Why do Organizations have to Meet Export Classification Requirements?

As with import compliance, a crucial part of export compliance regulations that is enforced by governments and jurisdictions around the world is controlling the movement of goods and technology out of the country. This is usually achieved by assigning categories of items and technology unique classification codes, each of which may have their own export restrictions associated with it.

Classifying exports properly and accurately is therefore paramount to meeting export control requirements for all organizations. Failing to properly comply with export controls can lead to significant fines and penalties.

ITAR and EAR are the two export control regimes that organizations have to comply with for different reasons. The International Traffic in Arms Regulations (ITAR) is enforced by the U.S. State Department via the United States Munitions List (USML), and primarily exists to control the export and movement of military and military-adjacent goods and technology out of the country.

The Export Administration Regulations (EAR) are administered by the U.S. Commerce Department’s Bureau of Industry and Security (BIS). It controls goods and technology that have commercial applications, but may also find military uses and applications (i.e. “dual-use” goods and technology).

BIS maintains a list of possible generic dual use items and technology, known as the Commerce Control List (CCL); each of these is identified via a unique numeric identifier, known as the Export Control Classification Number (ECCN). ECCN codes can be used to identify items and technology against the BIS’s list, and to determine what licenses and restrictions are associated with them, if any, as well as what export compliance obligations organizations have with respect to exporting those.

The United States Munitions List (USML) is maintained by the International Traffic in Arms Regulations (ITAR) for the control of military goods and technology out of the United States. Every item on the list gets its own unique USML code, which, much like the ECCN code, can be used to identify items and technology, as well as the licenses and exemptions associated with them.

EAR99 is a catch-all designation on the CCL for items that are not formally on the list, but are recognized as falling under its purview regardless owing to potential dual-use applications. Generally speaking, there are minimal controls and restrictions associated with EAR99 items, and they can be exported freely without license requirements, with the exception of certain countries under sanctions and embargoes.

Exporting items on the CCL and USML typically requires licenses obtained from the relevant government body. Licenses are limited by time, value, or number of exports. Once they exceed that threshold, they expire, and must be renewed with a new license application.

For items on the CCL, there may be “exceptions" to needing licenses when exporting. These can range from public domain information, fundamental research, and educational information. For items on the USML, there are specific circumstances where certain items may be “exempt” from license requirements when exported to some countries. ITAR typically tries to avoid broad exemptions for USML items in view of national security interests; however, scientific research and military and diplomatic treaties have led to license requirement exemptions in the past.

Organizations exporting items on the CCL and USML need either a license, an exception, or an exemption (unless the item is EAR99). If they are unable to procure any of those, they cannot legally export that item.

Schedule B numbers are administered by the U.S. Commerce Department’s Census Bureau. They are 10 digit codes that are used to classify goods bound for export from the United States. Schedule B numbers are based in part on the international Harmonized Schedule, which is used to regulate imports of goods around the world (including in the United States, using a variant known as the Harmonized Tariff System).

Schedule B numbers and HTS numbers are U.S.-specific numbers derived from the same international standard – the Harmonized System (HS) – set by the World Customs Organization (WCO). The first six digits of a Schedule B, HTS, and HS number for a given item will be the same; however, the last four is where they differ.

It is important to use the correct number for the correct use-case. Schedule B numbers are used by the U.S. Census Bureau for tracking exports, and HTS numbers are used for importing. Both of these sets of numbers are applicable for the U.S. only; the rest of the world uses HS numbers.

They do. Every country in the world has its own system of export controls and classifications, which can involve its own unique processes and requirements for export item classification as well as denied party screening. Export compliance regulations are always legally enforced, and it is the responsibility of the organizations engaging in any export transactions to ensure they are abiding by and adhering to their specifics and particulars.