1. 1 August 15, 2012 Export Compliance Export Compliance Cross Border Traffic Joseph “JOE” Tosto, Jr. Export Administration Specialist WMTAaug15-2012

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3. 3 Western Maquiladora Trade Associaton 8:00am - 10:00am August 15, 2012

4. 4 BIS Bureau of Industry & Security “DUAL USE” Items “DUAL USE” Items Real World Examples Real World Examples License Exception “TMP” License Exception “TMP” RED FLAGS RED FLAGS Summary Summary

5. , NOT BIS Issued by Bureau of the Census, NOT BIS Used for compiling export trade statistics Used for compiling export trade statistics May also use Harmonized Tariff Schedule Number May also use Harmonized Tariff Schedule Number *Schedule B book available on-line *Schedule B book available on-linewww.census.gov/trade For Schedule B issues call 1-800-549-0595 For Schedule B issues call 1-800-549-0595 ** $2,500 per Schedule B Rule ** has bearing on BIS ** $2,500 per Schedule B Rule ** has NO bearing on BIS

6. 6 Dual Use Exports Term used to distinguish types of items covered by EAR from those covered by Other Government agencies with export licensing authority. Term used to distinguish types of items covered by EAR from those covered by Other Government agencies with export licensing authority. In general, the term Dual Use serves to distinguish EAR “Export Administration Regulations” items that can be used both in military and other strategic uses and in civil applications. In general, the term Dual Use serves to distinguish EAR “Export Administration Regulations” items that can be used both in military and other strategic uses and in civil applications.

7. 7 INK PENS to NUCLEAR COMPONENTS

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10. 10 What Kind of Authorization is Required to Export? NO LICENSE REQUIRED LICENSE EXCEPTION LICENSE EXCEPTION LICENSE LICENSE VEU VEU

11. ON-LINE ACCESS BIS home page www.bis.doc.go v E-mail notifications Service E-mail notifications Service Seminars Seminars REGULATORY CHANGES REGULATORY CHANGES 11

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14. 14 ECCN EXAMPLES ECCN EXAMPLES How to Build an Airplane encryption software

15. 15 Real World Examples 1C997 Ammonium nitrate, including fertilizers and fertilizer blends containing more than 15% by weight ammonium nitrate…. 1C997 Ammonium nitrate, including fertilizers and fertilizer blends containing more than 15% by weight ammonium nitrate…. 2A226 Valves having all of the following characteristics (see list of items controlled) 2A226 Valves having all of the following characteristics (see list of items controlled) 2B350 Chemical manufacturing facilities and equipment….. 2B350 Chemical manufacturing facilities and equipment….. The technical description of your items must be known for accurate selection of ECCN. The technical description of your items must be known for accurate selection of ECCN.

16. 16 How to Classify Item Company Engineer, Chemist or other Technical expert Company Engineer, Chemist or other Technical expert The Manufacturer The Manufacturer Official Request to BIS Official Request to BIS

17. 17 Ten Categories in the CCL (0 to 4) ECCNs-Export Control Classification Numbers 0. Nuclear Materials, Facilities & Equipment and Miscellaneous Miscellaneous 1. Materials, Chemicals, Microorganisms & Toxins 2. Materials Processing 3. Electronics Design, Development and Production 4. Computers

18. 18 Ten Categories in the CCL (5 to 9) ECCNs-Export Control Classification Numbers 5. Telecommunications & Information Security 6. Sensors and Lasers 7. Navigation and Avionics 8. Marine 9. Propulsion Systems, Space Vehicles and Related Equipment

19. 19 ECCN Structure- Product Groups 5A101 5B101 5C101 5A101 5B101 5C101 5D101 5E101 5D101 5E101 Equipment, assemblies and components Test, inspection and production equipment Software Technology Materials

20. 20 EAR99 EXAMPLES EAR99 EXAMPLES blank cd’s Automobile User’s Manual

21. 21 If an item does not fall within a specific ECCN, it is… EAR99 Reminder:  Start at the beginning of each category

22. 22 Other factors can trigger a license requirement End Use End Use End User End User

23. 23 End users of concern Denied Persons List Denied Persons List Supp. 2 to Part 764 Supp. 2 to Part 764 Specially Designated Nationals List Specially Designated Nationals List www.treas.gov/ofac www.treas.gov/ofac www.treas.gov/ofac Entity List Entity List Supp. 4 to Part 744 Supp. 4 to Part 744 Unverified End Users Unverified End Users BIS Home Page “Lists to Check” BIS Home Page “Lists to Check” General Orders General Orders Part 736, Supplement 1 Part 736, Supplement 1

24. 24 End use concerns Nuclear Nuclear Section 744.2 Section 744.2 Chemical/Biological Weapons Chemical/Biological Weapons Section 744.3 Section 744.3 Missile Missile Section 744.4 Section 744.4 Support of these activities by a U.S. Person Support of these activities by a U.S. Person Section 744.6 Section 744.6

25. 25 LICENSE EXCEPTIONS BIS-748P

26. 26 License Exceptions Part 740 Definition: An authorization that allows you to, under stated conditions, items subject to the EAR that would otherwise require a license. Definition: An authorization that allows you to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license. Each license exception bears a three letter symbol used for export clearance purposes.

