Export Administration Regulations: Understanding Export License Exceptions

Arnesh Roy | October 7, 2019 | Export Compliance
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Understanding Export License Exceptions | Shipping SolutionsThere are many reasons the U.S. government has decided some goods should require a second look before they can be exported to certain countries.

In my previous article I explained what these various reasons for control are as they appear in the Commerce Department’s Export Administration Regulations (EAR). And I explained why exporters would need to apply for an export license from the U.S. government based on the particular Reason for Control and the destination country.

Even if one or more reasons might apply to a product going to a specific country, the EAR also provides exceptions to the export license requirement.

License exceptions are specific criteria that, if met, enable a company to export without a license even when one or more reasons for control apply to their export. That includes checking the general restrictions found in Part 740.2 of the EAR to make sure you meet all the conditions of the license exception you are using.

In addition, the EAR imposes additional restrictions on using license exceptions for "600 series" items. These are goods that were moved from the United States Munitions List (USML) under the International Traffic in Arms Regulations (ITAR) to the less restrictive Commerce Control List (CCL) under the EAR. If your exports include these types of goods, you should review these restrictions as well.

EAR License Exceptions

Essentially, license exceptions are what their name implies—exceptions to the normal rules regarding license requirements. There are two different types of license exceptions under the EAR: list-based and transaction-based.

List-based license exceptions are typically easier to use than transaction-based exceptions.

List-Based License Exceptions

List-Based License Exceptions | Shipping Solutions

Each Export Control Classification Number (ECCN) entry on the Commerce Control List (CCL) found in Part 774 of the EAR includes a list of any license exceptions available for items categorized under that ECCN. As with reasons for control, the EAR utilizes acronyms as shorthand to refer to license exceptions, though while reasons for control use two-letter acronyms, license exceptions use three-letter acronyms.

In order to be able to claim a license exception, it must be available for the ECCN being shipped and available for the destination country.

GBS—Shipments to Country Group B Countries

License exception GBS authorizes exports and reexports to Country Group B (see Supplement No. 1 to part 740) of those commodities where the Commerce Country Chart indicates a license requirement to the ultimate destination solely for reason National Security (NS) and identified by “GBS—Yes” on the CCL. See Part 743.1 of the EAR for reporting requirements for exports of certain commodities under License Exception GBS.

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CIV—Civil End-Users

License exception CIV authorizes exports and reexports of items on the CCL that have a license requirement to the ultimate destination country for National Security (NS) reasons only; and identified by “CIV—Yes” in the License Exception section of their ECCN entry, provided the items are destined to civil end-users for civil end-uses in Country Group D:1, except North Korea (see Supplement No. 1 to Part 740).

The EAR clearly states that you may not claim this license exception if you know that the export is destined for military use.

The Commerce Department recently announced that it plans to eliminate the CIV License Exception from the EAR entirely, though it gave few details as to the reasoning behind this change, when the change will be official, and if something new will replace it. As of the publication date of this article, exporters may still claim CIV if they meet the criteria.

LVS—Shipments of Limited Value

Each ECCN that lists the LVS exception also lists a corresponding value limit unique to that ECCN under its entry in the Commerce Control List. The LVS criteria are simple: if the value of the goods on a single order listed under a single ECCN does not exceed the LVS limit listed under that ECCN’s entry in the CCL, the export is eligible for this License Exception.

TSR—Technology and Software Under Restriction

License Exception TSR is available for exports and reexports destined for countries in Country Group B for ECCNs with National Security (NS) as their only Reason for Control and with “TSR—Yes” listed under their entry on the CCL.

In order to be eligible for this license exception, the exporter must first obtain written assurance from the consignee that they will abide by certain conditions that are detailed in Part 740.6.

STA—Strategic Trade Authorization

License exception STA was created in 2011. While it is not technically a list-based license exception, ECCNs often contain special conditions for using STA.

STA authorizes the export, reexport and transfer (in-country) of certain items on the CCL to destinations posing a low risk of unauthorized or impermissible uses. If items have multiple reasons of control, this exception can be used for exports to a list of 36 countries; if it has a National Security (NS) reason for control, it can be used for a smaller list of eight countries.

In order to prevent reexports to unauthorized destinations, a prior statement from the consignee is required along with specific notification requirements. If an export is eligible for STA and one or more other license exceptions, the exporter may claim one of the other ones, which exempts them from the prior statement and notification requirements specific to license exception STA.

Transaction-Based License Exceptions

For transaction-based license exceptions, the ECCN classification of the goods is still important, but whether or not the license exception is available is based more on what's happening in the transaction.

AGR—Agricultural Commodities

License exception AGR permits the export of agricultural commodities to Cuba, as well as the reexport of U.S. origin agricultural commodities to Cuba, provided the transaction meets all of the criteria laid out in Part 740.18. Exporters must notify BIS prior to any export or reexport under license exception AGR.

