1. UNDERSTAND RE-EXPORT CONTROLS
If a trader is unsure about the origin of a product, this could result in the export being deemed as illegal. It is worth noting that all companies that are physically located out of the US are covered by the country’s re-export regulations. Any case of non-compliance can result in hefty penalties for the traders. In extreme cases, non-compliance can also be punished by a ban. Therefore, it is extremely important for traders to comply with these regulations.
2. IS THE ITEM COVERED UNDER EAR?
Secondly, traders need to establish whether the item that they are trading is covered under the Export Administration Regulations (EAR). There are three main characteristics of products that can help traders in ensuring EAR compliance. Firstly, re-export goods are subject to the EAR if they are of US origin. Secondly, the goods are exempt if they are controlled by another US government agency or if they are categorised as publicly-available technology. Thirdly, traders need to assess the degree of US-controlled materials in their items. If the US-controlled materials account for less than 25% of an item, then it is exempt from EAR. In the case of sanctioned countries like North Korea and Iran, the threshold is 10%. These exemptions are categorised under the de minimis rule. This rule implies that the goods are not subject to the EAR. Further, in the case of defense-related products, the governing regulations are known as International Traffic in Arms Regulations (ITAR). ITAR guidelines require traders to register with the Office of Defense Trade Controls.
3. OBTAIN PRE-REQUISITE LICENSES
