CES Export Controls & Sanctions Compliance 2 — Questions and Answers
Question 1: What is a 'deemed export' under US export control regulations?
- An export shipment that has received advance BIS approval
- The release of controlled technology or source code to a foreign national within the United States (Correct answer)
- A shipment completed without required export documentation
- An export to a country with an active US free trade agreement
Correct answer: The release of controlled technology or source code to a foreign national within the United States
A deemed export is the transfer of export-controlled technology or source code to a foreign national in the US, treated as an export to that person's home country and potentially requiring a license.
Question 2: What are the maximum criminal penalties for knowingly violating the Export Administration Regulations (EAR)?
- Civil fines up to $10,000 per violation with no criminal exposure
- Up to $1 million per violation and/or 20 years imprisonment (Correct answer)
- Suspension of export privileges for 90 days and a $50,000 fine
- A warning letter for first offense with escalating fines thereafter
Correct answer: Up to $1 million per violation and/or 20 years imprisonment
Willful violations of the EAR carry criminal penalties of up to $1 million per violation and/or up to 20 years imprisonment, reflecting the serious national security implications of illegal exports.
Question 3: What does the 'red flag' rule require US exporters to do when warning signs appear in a transaction?
- Mark the shipment with red warning labels and proceed normally
- Pause the transaction and conduct reasonable inquiry to resolve the concern before proceeding (Correct answer)
- Report the transaction to BIS and await written clearance before shipping
- Cancel the transaction immediately and file a suspicious activity report
Correct answer: Pause the transaction and conduct reasonable inquiry to resolve the concern before proceeding
The red flag rule requires exporters who encounter indicators of potential diversion or illegal end-use to stop and make reasonable inquiries until satisfied the transaction is legitimate before proceeding.
Question 4: The Strategic Trade Authorization (STA) license exception primarily benefits exporters by:
- Allowing unlimited export of any item to all countries without individual licenses
- Permitting export of specified controlled items to approximately 36 close US allies without individual licenses (Correct answer)
- Exempting all EAR99 items from filing Electronic Export Information
- Providing a blanket license for all dual-use technology to NATO members only
Correct answer: Permitting export of specified controlled items to approximately 36 close US allies without individual licenses
STA allows exports of specified lower-risk controlled items to a defined group of approximately 36 US-allied countries without requiring individual BIS licenses, reducing administrative burden for routine trade.
Question 5: When determining whether a US export license is required, what should be the exporter's first step?
- Contact the destination country's customs authority for guidance
- Classify the item by identifying its ECCN on the Commerce Control List (Correct answer)
- Submit a license application to BIS as a precautionary measure
- File Electronic Export Information (EEI) through AES and await clearance
Correct answer: Classify the item by identifying its ECCN on the Commerce Control List
Classifying the item with the correct ECCN is the essential first step, because licensing requirements depend on the item's classification, the destination country, the end-user, and the end-use.
Question 6: BIS's Entity List identifies which type of parties?
- Countries that have signed US free trade agreements
- Foreign entities pre-approved to receive US-origin technology without a license
- Foreign persons subject to specific license requirements due to proliferation or national security concerns (Correct answer)
- All foreign companies that have successfully applied for US export licenses
Correct answer: Foreign persons subject to specific license requirements due to proliferation or national security concerns
The Entity List names foreign individuals, companies, and organizations against whom BIS has imposed specific license requirements because of their involvement in proliferation activities or other national security risks.
Question 7: Which statement best describes the difference between EAR and ITAR jurisdiction?
- EAR controls all military items; ITAR controls all commercial items
- EAR controls dual-use commercial items via BIS; ITAR controls defense articles on the USML via DDTC (Correct answer)
- EAR applies only to software; ITAR applies only to hardware
- EAR is administered by Treasury; ITAR is administered by Commerce
Correct answer: EAR controls dual-use commercial items via BIS; ITAR controls defense articles on the USML via DDTC
EAR (administered by BIS/Commerce) covers dual-use items with both commercial and potential military applications, while ITAR (administered by DDTC/State) covers items specifically designed or modified for military use and listed on the US Munitions List.
CES Export Controls & Sanctions Compliance 2
What is a 'deemed export' under US export control regulations?