US law tips
US export controls: update and help with "de minimis"
De minimis rules are deeply embedded in US export control laws and affect companies around the world. Here are useful details to avoid misunderstandings.
27.05.2022
De minimis in US export controls: the basics
Export control law is a domain where superficial knowledge often passes for fact. One example is the de minimis rule in the US Export Administration Regulations (EAR). The de minimis rule governs which products manufactured outside the US but incorporating US content fall within the purview of US export control law under the EAR.
The terms of the de minimis rule can be found in § 734.4 EAR. They apply to re-exports of foreign-made commodities incorporating controlled US-origin commodities. What’s critical here is that only controlled US-origin commodities need to be included in a de minimis calculation.
Excerpt from § 734.4 EAR
(….)Reexports of a foreign-made commodity incorporating controlled US-origin commodities
(….)
Important to note here
What’s very often overlooked in practice is the key criterion of “controlled” in the de minimis calculation. It is not uncommon for the consequences of this error to reverberate throughout the supply chain. The Guidelines for De Minimis Rules in Supplement No. 2 to § 734 EAR explain how to identify “controlled” content as defined in the EAR.Excerpt from Supplement No. 2 to § 734.4 EAR
(…..)(1) US-origin controlled content. To identify US-origin controlled content for purposes of the de minimis rules, you must determine the Export Control Classification Number (ECCN) of each US-origin item incorporated into a foreign-made product. Then, you must identify which, if any, of those US-origin items would require a license from BIS if they were to be exported or re-exported (in the form in which you received them) to the foreign-made product’s country of destination. F. (….)
(….)
The fictitious test behind the de minimis rule
The de minimis rule requires a fictitious test. You need to check whether the shipment of US products in their unincorporated state would require a license if exported from the US to the final product’s country of destination. Only if the answer is yes do you need to perform a de minimis calculation, including when you re-export this US product in its incorporated state.
The de minimis rule requires looking at each case on its own merits, something that is impossible without in-depth experience dealing with the EAR.
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