APP—Computers Adjusted Peak Performance

License exception APP authorizes exports, reexports and transfers (in-country) of computers, including “electronic assemblies” and specially designed components therefor controlled by ECCN 4A003 exported or reexported separately or as part of a system for consumption in Computer Tier countries as listed in Part 740.7. When evaluating your computer to determine license exception APP eligibility, use the APP parameter to the exclusion of other technical parameters in ECCN 4A003.

License exception APP also authorizes exports of technology and software controlled by ECCNs 4D001 and 4E001 specially designed or modified for the “development,” “production,” or “use” of computers, including “electronic assemblies” and specially designed components therefor classified in ECCN 4A003 to Computer Tier countries.

Technology and source code eligible for license exception APP may not be released to nationals of Cuba, Iran, North Korea, Sudan, or Syria.

APR—Additional Permissive Re-exports

License exception APR authorizes reexports of two categories: reexports from Country Group A:1 and Hong Kong; as well as reexports to and among specific countries as detailed in Part 740.16.

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AVS—Aircraft, Vessels, and Spacecraft

License exception AVS authorizes departure from the United States of foreign registry civil aircraft on temporary sojourn in the United States and of U.S. civil aircraft for temporary sojourn abroad; the export of equipment and spare parts for permanent use on a vessel or aircraft; exports to vessels or planes of U.S. or Canadian registry and U.S. or Canadian Airlines’ installations or agents; the export or reexport of cargo that will transit Cuba on an aircraft or vessel on temporary sojourn; and the export of spacecraft and components for fundamental research. Generally, no License Exception symbol is necessary for export clearance purposes; however, when necessary, the symbol ‘‘AVS’’ may be used.

BAG—Baggage

License exception BAG authorizes individuals leaving the United States either temporarily (i.e., traveling) or longer term (i.e., moving) and crew members of exporting or reexporting carriers to take to any destination, as personal baggage, the classes of commodities, software and technology described in Part 740.14. This part also lists special provisions including those related to unaccompanied baggage (baggage that is not being transported on the same carrier as the baggage owner), software, technology, shotguns, and shotgun shells.

CCD—Consumer Communications Devices

License exception CCD authorizes the export or reexport of commodities and software to Cuba or Sudan subject to the requirements stated in Part 740.19. Commodities that may be eligible for this license exception include consumer computers, mobile phones, televisions, radios and related equipment.

ENC—Encryption Commodities, Software, and Technology

Encryption is the process of encoding a message or information in a manner that allows only an authorized party to decipher it, while barring unauthorized parties from making sense of it . Encryption is widespread in both the public and private sectors, and has significant implications for maintaining national security, ensuring privacy and protecting intellectual property.

Part 740.17 explains criteria related to the exportation of encryption commodities, software and technology that may enable an exporter to claim license exception ENC. Supplement No. 3 to Part 740 lists “ENC Favorable Countries,” countries for which certain terms of this license exception may apply.

GFT—Gift Parcels and Humanitarian Donations

The provisions of license exception GFT are explained in Part 740.12 and authorize exports and reexports of gift parcels by an individual (donor) addressed to an individual, or a religious, charitable or educational organization (donee) located in any destination for the use of the donee or the donee's immediate family (and not for resale).

The gift parcel must be provided free of charge to the donee. However, payment by the donee of any handling charges or of any fees levied by the importing country (e.g., import duties, taxes, etc.) is not considered to be a cost to the donee for purposes of this definition of gift parcel.

For Cuba, no items listed on the Commerce Control List other than items listed in Part 740.19(b) of the EAR may be included in a gift parcel.

For all destinations, no items controlled for Chemical and Biological Weapons (CB), Missile Technology (MT), National Security (NS), Nuclear Proliferation (NP) or Encryption Items (EI) reasons on the Commerce Control List may be included in a gift parcel.

GOV—Governments, International Organizations, International Inspections Under the Chemical Weapons Convention, and the International Space Station

License exception GOV authorizes exports and reexports to U.S. government agencies as well as exports and reexports related to the United States’ participation in international treaties and agreements. It is explained in Part 740.11, which is divided into five sections:

1. International Safeguards
The International Atomic Energy Agency (IAEA) is an international organization that establishes and administers safeguards, including Additional Protocols, designed to ensure that special nuclear materials and other related nuclear facilities, equipment, and material are not diverted from peaceful purposes to non-peaceful purposes.

European Atomic Energy Community (Euratom) is an international organization of European countries with headquarters in Luxembourg. Euratom plays a similar role to IAEA, existing primarily to control the international trade of nuclear-related materials. This section authorizes exports and reexports of commodities or software to the IAEA and Euratom and reexports by IAEA and Euratom for official international safeguard use.

