FAQ: Commodity Jurisdiction & Classification

How do we know the jurisdiction of our items, that is, whether they are controlled under the International Traffic in Arms Regulations (ITAR) or the Export Administration Regulations (EAR)?

Determining your product’s jurisdiction is an important first step in classification, particularly during this period of Export Control Reform as items are systematically moved from the U.S. Munitions List (USML) to the Commerce Control List (CCL). Generally speaking, companies have three options:

1. Apply directly to the State Department’s Directorate of Defense Trade Controls (DDTC) for a Commodity
   Jurisdiction (CJ) ruling. Although eventually definitive, the processing is slow and limited in quantity.
2. Train in-house experts to read the ITAR and the EAR sufficiently well to determine the product’s jurisdiction.
3. Hire a law firm or a 3rd party consultant team like CTP to handle specific or bulk requests.

Once we know the jurisdiction, how do we determine the classification of our items?

Experts must look at the characteristics and technical parameters of each item and compare these against the criteria of the respective control lists. Military items will be put into one of 21 USML Categories which are usually obvious.

Dual-use classifications are more challenging. Each item will be assigned a 5 digit code called an Export Control
Classification Number (ECCN) that very specifically locates its place on the CCL. These classifications will determine the licensing requirements.

Companies have a few options to determine their classifications, notably the ECCNs:

1. Contact the manufacturer, producer, or developer to see if they have classified the item. This is not always
   reliable since classifications may change over time, especially now with Export Control Reform, and OEMs
   may not regularly update the classifications in their database.
2. Submit an official classification request to the Department of Commerce’s Bureau of Industry and Security
   (BIS) via their electronic licensing system, SNAP-R. Like DDTC, this option is limited in quantity and
   response time can vary so companies should plan accordingly.
3. Train in-house experts to self-classify. This requires having a technical understanding of the product and
   familiarity with the structure and format of the CCL.
4. Hire lawyers or third party specialists like CTP to classify your products or update ECCNs in specific or bulk
   requests.

How would we get started with classifying in-house? What are the pros and cons?

Depending on the size of the task, you would train one or more technical experts in the logic and language of the regulations, enabling them to follow a decision-making flow chart to determine the classifications.

• Pros
  • Assuming reasonable efficiency is achieved, it is beneficial to have salaried employees capable of
    classifying products to avoid waiting for responses from government agencies.
• Cons:
  1. Classification tasks take your experts away from their regular roles and responsibilities within the
     company.
  2. If the employee is not experienced in the task of classification, the process may be unduly
     time consuming and there is a greater possibility of inaccurate classifications.
  3. The initial inventory of
     products may be so large that it would take months or even years for an inexperienced person to complete the
     classifications.

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If we use a 3rd party team like CTP, how do I prepare for the classification project?

Our classification experts are first provided with a list of all the items (products, parts, and technologies) that need to be classified. This is usually organized in an Excel spreadsheet with one item on each row, complete with part number, description of the item, and key parameters listed in multiple cells, all arranged horizontally. This document is called the Classification Matrix.

The key thing is information. For each item, our classification experts need to compare its technical parameters against the Control List criteria of the various ECCNs. If this information can be parsed out of the company’s data system, that is ideal. If you can provide URL links to the data sheets for each item, that is also excellent. Some companies provide us with National Stock Numbers (NSNs) which provide useful information from the central government database. Regardless of format, the more detail provided by the client, the more efficiently our specialists can work.

What about problematic destination countries or possible license exceptions?

Those are just a couple of the possible licensing issues and none of them pertain to the classification. Commodity
classification is a purely technical process, a determination based solely on the parameters of the item. All the licensing factors come into play after the classification is determined.

How long will it take and what does it typically cost?

The duration and expense depends on the overall difficulty of the classification project, which is comprised of four factors:

• Length of List – Important but less so than the others.
• Complexity of Items – What are the items involved? Are they nuts and bolts or complex accelerometers? The level
  of intricacy and sensitivity of the item is obviously important.
• Similarity of Items – Although items in a product line may be intricate, sometimes they are highly similar in design
  and functionality and therefore may have identical classifications.
• Availability of Information – As explained above, our experts need specific technical data to reach conclusions.
  Ideally, this information is provided at the outset, either in the Classification Matrix or via links to data sheets or a
  product catalog. The more time we have to spend tracking down information via web searches or individual data
  requests, the less efficient we become.

If you have any other topics or questions in mind, please visit www.ctp-inc.com or reach out directly to Rick Phipps at rphipps@ctp-inc.com.