Applicability of Extraterritorial US Export Control Laws

United States international trade laws and regulations control how and to which countries its products, services, and technology can be exported directly and indirectly. These laws have a broad extraterritorial reach and apply to individuals, companies, and entities worldwide and carry severe civil and criminal penalties in the event of a breach, regardless of where the entity may be located.

The U.S. participates in various multilateral export control regimes to achieve foreign policy and regional stability concerns, along with national security considerations. These laws and regulations aim to prevent the proliferation of weapons of mass destruction, combat organized crime and terrorism, control chemical and biological weapons, and prevent destabilizing accumulations of conventional weapons and related material.

Multiple U.S. government departments and agencies are involved in these controls, and the three primary authorities are:

1. Department of State’s Directorate of Defense Trade Controls (DDTC) for the International Traffic in Arms Regulations (ITAR)
2. Department of Commerce’s Bureau of Industry and Security (BIS) for implementation and enforcement of the Export Administration Regulations (EAR)
3. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administration and enforcement of embargoes and sanctions

Additionally, presently, the Export Controls Act of 2018 (ECA) is the statutory authority that allows the US to apply these laws with an extraterritorial scope.

The extraterritorial scope of these regulations is outlined in the Export Administration Regulations (15 C.F.R. 730 –774) and applies to commodities, technology, and services that are exported, re-exported, released, and transferred. These specifically outline controls in the following categories:

1. “All items in the United States, including in a U.S. Foreign Trade Zone or moving in transit through the United States from one foreign country to another
2. All U.S. origin items, wherever located
3. Foreign-made commodities that incorporate controlled U.S.-origin commodities, foreign-made commodities that are bundled with controlled U.S.-origin software, foreign-made software that is blended with controlled U.S.-origin software, and foreign-made technology that is blended with controlled U.S.-origin technology
   1. In any quantity, as described in § 734.4(a) of this part; or
   2. In quantities exceeding the de minimis levels, as described in § 734.4(c) or 734.4(d) of this part;
4. Certain foreign-made direct products of U.S. origin technology or software, as described in § 736.2(b)(3) of the EAR. The term ‘direct product’ means the immediate product (including processes and services) produced directly by the use of technology or software; and
5. Certain commodities produced by any plant or major component of a plant located outside the United States that is a direct product of U.S.-origin technology or software, as described in § 736.2(b)(3) of the EAR.”

Compliance with these regulations is paramount for FlavorCloud and our partners. Ensuring compliance through dedicated and proactive controls, awareness, and audits are some of the main methods to effectively and efficiently operate within the regulations of the United States and other jurisdictions where FlavorCloud transactions occur.