Home /  Our experts speak / No need to feel surprised by lower-than-expected usage of STA license exception

No need to feel surprised by lower-than-expected usage of STA license exception

Jan 16, 2015
George Reed Jr., Director, Trade Compliance We are now several years into the era of “Export Control Reform” under the Obama administration here in the U.S., and a great deal of work has been accomplished towards the stated objective of overhauling U.S. export controls. As part of this process the Bureau of Industry and Security (BIS) has created a license exception called “strategic trade authorization”, or STA, within Part 740 of the Export Administration Regulations.

Although this license exception has been available for a few years, many U.S. exporters have made little or no use of STA. One asks why this is? The answer is found in the strict conditions placed upon its utilization.

Let’s take a look at the general conditions:

  • Each specific ECCN must be designated as eligible for utilization of STA and all of the “reasons for control” that are relevant to the transaction must be authorized;
  • The Exporter must provide the consignee with the ECCN of each item shipped pursuant to the license exception;
  • The Exporter must notify the consignee that the shipment (or specific items within a shipment) are being exported pursuant to exception STA;
  • The Exporter must obtain a “Consignee Statement” in writing, prior to shipping the item, which must include specific language stating: (a) That the consignee is aware that the items are to be shipped under STA, (b) That the consignee has been informed of the ECCN by the exporter, (c) That they understand the item may not be subsequently re-exported pursuant to License Exception Additional Permissive Re-exports (APR), (d) The consignee agrees not to ship in or transfer in violation of EAR, and (e) They agree to provide documents to the U.S. Government upon request regarding the subject transactions; and
  • The Exporter must maintain records demonstrating which shipments belong to each Consignee Statement.

For exporting 600-series commodities some additional conditions apply:

  • ALL of the non-U.S. parties to the prospective export transaction must have been approved parties on at least one U.S. export license issued by either BIS or the U.S. State Department;
  • The Consignee Statement must address specific end-user restrictions;
  • The ultimate consignee must agree to BIS end-user checks.

Assuming the conditions for eligibility are met, the steps to be undertaken to enable use of STA are significant and take time to put in-place. This license exception requires tracking of statements and notifications and subsequent record-keeping on both ends of the transaction.

But more importantly, when STA is utilized, the ultimate consignee is agreeing to host a visit from BIS Enforcement staff for an “end-user check” in the destination country. The U.S. Exporter is agreeing to a BIS check-up on-site. While this check-up visit is downplayed by BIS, it amounts an initial sampling that will expand to a Compliance Audit if any of the sampling indicates a reason for concern.

In many instances it may be less effort and risk to simply process an export license rather than navigate through the STA requirements. Creating high probability of BIS Enforcement visits to your foreign consignee, as well as the virtual certainty of BIS Enforcement visiting the Exporter’s facility to sample the records, should be carefully considered. License exception STA is a mixed blessing, and the exporting community is correct to greet it with limited enthusiasm.