Export Control Classification Numbers (ECCNs) play a crucial role in international trade and ensuring compliance with export control regulations. As a buyer, it is essential to request an ECCN from the supplier when asking for a quote. This blogpost will explore the importance of obtaining an ECCN and the potential consequences of not requesting an ECCN for Quoted Products.

Explaining ECCN

An Export Control Classification Number (ECCN) is a five-character alpha-numeric code used to classify items, technology, or information that are subject to export control regulations. These regulations are enforced by governments to control the export and re-export of specific items for reasons related to national security, foreign policy, or other strategic concerns. In the United States, ECCNs are assigned by the Department of Commerce’s Bureau of Industry and Security (BIS) and are listed in the Commerce Control List (CCL), which is part of the Export Administration Regulations (EAR).

The ECCN classification of an item helps determine the level of control and licensing requirements for exporting that item. The first three characters of an ECCN indicate the category and group to which the item belongs, while the last two characters represent the specific reasons for control, such as national security, missile technology, or nuclear nonproliferation. For example, an ECCN of “3A001” can be broken down as follows: “3” represents the category, which is Electronics. “A” indicates the group, which is Systems, Equipment, and Components. “001” denotes the specific reasons for control that apply to the item.

Understanding the ECCN of a product is essential for complying with export control regulations. It enables exporters to determine whether an item is subject to any export restrictions, licensing requirements, or other compliance-related procedures. Failure to comply with these regulations can result in severe penalties, including fines, loss of export privileges, and even criminal charges.

An ECCN consists of a five-character alphanumeric code. Each character plays a part in defining the category, product group, and the type of control that applies to the item. Here’s a breakdown of what each part of the ECCN represents:

• Category: The first digit represents the category of the item, such as electronics, computers, telecommunications, etc.
• Product Group: The second character, a letter, identifies the product group (e.g., systems, equipment, components, etc.).
• Type of Control: The last three digits indicate the type of control that applies to the item, which hints at the reason why the item is controlled (e.g., national security, missile technology).

Understanding an item’s ECCN is crucial for exporters, as it helps determine whether an export license is required to ship the product to a particular destination. The determination is based on the item itself, the country of destination, the end-users, and the end-use of the item. Items that do not have a specific ECCN are designated as EAR99, which generally means they are less sensitive and subject to fewer restrictions, though exceptions apply, particularly when it comes to sanctioned countries or entities.

5 examples of ECCN for Quoted Products

Here are five examples of ECCN codes, each representing a different category of items under the U.S. Export Administration Regulations (EAR). Remember, these codes are part of a complex system used to identify items for export control purposes, and each code has specific control parameters associated with it.

• 3A001 – This code is for electronic equipment and components, specifically those designed for “Electronic Test Equipment.” These are items that might have applications in developing, producing, or testing electronics and can include advanced technologies that are controlled for reasons related to national security.
• 5A002 – This code relates to “Information Security” equipment, software, and technology, specifically systems and equipment designed for encrypting and securing telecommunications and information processing systems. Given the potential use in securing sensitive information, items classified under this ECCN are controlled for national security and anti-terrorism reasons.
• 7A003 – This ECCN code covers certain types of “Navigation and Avionics” equipment, including systems like gyroscopes and accelerometers that are not specifically covered under more restrictive categories. These items can be critical for both civilian and military navigation and stability systems.
• 9A991 – This category includes “Aircraft and Gas Turbine Engines” that are not specifically listed under a more controlled ECCN. These can be parts and components for commercial aircraft and engines, which are controlled for anti-terrorism reasons but are less sensitive compared to military-grade equipment.
• 6A008 – This code pertains to “Marine” technology and equipment, specifically underwater systems and equipment like sonar and acoustic equipment not covered by more specific ECCNs. Such items can have both civilian and military applications, including environmental monitoring, naval research, and defense.

These examples illustrate the breadth of the ECCN classification system, spanning electronics, information security, navigation, aviation, and marine technology. Each ECCN code not only categorizes the item but also ties it to specific regulatory controls based on its potential use in sensitive applications. Compliance with these regulations is crucial for exporters to ensure legal and ethical international trade practices.

Learn more in US

US websites that provide information and guidance on Export Control Classification Numbers (ECCN):

1. U.S. Bureau of Industry and Security (BIS): The BIS is a part of the U.S. Department of Commerce and is responsible for administering and enforcing the Export Administration Regulations (EAR), which includes the Commerce Control List (CCL). The BIS website provides comprehensive information about ECCNs, export controls, licensing requirements, and compliance procedures.
2. International Trade Administration (ITA): The ITA is a part of the U.S. Department of Commerce and is dedicated to promoting trade and investment. While its focus is broader than just ECCNs and export controls, the ITA website offers resources and guidance on various aspects of international trade, including compliance with export control regulations, which encompass understanding and determining ECCNs for products.

European Union Export Control Classification: AL Code

In the European Union, the export control classification system is governed by Council Regulation (EC) No 1334/2000 (as amended, most recently by EC No 394/2006). This regulation sets out the controls for the export, transfer, brokering, and transit of dual-use items.

The classification system in the EU uses the AL code (Annex List), which consists of a series of numbers and sub-numbers, such as “6a108b2”. These codes correspond to specific items listed in the annexes of the regulation.

• Listed Items: If an item is included in the EU List of Dual Use Items, it is assigned a specific AL code. For example, “6a108b2” could refer to a particular type of technology or material with dual-use capabilities.
• Unlisted Items: If an item is not included in the EU list, it is classified with the code “N”.

The AL code is crucial for exporters in determining whether an item requires an export license before being sent outside the EU.

Connection Between ECCN and European Law

The ECCN system in the US and the AL code system in the EU both serve similar purposes: to control the export of dual-use items and technologies. However, they operate under different legal frameworks, and the specific codes used are not directly interchangeable.

