While most of our clients in the DIB (Defense Industrial Base) are very familiar with ITAR regulations, many of our Aerospace clients are not familiar with EAR regulations, which can often apply to their businesses without them being aware.
On February 28, Bruce Andrews wrote a Deal Note™ addressing buyer due diligence regarding International Traffic in Arms Regulations (ITAR) compliance. EAR is a similar, but quite different, set of regulations. Unlike ITAR regulations, where compliance is tied to items specifically scheduled on the Department of State’s USML (United States Munitions List), the EAR regulations can be more challenging to navigate.
The Export Administration Regulations (“EAR”), are administered by the Bureau of Industry and Security (BIS), which is an agency of the United States Department of Commerce. The mission of the BIS is to advance and protect U.S. national security, foreign policy, and economic interests. Whereas ITAR compliance is tied to one list, EAR compliance requires the exporter to adhere to three separate lists (CCL, EAR99, and ECCN) and many of the items scheduled are not readily apparent to be sensitive to national security. As an example, in 1999 the Sony PlayStation was restricted from export to numerous countries under the EAR.
If your company ships any products outside the United States, even if they are not on the USML, you are still subject to the EAR. And, based on our 22 years of experience, we suggest you assume that most buyers will conduct sufficient due diligence to find any significant non-compliance issues relating to EAR. Just because you ship products that are not listed on the USML, does not mean you are in compliance with the EAR.
If you are considering selling your business in the future, make sure you are compliant with the EAR. If your business is too small to have export compliance support in-house, we encourage you to retain a qualified third-party to help. If you need some referrals, we would be glad to recommend a handful of reputable firms.
Have a terrific day everyone,