Background on Export Administration Regulations
Over 95% of the world’s consumers are outside of the United States. Opportunities abound for U.S. companies that export. However, exporting is a privilege and not a right. U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”).
Administered by the U.S. Commerce Department, the EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. U.S. exporters have an important responsibility to adhere to the EAR. Violations of the EAR carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned.
The GOV License Exception for Governments and International Organizations
Although an EAR export license may ordinarily be required for a proposed transaction, the EAR provides numerous license exceptions found in 15 CFR 740.
This article focuses on the export license exception GOV, which authorizes exports and re-exports for:
- US. government agencies or personnel;
- International nuclear safeguards
- Agencies of cooperating governments
- International inspections under the Chemical Weapons Convention
- International Space Station
Of the above categories, the GOV license exception is most often used for exports and re-exports of U.S. government agencies or personnel. The GOV license exception authorizes exports, re-exports, and in-country transfers to personnel and agencies of the U.S. government including all civilian and military departments. However, the scope of the GOV license exception does not include national agencies such as the American Red Cross or international organizations in which the United States participates, such as the Organization of American States.
There are four primary categories of exports, re-exports and in-country transfers for U.S. government agencies or personnel under the GOV license exception:
- Items for personal use by personnel and agencies of the U.S. Government
This provision is available for items in quantities sufficient for only personal use by civilian members of U.S. government agencies or members of the U.S. Armed Forces, as well as their families and household employees. Items for personal use include household effects, food, beverage, and other duty necessities.
- Exports, reexports, and in-country transfers made by or consigned to a department or agency of the U.S. Government.
The GOV license exception authorizes exports, re-exports, and in-country transfers of items when made by or consigned to a U.S. Government agency solely for the agency’s official use or for carrying out any U.S. Government program with foreign governments or international organizations. Contractor support personnel are eligible for this authorization when the performance of their duties pursuant to their official duties.
- Exports, reexports, and in-country transfers made for or on behalf of a department or agency of the U.S. Government
The GOV license exception authorizes exports, re-exports, and in-country transfers of items solely for use by a U.S. Government agency when items are destined for a U.S. person and the item is exported pursuant to a contract between the exporter and the U.S. Government agency.
- Items exported at the direction of the U.S. Department of Defense
The GOV license exception authorizes exports, re-exports, and in-country transfers pursuant to an official written request or directive from the U.S. Department of Defense. The license exception includes:
- Items sold, leased, or loaned by the U.S. Department of Defense to a foreign country or international organization
- Items sold, leased, or loaned in furtherance of a contract between the exporter and an agency of the U.S. Government if the contract provides for such technology and is not “development” or “production” technology
For further information on the GOV license exception, please refer to BIS’ guidance on the GOV license exception.
What Should You Do?
Exporters have significant responsibilities to ensure compliance, to avoid penalties and/or jail time (i.e., your compliance manager deserves a raise!). Proper adherence to EAR requirements ensures that your business contributes to safeguarding U.S. national security and avoiding costly penalties. Many U.S. businesses have paid hefty civil penalties for violating U.S. export control laws. L3Harris Technologies, for example, was fined $13 million for illicitly exporting defense technology and software. For more examples of costly civil and criminal penalties, check out BIS’ latest Don’t Let This Happen to You! Publication.
If you are exporting goods subject to EAR, we propose you should:
- Develop an effective export compliance plan.
A key foundation of proactive and effective export compliance requires the development of an export compliance plan. An export compliance plan establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and to protect national security. Diaz Trade Law helps exporters create export compliance manuals that help prove you have a process in place to classify your merchandise correctly, vet your customers and ensure you can prove you can take compliance seriously and implement all the important great weight mitigating factors. Diaz Trade Law has significant experience in developing and enhancing export compliance plans for organizations. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.
- Engage in regular export compliance training.
A foundation of a strong export compliance program is export compliance training. Training is important because it (1) ensures that all employees understand the export regulations and reinforces internal policies and procedures, (2) demonstrates to federal government agencies that your business is proactive about export compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, export compliance training can be highly tailored to meet your company’s needs. All your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next export compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.
- Thoroughly vet your proposed export transactions
Unsure whether a proposed export transaction violates the EAR? Diaz Trade Law has significant experience vetting your potential transaction against U.S. export control laws. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road.
- Request authorization when necessary
BIS export authorization is required for many export transactions of controlled goods. Diaz Trade Law has significant experience in vetting proposed transactions to determine whether BIS authorization is required. Furthermore, Diaz Trade Law assists clients by filing BIS export license applications on their behalf on BIS’ SNAP-R portal.
- Engage in mitigation and corrective actions.
If your business has violated U.S. export control laws, there is a lot you can do to mitigate penalties and prevent future violations. Diaz Trade Law has significant experience representing businesses in dealing with the U.S. Commerce Department’s Bureau of Industry & Security and the Census Bureau. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self-disclosures to mitigate penalties, (2) negotiated agreements with BIS and Census, and (3) built corrective action systems to help ensure that your business does not make the same violation again.
Diaz Trade Law’s Upcoming Webinar: Building & Maintaining an Effective Export Compliance Plan
On September 22, 2021 at 12:00 PM ET, Diaz Trade Law is hosting a webinar on Building & Maintaining an Effective Export Compliance Plan. This one-hour webinar will discuss the elements of an effective export compliance plan, best practices, how to train your employees, and an overview of both how to build and effectively maintain a robust export compliance plan.
In the webinar, you will learn:
- Why you Should Have an Export Compliance Plan in Place
- Elements of an Effective Export Compliance Plan
- How to Build and Effective Export Compliance Plan
- Common Risks Associated with the Export Process that Should be Addressed in Your Plan
- What to do When BIS/OFAC/Census/DDTC Come Knocking on Your Door
- How to Maintain an Effective Export Compliance Plan Through Training
- What to Do When All Goes Wrong
- What NOT to Do – Examples from “Don’t Let This Happen to You”
Diaz Trade Law has significant experience in a broad range of export compliance matters. To learn more about the services we offer, contact us at email@example.com or call us at 305-456-3830.