export compliance. Is your company required to comply? Here’s what you need to know.

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Exporting is a multi-trillion-dollar industry. In 2018, U.S. companies exported approximately $2.5 trillion in goods to companies around the world. While many U.S. companies export tens or hundreds of millions of dollars of goods each year, smaller companies contribute to this total figure as well. Critically, many of these smaller companies are unaware that they are subject to federal export laws and regulations.

Is your company required to comply? You might be surprised to learn the answer. While not every individual and company that ships items oversees is labeled an “exporter,” far more businesses fall into this category than most owners and executives realize. 

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Lynette S. Byrd
Lynette S. Byrd

Former Assistant U.S. Attorney

Partner

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Federal Export Compliance Lawyers Representing Companies of All Sizes Nationwide

At Oberheiden P.C., we represent companies of all sizes with regard to federal export compliance. Our practice is nationwide in scope, and our federal compliance attorneys serve clients in all industries. If you are unsure whether your company’s operations have federal export compliance implications, you need to find out quickly. 

Do you have questions about federal export compliance? If so, we encourage you to get in touch. Our attorneys can examine your company’s operations to determine where and to what extent compliance is required. Once we have thoroughly assessed your company’s needs, we can help you implement a custom-tailored export compliance program designed to protect your company (and you) from the risk of federal prosecution.

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What Does it Mean to “Export”?

Under federal law, an “export” occurs any time a physical item is shipped outside of the United States or an “oral, written, electronic, or visual disclosure” is transferred or transmitted from the United States to a foreign country. This applies to all types of tangible and intangible products, from oil and gas to software code and other forms of intellectual property (IP). 

There are five primary ways in which a company can “export” a product to a foreign country. These are:

  • Shipping a Product to a Recipient in a Foreign Country – Most companies that export products do so by shipping them via a third-party delivery or freight service. This includes mailing items internationally through the U.S. Postal Service (USPS) and shipping internationally with carriers such as DHL, FedEx, or UPS.
  • Carrying a Product to a Foreign Country – Companies that send their employees overseas can also face export compliance obligations. While this includes delivering products to foreign customers in person, carrying laptops, electronics, and other equipment can potentially implicate federal export control laws and regulations as well. 
  • Transmitting or Transferring Data to a Foreign Country – Transmitting or transferring software code, proprietary information, or other data to a foreign country is another form of export that is subject to federal oversight. This includes transmissions and transfers via phone, fax, email, file sharing, and other electronic means. 
  • Through the “Re-Export” of an Exported Product or Exported Data – If your company exports a product or data to a foreign country and then a person in that country subsequently sends it to a company or individual in a third country, this is known as a “re-export.” Under federal law, U.S. companies’ export compliance obligations “follow” products and data to all countries to which they are shipped.  

Within each of these five broad categories, an “export” can take many different forms. For example, depending on the specific circumstances involved, all of the following are examples of shipments, transactions, and transmissions that can potentially raise export control compliance concerns:

  • Shipping final products to a foreign country
  • Shipping materials, supplies, or specifications to a foreign country
  • Providing access to software code, proprietary information, or other data to one or more individuals who are located in a foreign country
  • Transmitting proposals or marketing information to a foreign country
  • Collaborating with internal personnel or external business partners who are located in a foreign country
  • Traveling overseas with business equipment or supplies
  • Providing “defense services” in any capacity, directly or indirectly, to foreign nationals

How are Exports Regulated in the United States?

While not all exports require pre-approval from the U.S. government, virtually all products are subject to federal export laws and regulations in one form or another. The products that are subject to government approval are known as “controlled” exports, and dealing with controlled exports involves unique compliance burdens. This may involve obtaining a license from one or more of the following federal agencies:

  • The Bureau of Industry and Security (BIS) within the U.S. Department of Commerce (DOC)
  • The Office of Foreign Assets Control (OFAC)
  • The U.S. Department of State (DOS)

Most commercial exports are subject the oversight of BIS. BIS administers the federal Export Administration Regulations (EAR), and these regulations apply to physical goods as well as technology assets and transmittable data. One of the key aspects of EAR is the Commerce Control List (CCL). Under the CCL, all exports are given an Export Control Classification Number (ECCN). This is five-digit alphanumeric code that specifies the category and tangible or intangible nature of the product. There are 11 categories under the CCL and five product groups.

