Export Compliance Checklist

What is Export Compliance?

Export compliance is a requirement by the U.S. Department of Commerce designed to enforce the Export Administration Regulations (EAR) and regulate the export of “dual-use” items or products that have both commercial and military applications. The Commerce Control List (CCL) categorizes each item using a five-character alphanumeric code called Export Control Classification Number (ECCN).

What is an Export Compliance Checklist?

An export compliance checklist is an assessment tool used to easily identify red flags, effectively implement corrective actions, and proactively ensure EAR compliance. Criminal fines of up to $1 million per violation, civil penalties of up to $500,000 per violation, and/or imprisonment of up to twenty years await non-compliant corporations or individuals.

Export Compliance: Guide Questions and Red Flags

EAR-compliant manufacturers and exporters of dual-use items improve productivity, gain visibility across their entire operations, and prevent debarment or losing export licenses. To help your business easily comply with EAR, here are 5 key determinants with corresponding potential EAR-violation scenarios developed by the Bureau of Industry and Security (BIS):

1. What is the product?

Deemed exports, or the disclosure of EAR-controlled technical data to foreign persons in the U.S., require appropriate export licenses. Properly classify your EAR-controlled commodity, software, or technology according to the following CCL categories:

• Category 0 – Nuclear Materials, Facilities, and Equipment, and Miscellaneous Items

• Category 1 – Special Materials and Related Equipment, Chemicals, Microorganisms, and Toxins

• Category 2 – Materials Processing

• Category 3 – Electronics

• Category 4 – Computers

• Category 5 – Telecommunications and Information Security

• Category 6 – Sensors and Lasers

• Category 7 – Navigation and Avionics

• Category 8 – Marine

• Category 9 – Aerospace and Propulsion

EAR Compliance Red Flags for Items:

1. The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.

2. The customer is unfamiliar with the product’s performance characteristics but still wants the product.

3. The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.

2. Where is the product going?

For any export or re-export, specifying the country of ultimate destination determines licensing requirements. Refer to the Commerce Country Chart and identify required export licenses for listed or embargoed countries.

EAR Compliance Red Flags for Destinations:

1. Delivery dates are vague, or deliveries are planned for out-of-the-way destinations.

2. The shipping route is abnormal for the product and destination.

3. Packaging is inconsistent with the stated method of shipment or destination.

3. Who will receive the product?

The ultimate end-user of EAR-controlled items cannot be a part of the BIS’ Denied Persons List (DPL). When a receiving party is on the Unverified List (UVL), companies should obtain a UVL statement prior to exporting, re-exporting, or transferring (in-country) EAR-controlled items.

EAR Compliance Red Flags for End-user:

1. The customer or its address is similar to one of the parties found on the Commerce Department’s [BIS] list of denied persons.

2. The customer has little or no business background.

4. What will the receiver do with the product?

The manner in which EAR-controlled items are ultimately used should adhere to BIS’ end-use control policy, which sets restrictions on certain nuclear end-uses, rocket systems, and chemical and biological weapons.

EAR Compliance Red Flags for End-use:

1. The customer or purchasing agent is reluctant to offer information about the end-use of the item.

2. When questioned, the buyer is evasive and unclear about whether the purchased product is for domestic use, export, or re-export.

3. Routine installation, training, or maintenance services are declined by the customer.

5. What else does the receiver do?

Entities or individuals engaging in certain activities related to exports such as contracting, financing, and freight forwarding in support of a proliferation project may prevent your company from dealing with them.

EAR Compliance Red Flags for Export-related Activities:

1. The customer or purchasing agent is reluctant to offer information about the end-use of the item.

2. When questioned, the buyer is evasive and unclear about whether the purchased product is for domestic use, export, or re-export.

3. Routine installation, training, or maintenance services are declined by the customer.