What is an Export?

Many companies mistakenly believe that U.S. export control laws apply only to military items. Not so. Any item sent to a foreign destination from the U.S. may be an export. Still, it seems simple, doesn’t it? “Items” include commodities, such as toys, clothing, building materials, automotive parts, as well as software or technology, such as retail software packages and circuit boards.

But it also includes disclosure or sharing of technical information, regardless of whether the information exists on disk, thumb drives, blueprint or other tangible format. Ownership of the information is irrelevant. The transmission method is irrelevant. Therefore “sent” includes not only the obvious shipment or mailing of products, but also electronic transfers via facsimile, email or the internet. Uploading controlled information into a search engine whose server is outside the U.S. would be an export.

An export would occur even if the server is in the U.S. but the technical support staff are foreign nationals. Direct sharing or disclosure through consultations, telephone conversations, seminars and training are exports, as is the foreign application of knowledge learned in the United States. Just giving access to the information or technology, be it via a computer network or filing cabinet, fits the bill.

“Foreign destination” seems clear. But the laws also apply to U.S. citizens and certain others wherever they are in the world. Items sent from a U.S. headquartered company to its wholly-owned U.S. subsidiary located in a foreign country are included. Items originating in a foreign country being returned from the United States to their country of origin are included.

So returning or consulting on information, specifications or drawings provided to you by a non-U.S. client may be an export. Even disclosure or sharing of information here in the U.S. with co-workers who are not U.S. citizens may be considered a “deemed export.”

And U.S. regulators have successfully applied U.S. laws to foreign companies having no U.S. business other than receiving products, technologies or technical data originating in the United States.

Why the concern?

Controlled items or services – those regulated by either the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR) - cannot be exported without first determining if an export license is required or if the activity fits within a license exception. Companies are subject to an array of sanctions for violating the EAR and/or ITAR, including civil and criminal fines up to $1,000,000 and ten years in jail per individual violation, loss of export privileges and suspension or possible debarment from contracting with the government. Even foreign executives may be arrested, extradited to the United States and jailed if convicted. Despite their innocence, U.S. subsidiaries may find themselves paying the price for the misconduct of their foreign parents.

Next time: Exporting Commercial Products

SC
MR