In the first of a five-part series, this article considers the first step in US export compliance: determining the jurisdiction of a US-acquired item.
Why is jurisdiction and subsequent classification (think item identification) important? By acquiring US technology, you are obliged to abide by US export controls for the life of the product; meaning that approval is required for all subsequent transfers and end-use (including disposal).
Any failure to correctly determine jurisdiction during acquisition will be compounded for all future export related decisions.
Jurisdiction dictates the controlling agency, registering obligation, licensing and brokering responsibilities and any applicable license exemptions/exceptions. US sanctions imposed due to export control breaches can include economic and embargo penalties as well as the risk to individuals of imprisonment and fines.
There are two primary agencies responsible for regulating US exports. These are the Directorate of Defense Trade Controls (DDTC) within the US Department of State and the Bureau of Industry and Security (BIS) within the US Department of Commerce.
DDTC implements the Arms Export Control Act which governs the export of military goods and technology on the US Munitions List (USML) through the administration of the International Traffic in Arms Regulations (ITAR). In 2009, then-President Obama directed a broad interagency review of export control which resulted in the Export Control Reform Act (2018) (ECRA) and the refinement of the USML to only those articles considered critical to national security. This initiative was billed as ‘building a higher fence around a smaller yard’, reflecting DDTC’s broad licensing powers but narrow span of control.
Defense articles which do not meet this standard as well as those that have a dual use (ie could be used in both military or civilian applications) are captured in the Commerce Control List (CCL) and controlled by BIS. The CCL is governed by the ECRA and administered by the Export Administration Regulations (EAR).
The first step in determining commodity jurisdiction and classification begins with a thorough understanding of the product or service’s capabilities and end-uses. This will enable you to undertake an Order of Review assessment of jurisdiction which sequentially considers if the item is controlled under the USML, not specifically enumerated (that is, listed) but captured in a ‘Specially Designed’ for military purpose catch all, or is subject to the EAR’s CCL. DDTC provides an online tool to assist in this decision-making process which prompts you through classification under the USML or directs you to exit and go to the CCL Order of Review Decision Tool.
Fortunately, ECRA has significantly improved USML category definitions, such that ‘aircraft’ which had previously been described as ‘specifically designed, modified or equipped for military purposes’ is now broken into functional categories including bombers, fighters, UAVs etc. In ECRA language, this was intended to create a ‘bright line’ between USML and CCL jurisdiction.
Identification of your item on the USML then denotes its classification in one of 21 Categories. If an item is to be controlled on the CCL, its classification reflects its category, product group and type of control in a five-digit Export Control Classification Number (ECCN). Ultimately if self-determination is not possible and doubt persists, you can submit a Commodity Jurisdiction Determination Request to DDTC or a Classification Request to BIS using their online portals.
Recently, there has been debate over the jurisdiction of 3-D produced firearms and parts. DDTC clarified that these articles were subject to control on the USML, effectively prohibiting their open sale on the internet and arguably the proliferation of these weapons into the wrong hands. This underscores the importance of getting commodity jurisdiction correct, in the first step towards assuring your compliance with US export controls.
Note: Debbie Richardson is a Senior Consultant with Goal Group.