The United States regulates the export of certain technologies, technical information, and technical services in order to keep it from falling into the hands of individuals and countries that are hostile to or technologically competitive with the United States.
Most exports are obviously exports, because they are commercially shipped to international destinations and must pass through U.S. Customs. Other exports are not intuitively obvious.
For example, taking your laptop overseas without a license can be an export violation. If the laptop contains any export-controlled technical information, then you must obtain an export license, even if the technology is not transferred to a “foreign person” (which is defined in the International Traffic in Arms Regulation (ITAR) to include individuals, businesses and governments).
There is also a type of export that is referred to as a “deemed export.” This occurs when you transfer export-controlled technology, technical information, or technical services to a foreign person while they are in the United States.
Export compliance is the process of complying with United States export regulations. The two primary sets of export regulations are the International Traffic in Arms Regulations (ITAR) (22 C.F.R Parts 120-130) and the Export Administration Regulations (EAR). The Department of State, Directorate of Defense Trade Controls (DDTC) administers the ITAR and The Department of Commerce, Bureau of Industry and Security (BIS) administers the EAR.
An export license may be required if the technology you are exporting appears on the U.S. Munitions List (a part of ITAR) or if it appears in the Commerce Control List (a part of the EAR). The DDTC/ITAR also has licenses in the form of an agreement if you are providing technical assistance services to foreign persons (Technical Assistance Agreement or TAA), or if you are executing an agreement that includes a license for a foreign person to manufacture your technology overseas (Manufacturing License Agreement or MLA).
TAAs and MLAs must be reviewed and approved by the DDTC before you can execute any agreements with the foreign customer. After the DDTC approves your export-licensing agreement, license applicants will typically also execute an agreement that governs the transaction with the foreign customer, including without limitation a description of the technical information or defense services that the U.S. person will provide to the foreign customer(s), terms and conditions, and/or a license to manufacture the applicants product(s), plus the agreed price(s) of the defense services, technical information and/or products that are exported.
The Department of the Treasury, Office of Foreign Assets Control (OFAC) administers and enforces economic sanctions programs that you must comply with when you export. Complying with their sanctions requires a screening of various lists to determine if there are any sanctions and restriction of exports to your prospective foreign customers and/or any intermediate consignees.
You may also need to undergo a review by the Treasury Department’s interagency Committee on Foreign Investment in the United States (CFIUS) if you sell an interest in your company to a foreign person.
A key element of an export-compliance program is an Export Compliance Manual. The DDTC requires all registrants to have and maintain an Export Compliance Manual. The BIS does not require a compliance manual, but it is best to include in your manual information and required procedures for the EAR, OFAC and CFIUS in addition to the ITAR.
This Manual, in addition to complying with a DDTC requirement, will also prove very valuable as a transition guide if you have to hire a new export-compliance representative. Attorneys at Whitcomb Selinsky, PC can write a detailed Export-Compliance Manual tailored to your company’s organization and the amount and type of products that your company exports.