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August 15, 2012August 15, 2012

Export ComplianceExport Compliance

Cross Border TrafficCross Border TrafficJoseph Joseph ““JOEJOE”” Tosto, Jr. Tosto, Jr.

Export Administration SpecialistExport Administration SpecialistWMTAaug15-2012

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Western Western Maquiladora Maquiladora

Trade Trade AssociatonAssociaton

8:00am - 10:00am8:00am - 10:00am

August 15, 2012August 15, 2012

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BIS BIS Bureau of Industry & Bureau of Industry &

SecuritySecurity ““DUAL USEDUAL USE”” Items Items Real World ExamplesReal World Examples License Exception License Exception ““TMPTMP”” RED FLAGSRED FLAGS SummarySummary

Issued by Bureau of the Census, , NOT BISNOT BIS Used for compiling export trade statisticsUsed for compiling export trade statistics May also use Harmonized Tariff Schedule May also use Harmonized Tariff Schedule

NumberNumber

*Schedule B book available on-line*Schedule B book available on-linewww.census.gov/tradewww.census.gov/trade

For Schedule B issues For Schedule B issues call 1-800-549-0595 call 1-800-549-0595

**** $2,500 per Schedule B Rule $2,500 per Schedule B Rule ****

has has NO bearing on BIS bearing on BIS

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Dual Use ExportsDual Use Exports

Term used to distinguish types of items Term used to distinguish types of items covered by EAR from those covered by covered by EAR from those covered by Other Government agenciesOther Government agencies with with export licensing authority. export licensing authority.

In general, the term In general, the term Dual UseDual Use serves serves to distinguish to distinguish EAR EAR ““Export Export Administration RegulationsAdministration Regulations”” itemsitems that can be used both in military that can be used both in military and other strategic uses and in and other strategic uses and in civil applications.civil applications.

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INK PENS to NUCLEAR COMPONENTSINK PENS to NUCLEAR COMPONENTS

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What Kind of Authorization What Kind of Authorization is Required to Export?is Required to Export?

NO LICENSE REQUIREDNO LICENSE REQUIRED

LICENSE EXCEPTIONLICENSE EXCEPTION

LICENSELICENSE

VEUVEU

ON-LINE ACCESSON-LINE ACCESSBIS home pageBIS home page

www.bis.doc.govwww.bis.doc.govE-mail notifications ServiceE-mail notifications Service

SeminarsSeminars REGULATORY CHANGESREGULATORY CHANGES

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ECCN ECCN EXAMPLESEXAMPLES

How to How to Build an Build an AirplaneAirplane

encryption software

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Real World ExamplesReal World Examples 1C997 1C997 Ammonium nitrate, Ammonium nitrate,

includingincluding fertilizers and fertilizer fertilizers and fertilizer blends containing more than 15% by blends containing more than 15% by weight ammonium nitrate….weight ammonium nitrate….

2A2262A226 Valves Valves having all of the having all of the following characteristics (see list of items following characteristics (see list of items controlled)controlled)

2B3502B350 Chemical manufacturing Chemical manufacturing facilities and equipment…..facilities and equipment…..

The The technical description of your technical description of your items must be known for accurate items must be known for accurate selection of ECCN.selection of ECCN.

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How to Classify ItemHow to Classify Item

Company Company Engineer, Chemist Engineer, Chemist or other Technical or other Technical expertexpert

The ManufacturerThe Manufacturer

Official Request to Official Request to BISBIS

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Ten Categories in the CCL Ten Categories in the CCL (0 to 4)(0 to 4)

ECCNs-Export Control Classification ECCNs-Export Control Classification NumbersNumbers

00. Nuclear Materials. Nuclear Materials,, Facilities & Facilities & Equipment andEquipment and

MiscellaneousMiscellaneous

11. . Materials, Chemicals, Materials, Chemicals, Microorganisms & ToxinsMicroorganisms & Toxins

2. Materials Processing2. Materials Processing

33. . Electronics Design, Development Electronics Design, Development and Productionand Production

4. Computers4. Computers

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Ten Categories in the CCLTen Categories in the CCL(5 to 9)(5 to 9)

ECCNs-Export Control Classification ECCNs-Export Control Classification NumbersNumbers

5. Telecommunications & 5. Telecommunications & Information SecurityInformation Security

6. Sensors and Lasers6. Sensors and Lasers

7. Navigation and Avionics7. Navigation and Avionics

8. Marine8. Marine

9. Propulsion Systems, Space 9. Propulsion Systems, Space Vehicles and Related EquipmentVehicles and Related Equipment

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ECCN Structure- Product ECCN Structure- Product GroupsGroups

