Are you importing or exporting US products or components? Customs expert Arne Mielken explains how to navigate strict US export controls and avoid falling foul of American law.
Back in the days of the Wild West, the US authorities used to put up wanted posters naming and shaming outlaws who were trying to evade justice.
UK business owners today also face the long-arm of American justice if they flout strict controls on the export of US-origin goods and technology around the world.
If you don’t want to see your mugshot on a US government website, then you need to know if the rules apply to you and your products.
Whether you are receiving or exporting American goods – or incorporating items of US origin in your own products for sale to third countries – you could be subject to stringent export controls.
That’s because US law sticks to products like glue, no matter where in the world you are shipping them from or to. It doesn’t matter that your company isn’t based in America, the rules can still apply to you.
US export controls are designed to protect national security and stop the proliferation of weapons of mass destruction, but they don’t only cover physical products. Sharing certain sensitive technology or software may also require authorisation and an export licence.
You don’t have to be manufacturing nuclear centrifuges for export to North Korea to violate US export controls. You could be producing products with US origin content that may seem harmless enough, but could be used in unintended and malign ways.
Perhaps you’re thinking about adding a tiny, shiny US origin-controlled microchip to your very standard machine that you then plan to export. Depending on their value and the destination, the entire machine may be subject to US export controls.
If you are a UK trader selling products that contain US-origin items, you therefore need to establish whether you require export approval before shipping them to third countries. You also need to understand where – and to who – you can and can’t ship your products under American law.
Play it by EAR
The first thing you need to establish is whether you are subject to US Export Administration Regulations (EAR) and require an export licence.
As well as controlled goods that have been produced in the United States, or that contain a specific percentage of US-origin content, EAR also controls the sharing of sensitive technology to non-US nationals and products produced using such technology.
So, if you are thinking about bringing a certain US fertilizer from the UK to Ireland for example, know that some of its chemical compounds are popular in the US as industrial explosives, so again, American export controls may apply to you.
Many products controlled by EAR are classed as dual-use which means they have both a civilian and military application. A bicycle, for example, can be made from an aluminium alloy
but the same holds true for the production of M16 riffles, but this alloy is also used for inline skates. Image intensifier tubes are great for security when used as night vision CCTV cameras, but they can also show the army the way in a conflict zone.
It’s a good idea to check the Commerce Control List (CCL) within EAR to see if your product is classified as a controlled item. There are numerous licence exceptions within EAR that you can explore: GBS, for example, allows exceptions from a wide range of low-risk countries and CIV can be used when you can demonstrate the civil end users.
De-minimis rules OK
If you make products that incorporate US-origin controlled content, you need a thorough understanding of what we in the trade call the de-minimis rules. They determine how much US content you are permitted to use in foreign-made products before triggering the need for an export control licence.
Generally speaking, if the de-minimis percentage of controlled US origin content in your items exceeds 10% or 25%, depending on their destination, then the products are covered by EAR.
You should also consider establishing an internal compliance programme (ICP) that conforms to US standards. Having an ICP in place can provide valuable reassurance to your US partners and makes it much easier to trade with America.
Penalties for US export violations can be severe and include multi-million-dollar fines, export bans and even jail. There’s also the reputational damage to your business that would result from a prosecution.
By having a thorough understanding of US export controls, you can ensure you don’t end up on the US government’s wanted list of rogue company directors.
If you would like to learn more, I’m running a series of live webinars, in conjunction with WorldECR, that will provide valuable advice on US extraterritorial export controls to non-US companies.
For more information please go to https://www.worldecr.com/webinars/the-us-export-control-series-for-non-us-companies-and-their-us-partners-and-subsidiaries/