However, exporters operating internationally need to understand the connections between these systems:

1. Dual-Use Coordination: Both the EU and US regulations are aligned with international agreements, such as the Wassenaar Arrangement, which promotes transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies. Items listed under one system (e.g., ECCN) are often listed under the other (e.g., AL code), although the specific classification number may differ.
2. Compliance Requirements: Companies exporting goods from both the EU and the US must comply with the regulations of both jurisdictions. An item may need to be classified under both ECCN and AL code if it is exported from both regions.
3. License Requirements: Depending on the classification, an item might require an export license from both US and EU authorities, especially if it falls under specific control categories in both systems.

Understanding the nuances of both the ECCN and AL code systems is essential for companies engaged in international trade to ensure compliance with export control regulations in both the US and the EU.

The Importance of Requesting an ECCN (and AL) for Quoted Products

1. Legal Compliance:

The primary reason to request an ECCN is to comply with export control regulations. These regulations are enforced by governments to control the export and re-export of specific items, technology, or information for national security and foreign policy reasons. An ECCN helps identify whether an item is subject to any export restrictions, thereby ensuring that the buyer remains compliant with relevant laws.

2. Avoidance of Penalties:

Failure to comply with export control regulations can lead to severe penalties, including fines, loss of export privileges, and even criminal charges. By requesting an ECCN and following the appropriate export control procedures, buyers can avoid these potential consequences and maintain a clean legal record.

3. Simplification of the Export Process:

An ECCN simplifies the export process by providing buyers with clear guidance on the licensing requirements for a specific item. This information helps buyers accurately complete export documentation, determine whether an export license is required, and ultimately expedite the shipment process.

4. Enhanced Risk Management:

Requesting an ECCN can help buyers manage potential risks associated with international trade. It allows buyers to identify any trade restrictions or compliance concerns early in the procurement process, ensuring that they have sufficient time to address these issues and avoid any disruptions in their supply chain.

5. Improved Supplier Relationships:

Requesting ECCN for quoted products demonstrates a commitment to compliance and responsible business practices. By requesting ECCN for Quoted Products, buyers show their suppliers that they value transparency, communication, and adherence to legal requirements. This approach can foster trust and strengthen long-term relationships with suppliers.

6. Protecting National Security and Foreign Policy Interests:

Requesting ECCN for quoted products supports efforts to maintain national security and uphold foreign policy objectives. By ensuring that sensitive items do not end up in the hands of unauthorized users, buyers play a critical role in preventing potential threats to their country and the international community.

Export Control Clause in Frame agreement

It is advisable for a buyer to include an ECCN/AL (Export Control) clause in their framework agreement with a supplier. Including such a clause is important for several reasons:

Example of an ECCN/AL Clause

Here’s a sample ECCN/AL clause that could be included in a framework agreement (educational purpose only, always adapt clauses to specific conditions):

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Export Control Classification Clause

1. Compliance with Export Control Regulations:

1.1. Supplier’s Obligations: The Supplier shall comply with all applicable export control laws and regulations, including but not limited to the Export Administration Regulations (EAR) of the United States and Council Regulation (EC) No 428/2009 (EU Dual-Use Regulation) of the European Union, as amended.

1.2. Classification Information: The Supplier shall provide the Buyer with the correct Export Control Classification Number (ECCN) under the EAR and the AL (Annex List) code under the EU Dual-Use Regulation, as applicable, for each item, software, or technology supplied under this Agreement. If the items are not subject to export control regulations, the Supplier shall state the corresponding classification as “EAR99” or “N” respectively.

1.3. Notification of Changes: The Supplier shall notify the Buyer in writing of any changes to the ECCN or AL classification of the supplied items within [X] days of the change becoming effective.

1.4. Licensing Requirements: If any supplied item is subject to export licensing requirements, the Supplier shall inform the Buyer of such requirements prior to delivery and shall obtain all necessary export licenses or authorizations, unless otherwise agreed in writing.

2. Buyer’s Obligations:

2.1. Re-export Compliance: The Buyer agrees to comply with all applicable export control laws and regulations regarding the re-export, transfer, or use of the items supplied by the Supplier, including adhering to any restrictions communicated by the Supplier.

3. Indemnification:

The Supplier agrees to indemnify and hold harmless the Buyer from any fines, penalties, or legal costs arising from the Supplier’s failure to comply with the obligations outlined in this clause.

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Explanation of the Clause:

• Compliance Obligations: Both parties are reminded of their legal obligations, ensuring that the supplier provides all necessary classification information.
• Classification Information: The supplier is required to provide the correct ECCN/AL codes, which the buyer needs for compliance and risk management.
• Notification of Changes: If there are changes in classification, the buyer must be informed promptly to avoid non-compliance.
• Licensing Requirements: The responsibility for obtaining necessary export licenses is clarified, preventing delays or legal issues.
• Indemnification: The clause protects the buyer from any consequences of the supplier’s failure to comply with export control regulations.

Including such a clause in the framework agreement not only protects both parties but also fosters a culture of compliance and due diligence in international trade.

Summary – ECCN for Quoted Products

Requesting an ECCN for Quoted Products from suppliers is responsible business practice. It helps buyers ensure compliance with export control regulations, avoid penalties, simplify the export process, manage risks, and build strong supplier relationships. Ultimately, it contributes to the larger goal of protecting national security and upholding foreign policy interests.

Learn more about the documents included in a standard RFQ by attending LHTS’ course RFQ template which explain how to create a strong RFQ and there you will find a place for requesting ECCN for Quoted Products.

Note: Illustration to the blogpost “The Importance of Requesting an ECCN for Quoted Products” is created by CHAT-GPT on March 16, 2024.