55AA101 101 55BB101101 55CC101101

55DD101101 55EE101101

Equipment, assemblies and components

Test, inspection and production equipment

Software Technology

Materials

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EAR99 EXAMPLESEAR99 EXAMPLES

blank cd’sAutomobile Automobile

UserUser’’s s ManualManual

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If an item does not fall If an item does not fall within a specific ECCN, it within a specific ECCN, it

is…is…

EAR99EAR99Reminder:Reminder:

Start at the beginning of each Start at the beginning of each categorycategory

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Other factors can trigger Other factors can trigger a license requirementa license requirement

End UseEnd Use

End UserEnd User

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End users of concernEnd users of concern

Denied Persons ListDenied Persons List Supp. 2 to Part 764Supp. 2 to Part 764

Specially Designated Nationals ListSpecially Designated Nationals List www.treas.gov/ofac

Entity ListEntity List Supp. 4 to Part 744Supp. 4 to Part 744

Unverified End UsersUnverified End Users BIS Home Page BIS Home Page ““Lists to CheckLists to Check””

General OrdersGeneral Orders Part 736, Supplement 1Part 736, Supplement 1

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End use concernsEnd use concerns

NuclearNuclear Section Section 744.2744.2

Chemical/Biological WeaponsChemical/Biological Weapons Section Section 744.3744.3

MissileMissile Section Section 744.4744.4

Support of these activities by a U.S. Support of these activities by a U.S. PersonPerson Section Section 744.6744.6

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LICENSE EXCEPTIONSLICENSE EXCEPTIONS

BIS-748P

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License ExceptionsLicense ExceptionsPart 740Part 740

Definition:Definition: An authorization that An authorization that allows you to allows you to export or reexport, , under stated conditions, items under stated conditions, items subject to the EAR that would subject to the EAR that would otherwise require a license.otherwise require a license.

Each license exception bears a Each license exception bears a three three letter symbolletter symbol used for export clearance used for export clearance purposes.purposes.

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Can You Use a License Can You Use a License Exception?Exception?

Review general restrictions (Section Review general restrictions (Section 740.2)740.2)

Identify all applicable License Identify all applicable License Exception(s)Exception(s) List based and transaction based Use least restrictive exception that is Use least restrictive exception that is

availableavailable

Each Each ““XX ”” (license requirement) must be (license requirement) must be overcomeovercome

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COUNTRY GROUPSCOUNTRY GROUPS (Part 740, (Part 740, SupplementSupplement No. 1) No. 1)

A - Regime membersA - Regime members B - Less restricted B - Less restricted

countriescountries C - ReservedC - Reserved D - Countries of D - Countries of

concernconcern E – EmbargoedE – Embargoed**/ /

Terrorist CountriesTerrorist Countries * Not a complete list of* Not a complete list of embargoed countriesembargoed countries

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General RestrictionsGeneral Restrictions(Section 740.2)(Section 740.2)

You may not use any License Exception if any one or more of the You may not use any License Exception if any one or more of the following apply:following apply:

Your authorization to use a License Exception has been Your authorization to use a License Exception has been suspended or revoked, or does not qualify for a license suspended or revoked, or does not qualify for a license exceptionexception

Export or reexport is subject to one of the 10 General Export or reexport is subject to one of the 10 General Prohibitions, is not eligible for a license exception, and has not Prohibitions, is not eligible for a license exception, and has not been authorized by BISbeen authorized by BIS

The item is primarily useful for surreptitious interception of The item is primarily useful for surreptitious interception of wire, oral or electronic communications under 5A/5D980 unless wire, oral or electronic communications under 5A/5D980 unless for official use of an agency of the US. Governmentfor official use of an agency of the US. Government

The item is a crime control and detection instrument (described The item is a crime control and detection instrument (described in in ''742.7), 742.7), unlessunless: export is to NATO, Australia, Japan, New export is to NATO, Australia, Japan, New Zealand; item is for official use by Zealand; item is for official use by personnel and agencies of the U.S. government under under ''740.11(b)(2)(ii) of license 740.11(b)(2)(ii) of license exception GOV; certain shotguns and shells for personal useexception GOV; certain shotguns and shells for personal use

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General Restrictions, contGeneral Restrictions, cont’’dd(Section 740.2)(Section 740.2)

You may not use any License Exception if any one or You may not use any License Exception if any one or more of the following apply:more of the following apply:

The item is controlled for missile technology (MT) reasons, The item is controlled for missile technology (MT) reasons, with some exceptionswith some exceptions

The export or reexport is to a comprehensively embargoed The export or reexport is to a comprehensively embargoed destination (Cuba, Iran, North Korea), unless specifically destination (Cuba, Iran, North Korea), unless specifically listed as available in Part 746 of the EAR. Note: Syria, listed as available in Part 746 of the EAR. Note: Syria, Lybia, Sudan have special controls.Lybia, Sudan have special controls.

