US Export Control, Sanctions & Solutions
Reform of U.S. export controls that began in 2013 has increased the profile and responsibilities for the Department of Commerce’s Bureau of Industry and Security (which administers the Export Administration Regulations). Among its new duties, BIS now has oversight for certain items previously controlled by the Department of State’s Directorate of Defense Trade Controls (which administers the International Traffic in Arms Regulations), referred to as “600 series items.” Although BIS ostensibly has chief responsibility for these items, overlap between the regimes remains that can ensnare unwitting exporters. In some scenarios, U.S. exporters may require separate licenses from BIS and DDTC, one to export and another train customers on the item.
Usually, exporters of 600 series items may rely on the license exception found in the EAR at 15 C.F.R. 740.13 to train customers on exported items. This exception permits provision of “operation technology,” defined as the minimum technology necessary for the installation, operation, maintenance (checking), or repair of those commodities or software that are lawfully exported. When instruction implicates “defense services,” however, ITAR trumps the EAR exception and exporters must obtain a separate license from DDTC, even with a BIS license already in hand.
ITAR requires DDTC authorization to provide defense services to non-U.S. persons. Although chiefly limited in scope to defense articles, the definition of “services” includes any military training of foreign units regardless of whether the training involves a defense article, whether the units are regular or irregular, and whether the training is formal or informal, remote or in person. 22 C.F.R. 120.32(a)(3). USML Category IX(e)(3) further confirms DDTC’s jurisdiction over licensing in these situations by including “Military training not directly related to defense articles or technical data enumerated in this subchapter.”
As with the EAR license exception for training, the USML contains a license exception permitting training on exported items—but that exception only authorizes training for defense articles. 22 C.F.R. 124.2. The dueling license exceptions in the EAR and USML therefore produce an unexpected gap: an exporter of a 600 series item to a foreign military must obtain separate licenses from BIS and DDTC for export and training, respectively.
Exporters of 600 series items can take steps to ensure they do not become a cautionary tale. Exporters can conduct ECCN audits to confirm exported items are properly classified, review customer lists to ensure DDTC jurisdiction does not exist, and file voluntary self disclosures where necessary. Export control policies and procedures can be reviewed and tailored to the specific needs and demands of the company and specifically identify items or services that deserve greater attention and care. Most important, however, is documenting your compliance efforts to create a record of the company’s good-faith in complying with U.S. export control law.
Thomas Slattery is a partner in Jones Walker’s Litigation Practice Group. He focuses on internal corporate investigations and compliance matters.