IOE and IT export controls special interest group offers US insights

Wed 1 Nov 2023
Posted by: Benjamin Roche
IOE News

shipping, customs control officer

Roger Arthey and Lindsay Bliss of the Institute of Export and International Trade (IOE&IT) led a special interest group (SIG) meeting yesterday (31 October) on export controls, with a particular focus on the US market.

Among those joining them were two special guests: George Grammas of Squire Patton Boggs and Brad Kabanuk of Content Enablers.

The China factor

Grammas presented on recent developments, key concepts and compliance case studies in US export controls, aiming to “give a high-level perspective”, particularly surrounding China.

Citing president of the US Council on Foreign Relations Richard Hass, Grammas diagnosed a “competitive bipartisanship” in US politics, where politicians compete to be tougher than each other on China.

This, Grammas added, is driven by a plummeting favourability rating towards China among the American population.

‘A fundamental change’

The most important changes in US export legislation relating to China focuses on advanced computing and semiconductor manufacturing.

Even those whose businesses are not in the sector should pay attention to this, Grammas suggested, because it represents “a fundamental change in US export controls”.

Updates to the US export administration regulations (EAR) were a particular focus. There is now EAR jurisdiction over foreign-produced items, he said, with the Additional Foreign Direct Product (FDP) rule.

US individuals are also now subject to additional licensing requirements on items that are not related to the EAR. Those who provide services to Chinese firms involved in semiconductors are among those affected, Grammas added.

Defence

He also highlighted the UK/Australia/Canada open general licence (OGL) pilot programme, which allows the export and retransfer of defence-related items without a license.

Grammas explored the issue of “contamination”, which involves exports containing US content or components becoming subject to US export controls.

The US International Traffic in Arms Regulations (ITAR) are the set of American regulations that control the trade of defence goods and services. Under the ITAR, even a small amount of US involvement in the production of a good can cause “contamination”.

“The main thing I want to share,” Grammas explained, “is that you need to be cognisant of which things are going to be subject to US export controls and which things you cut off from US contamination, so they are not subject to them inadvertently.”

He outlined the difference between export controls and sanctions, setting out that export controls such as ITAR and EAR are aimed at US content such as goods, software and technology, while sanctions are aimed at persons, countries, activities and transactions.

A poll conducted after Grammas’ presentation found that, when asked whether ITAR or EAR are relevant to them, 48% of attendees said that both sets of regulations were relevant.

Content Enablers

Kabanuk spoke next on Content Enablers’ offer of trade compliance training, describing the four courses offered on US export controls for non-US practitioners.

The courses explore subjects including classification, authorisations and compliance, Kabanuk explained, while Content Enablers also has a series of case studies available to those in the UK.

Role-specific UK export controls training is also among the company’s offer, including dual-use and defence controls training for engineering, HR, marketing and business and general employees.

Q&A

Following a breakout room session, a panel including IOE&IT’s Hamish Mackay, Samantha Hodgkins, Raymond Burgin and Arthey took questions from attendees.

The first questions inquired about a customer in the EU who refused to accept goods from a UK exporter without new, additional proof that there was no Russian material in their products in the wake of sanctions. The question: is this kind of additional proof mandatory?

Burgin suggested that there was nothing beyond existing legal and compliance requirements, but that “some customers are very nervous and want continuous assurance” in case the exported product is used further along the supply chain.

Another question explored how to prove the provenance of parts sent to the US for repair in the aviation industry, even when they were not produced recently, in light of sanctions.

Arthey said that it was “sometimes possible to work back” to the origin of the product and its design.

Burgin added that an earlier IOE&IT sanctions seminar shed light on how the UK, US and EU are trying to unify their sanctions regimes to address issues like this, where the EU offers a cut-off date before which sanctions don’t apply to a product but the UK, for instance, does not.