This memorandum summarizes the regulatory concerns applicable to the export of specialty steel and specialty metals products, as well their ancillary melting and processing technologies. The memorandum is intended to assist company representatives identify issues that could give rise to export licensing consequences.
The number of different U.S. government agencies involved in developing export control lists, denied persons lists, and in enforcing the various export control statutes presents one of the biggest challenges to tracking developments in the export control area.
The principal agency, the Department of Commerce’s Bureau of Industry and Security (BIS), is responsible for administering and enforcing the “dual use” export controls. These controls apply to products with applications for both commercial and military uses. BIS administers three principal types of controls. The first set applies to particular materials, finished products, software, and technologies.
Many specialty steel and specialty metals producers are concerned with materials and materials processing controls that are found in Categories 0, 1 (materials), and 2 (materials processing) of BIS’s Commerce Control List (CCL), which is part of the Export Administration Regulations (EAR). These categories identify products that are controlled for export, specify which controls apply, and help determine which shipments will require an export license.
In addition to the nuclear materials listed in Category 0, one also finds certain nickel powder or porous nickel metal for the manufacture of gaseous diffusion barriers (ECCN 0C006), other compounds or powders resistant to corrosion by UF6. Certain nickel powder products not controlled for export by 0C006 are controlled for export by ECCN 1C240.
In CCL Category 1, certain equipment for producing metal alloys, metal alloy powder, or alloyed materials is controlled for export to many destinations under ECCN 1B002. Tools, dies, molds or fixtures for “superplastic forming” or “diffusion bonding” titanium, aluminum or their alloys for the manufacture of airframe or aerospace structures, aircraft or aerospace engines, or components of such engines are controlled for export by ECCN 1B003. Other metal powder production equipment is controlled for export by ECCN 1B102.
Many other products that could potentially be used to produce propellants, particularly for missiles, are controlled under other sections of ECCN category 1B.
A number of metal alloys, metal alloy powders and alloyed materials are controlled by ECCN 1C002. Controlled materials include over 40 different subcategories of aluminides, nickel alloys, niobium alloys, titanium alloys, and aluminum alloys. Other metal alloy powders or particulate material for use in turbine engine parts, alloys made using vacuum atomization, gas atomization, rotary atomization, splat quenching, melt spinning and comminution, melt extraction and comminution, or mechanical alloying, and certain alloyed materials in flake or thin rod form are also controlled by this category.
Other titanium and aluminum alloys of specified characteristics that are not controlled by 1C002 are controlled by 1C202.
Certain magnetic metals are controlled by 1C003. Certain uranium titanium alloys or tungsten alloys with a matrix based on iron, nickel, or copper are controlled by 1C004, while certain “superconductive” “composite” conductors materials are controlled by 1C005.
Metals in particle sizes of less than 60µm (in most shapes) made from 99% or more zirconium, magnesium, and alloys of these metals, whether or not encapsulated, are controlled by 1C011, along with certain boron and boron carbide, guanidine nitrate, or nitroguanidine.
Maraging steels are controlled by 1C116 or 1C216.
Tungsten, molybdenum and alloys in particle form, as well as tungsten in solid form, that can be used for certain rocket or missile components are controlled by 1C117.
Certain titanium stabilized duplex stainless steel is controlled by 1C118
Enriched boron is controlled by 1C225, and tungsten, tungsten carbide and other alloys of tungsten are controlled by 1C226. Many other metals are controlled in the 1C category, including certain magnesium, bismuth, beryllium, hafnium, zirconium, and others.
Certain other production equipment is also controlled under Category 2, such as crucibles resistant to liquid actinide metals (2A225), pumps that can move molten metal by electromagnetic forces (2A293), a number of types of machine tools (2B, among other categories), isostatic presses (2B), certain spray deposition products (2B), robots, flow forming machines (2B109), certain furnaces (2B), and many other types of material processing equipment.
Moreover, more and more products are being manufactured from high nickel content alloys. Products like pumps, valves, storage tanks, heat exchangers, agitators and other types of liquid, gas, and chemical processing equipment made from those products are controlled for export under 2A226, 2A292, 2B350, and 2B999. Controls on these product categories, including equipment for chemical processing, were expanded significantly in recent years. Commerce now controls exports for the ECCN categories listed in this paragraph to approximately 160 countries, an over 400% of the number controlled a decade ago.
Software and technology (the “know-how” required to develop, produce, or use materials or equipment listed in the CCL) is also controlled for export to many destinations. Such exports could include written “recipes” for manufacturing certain controlled powders, alloys, or metals, for example, or technical manuals and other materials related to manufacturing equipment. These technology controls apply to transfers in the United States to nationals of countries that would require an export license if the technology were to be shipped to that destination (known as a “deemed export”). For example, if a license were required to export a certain nickel powder to India and China, a license would be required to share technology for producing that product with an Indian or Chinese engineer in the United States, whether they are an employee or a visitor to your facility. These “deemed export” controls do not apply to persons who hold green cards.
Many of the products listed above are controlled for export for, among other reasons, National Security (NS), meaning that licenses are generally required to export them to most destinations.
Please note that this listing of materials is not intended to be comprehensive regarding the product controls in the Commerce ECCN listings. The control categories referred to briefly above are included for illustrative purposes. To ensure compliance with product export controls, each company must evaluate its own products against the ECCN listings and classification criteria to determine if they manufacture products that may require a license for export.
