Export Control Jurisdiction Overview and

Determining the classification of an item under the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR) can be the trickiest part of the entire export process. It can also be the most important part; until you correctly classify the item, you can’t be sure if you need an export license.

The following is a high-level overview of the process, along with some key points learned through hard-earned experience. It is intended to provide a basic approach to item classification for those just beginning their education in export compliance.

To gain insight into this process, the ECTI course “The Ultimate Guide to Classification: Basics, New Advances, and Expert Tips” may be helpful.

Terminology and background

Before we dive in, let’s get some basic definitions out of the way:

Even in the field of international trade,Classification” can mean different things. When we use it, we are specifically referring to determining whether an item is on the United States Munitions List (USML), in which case it falls under ITAR; or whether it is on the Commerce Control List (CCL), and therefore falls under the EAR.

An item cannot appear in both lists; it can appear in only one of them. If it appears in one of the lists, the conditions that must be met to be exported are noted.

one”thing” does not always refer to a physical object. It can be any of the following things:

• Components
• Finished Product
• software
• A service
• A technology

The classification of items is important to anyone exporting from the U.S. It does not matter if the item was produced in another country; as long as the item arrives in the United States, it is subject to U.S. export controls.

In addition, it applies to anyone outside the United States who re-exports or transfers an item subject to U.S. jurisdiction—even if the item never touches U.S. territory.

The process is difficult because there are so many different types of goods that are exported that no single list can cover them all. The EAR doesn’t even try; its EAR99 classification is only for goods that don’t appear elsewhere. So it’s often necessary to figure out how a particular item wasn’t classified in order to infer its correct classification.

I like to think of the classification process in five steps.

1. Collecting Information

The description of the item, its purpose, and who uses it are key to classifying it. Is it a final item (a system, device, or assembled, ready-to-use item, such as an aircraft) or is it used as part of a larger assembly? Is it used for military purposes? What type of people or organizations would buy it, would they resell it themselves or use it to make something else?

This information can usually be found in existing resources such as websites, marketing brochures, and data sheets.

If the item is purchased from a third party, that entity may already know its classification. However, it is important to understand that if you are exporting the item, it is your responsibility to accurately classify it and obtain an export license if necessary. Therefore, the information provided by the original supplier should be reviewed with caution and skepticism.

2. Follow the review order

Both the ITAR and the EAR provide their own recommended processes for classifying items. It always starts with the USML. If an item is listed there, it is governed by the ITAR. You will follow the recommended review order for the ITAR, which can be found in §120.11.

If it is not on the USML, search the CCL and follow the EAR review order, which is located in Supplement 4 to Part 774. The Bureau of Industry and Security (BIS), which administers the EAR, also provides an online decision support tool to help navigate the EAR review order.

ECTI provides a free downloadable quick reference flowchart that describes the review sequence for ITAR and EAR. (For more information on EAR classifications, see related blog post: Understanding EAR Export Classifications.)

3. Look for complications

After evaluating the review order, there are other factors to consider when categorizing. These factors include:

ITAR Transparency Rule – Sometimes referred to as “ITAR contamination.” The rule, found in §120.11(c), states that items on the USML are still subject to the ITAR even if they are incorporated into other items.

The EAR works differently. The EAR is designed to classify assembled items and is generally not concerned with the components contained within those items.

There are exceptions, however. For example, encryption built into a product may result in a change in the product classification (and may require an export license), even if it is only one aspect of the product’s functionality. (See related articles: License Exception ENC and the Complexity of Encryption.)

Irrelevant to buyers and end users: The question of the recipient of exported goods is often confused with the question of the purpose of the goods. The classification of goods does not usually change depending on the identity of the buyer and end user.

The sale of certain items may be restricted, depending on the buyer or end user, but these decisions are made after the classification process. (See related articles: Best Practices for Screening for Denied or Restricted Parties; and Understanding the Various Restricted Party Lists.)

Understanding the definition: Many entries in the USML and CCL are accompanied by comments that use seemingly simple terms but contain specific technical definitions. It is important to understand these terms.

For example, when an item is described in an entry, additional controls may be triggered if the defined term “specially designed” is used. (To learn more about this topic, ECTI offers a short course ITAR/EAR Specially Designed.)

Therefore, if you believe you have determined the correct specifications for a product, be sure to read the description and understand the specific definitions of all terms used. In addition, if a product appears to fall under more than one ECCN or paragraph, you will generally apply the most restrictive ECCN or paragraph. These definitions are provided in EAR §772.1 and ITAR Part 120 Subpart C.

Check individual restrictions on materials: Both the ITAR and the EAR regulate specific materials. The material itself, either in its raw form or sometimes after further processing, can trigger controls. This is especially true for materials that may be hazardous or used in sensitive industries, such as chemicals or biological agents. Therefore, it is always wise to check the classification of the material itself.

4. If in doubt, consult the government

Both the ITAR and the EAR provide processes by which you can request a government decision regarding the classification of an item.

This should not be the starting point. It is not mandatory and you should make your own decision to use these processes as a last resort.

But if you have done your best to classify an item and are still unsure, then this is a way to eliminate uncertainty. It is also reasonable if you are exporting an item that you purchased from another party and you do not have confidence in the classification information provided by that party.

Under the International Traffic in Arms Regulations, this is known as Goods jurisdiction requestThe State Department reviews such requests and publishes some of the results; your question may have been answered in a previous case.

If you do file a CJ request, it can take approximately 90 days to receive a response confirming whether an item is subject to ITAR.

If not subject to ITAR, the State Department will sometimes provide the correct classification of the product under the EAR – but you cannot rely on this.

If the question is not whether an item is covered by ITAR, but how it is classified under EAR, you need to go through a similar process to EAR, which is called Product classification request, Submit directly through the BIS SNAP-R portal. The regulations provide that BIS will respond to such requests within 14 days.

5. Document your work

As a civil matter, export control violations carry strict liability. Misclassification, even if unintentional, can be costly. Thoroughly documenting the classification process is the best way to mitigate risk.

There is no prescribed method or format for this, but you will want to be able to show the steps you took to reach your conclusion.

You can draft a memo detailing each step of the process, or track their comments, notes, and findings in a spreadsheet.

Useful information includes the rationale behind each decision; citations to relevant rules or clauses in the statute; who made the decision and who approved it. If you receive classified information from a third party, get it in writing and add it to your documentation file.

This level of care does not guarantee that mistakes will not occur, but it will demonstrate that you exercised reasonable care and may prevent the government from escalating the case.

Do you have questions about jurisdiction and classification of items?

Visit www.learnexportcompliance.com to learn about our company, our faculty, our staff, and our highly regarded Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars in the U.S., Europe, and elsewhere, and live webinars, and to browse our catalog of more than 80 on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute (540-433-3977) for more information.

Scott Gearity is President of ECTI, Inc.