Commentary: Know your exports

Determining the commodity jurisdiction and classification of a product is the most critical component of any export compliance program.    Determining the commodity jurisdiction and classification of a product is the most critical component of any export compliance program, since this activity ultimately determines the licensing and compliance requirements for the export.
   The process, on the surface, may appear to be daunting, and to a degree it is for the compliance officer. However, it’s important that commodity jurisdictions and classifications are carried out methodically and with the uppermost due diligence in mind by both the exporter and the government licensing officer.
   A sloppy effort with this activity risks unnecessarily heavy regulatory burdens for your product by export licensing authorities.
   Any commodity jurisdiction or classification request should ideally begin before the product is manufactured, since a technology may be controlled for access to foreign nationals (non-U.S. citizens or non-U.S. permanent residents) in the development process.
   It’s also important for product designers to be involved in the commodity jurisdiction and classification process at the onset, with oversight provided by the export compliance officer. 
   When determining a commodity’s jurisdiction, an exporter must take into the account the regulations of both the Commerce and State departments, as well as to a lesser degree the regulations of the Defense Department, Nuclear Regulatory Commission, Energy Department and the Patent and Trademark Office.
   Due to the U.S. export control reform, which started nearly 10 years ago, it’s imperative for companies to reassess any items or technologies that had been previously determined to be under the State Department’s International Traffic in Arms Regulations (ITAR) since they may have since been transferred to the Commerce Department’s Export Administration Regulations (EAR).
   If there’s any doubt whether a product comes under ITAR or EAR, do not submit for a commodity jurisdiction (CJ) until first discussing it with a Commerce Department export licensing officer. Blindly submitting a CJ without Commerce’s initial input could result in long delays with reviews and incorrect outcomes for the exporter.
   For the export’s commodity classification, it’s essential to know whether a product falls under State’s U.S. Munitions List or the Commerce Control List. Here again the product owners, such as your company’s developers, must be an integral part of the process. 
   Initially review the Commerce Control List Index, which is available through the Bureau of Industry and Security’s website, to determine if the products are described “generically.” If so, then proceed to the identified Export Control Classification Number (ECCN). Be sure to review carefully the subparagraphs under the “List of Items Controlled” to determine if the technical description excludes the product or is inclusive of its function. Also, when reviewing against the subparagraphs, pay careful attending to the “or” and “and” in each sentence.
   In addition, any verbiage in the review that’s set off by quotation marks means that it’s further defined in the EAR. In this case, go to the “EAR Downloadable Files” and then to the “Definition of Terms” for EAR Part 772. This will provide clarity as to the intended definition.
   When drafting your export classification request, it’s important to show in writing your matrix of decisions related to a product’s “inclusiveness” or “exclusiveness” as it applies to each ECCN. You should also draw conclusions as to what applies and what’s excluded. 
   Those products that are sourced from other vendors should be initially classified by coordinating with the product owner or manufacturer. 
   Before submitting the export classification request, it’s important for a company’s export compliance officer to establish a rapport with the assigned Commerce licensing officer. I would suggest that the export compliance officer set up a phone call with the Commerce licensing officer to discuss the preliminary product classification determinations to ensure that everyone is on the same page with regard to interpretation and application of a product parameters to the ECCNs. Emailing the determinations to the licensing officer before the call will help ensure an efficient discussion. 
   After the conference call with the Commerce licensing officer and a final internal review, the company then can submit for a formal commodity classification request through Commerce’s Commodity Classification Automated Tracking System (CCATS) or document the results of the conversation for a self-classification. 
   Make no mistake, commodity jurisdiction and classification determinations are time-consuming in order to be done correctly, but the reward in doing so will result in a much more efficient classification process with Commerce for the export compliance officer and the company.
   DiVecchio, principal of Boston-based DiVecchio & Associates, has provided export compliance consulting services to U.S. exporters for more than 35 years. He may be reached by email at pauldivec@earthlink.net.