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International Trade and Investment Counsel for Technology Companies

Licensing

Maher M. ShomaliBy Maher Shomali

Introduction

After you have determined the Jurisdiction and the Classification of the item(s) you wish to export, the next consideration is Licensing.

The first step in licensing analysis is to ask: Is a license even required for my proposed transaction?

The three principal licensing agencies the Commerce Department’s Bureau of Industry and Security (BIS), the State Department’s Directorate for Defense Trade Controls (DDTC), and the Treasury Department’s Office of Foreign Assets Control (OFAC) all have regulations authorizing certain kinds of transactions without a license. They go by different names, including Exemptions, License Exception, and General Licenses ─ but the net effect is that the transaction may proceed without filing for a license, permit or other approval.

If the transaction does require a license, the next question is: What kind of license best suits my needs?

We help you select the right kind of license that best meets your needs. Filling out the forms is an art, not a science. The challenge is to provide just the right information to optimize the likelihood of approval, keeping in mind that: Submission of the application itself is not the goal of license timely approval is the goal.

Each of the agencies with jurisdiction have unique inter-agency approval processes.  The challenge is to manage this process to obtain a timely and favorable response.

 Department of Commerce

 Is a license required?

 Most items classified under the Export Administration Regulation’s (EAR) Commerce Control List (CCL) are eligible for export under a License Exception, including ENC (Encryption Commodities, Software and Technology) CIV (Civil End-Users), RPL (License Exception Servicing and Replacement of Parts and Equipment) and TSR (Technology and Software under Restriction), and others.

Some transactions, however, are not eligible for a License Exception and require a specific type of license authorization, depending on the nature of that product and its classification, the destination country, and the purchaser, consignee, end-user and end-use. These licenses include:

  • Controlled Product Exports;
  • Off-Shore Technology Transfers;
  • Encryption Licensing Arrangements;
  • Deemed Exports; and
  • Denied Party and Sanctioned Country Exports.

What kind of license suits my needs?

Choosing the right license form is the easy part, since a Form BIS-748P must be used for all export and reexport transactions. A Form BIS-748P is a multipurpose application filed via BIS’s Simplified Network Application Processing system (SNAP-R). The challenge is to tailor the information required under the Form BIS-748P and supporting documentation in order to obtain a timely and favorable response from BIS.

Department of State

Is a license required?

Under the ITAR, unlike the EAR, almost all exports of defense articles and services described in the International Traffic in Arms Regulations (ITAR) United States Munitions List (USML) require license authorization from DDTC, as the number of license exemptions is limited.

What kind of license suits my needs?

DDTC has several different types of licenses that must be filed via DTrade, which is DDTC’s electronic export licensing system, including:

  • Form DSP-5 to permanently export unclassified defense articles;
  • Form DSP-61 is used to temporarily import unclassified defense articles; and
  • Form DSP-73 is used to temporarily export unclassified defense articles.

The transactions may also be better suited for a license agreement, including a Technical Assistance Agreement (TAA), Manufacturing Licensing Agreement (MLA), or a Distribution Agreement (DA). There are also different forms required to amend existing licenses and agreements.

You can quickly conclude that a DDTC license is required for a transaction involving a defense article or service. The challenge will be to determine which license or agreement is the appropriate vehicle for obtaining export approval, and manage the interagency review process in order to obtain a timely and favorable response from DDTC.

Department of Treasury

Is a license required?

Like transactions under DDTC’s jurisdiction, most OFAC transactions require a specific license, such as exports to countries under U.S. sanctions (Cuba, Iran, North Korea, Sudan, Syria and Crimea Region of Ukraine, etc.).

OFAC does have some general licenses available, which authorizes a particular type of transaction for a class of persons without the need to apply for a license, including the export of hardware, software and services incident to the exchange of personal communications items over the Internet (General License D-1, etc.). These general licenses deserve special scrutiny, as they vary according to the specific sanctions regulations at issue.

What kind of license suits my needs?

OFAC has several types of license applications, including:

  • Application to travel to Cuba;
  • Application for the release of a wire transfer blocked at a U.S. financial institution;
  • Application for a license or interpretive guidance in all other circumstances (transactional); and
  • Application to export agricultural commodities, medicine, or medical devices to Sudan or Iran pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA).

The OFAC licensing analysis will require an interpretation of the available general licenses, and if necessary, choosing the appropriate license for the proposed transaction. The challenge is to provide the right information to optimize the likelihood of approval from OFAC.

Conclusion

Submission is not the goal of licensing timely approval is the goal. The agencies with licensing jurisdiction have unique inter-agency approval processes.  The challenge is to manage this process to obtain a timely and favorable response. Thomsen and Burke helps the firm’s clients tailor the license application for each unique transaction to optimize the probability of success.

 

Disclaimer: This document may be considered Attorney Advertising. It is provided for informational purposes only and is not to be considered legal advice. Its distribution does not establish an attorney-client relationship. Each situation is unique and the techniques used will differ depending on the facts and circumstances. Therefore, this document does not describe the work that may performed in any particular matter.

Thomsen and Burke LLP

International Trade and Investment Counsel for Technology Companies

Baltimore, MD
Washington, DC

P  410.539.2595
E  info@t-b.com
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