CE CE Export Controls & Sanctions Compliance 3 — Questions and Answers
Question 1: What is 'deemed export' under the EAR and why is it significant for U.S. companies employing foreign nationals?
- The release of controlled technology to a foreign national in the U.S. is deemed an export to that person's home country and may require a BIS license (Correct answer)
- Goods displayed at a U.S. trade show are deemed exported to attending foreign buyers
- Any product shipped overseas is deemed to include all related technical data
- Training a foreign customer in a foreign country is deemed a domestic activity
Correct answer: The release of controlled technology to a foreign national in the U.S. is deemed an export to that person's home country and may require a BIS license
Deemed export rules mean that sharing controlled technical data or source code with a foreign national in the U.S.—even verbally—is treated legally as if you exported that information to their country of citizenship.
Question 2: What is the purpose of the Specially Designated Nationals (SDN) List and which agency maintains it?
- OFAC maintains the SDN List, which identifies individuals and entities whose assets are blocked and with whom U.S. persons are generally prohibited from transacting (Correct answer)
- BIS maintains the SDN List to track export violations by foreign companies
- The State Department maintains the SDN List for visa denials
- CBP maintains the SDN List to identify high-risk import shipments
Correct answer: OFAC maintains the SDN List, which identifies individuals and entities whose assets are blocked and with whom U.S. persons are generally prohibited from transacting
OFAC's SDN List names terrorists, drug traffickers, sanctioned government officials, and others whose assets are frozen; U.S. persons are broadly prohibited from doing business with any listed party.
Question 3: What civil penalty can OFAC impose on a U.S. company for a single willful violation of economic sanctions?
- The greater of $1 million or twice the transaction value (Correct answer)
- A fixed penalty of $100,000 per violation
- A mandatory 2-year export ban
- A penalty equivalent to 10% of annual revenue
Correct answer: The greater of $1 million or twice the transaction value
OFAC can impose civil penalties up to $1 million or twice the transaction value per willful sanctions violation, with criminal penalties also possible for egregious cases.
Question 4: What is an export compliance program (ECP) and what are its key components?
- A company's documented system for ensuring compliance with export control laws, including management commitment, classification, screening, training, recordkeeping, and auditing (Correct answer)
- An insurance policy covering fines from export violations
- A government certification program for low-risk exporters
- A software tool that automatically files export declarations
Correct answer: A company's documented system for ensuring compliance with export control laws, including management commitment, classification, screening, training, recordkeeping, and auditing
An ECP is a comprehensive internal compliance framework covering classification of products, screening of parties, transaction review procedures, employee training, recordkeeping, and periodic audits.
Question 5: Under the EAR, how long must exporters retain export control records?
- Five years from the date of the export, re-export, or other regulated transaction (Correct answer)
- Two years from the shipment date
- Seven years from the end of the fiscal year in which the transaction occurred
- Ten years for controlled items and three years for EAR99 items
Correct answer: Five years from the date of the export, re-export, or other regulated transaction
BIS requires exporters to retain all export-related records (licenses, EEI filings, contracts, correspondence) for five years from the date of the transaction.
Question 6: What is the 'catch-all' control under the EAR and when does it apply?
- It applies when an exporter knows or has reason to know that an EAR99 item will be used in weapons of mass destruction (WMD) programs, requiring a license regardless of classification (Correct answer)
- It automatically subjects all goods to a license requirement during national emergencies
- It requires licenses for all exports to countries on the OFAC sanctions list
- It allows BIS to reclassify any item if it poses a national security risk
Correct answer: It applies when an exporter knows or has reason to know that an EAR99 item will be used in weapons of mass destruction (WMD) programs, requiring a license regardless of classification
The catch-all control (EAR Section 744) means that even EAR99 items require a BIS license if the exporter has knowledge or reason to know the items will be used in WMD, missile, or military end-use programs.
CE CE Export Controls & Sanctions Compliance 3
What is 'deemed export' under the EAR and why is it significant for U.S. companies employing foreign nationals?