Deloitte Conference Casi pratici di classificazioni di prodotti e di riesportazioni di prodotti europei con componenti americani Milan, November 23rd, 2017 Maurizio Castello Global Trade Compliance Organization | EMEA Regional Trade Compliance Manager ST Microelectronics S.r.l. Cristian Battistello Director – Deloitte Financial Adsvisory S.r.l.
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Deloitte ConferenceCasi pratici di classificazioni di prodotti e di riesportazioni di prodotti europei con
Methodology approach• An efficient and effective Internal Compliance Program (“ICP”) should consider different elements starting from the
Company’s Export Control risk analysis.
• Processes and procedures must be set up and deployed in the organization in order to assure the Company to abide by the Regulations from the different jurisdictions that could apply to the company business model (i.e. EU Dual Use Regulation & US Export Administration Regulation – “EAR”).
• A careful classification process is needed when dealing with goods ( tangible & intangible) developed/produced/purchased in different countries and a specific training program to the classificators is required internally.
• Main risks related to the item’ classifications are:
• Non-classification of known Dual-Use Products, Goods & Technologies
• Incorrect classification of Products, Goods & Technology
• Timeliness to adopt changes in National & International Regulations
• Classification NOT carried out by technical experts ( classification is a job for Engineers!)
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Internal Compliance ProgramOverview of the Program
U.S. (Re)-Export RegulationThe reach of US Re-Export Regulations
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All foreign persons whose activities involve the export or re-export of items and/or technology
controlled by the ITAR or EAR (hereinafter collectively referred to as “controlled goods and technology”)
must be concerned about Compliance with the AECA (Arms Export Control Act) and EAA (Export
Administration Act).
Generally, non-US parties who re-export (export a US origin item or an item with US components from a
country outside the United States to another country outside the US) must adhere to the same rules as
US parties, though in some cases re-export rules are slightly more relaxed. ("Technology" and Technical
data, hardware, software)
U.S. (Re)-Export RegulationWhen do U.S. Sanctions Apply?
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Any transaction that involves “U.S. Persons”
All other activities, if U.S.-origin items or certain foreign-made items
incorporating more than “10% or 25%” level of controlled U.S. content.
“U.S. Person” means:
U.S. companies and their non-U.S. branches; U.S. citizens, Green Card” holders, wherever located oremployed; and all persons in the United States regardless of their nationality.
If a non-U.S. company engages in transactions involving destinations or parties sanctioned by the UnitedStates, U.S. citizens or Green Card holders who are employed by, or acting on behalf of, the non-U.S.company are prohibited from participating in these transactions.
This prohibition applies to all U.S. citizens or permanent resident aliens wherever located, including those whoare affiliated with a non-U.S. company, such as (but not limited to): employees, secondees, independentcontractors, attorneys, officers, and directors.
Is my items subject to U.S Export Controls? 27
What items are subject to the EAR? Dual-Use – Abstract model
All items within the U.S.
All products sent to U.S.
All products with U.S. origin.
Outside U.S.:
- Products produced with U.S. content if the de-minims threshold is exceeded
- Normal over 25% in all countries
- Over 10% for terrorism supporting countries
- U.S foreign made items bundled with U.S. Software if the U.S content exceeds de-
minims threshold
- U.S. foreign made products (FMP)
- With the usage of sensible U.S. Technology or Software heading to certain
countries (§ 736.2(b)(3) EAR)
- Or items which are a direct product of U.S. Technology or Software (§736.2(b)(3)
EAR)
There are exception not applying to the model for certain technologies no de-
minimise threshold
General Prohibitions 28
1.What will be
exported?
2. Where it will
be exported
3. Who
receives the
item
4. What is the
end-use
Keep in mind the general prohibitions
1. Exporting/re-exporting controlled items without applicable export licenses
2. Re-exporting foreign-made items incorporating more than a De Minimis amount of controlled
U.S. content without licenses or applicable exception
3. Re-exporting to certain countries foreign-produced-direct-products of U.S. origin, technical
data or SW without licenses or applicable license exception
4. Exporting, re-exporting, or transferring within a country to parties on the Sanctioned Party Lists
(organizations/individuals who have violated the EC laws and regulations)
5. Exporting/re-exporting to end-users known to be involved in activities concerning weapons of mass
destruction or nuclear end-use
6. Exporting/re-exporting virtually any product to embargoed destinations
7. Engaging in conduct supportive of proliferation activities (see 5), or supporting foreign persons in
development or use of items that would be subject to the EC laws and regulations.
8. Shipping certain items in transit through sensitive countries if they will be unladen from vessels or
aircraft while in country
9. Violate any order, term, or condition of a license or license exception
10. Proceed with any transaction with knowledge that a violation of the EC laws and regulations has
occurred or is about to occur
All
items
ECCN-
items
U.S. (Re)-Export RegulationImpact of US Regulations on our daily business
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The precise goods origin (US origin!) must be known
A precise determination of a license requirement is indispensable
The percentage of US goods contained in our final product must be known (i.e. de minimis rule)
All business partners must be screened against the frequently changing Sanctioned Party Lists
The very complex US Re(Export) Regulations must be well known and applied safely (…)
DE MINIMIS CALCULATION
U.S. (Re)-Export RegulationThe minimis rule
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For non-“600 series,” non-9x515, non-‘see-through carve-out’1 items to Country Group E:1; and
For EAR99 items (except food and medicines) to N. Korea and Syria.
For .a-.x items, in “600 series” & 9x515, or ‘see-through carve-out’1 items, except to Country Group D:5;
For non-“600 series,” non-9x515, or non-‘see-through carve-out’1 items, except to Country Group E:1; and
For EAR99 items to Cuba and Crimea region of Ukraine (except food, medicines and certain software).
For .y items, in “600 series” or 9x515, except to Country Group E:1, E:2 and China;
For items controlled for (AT) reasons only, except to Country Group E:1 and E:2; and
For EAR99 items to all locations, except where noted above.
10 %
25%
Unlimited (not subject to the EAR for de minimis purposes)
U.S. (Re)-Export RegulationWho do I know if a license is required when ECCN – Listed ?
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In order to know if a license is required, you have to know the destination
country
Compare the ECCN with it´s Reason for control with the Commerce Country
Chart in Part 738 Supplement No. 1 of the EAR
- Is a “X” in a Box a license or a license exception is required
1.What will be
re-exported?
2. Where it will
be re-exported
3. Who
receives the
item
4. What is the
end-use
U.S. (Re)-Export RegulationWho do I know if a license is required when ECCN NOT Listed ?
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EAR 99 – A “bucket classification” at the end of each CCL category
Non-
Listed
Items
Items subject to the EAR that are not elsewhere specified in any category in the CCL are designated “EAR 99”.
EAR 99 means that a product is still controlled!
CCL
Work Process Flow – Decision Tree 33
Refer to the Bill of Materials (BOM) of the product to calculate de minimis (%) of controlled US-origin content using the formula