Export control agencies have continuously intensified their focus on pump, valve and other fluid handling equipment companies. In particular, there has been a great deal of enforcement emphasis on the broad, expanding export controls in the U.S. Export Administration Regulations (EAR) under Export Control Classification Number (ECCN) 2B350, which covers pumps, valves, pipes, storage tanks, heat exchangers and other equipment that can be used for chemical processing.
The ECCN 2B350 controls specifically require export licenses from the U.S. Department of Commerce's Bureau of Industry and Security (BIS) for multiple seal and seal-less (e.g., mag drive and canned drive) pumps and essentially all valves more than 1 cm that are made of certain chemically resistant materials on their wetted surfaces, as well as certain pump and valve parts.
Since 2005, export licenses have been required for shipments of these products to approximately 150 countries-a significant bump from the previous list of 37 controlled destinations. Numerous other controls apply directly to other types of pumps, valves and the technology needed to make those products.
In October 2007, civil penalties increased to $250,000 per violating shipment (or twice the value of the shipment-whichever is higher). In the last few months, a valve company in Houston received an $800,000 penalty under these export rules. In addition, in October 2008 the United States implemented $10,000 civil fines for faulty export paperwork (e.g., products identified with incorrect export classification numbers). Most concerning is the increase in criminal prosecutions of individuals and companies in the fluid handling equipment industry for export violations, particularly for diversion of products to countries subject to economic sanctions, like Iran.
The increase in prosecutions is the direct result of the creation of an export control task force at the Department of Justice, the accompanying training of federal prosecutors and their focus on the proliferation of weapons of mass destruction (WMD), including chemical weapons. One of the primary soft targets in the battle against WMD proliferation are U.S. exporters of equipment that can be used to handle dangerous chemicals, whether the equipment was designed for that purpose or not.
With "material creep" such as the increasing use of controlled fluoropolymers, high nickel content alloys, ceramics, glass, graphite, titanium and other higher-end materials that add to the useful life of products, more and more fluid handling equipment falls into an export-controlled category.
In addition to these export controls, a number of other product categories should be reviewed by export specialists, engineers and managers in the fluid handling equipment industry before products are exported. Those other controls, which can be traps for the unwary, are the focus of this article.
Specific Product Categories and Situations to Note When Exporting
To start, many in the industry are not aware of a series of export controls on machine tools and other production and auxiliary measurement and test equipment in the U.S. export regulations. While most companies are not in the business of exporting machine tools, such exports do occasionally occur.
A potential export compliance trap can occur when a company establishes a new production facility offshore and ships a production line to that new facility-or sells off used equipment to an unrelated overseas customer.