When it comes to thinking about U.S. export controls on non-U.S. transactions, the first question companies outside of the U.S. should ask is, “Does the U.S. government assert jurisdiction over what we’re doing?”
After all, it’s at least somewhat logical (and true!) that U.S.-origin equipment, parts, software and technology would continue to be subject to U.S. export controls even after their initial export from the U.S. However, non-U.S. companies that integrate or use U.S.-origin items – including software and technology – also risk becoming subject to U.S. export controls. In fact, if your company is headquartered in, say, Germany, and you incorporate U.S.-sourced items from one or more U.S. companies, the same U.S. export controls that apply to the originating U.S. export could apply to your company—almost as if you were exporting them directly from the U.S.
Moreover, your company could be manufacturing or assembling equipment overseas—for example, some type of aircraft. Yet, if you utilize enough U.S.-originated parts in it, or parts with a sufficient value, the U.S. Departments of State or Commerce might assert jurisdiction over the entire item—not just the U.S.-sourced parts.
Many non-U.S. companies, including parents, subsidiaries and affiliates of U.S. firms, as well as wholly non-U.S. companies, aren’t aware of this—and they absolutely should be. Indeed, U.S. regulatory agencies can and do impose serious penalties for U.S. and non-U.S. companies that fail to comply with highly extraterritorial U.S. rules. These include monetary fines, a loss of U.S government contracts and/or a complete ban from receiving any U.S. items. The recent pace of changes to U.S. export control and sanctions measures have made it even more important for non-U.S. companies to stay up-to-date on the regulations.
At the Export Compliance Training Institute, we think it makes good sense to align with an established and widely acclaimed export compliance training partner who can guide you step by step toward compliance success. We’ve built our entire business around this model by offering industry-leading e-seminars, live seminars and live webinars and a catalog of 80-plus on-demand webinars.
Key Issues Around Complying With U.S. Export Control for Non-U.S. Companies
In the ECTI webinar, “Fundamentals of U.S. Reexport Controls,” we explain what’s commonly known as the de minimis rule, which sets a threshold that determines whether non-U.S.-origin items are subject to U.S. reexport control jurisdiction. For most destination countries, that threshold for non-military/space components is 25%. In most cases, if no more than 25% of the value of incorporated hardware or software within a particular item you produce are controlled U.S.-origin items, that item of yours is not subject to U.S. jurisdiction. If that figure is less than 25%, no U.S. jurisdiction applies. (Note: The threshold is 10% for some countries such as Iran and Cuba, so make sure you understand which threshold figure applies in your specific case.)
Other important issues covered in this webinar include:
- Which non-U.S. transactions are subject to the ITAR or EAR?
- How does the ITAR control reexports and retransfers?
- Which entities are subject to additional restrictions because of their ties to the U.S.?
- When does a reexport require a license?
- Who may apply for a license?
- How do I apply for a license?
- How have recent export control reform (ECR) changes impacted the U.S. rules?
Complying With U.S. Export Controls – Smart Strategies Moving Forward
Before embarking on product development that entails any degree of integration with U.S.-sourced parts or reliance on U.S.-origin technology, your non-U.S.-based company must first get total clarity on whether that item is subject to U.S. export control jurisdiction. If it’s determined that a particular item is indeed subject to these controls – or, if you anticipate that other items could be (now or in the future) – your company must build a foundation upon which 100% compliance can be achieved. At ECTI, we believe it’s essential in this regard to develop and nurture an export compliance program. As part of this, it’s critical to perform regular risk assessments. Training is also key—and in this regard, we encourage you to browse our e-seminars, live seminars and live webinars and a catalog of 80-plus on-demand webinars for topics that can help you and your company achieve success on the road to compliance.
Additionally, one of the best ways companies have found to build compliance success is through ECTI’s premier Export Compliance Professional (ECoP®) certification program.
Certification under the ECoP® program reinforces in your own mind that you understand the information and steps necessary to pursue export compliance on behalf of your business. Knowledge is power, but confidence reinforces knowledge and can motivate you to deepen your export compliance skill set. Additionally, by taking and passing the certification test(s), you demonstrate to your employer and colleagues that you have mastered the content and now possess the skills necessary to perform your expert compliance duties.
ECoP® certification also provides a systematic framework for a continuing education plan and documentation of your current export regulation mastery. By getting certified, you’ll really benefit over time from all of ECTI’s e-seminars, live seminars and live webinars and on-demand webinars. After all, you could drill deep into a narrow export compliance subject; but if you aren’t rock-solid on the basics, you may not be able to apply your learnings constructively.
Additionally, by pursuing certification, you’ll be better equipped to minimize compliance risk for your company, and you’ll help yourself move more quickly along your career path and demonstrate evidence of your skills on your résumé. Employers want export control practitioners who can readily demonstrate their expertise. A recognized certification is a great way to do that.
Finally, once certified under ECoP®, tuition for live seminars, e-seminars and webinars taken for certification renewal is 20% off regular tuition prices.
We hope this article highlights some of the most pressing issues that non-U.S. companies face when it comes to complying with U.S. export controls. Whether your company is based in the U.S. or abroad, its investments rely on achieving 100% compliance with all applicable export regulations and controls. That said, it is absolutely achievable—you can do it, provided you take the necessary time up front to align with an established and widely acclaimed export compliance training partner who can guide you step by step toward compliance success.
Do you have questions about complying with U.S. export controls or other export compliance challenges? Visit www.learnexportcompliance.com to learn about our company, our faculty, our staff and our esteemed Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars and live webinars and browse our catalog of 80-plus on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute at 540-433-3977 for more information.
Scott Gearity is President of ECTI, Inc.