The item is The item is ““Space qualifiedSpace qualified”” with an ECCN listed in with an ECCN listed in ''740.2(a)(7)740.2(a)(7)

The item is controlled under ECCN 2A983, 2D983 or The item is controlled under ECCN 2A983, 2D983 or 2E983 (explosives detection), with some exceptions2E983 (explosives detection), with some exceptions

Certain Micromachined Angular Rate SensorsCertain Micromachined Angular Rate Sensors

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Temporary Imports, Exports Temporary Imports, Exports

and Reexports: and Reexports: TMPTMP(Section 740.9)(Section 740.9)

Temporary Exports and Reexports Temporary Exports and Reexports ……One (1) year…One (1) year…

Tools of tradeTools of trade Kits with replacement partsKits with replacement parts Exhibition and demoExhibition and demo Inspection and calibrationInspection and calibration Return of unwanted shipmentsReturn of unwanted shipments Items refused entryItems refused entry Containers – not what is in container -Containers – not what is in container -

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Temporary Imports, Exports and Temporary Imports, Exports and Reexports: Reexports: TMPTMP

(Section 740.9)(Section 740.9)

Export of Items Temporarily in the U.S.Export of Items Temporarily in the U.S.

Assembly in Mexico -Assembly in Mexico -MaquiladoraMaquiladora--

Temporary Exports to U.S. Subsidiary, affiliate or facilityTemporary Exports to U.S. Subsidiary, affiliate or facility in Country Group B. (Mexico is in Country Group B)in Country Group B. (Mexico is in Country Group B)

Exports of Items Temporarily in the U.S.Exports of Items Temporarily in the U.S.

Item Item ““withdrawal for exportwithdrawal for export”” from Bonded warehouse from Bonded warehouse

Item moving Item moving ““T+ET+E”” Transportation + Entry Transportation + Entry

Item moving Item moving ““IEIE”” Immediate Export Immediate Export

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ASSEMBLY IN ASSEMBLY IN MEXICOMEXICO

Maquiladora TransactionsMaquiladora Transactions, , exported to Mexico under Customs exported to Mexico under Customs entries that require return to the entries that require return to the U.S. after processing, assembly, or U.S. after processing, assembly, or incorporation into end products by incorporation into end products by companies, factories, or facilities companies, factories, or facilities participating in Mexicoparticipating in Mexico’’s in-bond s in-bond industrialization program; industrialization program; provided provided that all resulting end-products (or that all resulting end-products (or the commodities) are returned to the commodities) are returned to the U.S.the U.S.

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TEMPORARY EXPORT toTEMPORARY EXPORT to U.S. U.S. subsidiary, affiliate or facility subsidiary, affiliate or facility

in Mexicoin Mexico Components, parts, tools or test Components, parts, tools or test

equipment exported by a U.S. Person to its equipment exported by a U.S. Person to its subsidiary, affiliate or facility in Mexico, subsidiary, affiliate or facility in Mexico, that is owned or controlled by the U.S. that is owned or controlled by the U.S. person, provided items exported person, provided items exported temporarily are not transferred or temporarily are not transferred or reexported to a country other than the reexported to a country other than the U.S., without prior authorization by BIS. U.S., without prior authorization by BIS. Note:Note: U.S. person is defined in Part 740.9 U.S. person is defined in Part 740.9 (ix) (B); Ineligible commodities or (ix) (B); Ineligible commodities or software, sensitive Nuclear Activity per software, sensitive Nuclear Activity per Part 744.2.Part 744.2.

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Items Moving in transit Items Moving in transit though the U.S.though the U.S.

Subject to conditions, Subject to conditions, authorizes export of items authorizes export of items moving in transit through moving in transit through U.S. under a U.S. under a ““Transportation Transportation and Exportationand Exportation”” (T+E) or (T+E) or ““Immediate ExportationImmediate Exportation”” (I.E.) customs entry made at (I.E.) customs entry made at a U.S. Customs office.a U.S. Customs office.

