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Compliance

Export Controls—Export Administration Regulations (EAR)

I. PURPOSE

The US Government regulates exports in order to uphold national security, protect the domestic economy, and further the foreign policy goals and international obligations of the United States. The Export Administration Regulations (EAR) are issued in accordance with laws governing certain exports, re-exports, and related activities. The Office of Foreign Assets Control (OFAC) Regulations, which enforce economic and trade sanctions against certain foreign countries and individuals that pose a threat to the United States, as well as the International Traffic in Arms Regulations (ITAR), which govern defense materials, are outside the scope of this memo.

II. HISTORY

The Export Administration Act of 1979 (EAA) provides the statutory authority for the EAR. Although originally slated to expire in 1994, the EAA has been consistently reauthorized by statute or by executive order through other statutorily granted authority. The Bureau of Industry and Security (BIS) of the Department of Commerce, which promulgated the EAR, received authority from the EAA to regulate exports and issue export licenses.

III. APPLICABILITY TO BYU–HAWAII

The EAR regulate the export of US originated “items,” which include commodities, software, technology, and even certain types of information. To the extent that BYU–Hawaii faculty work with and share US information or technology with foreign nationals or outside the US, BYU–Hawaii is subject to the EAR.

IV. REQUIREMENTS

A. Items Subject to the EAR

The EAR prohibit the export of the following categories of items without an exemption or license:

  • all items in the United States and US Foreign Trade Zones, or in transit through the United States from one country to another that isn’t controlled by one of several other government departments
  • anything originating in the United States, regardless of whether it is currently within the United States
  • foreign commodities that incorporate commodities originating in the United States that are subject to the EAR
  • anything foreign-made that is bundled or combined with something from the United States
  • certain immediate products produced using technology or software from the United States
  • certain commodities produced by a plant or plant component outside the United States if the
  • plant or plant component was the product of technology or software from the United States

In addition to the above items, certain actions not usually considered “exports” may be “deemed exports” subject to the EAR. For instance, sharing information or technology with a foreign national even by demonstration or oral briefing can be a “deemed export.”

B. Exceptions to the EAR

The following are exceptions to the above categories of exports and are not subject to the EAR:

  • anything on the US Munitions List (regulated by the Department of State)
  • exports to certain countries under a trade embargo (regulated by the Treasury Department)
  • exports covered by the Trading with the Enemy Act (relating to trading with those at war with the US) or the International Emergency Economic Powers Act
  • nuclear materials and reactor components (regulated by the Nuclear Regulatory Commission)
  • technology related to producing nuclear materials (regulated by the Department of Energy)
  • unclassified technology in patent applications and amendments (regulated by the Patent and Trademark Office)
  • items sold or loaned by the Department of Defense
  • published books, newspapers, maps, and other publications
  • some publicly available technology and software, such as fundamental research.

The EAR provide an exception for “fundamental research.” This exception excludes from EAR coverage “basic and applied research in science and engineering” that is published and shared within the scientific community. If the research contains any restrictions on publication (by sponsors or researchers), the research is not considered “fundamental.” If the research is not considered “fundamental,” researchers who export or share the research with a foreign national or otherwise outside the US would be required to comply with the EAR.

C. The Commerce Control List

BIS maintains a list of commodities, software, and technology that are subject to the EAR. This list is called the Commerce Control List (CCL). To determine export restrictions, exporters are required to determine an item’s Export Control Classification Number (ECCN) listed on the CCL. The ECCN provides several pieces of information, including a categorical description of the controlled item, license requirements, and license exceptions, as outlined below. Most items subject to the EAR have a designation on the CCL and are thus accompanied by an ECCN. However, if an item subject to the EAR is not listed on the CCL, that item is identified instead by the designator “EAR99.” Items classified as EAR99 generally do not require an export license, but they may need a license if they are being exported to embargoed countries, to certain end-users, or for certain prohibited end-uses.

D. Licenses

Items subject to the EAR may require a license for exportation. BIS may require and issue licenses for a specific export or for multiple exports. BIS maintains a Commerce Country Chart to determine necessary requirements of exporters for specific countries.

1. Items Requiring License

The following categories of activities are generally prohibited without an export license.