27. 27 Can You Use a License Exception? Review general restrictions (Section 740.2) Review general restrictions (Section 740.2) Identify all applicable License Exception(s) Identify all applicable License Exception(s) List based and transaction based Use least restrictive exception that is available Use least restrictive exception that is available Each “X” (license requirement) must be overcome Each “X” (license requirement) must be overcome

28. 28 COUNTRY GROUPS (Part 740, Supplement No. 1) A - Regime members A - Regime members B - Less restricted countries B - Less restricted countries C - Reserved C - Reserved D - Countries of concern D - Countries of concern E – Embargoed*/ Terrorist Countries E – Embargoed*/ Terrorist Countries * Not a complete list of * Not a complete list of embargoed countries embargoed countries

29. 29 General Restrictions (Section 740.2) You may not use any License Exception if any one or more of the following apply: Your authorization to use a License Exception has been suspended or revoked, or does not qualify for a license exception Your authorization to use a License Exception has been suspended or revoked, or does not qualify for a license exception Export or reexport is subject to one of the 10 General Prohibitions, is not eligible for a license exception, and has not been authorized by BIS Export or reexport is subject to one of the 10 General Prohibitions, is not eligible for a license exception, and has not been authorized by BIS The item is primarily useful for surreptitious interception of wire, oral or electronic communications under 5A/5D980 unless for official use of an agency of the US. Government The item is primarily useful for surreptitious interception of wire, oral or electronic communications under 5A/5D980 unless for official use of an agency of the US. Government The item is a crime control and detection instrument (described in ' 742.7), unless export is to NATO, Australia, Japan, New Zealand; item is for official use by under ' 740.11(b)(2)(ii) of license exception GOV; certain shotguns and shells for personal use The item is a crime control and detection instrument (described in ' 742.7), unless: export is to NATO, Australia, Japan, New Zealand; item is for official use by personnel and agencies of the U.S. government under ' 740.11(b)(2)(ii) of license exception GOV; certain shotguns and shells for personal use

30. 30 General Restrictions, cont’d (Section 740.2) You may not use any License Exception if any one or more of the following apply: The item is controlled for missile technology (MT) reasons, with some exceptions The item is controlled for missile technology (MT) reasons, with some exceptions The export or reexport is to a comprehensively embargoed destination (Cuba, Iran, North Korea), unless specifically listed as available in Part 746 of the EAR. Note: Syria, Lybia, Sudan have special controls. The export or reexport is to a comprehensively embargoed destination (Cuba, Iran, North Korea), unless specifically listed as available in Part 746 of the EAR. Note: Syria, Lybia, Sudan have special controls. The item is “Space qualified” with an ECCN listed in ' 740.2(a)(7) The item is “Space qualified” with an ECCN listed in ' 740.2(a)(7) The item is controlled under ECCN 2A983, 2D983 or 2E983 (explosives detection), with some exceptions The item is controlled under ECCN 2A983, 2D983 or 2E983 (explosives detection), with some exceptions Certain Micromachined Angular Rate Sensors Certain Micromachined Angular Rate Sensors

31. 31 Temporary Imports, Exports and Reexports: TMP (Section 740.9) Temporary Exports and Reexports Temporary Exports and Reexports …One (1) year… …One (1) year… Tools of trade Tools of trade Kits with replacement parts Kits with replacement parts Exhibition and demo Exhibition and demo Inspection and calibration Inspection and calibration Return of unwanted shipments Return of unwanted shipments Items refused entry Items refused entry Containers – not what is in container - Containers – not what is in container -

32. 32 Temporary Imports, Exports and Reexports: TMP (Section 740.9) Export of Items Temporarily in the U.S. Export of Items Temporarily in the U.S. t Assembly in Mexico -Maquiladora- t Temporary Exports to U.S. Subsidiary, affiliate or facility in Country Group B. (Mexico is in Country Group B) t Exports of Items Temporarily in the U.S. t Item “withdrawal for export” from Bonded warehouse t Item moving “T+E” Transportation + Entry t Item moving “IE” Immediate Export

33. 33 ASSEMBLY IN MEXICO Maquiladora Transactions, exported to Mexico under Customs entries that require return to the U.S. after processing, assembly, or incorporation into end products by companies, factories, or facilities participating in Mexico’s in-bond industrialization program; provided that all resulting end-products (or the commodities) are returned to the U.S. Maquiladora Transactions, exported to Mexico under Customs entries that require return to the U.S. after processing, assembly, or incorporation into end products by companies, factories, or facilities participating in Mexico’s in-bond industrialization program; provided that all resulting end-products (or the commodities) are returned to the U.S.

