Direct Product Guidelines

Details

General Prohibition No. 3: Direct Product Rule
§ 736.2(b)(3) of the EAR (as modified on 7/1/14)

 

(A) Non-"600 series" and non-9Y515 foreign direct products of U.S. technology or software are subject to the EAR and require a license or license exception for export from abroad or reexport if all of the following apply:

(1)  The foreign direct product of U.S. technology or software requires a written assurance as a supporting document for a license as defined in part 748 Supp. 2 (o)(3)(i), or as a precondition for use of LE TSR in part 740, i.e., NS controlled U.S. technology/software;

(2)  The foreign produced item is subject to national security (NS) controls as designated in the ECCN on CCL (Supp. No. 1 to part 774 of the EAR); and

(3)  The foreign produced item is destined to a destination listed in Country Group D:1 or E:1 (Supp. No. 1 to part 740 of the EAR). 

(B) "600 series" and 9Y515 foreign direct products of U.S. technology or software are subject to the EAR and require a license or license exception to export from abroad or reexport if all of the following apply:

(1)  The foreign-made product is made from "600 series" or 9Y515 U.S. technology or software;

(2)  The foreign-made product is specified under a "600 series" ECCN or 9Y515 of the CCL (Supp. No. 1 to part 774 of the EAR); and

(3)  The foreign-made product is destined to a destination listed in Country Group D:1, D:3, D:4, D:5 or E:1(Supp. No. 1 to part 740 of the EAR).

(C) Direct products of a foreign plant or major component of a plant, made from non-"600 series" or non-9Y515 U.S. technology or software require a license or license exception to export from abroad or reexport if all of the following apply:

(1)  The plant or component is a direct product of U.S. technology or software that requires written assurance as supporting document for a license, or as precondition for use of LE TSR;

(2)  The foreign-made direct products of the plant or component are subject to national security controls as designated in applicable ECCN; and

(3)  The foreign-made item is destined to a destination listed in Country Group D:1 or E:1 (Supp. No. 1 to part 740 of the EAR).

(D) Direct products of a foreign plant or major component of a plant, made from "600 series" or 9Y515 U.S. technology or software require a license or license exception to export from abroad or reexport if all of the following apply:

(1)  The plant or component is a direct product of "600 series" or 9Y515 U.S. technology or software;

(2)  The foreign-made product is specified under a "600 series" ECCN or 9Y515 of the CCL (Supp. No. 1 to part 774 of the EAR); and

(3)  The foreign-made product is destined to a destination listed in Country Group D:1, D:3, D:4, D:5 or E:1(Supp. No. 1 to part 740 of the EAR).

NOTE: "600 series" or 9Y515 foreign-produced direct products of U.S. technology or software subject to GP3 do not require a license for reexport or export from abroad to the new destination unless the new destination would have been prohibited or made subject to a license requirement by part 742, 744, 746, or 764 of the EAR.

De Minimis Guidelines

Details

De minimis Rules Guidelines - as modified on 7/10/14

(§ 734.4 and Supplement No. 2 to part 734 of the EAR)

 

  •  IF ...
    • Foreign-made commodity incorporates controlled U.S.-origin commodities
    • Foreign-made commodity is 'bundled' with controlled U.S.-origin software,
    • Foreign-made software is commingled with controlled U.S.-origin software, or
    • Foreign-made technology is commingled with controlled U.S.-origin technology,

 

  •  THEN... the Foreign-made item is subject to the EAR if the U.S.-origin controlled content exceeds:
    • "600 series" & 9Y515 .a - .x items: 0% to Country Group D:5, 25% to all other destinations.
    • "600 series" & 9Y515 .y items: 0% to China or Country Group E:1, unlimited to all other destinations.
    • Non-"600 series" & non-9Y515 items: 10 % to Country Group E:1, 25% to all other destinations.
    • Non-"600 series" & non-9Y515 AT only: 10% to Country Group E:1, unlimited to all other destinations.
    • EAR99: 10 % to Cuba, N. Korea and Syria (except food and medicines), unlimited to all other destinations.

 

  • "Controlled content"= US-origin items that require a license to the ultimate destination of the foreign product.
    • EAR99 items are considered "controlled content" for certain sanctioned countries.
    • Fair Market Value of the "controlled content" is needed to calculate de minimis percentage

 

  •   Content that you don't have to count: 
    • License Exception GBS or items that do not require a license to the ultimate destination of the foreign product (NLR designated items).

 

  • Content that is not eligible for de minimis treatment
    • U.S.-origin "600 series" & 9Y515 content when the foreign-made items are destined to Country Group D:5 of Supp. No. 1 to Part 740.
    • Certain 9E003 technology
    • Certain U.S. origin components of high performance computers
    • Encryption 5E002, and encryption commodities and software that don't meet the eligibility criteria in § 734.4(b)
    • QRS 11 if in commercial standby instrument system or commercial aircraft w/such system
    • Foreign made military commodities that incorporate cameras classified under ECCN 6A003.b.4.b

 

  • U.S. items are 'incorporated' when all of the following conditions are met:
    • They are essential to the functioning of the foreign equipment,
    • They are customarily included in the sale of foreign-made items, and
    • They are reexported with the foreign produced item.

 

  • Bundling
    • Software that is configured for a specific commodity, but is not necessarily physically integrated into the commodity.
    • Eligible software is software that is listed on the Commerce Control List (CCL) and is controlled for antiterrorism (AT) reasons or software that is designated EAR99 (subject to the EAR, but not listed on the CCL).

 

       
  • One-time report required for technology
    • Percentage of U.S. content by value
    • Description of your calculations
    • Values, assumptions, methodologies
    • Export price of U.S. content
    • Description and fair market value of the foreign technology

 

  • If over the de minimis limit ...
    • Classify the foreign product (self-classification vs BIS classification)
    • Determine License Requirements
    • Determine License Exception eligibility
    • Obtain any necessary authorization