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October 25, 2013 

BIS Modifies License Type Codes in AES to Prevent Encryption Hardware, Technology and Software from Being Shipped NLR

On October 15, 2013, the Department of Commerce’s Bureau of Industry and Security (BIS) added a new edit in the Census Bureau's Automated Export System (AES) to prevent exporters and freight forwarders (AES Filers) from inadvertently reporting electronic export information (EEI) on items of Encryption Commodities, Software and Technology under Export Control Classification Numbers (ECCNs) 5A002, 5B002, 5D002 and 5E002 under the designation of “No License Required” (NLR) or AES license code C33.

Effective November 15, 2013, AES will expand license code C32 to include the same requirements.

These two new edits will generate a fatal error “ECCN MUST BE FROM APPROVED LIST” because encryption items specifically classified under ECCNs 5A002, 5B002, 5D002 or 5E002 are subject to a license requirement (requires a license or license exception) for National Security (NS) reasons to all destinations except Canada.

AES Filers encountering this fatal error should verify that the item is classified correctly and confirm that the correct AES license code was reported. EEI filers often report NLR instead of license exception ENC (AES license code C50) for hardware and software containing encryption capabilities.  

AES Filers encountering this fatal error when the export is destined to Canada are reminded that NLR exports to Canada regardless of value are exempt from filing in AES under the U.S. Census Bureau’s Foreign Trade Regulations §30.36.

BIS has indicated that it will send a “friendly reminder” letter to these filers reminding them that AES reporting is not required.

Impacted AES Filers should be aware of this edit and make changes, if necessary, to internal processes to ensure that your company is in compliance with the EAR. Failure to do so could result in an increase in AES fatal errors and the potential for export violations and civil penalties.

It is important to note that electronic exports of intangible technology and software that do not require an export license from BIS are exempt from EEI filing requirements. However, as noted in section 30.37(f) of Census' Foreign Trade Regulations, an EEI needs to be filed for exports of "mass market" software (normally classified as ECCN 5D992). Census has advised that this requirement only applies to "mass market" software valued at more than $2500 and where the software is exported as a physical product, such as when someone purchases software in a box at a retail store. Mass market software downloaded from a software seller's or developer's website is an intangible export and is exempt from EEI filing requirements under the Foreign Trade Regulations. 


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