If I had a dime for every time an exporter told me, “we don’t need ‘export compliance’ – our products are EAR99” I’d be retired by now. And if I had a dime for every time I heard “we don’t need an export license because there is no “X” in the box for that country, I’d be retired and have a lot more money in my 401K.
I am referring to General Prohibitions 4-10 of the Export Administration Regulations (EAR). I think, or at least hope, that exporters of items in on the Commerce Control List (Supplement No. 1 to Part 774) that require an export license are, for the most part, aware of General Prohibitions 1-3 and perform their license screening accordingly. General Prohibitions 1-3 prohibit the export of certain items on the CCL to named countries on the Commerce Country Chart in Supplement No. 1 to Part 738.
What many exporters fail to realize is that General Prohibitions 1-3 are merely the first steps in license determination and compliance with U.S. export laws and regulations. General Prohibitions 4-10 are prohibitions on certain activities that are not allowed without authorization (i.e. licenses) from BIS, and these prohibitions apply to all items subject to the EAR unless otherwise specified (part 736.2(b)(4) through (10) of the EAR).
General Prohibition 4 states that you may not take any action that is prohibited by a denial order issued under part 766 of the EAR. Denial orders prohibit many actions in addition to direct exports by the person denied export privileges. This prohibition applies to all items subject to the EAR, that is to say, both items on the CCL and within EAR99. You are responsible for ensuring that your transactions in which a person who is denied export privileges is involved do not violate the terms of the order. Orders denying export privileges are published in the Federal Register when they are issued and are the legally controlling documents in accordance with their terms. The BIS also maintains compilations of persons denied export privileges on its Web site. There are many reasonably priced software programs to aid exporters in their restricted party screening.
General Prohibition 5 prohibits, without a license, the export or reexport any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR. Part 744 restricts the export of items and certain activities by U.S. persons subject to the EAR to defined nuclear, missile, and chemical and biological proliferation activities and nuclear maritime end-uses and certain items for aircraft and vessels. In addition, it prohibits, without a license, exports and re-exports to certain parties who have been designated as proliferators of weapons of mass destruction; certain Russian entities; entities listed for activities contrary to the national security or foreign policy interests (Entity List); Specially Designated Global Terrorists, Specially Designated Terrorists, or Foreign Terrorist Organizations; and persons named in General Orders. Part 744 also restricts the export of certain microprocessors for military end-uses and items on Supp. 2 to part 744 to China. Unless otherwise indicated, the license requirements of General Prohibition 5 apply to all items subject to the EAR, i.e. both items on the CCL and within EAR99. As mentioned above, there are software programs to aid exporters in screening the prohibited end-users above. Feel free to call or email me for a list of such providers.
General Prohibition 6 prohibits exports or re-exports to embargoed destinations without a license or license exception authorized under part 746. If your destination for any item is Cuba, Iran, Iraq, North Korea, or Rwanda you must consider the requirements of parts 742 and 746 of the EAR. Unless otherwise indicated, General Prohibition 6 applies to all items subject to the EAR which includes both items on the CCL and EAR99.
General Prohibition 7 prohibits U.S. persons from engaging in performance, without a license, of certain financing, contracting, service, support, transportation, freight forwarding, or employment that they know will assist in certain proliferation activities described in part 744. Such activity extends to services and dealing in wholly foreign origin items in support of the specified proliferation activity and is not limited to items listed on the CCL or included in EAR99. Moreover, there are no License Exceptions to General Prohibition 7 unless specifically authorized in part 740 of the EAR.
General Prohibition 8 prohibits the export or re-export of an item through or transit through the following countries without a license or license exception if a license or exception would have been required for a direct export to that country: Albania, Armenia, Azerbaijan, Belarus, Cambodia, Cuba, Georgia, Kazakhstan, Kyrgyzstan, Laos, Mongolia, North Korea, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam. General Prohibition 8 applies to all items subject to the EAR which includes both items on the CCL and within EAR99.
General Prohibition 9 prohibits the violation of the terms or conditions of a license or license exception issued under or made a part of the EAR, and the violation of any order issued under or made a part of the EAR. There are no license exceptions to this General Prohibition. Supplements Nos. 1 and 2 to part 736 provide for certain General Orders and Administrative Orders.
General Prohibition 10 prohibits anyone from proceeding with a transaction with knowledge that a violation of the EAR has occurred or is about to occur. It also prohibits related shipping, financing, and other services. This prohibition applies to all items subject to the EAR, again both items on the CCL and within EAR99. Obviously there are no License Exceptions to this General Prohibition.
I think the General Prohibitions are best summed up by the title of a recent BIS seminar in Orlando – “You might need an export license to ship a pencil to Canada”. If you understand these prohibitions you can clearly see how this, in fact, could be true. Now, are you still sure you don’t need an export license for your EAR99 items or no “X” in the box?
Compliance Assurance LLC offers in-depth import and export trade compliance assessment, training, and trade management systems. Solutions are available for U.S. companies and their foreign subsidiaries as well as non-U.S. companies bound by U.S. export laws.