  1. Export or re-export of items that are controlled and labeled with an ECCN, to a country listed on the Country Chart
  2. Export or re-export of foreign-made items from countries other than the United States, which incorporate more than a “minor or trivial” amount of US content, as long as the export’s destination is listed on the Country Chart
  3. Export or re-export from outside of the United States of products directly created using US software or technology, if the products are being sent to a country in Group D:1 or E:1 of the Country Chart
  4. Any action prohibited by a denial order from BIS
  5. Knowing export of an item destined for prohibited end-users or end-uses
  6. Export of any item to an embargoed destination
  7. Engagement in any action that supports a proliferation activity
  8. Export of any item that would require a license through one of the export-regulated countries on the way to another destination
  9. Violation of the terms or conditions of a license or license exception
  10. Carrying out a transaction with the knowledge that a violation has occurred or is about to occur

The general prohibitions’ applicability to an item is determined by the item’s CCL classification, destination, end-user, end-use, and relationship to a proliferation project. BIS may approve or deny license applications. If a license application is denied, the applicant can appeal to an administrative law judge who will determine only whether the item in question to be exported is actually on the control list. The Secretary of the BIS reviews the determination and must affirm or vacate the determination in writing. The Secretary’s decision is final. Exporters are subject to periodic review by the BIS.

2. License Exceptions

The EAR sets out several license exceptions whereby an exporter without a license may export an item that would normally require a license under certain circumstances. These exceptions are only available for general prohibitions 1, 2, 3, and 8 (listed above). Exceptions are classified according to the type of item being exported, and exporters should therefore check available license exceptions to see if the item to be exported qualifies for an exception.

E. Countries under Embargo

Technology, commodities, and software generally may not be exported to countries subject to an embargo; however, some embargoes allow exceptions for certain products. For example, although no items on the CCL can be exported to Syria, food and medicine may still be exported there.

F. Recordkeeping

Exporters must maintain records of their transactions that are subject to the EAR, including records of correspondence, contracts, account books, financial records, notes or memos, and export control documents. Records pertaining to EAR transactions must be maintained for five years after the last known export, re-export, or termination of a transaction. If BIS asks for records, the records may not be destroyed until the BIS provides written authorization to do so.

G. Voluntary Self-Disclosure of Violations

Entities that believe they may have violated EAR may disclose details of the violation to the Office of Export Enforcement (OEE). Acceptable disclosures are considered strong mitigating factors when sanctions are considered for the violation. The disclosure must include a description of the nature and extent of the violations and must be made as soon as possible after the violations are discovered. The disclosure is then followed by a review by OEE, during which the disclosing entity must submit a narrative account of the violation, including any relevant documentation.

If a narrative account is submitted, the disclosure is considered to have been made on the date of the original notification. The date of original notification is significant because voluntary disclosures are only acceptable if they are received before OEE or another government agency has learned of the violation from another source. Otherwise, the notification will not be considered a mitigating factor in any ensuing legal action. The narrative account must be submitted within 180 days of the initial notification for the date of original notification to be considered the date of disclosure.58 The director of OEE has discretion to extend the 180-day deadline if doing so is in the government’s interest or more time is required to complete the narrative account.

V. PENALTIES

If an institution violates the EAR, the Director of the OEE may begin enforcement by issuing a charging letter to the violating institution in the name of BIS. If a hearing ensues, an administrative judge will render a decision based on findings of fact, issues of law, and a determination of whether there has been a violation of the EAR. Violators of the EAR may be subject to both criminal and administrative penalties. Those who knowingly violate EAR shall be fined five times the value of the exports involved or $50,000, whichever is greater. If the violation involves a conspiracy pertaining to a country to which exports are controlled for foreign policy purposes, the OEE may fine an organization up to five times the value of the exports or $1,000,000, whichever is greater. However, in the case of an individual, fines are limited to $250,000 and prison sentences are limited to 10 years.

In addition to criminal charges, administrative monetary penalties can reach $11,000 per violation or $120,000 per violation if the exports involved are controlled for national security reasons. Violators may also be prohibited from future participation in transactions subject to the EAR in any way.

VI. Related Memos

Export Controls—Office of Foreign Assets Control (OFAC) Regulations (Regulations enforcing economic trade sanctions against certain foreign countries and individuals that pose a threat to the United States.)

Export Controls—International Traffic in Arms Regulations (ITAR) (Regulations governing the export of defense materials and services, including technical data, weapons, and training.)