2. United States Government
This section authorizes exports, reexports, and transfers (in-country) to personnel and agencies of the U.S. government and certain exports by the Department of Defense. These include all civilian and military departments, branches, missions, government-owned corporations, and other agencies of the U.S. government, but does not include such national agencies as the American Red Cross or international organizations in which the United States participates such as the Organization of American States.

3. Cooperating Governments and the North Atlantic Treaty Organization
The provisions of this section authorize exports, reexports and transfers (in-country) of the items listed in paragraph (c)(2) of this section to agencies of cooperating governments or agencies of the North Atlantic Treaty Organization (NATO). This includes all civilian and military departments, branches, missions, and other governmental agencies of a cooperating national government.

Cooperating governments are the national governments of countries listed in Country Group A:1 (see Supplement No. 1 to Part 740) and the national governments of Hong Kong, Singapore and Taiwan.

4. International Inspections Under the Chemical Weapons Convention (CWC)
The Organization for the Prohibition of Chemical Weapons (OPCW) is an international organization that establishes and administers an inspection and verification system under the Chemical Weapons Convention (CWC) designed to ensure that certain chemicals and related facilities are not diverted from peaceful purposes to non-peaceful purposes.

This section authorizes exports and reexports to the OPCW and exports and reexports by the OPCW for official international inspection and verification use under the terms of the CWC.

5. International Space Station (ISS)
The ISS is a research facility in a low-Earth orbit approximately 190 miles (350 km) above the surface of the Earth. The ISS is a joint project among the space agencies of the United States, Russia, Japan, Canada, Europe and Italy.

This section authorizes exports and reexports required on short notice of certain commodities subject to the EAR that are classified under ECCN 9A004 to launch sites for supply missions to the ISS.

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RPL—Servicing and Replacement of Parts and Equipment

License exception RPL authorizes exports and reexports associated with one-for-one replacement of parts, components, accessories and attachments. RPL also authorizes exports and reexports of certain items currently subject to the EAR to or for, or to replace, a defense article described in an export or reexport authorization issued under the authority of the Arms Export Control Act. It does not, however, authorize the export or reexport of defense articles subject to the ITAR, i.e., described on the United States Munitions List (22 CFR 121.1).

SCP—Support for the Cuban People

Part 740.21 of the EAR explains the provisions of license exception SCP that authorizes certain exports and reexports to Cuba that are intended to support the Cuban people by improving their living conditions and supporting independent economic activity; strengthening civil society in Cuba; and improving the free flow of information to, from and among the Cuban people.

TMP—Temporary Imports, Exports, Re-exports, and Transfers In-Country

License exception TMP authorizes various temporary exports and reexports; exports and reexports of items temporarily in the United States; and exports and reexports of beta test software.

Part 740.9 details categories of items that are potentially covered under TMP. This includes tools of the trade, which refers to standard tools and equipment as well as software necessary for a business to carry out its day-to-day functions. Software used as a tool of trade must be protected from unauthorized access.

Other categories that may be eligible under the criteria of TMP include, but are not limited to, kits consisting of replacement parts or components; items used for exhibition and demonstration (such as demo products displayed at trade shows); equipment used for inspection, test, calibration and repair; containers; news media; returns; and shipments of items intended for disposal.

TSU—Technology and Software Unrestricted

License exception TSU authorizes exports and reexports of operation technology and software; sales technology and software; software updates (bug fixes); mass market software subject to the General Software Note (see Supplement No. 2 to Part 774); and release of technology and source code in the United States by U.S. universities to their bona fide and full-time regular employees.

Note that encryption software subject to the EAR is not subject to the General Software Note.

Don’t Claim Permissions Until You’ve Read the Conditions

If you are exporting and you are not 100% sure whether your exports are controlled, the best thing you can do is understand the export license determination process and read the regulations. (You can access the EAR on the BIS website by clicking here.)

This is the surest way to make sure you’re aware of what’s required, which helps prevent any issues that could affect your business, but also—and perhaps more importantly—is a crucial aspect of playing your part in helping to protect the national and economic security of yourself and your fellow citizens.

Export Compliance Software

While it’s true that anyone with sufficient training can reference the publicly accessible EAR in order to determine if their export shipment is eligible for a license exception, this process can be tedious, confusing and open to human error.

Shipping Solutions Professional export documentation and compliance software includes a License Determination Wizard that automatically screens the ECCNs of your products against the destination country and determines what reasons for control apply to the export and whether any license exceptions are available.

If you don’t need help with customs paperwork, we also offer a standalone web-based tool that works the same way.

Interested in learning more about how we can help you stay compliant in your international business? Schedule a free demo today!

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