Export Controls Present Compliance Challenges for U.S. Businesses

In the age of pariah state sanctions and in the interest of national security, the federal government export controls of sensitive equipment, software, and technology. Complying with complex export control requirements can be very challenging for companies conducting cross-border business.

Under the current U.S. Export Controls System, the federal government maintains several lists of export-controlled items — the Commerce Control List (CCL), the United States Munitions List (USML), and the Nuclear Regulatory Commission Controls (NRCC) — that require a license prior to exportation.

Export license requests typically go through an extensive review process, including review by interested U.S. government agencies, such as the Department of Defense, Department of Energy, the intelligence community, and NASA, as well as interested bureaus within the Department of State.

As detailed by the U.S. Department of State, the federal government generally reviews:

• The eligibility of the applicant
• All parties involved in the transaction
• Appropriateness of the quality and quantity of the proposed export to the end-user and stated end-use
• Any legal impediments to the proposed export
• Any national security implications presented by the proposed export
• Any foreign policy implications, including but not limited to:
• Potential effect on regional stability
• Human rights
• Ensuring compliance with multilateral control regimes.

While the registration and licensing process can be complex and time-consuming, export control violations are serious and can result in severe civil and criminal penalties. For instance, munitions export control violations are punishable by a maximum criminal penalty of $1 million per violation and, for an individual person, up to 10 years imprisonment.

The Obama Administration is now attempting to modernize the current export control system. In October, the federal government revised the export control lists for the first time since the Cold War. The amendments to the USML and the CCL specifically pertain to controls on aircraft and gas turbine engines. As highlighted in a White House press release, “these two control categories account for the largest volume of U.S. export licenses and represent the highest percentage of licensed exports from 43 states, with licensed shipments of almost $21 billion a year.”

Under the new rules, controls are based on the sensitivity of the item and the destination. For example, unmanned aerial vehicles are no longer treated the same as brake pads or fuel filters. These less sensitive items, which often do not require specific export licenses, have now been moved to the CCL list. Additional changes are scheduled to take place in 2014.

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