Various U.S. Government departments are responsible for controlling different types of products. Therefore, these departments have created lists and categories of products under export control, and products requiring permission to be exported from the U.S. These governmental agencies also have lists of Denied Parties — including people and companies in the U.S. and around the world, as well as countries — to which products and Intellectual Property (IP) can't be exported. The aim of these export controls is to keep U.S.-developed IP and products out of the wrong hands.
Design's ultimate use = Critical
Although the ultimate end use of an application is sometimes the last thing on an engineer's mind when designing a custom component for a customer, it determines whether or not the custom component falls under a U.S. Government export control regime.
For this reason, prior to starting a new design, designers and their companies should fully define and understand both the intended end product in which a design will be used, as well as their obligations under U.S. law.
If a company does not have a well-defined Export Control Compliance plan, the drive to design new products and components can be hindered by paperwork and compliance nightmares.
Fortunately, the process does not have to be daunting once the differences between the export control requirements are understood throughout an organization, and a well-constructed plan is in place to match each of those requirements.
By definition, “exports” include data, drawings, intellectual property, and components transmitted to anyone not a U.S. citizen or permanent green resident alien.
If a component or system is or was designed, developed, or modified for a military application, and is listed on the United States Munitions List (USML), it is controlled under the International Traffic in Arms Regulations (ITAR) and managed by the Department of State.
If the item has dual use or is also used in a commercial application, it is controlled under the Export Administration Regulations (EAR) and enforced by the U.S. Department of Commerce, Bureau of Industry and Security (BIS).
If the product is going to a sanctioned country, it is controlled through a variety of federal laws and enforced by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC).
With potential fines in the six figures for failures in export control compliance, having the right system and people in place is crucial.
Start the documentation trail early. Understanding the final application early in the design process is valuable, as is knowing in advance whether the application falls under ITAR, EAR, or OFAC requirements.
First, the company can be checked against the Denied Parties List (DPL) to prevent extra work on a partnership not permitted by the government. If the company is confirmed as acceptable, separate processes for documentation, document control, and verification can be streamlined.
It's understandable that engineers are protective of designs, features, and end-user applications. Everyone aims to protect and prevent the release of their sensitive information.
To quell concerns, create standard business forms that match requirements for export licenses or documentation to help the customer feel more comfortable with providing information, and to maintain a consistent and accurate flow of information.
Clearly communicate with potential clients and customers as well. While all designers are not experts on the export control process, clear communication allows companies to be more open with information and protects all parties involved.
Internal communication and training are also crucial. Explaining the process and its importance throughout an organization helps ensure that government rules and company guidelines are followed.
Develop a system that catches mistakes, both internal and external — for example, when sub-suppliers are inexperienced in the documentation process. Here, careful review benefits each company in the chain, and protects organizations from future worries.
For smaller businesses or companies expanding into military applications, employing outside experts can be a valuable fallback.
If a member of your team is unfamiliar with export control and regulations, reach out to a third party for training or processing. Some organizations exist to help develop and implement export control compliance plans. In addition, various companies offer services to verify information against the Denied Parties List (DPL), provide training on forms and systems, and manage compliance processes.
Due to the legal nature of this topic, please note that this article is strictly informational, and the authors accept no responsibility for financial or other loss or damage resulting from its use.
The ABCs of export control
BIS - Bureau of Industry and Security
DPL - Denied Parties List
OFAC - Office of Foreign Assets Control
EAR - Export Administration Regulations
ITAR- International Traffic in Arms Regulations
USML - United States Munitions List