What is an ECCN?

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Export Controls and Alphabet Soup

1024px-HMS_Ocelot_ballast_tank_controls

In my last post, I mentioned export controls.  Yes, our US government, the same one that likes to promote exports, also likes to control what we export, or to whom we export.  It makes sense.  You wouldn’t want to ship a nuclear bomb to just anyone.  And to a small company, or one just new to selling internationally, export controls can seem as overwhelming as in the picture above.

Keep in mind that US export controls can apply to:

  • Anything in the US, whether of US origin or foreign made
  • Anything in the world of US origin, or made with US technology

ITAR

301px-X-35As in the case of our nuclear bomb, defense goods and services (as opposed to offense goods and services?) are controlled by the US Department of State’s Directorate of Defense Trade Controls under theInternational Traffic in Arms Regulations, or ITAR.  Obvious military items are listed on the United States Munitions List, or USML.  But the ITAR can also cover civil goods (as opposed to uncivil goods?) that have specially designed or modified for military use.

It’s important to note that the ITAR takes precedence over the Export Administration Regulations (EAR, below).  If something is controlled under the ITAR, the EAR doesn’t even enter the picture.  That’s why I list the ITAR first.  Most goods and services controlled under the ITAR are going to require an export license issued by the US Department of State, thought there are some exemptions.

EAR

159px-C-band_Radar-dish_AntennaThere are other products and technologies that are not specifically defense related for which the US Government still controls for export.  These are regulated by the US Department of Commerce’s Bureau of Industry and Security, or BIS, under the Export Administration Regulations, or EAR.

When a product or technology is controlled under the EAR, it will be listed on the Commerce Control List (CCL) with an Export Control Classification Number (ECCN).  Just because a product or technology has an ECCN doesn’t mean that a license is required.  EAR controls are based on combinations of four aspects:

  1. What it is – ECCN
  2. Where it’s going – the destination country
  3. Who is receiving it – restricted parties
  4. How it will be used – restricted uses.

Much of the EAR controls will mirror the export controls of US allies, as well as support certain United Nations initiatives.  You will often hear the term “dual-use” in reference to items controlled under the EAR.  The means that the items can have both civil and military application.  For example, certain valves made with exotic alloys to withstand the temperatures and corrosive environments underground are useful in petroleum exploration and production, but they can also be used for making nuclear, chemical, and biological weapons.

OFAC

IranRialThe US Department of Treasury’sOffice of Foreign Assets Control, orOFAC, has their own restrictions when it comes to dealing, exporting or importing, with some foreign nations and governments, as well as certain unsavory individuals and entities like terrorist organizations and drug cartels.  They don’t so much as restrict products and technologies, as they restrict financial dealings.

Restricted Parties

320px-DrugpackscorpionThere are lists of individuals, entities, and governments, terrorist organizations, and drug cartels to whom we should not ship or otherwise conduct business found atExport.gov.  These are cumbersome to use and sometimes fail to account for differences in spellings or pronunciation.  A better alternative might be one of the third party providers that utilize search engines with fuzzy logic algorithms to overcome these spelling and pronunciation issues.

Other Controls

Finally, there are other US Government agencies that may have export controls and restrictions, such as the Bureau of Alcohol, Tobacco, and Firearms, or ATF, and the Drug Enforcement Agency, or DEA.  These are not as common, but if your products are controlled for export, you’re likely already controlled for domestic distribution.

Census and Customs

Also part of the export controls picture are The US Department of Commerce Foreign Trade Division (aka Census), where Export Declarations are filed; and the US Department of Homeland Security Customs and Border Protection, which is mandated to provide enforcement of all of the above at the ports of export.

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Just for fun, and as a reward for reading all the way to the end, that header picture at the top is of the ballast controls for the HMS Ocelot, a British cold war era submarine on permanent display at The Historic Dockyard, Chatham, Kent.  But you don’t have to wait for your next trip the the UK as you can tour inside the Ocelot right now on Google Maps.

 

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Export Compliance: Whose Job is it Anyway?

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When you export from the United States, does your freight forwarder ask you a lot of questions?  Like, “What’s your Schedule B number?  What’s your ECCN?  Is an export license required?”

How do you know?  Isn’t that why you hired a freight forwarder?  Whose job is it anyway?

Uh, it’s your job.  OK, it’s a little bit everyone’s job, but it is mostly yours.  Because the freight forwarder isn’t the expert on your company’s products, technology, and customers.

And the US government says it’s your job, here and here.  You see, the government controls exports for reasons like national security and foreign policy.  And export violations can easily run into the hundreds of thousands millions of dollars.

Think of your freight forwarder like your tax accountant.  Sure, he files your taxes, and gets you the best possible refund.  But you have to give him the numbers for income and expenses, and whether those expenses are cost of goods sold, office expenses, or entertaining a client.

Similarly, your freight forwarder files your export declaration, and moves your stuff.  But you have to tell him what it is – the Schedule B number, the ECCN – where it’s going, who’s receiving it, and if any of that’s going to need an export license.

A bad freight forwarder doesn’t ask these questions.  He just assumes no license required because that makes his life simple.  He’s looking for a fast, easy buck.  Even if it means you get into trouble later for exporting without a required license.

A good freight forwarder does ask these questions.  He cares about protecting his business and yours for the long run.  And so should you.  Which is why you should have export compliance expertise on staff, or work with a qualified professional.

A really good freight forwarder will provide assistance.  And HE either has export compliance expertise on staff, or works with a qualified professional.

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