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Exports of Items Exports of Items Temporarily in the U.S.Temporarily in the U.S.

Exporting Foreign Origin Items Exporting Foreign Origin Items temporarily in U.S. moving in transit temporarily in U.S. moving in transit through U.S, through U.S, withdrawn withdrawn from afrom a Bonded WarehouseBonded Warehouse in U.S. under in U.S. under ““withdrawal for exportwithdrawal for export”” customs entry customs entry is considered: is considered: ““moving in transitmoving in transit””. . It It is is not considerednot considered ““moving in transitmoving in transit”” if withdrawn under any other type of if withdrawn under any other type of customs entry or broken for customs entry or broken for processing. processing. Part 740.9 (b)Part 740.9 (b)

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Record keepingRecord keepingPart 762Part 762

Provides audit trail—FIVE (5) Provides audit trail—FIVE (5) years!!years!!

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RED FLAGSRED FLAGS There are twelve (12) RED FLAGS There are twelve (12) RED FLAGS

covered Supplement No. 3 to Part covered Supplement No. 3 to Part 732 of the EAR. 732 of the EAR.

We will now review the twelve (12) We will now review the twelve (12) RED FLAGSRED FLAGS

RED RED - Hand Out -- Hand Out -

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KNOWLEDGEKNOWLEDGE

Part 736Part 736, General , General Prohibitions, (10)Prohibitions, (10)

Proceeding with transactions with Proceeding with transactions with knowledge that a violation knowledge that a violation hashas occurred occurred or or is about to occuris about to occur…. And …. And ….….

Part 772Part 772, Definitions of , Definitions of TermsTerms…. Are both parts of the EAR …. Are both parts of the EAR you, you, your staff and all associated with your staff and all associated with your transactions must be aware of.your transactions must be aware of.

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Bureau of Industry and security

Office of Export Enforcement

Keep the most Keep the most sensitive goods sensitive goods out of the most out of the most dangerous hands.dangerous hands.

Our Mission

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Bureau of Industry and securityOffice of Export Enforcement

OEE routinely works with various U.S. intelligence and defense agencies for threat assessment and the enforcement of U.S. Export Laws.

Office of Export Enforcement

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PenaltiesPenalties

Criminal: Criminal: 10/20 years imprisonment 10/20 years imprisonment$250,000 fine ($1,000,000$250,000 fine ($1,000,000

corporation)corporation)

Civil:Civil: $11,000/$50,000 per $11,000/$50,000 per violationviolation

$120,000 per national $120,000 per national securitysecurity

violationviolationDenial of export privilegesDenial of export privileges

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SUMMARYSUMMARY Be positive your items (products, test Be positive your items (products, test

equipment, software & technology are equipment, software & technology are properly classified ---ECCN properly classified ---ECCN oror EAR99--- EAR99---

Use the EAR, follow the steps in Part 732Use the EAR, follow the steps in Part 732 When making decisions, use WEB PAGE: When making decisions, use WEB PAGE:

www.bis.doc.govwww.bis.doc.gov current EAR current EAR ““Export Administration Export Administration

RegulationsRegulations””

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ContactsContacts Western Regional Offices:Western Regional Offices: (949) 660-0144 , (408) 998-(949) 660-0144 , (408) 998-

88068806 Washington D.C.Washington D.C. (202) 482-4811- dial (202) 482-4811- dial ““00 ”” Fine PrintFine Print: : The CFR The CFR ““Code of Federal Code of Federal

RegulationsRegulations””, EAR are the Regulations. Base , EAR are the Regulations. Base your decisions on the Regulations and have your decisions on the Regulations and have an export compliance program that is an export compliance program that is updated and current!updated and current!

ATTEND our Seminars, Updates and EXPORT CONTROL FOURM!

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Bureau of Industry and securityOffice of Export Enforcement

Office of Export Enforcement

If your If your competitor, competitor, or any or any PERSON is PERSON is breaking the breaking the law, help law, help them find a them find a new home.new home.

HOTLINE 1-800-424-2980

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Optimistically Optimistically Yours,Yours, Contact me for specific Contact me for specific ““challengeschallenges””

you may face in complying with you may face in complying with current Export Administration current Export Administration

Regulations!Regulations! Joe Tosto, Jr., (949)660-0144 x Joe Tosto, Jr., (949)660-0144 x

122122 joseph.tosto@bis.doc.govjoseph.tosto@bis.doc.gov