In addition to these product and technology controls, Commerce also enforces a second type of control on exports for certain prohibited end uses, including missile production and development in most parts of the world, chemical and biological weapons development, and for nuclear weapons development. These controls now apply virtually worldwide. Commerce has also emphasized that exporters are responsible to be alert for “red flags” indicating that an export may be destined for a prohibited end use, user, or destination.
Finally, in a third set of controls, Commerce, along with the other export enforcement agencies described below, administers lists of “denied parties.” In general, U.S. companies are not permitted to export to, import from, or conduct financial transactions with companies or individuals on these lists. There are a few exceptions to this practice, but every export should be screened against all the applicable denied party lists to ensure compliance.
Separate from the Commerce Department controls on dual use equipment, the Department of State’s Directorate of Defense Trade Controls (DDTC) controls exports of “defense articles.” Defense articles are items that are either listed on the United States Munitions List (USML) or provide performances equivalent to USML items. The export controls on defense articles are called the International Trafficking in Arms Regulations (ITAR). These controls do not apply exclusively to weapons or weapons systems. For example, articles on the USML include items in a partially completed state (such as forgings, castings, extrusions and machined bodies) which have reached a stage in manufacture where they are clearly identifiable as defense articles.
The USML includes metal products that may go into certain propellants for use in missiles and other propulsion purposes. Because certain powders are also controlled by BIS, it is important to ensure that your product is subject to the proper agency’s jurisdiction. Other ITAR controlled products include certain zirconium, magnesium and alloys of these metals in particle sizes of less than 60 micrometers are covered, as is certain aluminum powder. Explosives and fuels containing certain alloys (whether encapsulated or not), and metal fuels in particle sizes less than 500×10-m (500 Microns), whether spherical, atomized, spheroidal, flaked or ground, consisting of 97 percent or more of any of the following: zirconium, beryllium, boron, magnesium, zinc, and alloys of these are also controlled by the ITAR. The regulations also cover metal embrittling agents.
As with the Commerce product controls mentioned above, this list is only illustrative, not comprehensive. Moreover, software and technical data associated with defense articles may also be controlled for export.
The U.S. Department of State also administers anti-proliferation sanctions on specified parties, similar to the Commerce Department’s denied party lists.
Products used in overseas nuclear power facilities are generally controlled for export by the Nuclear Regulatory Commission, though there is some overlap with the Department of Commerce. Nuclear technology, or information, is controlled for export by the Department of Energy.
The Department of Treasury’s Office of Foreign Assets Control (OFAC) administers the assorted U.S. sanctions programs. These change regularly with U.S. foreign policy positions and priorities. As of this writing, broad sanctions apply to dealings with Cuba, Iran, Syria, Sudan, and North Korea. OFAC also administers a list of Specially Designated Nationals (SDNs), with whom U.S. persons are generally prohibited from dealing.
Penalties for violating U.S. export controls can be significant, including fines of up to $250,000 per violation, forfeited export privileges, and jail time for willful offenders. Representative enforcement cases include the following:
- Titanium Rods Without Licenses – Service Steel Aerospace Corp. of Tacoma, Washington (SSA) agreed to pay a civil penalty of $12,000 to settle changes that it committed three violations of the EAR on or between January 7, 2005, and December 29, 2005, by exporting titanium rods – items subject to the EAR and controlled for nuclear nonproliferation reasons – from the United States to Israel and Mexico without the necessary Department of Commerce licenses.
- Nickel Alloy Pipe to Iran – On December 16, 2005, PA Inc. of Houston, Texas, was sentenced to three years of probation and a $50,000 criminal fine following a guilty plea to a charge of attempting to export specialty nickel alloyed piping to Iran. On August 19, 2005, BIS assessed a $50,000 administrative penalty and a five year suspended denial of export privileges as part of an agreement with PA Inc. to settle administrative charges related to these transactions.
- Nickel Powder to Taiwan – On June 21, 2007, Theresa Chang pled guilty to one count of making false statements related to the export of nickel powder controlled for nuclear proliferation reasons to Taiwan without an export license. She was sentenced to three years of probation and to pay a $5,000 criminal fine.
- Nickel Alloyed Pipes to Iran – On November 30, 2007, Proclad International Pipelines, Ltd., a British corporation, pled guilty in United States District Court to one count of violating the International Emergency Economic Powers Act for conspiring to export nickel alloyed pipes to Iran. As part of a global settlement, Proclad agreed to pay $100,000 in civil penalties and to be subject to a suspended order denying its export privileges for a period of seven years.
- Nickel Powder Without Licenses – On October 1, 2009, Novamet Specialty Products Corporation agreed to pay $700,000 to BIS for 15 unlicensed shipments of controlled nickel powder worth about $80,000.
- Titanium Alloy Billets to China Firth Rixson Monroe, a specialty metals forger, agreed to pay $85,000 to BIS to settle charges that the company exported 1,055 pounds of 6-2-4-2 titanium alloy billets worth about $35,000 to China. The company voluntarily disclosed the exports to BIS.
- Minxia Non-Ferrous Metals, Inc. paid $1,198,000.00 to settle allegations of dealing in Cuban metals between 2003 and 2006.
With these in mind, it is imperative that companies take their export compliance responsibilities seriously. Doing so is not only critical for the companies themselves, but for the safety and security of the U.S. and its allies.