Government Contractors Must Follow Export Control Regulations Unless….
by Dan Minutillo, Partner
International Trade Law
The “GOV” US export license exception allows exports, reexports, and in-country transfers of controlled products and technology to personnel and agencies of the US government, including all civilian and military departments, without an export license. Most products and technology qualify for this exception to licensing so long as the transaction, that is, the reason for the transfer, meets the exception criteria.
Applying for a US export license to move export-controlled products or technology from the US to a foreign country is not complicated. Still, if the US government rejects the license because the product is not described sufficiently in the license application or if the applicant does not precisely follow the US export license application process, licensing delays consume time and can radically disrupt business operations.
Subject to restrictions, a US government contractor may use the GOV exception found at 15 CFR 740.11 to avoid licensing. Further, after a detailed analysis of the transaction concluding that GOV criteria are satisfied, the contractor can even avoid applying for a US export license.
US EXPORT LICENSE EXCEPTIONS
One of the complexities of US trade law is the interpretation and application of export exceptions and exemptions, i.e., when export licenses to move product or technology out of the US or to move US-origin products from other countries are not required because the activity, the buyer, or the product is exempt from licensing.
As described in earlier published Centre blogs, knowing the Export Control Classification Number (ECCN) for that product or technology is the first step in determining whether a license exception is applicable. An ECCN is an alphanumeric designation used by the US and other countries to identify items or technology for export control purposes. Once the ECCN is determined, “reasons for control” and related export restrictions are evident. The exporter must adhere to those restrictions to avoid fines and penalties.
THE GOV LICENSE EXCEPTION
Part 740 of the US Export Administration Regulations (EAR) specifies export license exceptions. That part of the EAR includes the GOV license exception and many other US government export license exceptions. GOV allows the export, reexport, and deemed export to US government agencies or personnel and agencies of cooperating foreign governments for specific transactions.
A qualifying transaction usually involves products or technology moved from the US or reexported out of foreign countries to a department or agency of the US government to be used for the agency’s official use or to effectuate a US government program with a foreign government or international organization. The exporter cannot use the GOV exception if the subject product or technology is development or production-related, i.e., an item or technology with the specific purpose of developing a different item.
Subject to the restrictions mentioned in this blog, US government prime and subcontractors can use this exception to aid in the timely performance of a government contract benefiting the contractor and the US government. The key to using GOV is accomplishing the following prior to export:
- A thorough export law analysis of the functionality and capabilities of the product and related technology;
- Choosing the correct ECCN for the product; and
- Comparing the relevant transaction to the criteria of the GOV exception.