When filing a Commodity Jurisdiction (CJ) request for a product, software or technology, treat the product, software or technology as ITAR controlled until the CJ is adjudicated.
When the Office of Defense Trade Controls Policy (DTCP) came knocking raising concerns over the potential misclassification of the Keysight MESG software and recommending the filing of a Commodity Jurisdiction to validate the export jurisdiction and classification of the MESG software, Keysight missed a clear compliance signal regarding how they were and should be treating the export jurisdiction of the MESG software.
The product and software description, available on the Keysight website describes a software used for signal generation for Electronic Warfare systems, which are sophisticated systems crucial to the U.S. natural security, with clear elaboration in the U.S.M.L. category XI(a)(4) and designated as Significant Military Equipment. Test sets for testing electronic warfare systems and radars are enumerated in USML XI(a)(11). Software which is treated as technical data under the ITAR is classified as USML XI(d).
When Keysight was instructed to file a Commodity Jurisdiction request to receive formal USG ruling from the Department of State regarding the export jurisdiction and classification of the MESG software, Keysight acted promptly and filed the Commodity Jurisdiction request within 2 months of the DTCP request. But instead of following the GOLDEN RULE of compliance and treating the MESG software as ITAR until formally advised otherwise, they continued to make exports of the MESG software as EAR99.
In doing so, they made exports of an ITAR software to an ITAR 126.1 sanctioned country (China); exports to Russia, when Russia required export licenses and was deemed a very sensitive destination; and made exports to 3 other countries. The DTCC determined that the exports to China and Russia caused harm to the national security of the U.S.
In total Keysight made unauthorized exports to 17 countries during the 2015 – 2018 period.
DTCC considered the exports as aggravating factors in weighing the 24 violations alleged in the proposed charging letter. Mitigating factors included Keysight's cooperation with DTCC, filing the voluntary disclosure that acknowledged the conduct, implementation of remedial measures and agreement to toll the statutory time limitations of the review period. DTCC determined it was not appropriate to debar Keysight in addition to the financial and compliance measures required by the consent agreement.
This case highlights the critical and fundamental first step for all exports. Conducting the export jurisdiction and classification analysis. Both at the time of design but on a continued basis, as the export regulations are evolving. While the ITAR and DTCP does not require the filing of Commodity Jurisdiction requests for each item to be exported, self-classification must follow the Order of Review set out in the ITAR and EAR. If conducted with export control and technical input, the export classification determination should clearly detail the analysis performed and stand the test of a government inquiry.
Keysight is a publicly traded company and a spin off from Agilent Technologies, who has many ITAR regulated and EAR regulated products. It is expected that Keysight had conducted its due diligence in classification and reached a very different conclusion for export control.
Here are the key takeaways:
1) DTCP regularly reviews exporters websites for products that might be ITAR regulated but not promoted by the exporter as such.
2) If contacted by DTCP and requested to file a CJ, immediately start treating the item as ITAR. Not all CJs result in an ITAR outcome, in fact, at least 60% provide an EAR determination. Voluntary Disclosures can be filed based on the outcome of the CJ, if needed.
2) When performing self-classification, exporters should research the Department of State Commodity Jurisdiction (CJ) database (DDTC CJ database) to see if there have been any prior CJs for similar products that would give insight to how the government adjudicated a similar product.
3) When filing a CJ because you are unsure if your product is ITAR or EAR, ALWAYS treat the product as ITAR until the CJ is adjudicated.
4) Self Classification of company products, should be periodically reevaluated by compliance personnel, as the ITAR USML and the EAR CCL have undergone overhaul, thus changing export jurisdiction and export classification of many items.
5) Regular and periodic internal and external audits should review export jurisdiction and classification of products
6) Exporters should never presume that a product, software or technology, if not ITAR controlled it is EAR99. If a product is truly not ITAR, there may be an applicable ECCN classification on the CCL before reaching EAR99 status.
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