ECCN classification:
We update our procedures to comply
with international regulations

The U.S. government has strenghtened its surveillance efforts in the global distribution of electronic components. The main objective is to exercise strict control over access to American technologies, particularly from countries such as Iran, North Korea, Russia and China.

In collaboration with its allies, notably the European Union, the United States has established a classification for each component, as well as rules governing their international trade and exchange. This system is known by the acronym ECCN.

What is ECCN?

ECCN stands for Export Control Classification Number. It is an alphanumeric code used by the Bureau of Industry and Security (BIS) to determine whether an export license is required. ECCNs are primarily used to identify and categorize dual-use items. A dual-use component is one originally designed and intended for civilian use, but which may be diverted to military, nuclear, biological or chemical use.

Take, for example, a component intended for a washing machine which may be diverted to the manufacture of a drone carrying an explosive charge.

ECCN classification

They are divided into ten main categories, themselves subdivided into five product subgroups.

The first digit identifies the broad category to which it belongs, and the second character identifies the sub-group. The last 3 digits are used to identify and classify the reason why the item is considered as a dual-use items, based on its technical characteristics.

ECCN classification issues

Dual-use items are considered strategic because they can be diverted for military purposes to strengthen the military capabilities and armament of the acquiring countries. These controls were introduced to combat the proliferation of weapons of mass destruction and the spread of conventional weapons.

When exporting a dual-use item, the exporter is subject to strict controls, regardless of the item’s commercial value or condition (new, used, worn, etc.).

What’s the risk?

In the EU:

Any act of smuggling, importing or exporting dual-use goods without declaration is punishable by five years’ imprisonment, confiscation of the objects, goods, assets and means of transport used to commit the offence, and a fine up to 3 times the value of the object.

The prison sentence is increased to ten years and the fine to ten times the value of the object when the smuggling, importing or exporting involves goods dangerous to public health, morals or safety.

In the U.S:

In the United States, legislation provides financial penalties for non-compliance with export procedures. Each procedural error can result in a maximum fine of $300,000, while the total absence of appropriate procedures can lead to a maximum fine of one million dollars.

These U.S. legal provisions are applicable to any export of U.S. intellectual property and/or any commercial transaction in USD. Thus, any violation of the rules surrounding the illicit import or export of dual-use goods exposes offenders to potential prosecution, both at European Union level and by the Bureau of Industry and Security.

Challenges for G 4 SOURCING

We distributed over 6,700 electronic components in 2022, through our network of over 1,600 customers and suppliers, in almost 45 countries. A significant proportion of our exports involved dual-use components.

Many criteria determine the conditions under which a component can be exported:

• Technology
• Country of destination
• Final application
• End-user

Therefore, it was essential to upgrade our control procedure to make it systematic and traceable.

Our ECCN classification management system

ECCN management is a vast and complicated subject. There is a lack of literature on the subject. No standard, no operating procedure, no best practice currently exists. However, after a collective effort by our staff, specialized consultants and government authorities, we can confidently state that we now have full control over our exports.

We apply the most comprehensive procedure on the independent distribution market for managing ECCNs.

Take Away

Many electronic products are subject to classification by European and American customs. In both legislations, the exporter is held responsible for the export of dual-use goods. The classification of electronic products is based on the following principle: “Can the good sold be diverted from its original use and used to produce military equipment?”

This blog post was written in collaboration with EC Compliance, a French software company specializing in export control. EC Compliance helps to simplify and make more reliable the procedures for exporting sensitive products.