CCL Categories:

  • (0) Nuclear and miscellaneous
  • (1) Materials, chemicals, microorganisms, and toxins
  • (2) Materials processing
  • (3) Electronics
  • (4) Computers
  • (5 Part 1) Telecommunications
  • (5 Part 2) Information security
  • (6) Sensors and lasers
  • (7) Navigation and avionics
  • (8) Marine
  • (9) Aerospace and propulsion 

CCL Product Groups:

  • (A) Systems, equipment, and components
  • (B) Test, inspection, and production equipment
  • (C) Material
  • (D) Software
  • (E) Technology 

Exports that do not fall into the CCL categories and product groups are given an ECCN of “EAR 99”. In most cases, though not always, exports designated as EAR99 are low-tech consumer goods that are not subject to BIS (or OFAC or DOS) licensing requirements. 

The other primary set of regulations that govern U.S. exports is the International Traffic in Arms Regulations (ITAR). ITAR applies to “defense articles,” “technical data,” and “defense services” supplied for military use. For defense contractors and companies that manufacture and distribute technologies, weapons, and other defense assets, complying with ITAR is of critical importance. 

Does Your Company Need a License to Export?

When it comes to exporting products and data from the United States, companies have three primary options available. These are (i) to obtain a license under EAR or ITAR, (ii) to rely on a license exception under EAR or ITAR, or (iii) to export under EAR’s No License Required (NLR) provisions.

Under EAR, there are 13 classifications of products and data that are subject to licensing through BIS. These are:

  • AT – Anti-Terrorism    
  • CB – Chemical & Biological Weapons
  • CC – Crime Control  
  • CW – Chemical Weapons Convention
  • EI – Encryption Items    
  • FC – Firearms Convention
  • MT – Missile Technology    
  • NS – National Security
  • NP – Nuclear Nonproliferation    
  • RS – Regional Security
  • SS – Short Supply  
  • XP – Computers
  • SI – Significant Items  

If a product or electronically-stored information falls within one of these 13 classifications, then the Commerce Country Chart in 15 C.F.R. § 738 Supplement 1 must be consulted to determine if a license is required based upon the country to which the product or data will be exported. 

Under ITAR, most defense articles, technical data, and defense services are subject to licensing; and, in virtually all cases, companies must register with the Directorate of Defense Trade Controls (DDTC) within the DOS. Once registered with DDTC, companies can then apply for licenses or utilize the license exemptions that are available. 

With EAR, the licensing exceptions fall into 18 categories, and certain items are eligible to be exported NLR. This includes most (but not all) products classified as EAR 99, and it includes various other products as well. Under EAR, licensing exceptions exist for:

  • LVS – Shipments of limited value
  • GBS – Shipments to Country Group B countries
  • CIV – Civil end-users
  • TSR – Technology and software under restriction
  • APP – Computers
  • TMP – Temporary imports, exports, re-exports, and transfers (in-country)
  • RPL – Servicing and replacement of parts and equipment 
  • GOV – Governments, international organizations, and international inspections
  • GFT – Gift parcels and humanitarian donations
  • TSU – Technology and software – unrestricted
  • BAG – Baggage
  • AVS – Aircraft, vessels, and spacecraft
  • APR – Additional permissive exports
  • ENC – Encryption commodities, software, and technology 
  • AGR – Agricultural commodities 
  • CCD – Consumer communications devices
  • STA – Strategic Trade Authorization license exceptions
  • SCP – Support for the Cuban People 

Speak with a Federal Export Compliance Lawyer at Oberheiden P.C.

If you need help assessing your company’s federal export compliance obligations, we encourage you to get in touch. One of our federal export compliance attorneys will be happy to discuss your company’s needs in a complimentary needs assessment. To request an appointment with an attorney at Oberheiden P.C., call 214-692-2171 or inquire online today.

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