34. 34 TEMPORARY EXPORT to U.S. subsidiary, affiliate or facility in Mexico Components, parts, tools or test equipment exported by a U.S. Person to its subsidiary, affiliate or facility in Mexico, that is owned or controlled by the U.S. person, provided items exported temporarily are not transferred or reexported to a country other than the U.S., without prior authorization by BIS. Note: U.S. person is defined in Part 740.9 (ix) (B); Ineligible commodities or software, sensitive Nuclear Activity per Part 744.2. Components, parts, tools or test equipment exported by a U.S. Person to its subsidiary, affiliate or facility in Mexico, that is owned or controlled by the U.S. person, provided items exported temporarily are not transferred or reexported to a country other than the U.S., without prior authorization by BIS. Note: U.S. person is defined in Part 740.9 (ix) (B); Ineligible commodities or software, sensitive Nuclear Activity per Part 744.2.

35. 35 Items Moving in transit though the U.S. Subject to conditions, authorizes export of items moving in transit through U.S. under a “Transportation and Exportation” (T+E) or “Immediate Exportation” (I.E.) customs entry made at a U.S. Customs office. Subject to conditions, authorizes export of items moving in transit through U.S. under a “Transportation and Exportation” (T+E) or “Immediate Exportation” (I.E.) customs entry made at a U.S. Customs office.

36. 36 Exports of Items Temporarily in the U.S. Exporting Foreign Origin Items temporarily in U.S. moving in transit through U.S, withdrawn from a Bonded Warehouse in U.S. under “withdrawal for export” customs entry is considered: “moving in transit”. It is not considered “moving in transit” if withdrawn under any other type of customs entry or broken for processing. Part 740.9 (b) Exporting Foreign Origin Items temporarily in U.S. moving in transit through U.S, withdrawn from a Bonded Warehouse in U.S. under “withdrawal for export” customs entry is considered: “moving in transit”. It is not considered “moving in transit” if withdrawn under any other type of customs entry or broken for processing. Part 740.9 (b)

37. 37 Record keeping Part 762 Provides audit trail—FIVE (5) years!!

38. 38 RED FLAGS There are twelve (12) RED FLAGS covered Supplement No. 3 to Part 732 of the EAR. There are twelve (12) RED FLAGS covered Supplement No. 3 to Part 732 of the EAR. We will now review the twelve (12) RED FLAGS We will now review the twelve (12) RED FLAGS RED - Hand Out - RED - Hand Out -

39. 39 KNOWLEDGE Part 736, General Prohibitions, (10) Part 736, General Prohibitions, (10) Proceeding with transactions with knowledge that a violation has occurred or is about to occur …. And …. Proceeding with transactions with knowledge that a violation has occurred or is about to occur …. And …. Part 772, Definitions of Terms …. Are both parts of the EAR you, your staff and all associated with your transactions must be aware of. Part 772, Definitions of Terms …. Are both parts of the EAR you, your staff and all associated with your transactions must be aware of.

40. 40 Bureau of Industry and security Office of Export Enforcement Keep the most sensitive goods out of the most dangerous hands. Our Mission

41. 41 Bureau of Industry and security Office of Export Enforcement OEE routinely works with various U.S. intelligence and defense agencies for threat assessment and the enforcement of U.S. Export Laws. Office of Export Enforcement

42. 42 Penalties Criminal: 10/20 years imprisonment $250,000 fine ($1,000,000 corporation) corporation) Civil:$11,000/$50,000 per violation $120,000 per national security violation violation Denial of export privileges

43. 43 SUMMARY Be positive your items (products, test equipment, software & technology are properly classified ---ECCN or EAR99--- Be positive your items (products, test equipment, software & technology are properly classified ---ECCN or EAR99--- Use the EAR, follow the steps in Part 732 Use the EAR, follow the steps in Part 732 When making decisions, use WEB PAGE: www.bis.doc.gov When making decisions, use WEB PAGE: www.bis.doc.gov current EAR “Export Administration Regulations” current EAR “Export Administration Regulations”

44. 44 Contacts Western Regional Offices: Western Regional Offices: (949) 660-0144, (408) 998-8806 (949) 660-0144, (408) 998-8806 Washington D.C. Washington D.C. (202) 482-4811- dial “0” (202) 482-4811- dial “0” Fine Print: The CFR “Code of Federal Regulations”, EAR are the Regulations. Base your decisions on the Regulations and have an export compliance program that is updated and current! Fine Print: The CFR “Code of Federal Regulations”, EAR are the Regulations. Base your decisions on the Regulations and have an export compliance program that is updated and current! ATTEND our Seminars, Updates and EXPORT CONTROL FOURM!

45. 45 Bureau of Industry and security Office of Export Enforcement If your competitor, or any PERSON is breaking the law, help them find a new home. If your competitor, or any PERSON is breaking the law, help them find a new home. HOTLINE 1-800-424-2980

46. 46 Optimistically Yours, Contact me for specific “challenges” you may face in complying with current Export Administration Regulations! Contact me for specific “challenges” you may face in complying with current Export Administration Regulations! Joe Tosto, Jr., (949)660-0144 x 122 Joe Tosto, Jr., (949)660-0144 x 122 joseph.tosto@bis.doc.gov joseph.tosto@bis.doc.gov