Article by: Glenn Shearron, Trade Compliance Specialist, TradeInsights

The world of international trade is certainly changing. It seems that we cannot go a single day without new or updated sanctions, on top of the already challenging world of the physical movement of our goods.

With all of the recent regulatory changes, one thing that may get overlooked is a reexport. Many companies think that once the export form the US has been completed, that the compliance burden is now complete as well.

So, what’s the big deal? Well, if your item(s) are subject to the Export Administration Regulations (EAR), they are subject to EAR for the life of the item, no matter where they are located, or how many times they are reexported, transferred, or sold. Your items could also be subject to the EAR if they are incorporated into a foreign item. In fact, the reexport is subject to the EAR if it is of US origin, wherever located, unless:

1. It is exclusively controlled for reexport by another US government agency
2. It is publicly available technology or software, except encryption

So, what is a reexport?… Well, the Bureau of Industry and Security (BIS) defines a reexport as:

1. An actual shipment or transmission of an item subject to the EAR from one foreign country to another foreign country, including the sending or taking of an item to or from such countries in any manner.
2. Any release outside of the United States of “technology” or source code subject to the EAR to a foreign person of another country is a deemed reexport.
3. The reexport of an item subject to the EAR that will transit through a country or countries to a destination identified in the EAR is deemed to be a reexport to that destination.

What if my item is only a small portion of a foreign item? There are De Minimis rules for those situations, and the percentages do vary, so you will need refer to the EAR 15 CFR part 734.4 to see if there is a De Minimis rule for your item.

A few red flags that should alert you are:

1. Am I selling to a distributor?
2. Am I selling/providing product to a subsidiary/related company who resells?
3. Is my customer the end user?
4. Is my customer asking me for the Export Control Classification Number (ECCN).

These are just a few questions to ask, but they are not an exhaustive list. Remember, other countries likely do not have the extensive sanctions on other countries and entities like the US does.

As you can imagine, the rules for reexports can become very involved, and confusing. So, due diligence is the name of the game. Know what’s being done with your products. To begin the process, ask the questions:

1. Is my item subject to the EAR?
2. Classify your item according to the EAR (ECCN, not Schedule B!)
3. What is the ultimate destination of my item?
4. Who is the end user and what is the end use of my item?
5. Is my item being incorporated into a foreign made item?

You can find more information on reexports from BIS at the below links:

https://www.bis.doc.gov/index.php/licensing/reexports-and-offshore-transactions

https://www.bis.doc.gov/index.php/documents/regulations-docs/2382-part-734-scope-of-the-export-administration-regulations-1/file

Glenn Shearron
Trade Compliance Specialist
gshearron@valexander.com
tradeinsights@valexander.com
Tel: 615-885-0020, ext. 2400

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