THE QUE GROUP WOULD LIKE TO THANK THE 2013 SPONSORS

1. THE QUE GROUP WOULD LIKE TO THANK THE 2013 SPONSORS

2. Export Compliance Paul StewartChief Technology Officer/Export Compliance OfficerWorthington Aviation Parts, Inc.Worthington Maintenance Repair and Overhaul Center

3. Who am I … • Paul Stewart, Chief Technology Officer and Export Compliance Officer for Worthington Aviation since 2004. Former employee of Component Control from 1998 to 2004, leaving as the Vice President of Quantum Product. QUE Group Board Member since 2009 and former QUE Group Liaison at Component Control. • Worthington Aviation specializes in Regional Turboprop, Commercial and Corporate aircraft. Established in 1998, Worthington has locations in Eagan MN. USA, Pompano Beach FL. USA, Tulsa Ok. USA, Brisbane Australia and Prague Czech Republic. http://lnkd.in/9GYE8S

4. In This Session … • Gain knowledge of common export classifications. • Learn the elements of a basic compliance program • Understand where functions are within Quantum to support your program • See how customizations can refine Quantum to better support your internal needs

5. What are the elements of an export? • Export Control Classification • Universal Harmonized Code (UHC) • End User Information • Country of Destination • Country of Manufacturer

6. Export Control Classification is a category code assigned to a commodity to determine if an export license is required to ship the goods. You are responsible for determining this classification As the exporter of record!

7. The Harmonized Code – UHC – is used to determine duties, taxes and other tariffs in international trade when passing through customs. It does NOT determine licensing requirements! Establish in 1988 by the World Customs Organization, more than 200 countries recognize these codes. As of 2010, 98 percent of international trade used the Harmonized system

8. BUT I’VE NEVER WORRIED ABOUT THIS BEFORE. WHAT’S THE BIG DEAL? We Are In A Global Market Laws Change. Rules Change. The Debarred Lists Change. Customers Change. So you must always be diligent.

9. My products and services are mass-marketed around the world. They are not subject to U.S. Export Controls. Truth:Whether or not a product is mass-marketed around the world does not determine whether it is subject to U.S. export controls (though it may play a role in determining how tight a control will be placed on such a product). U.S. embargoes, for instance, often capture things as "simple" as toys and office equipment..

10. My product or service does not have a military use, so it's not subject to U.S. export controls. Truth:Everything can be (and is) subject to export controls. Even e-mails, telephone calls, and release of technologies (software, data, diagrams, etc) to non-exempt foreign nationals can be subject to U.S. export controls.

11. COMMERCIAL PRODUCT IS GOVERNED BY THE DEPARTMENT OF COMMERCE

12. EAR (Export Administration Regulations) This is the governing law for categorizing your product and determining if a license requirement exists. The Department of Commerce uses Export Control Classification Numbers – or ECCNs to categorize products. These are alpha-numeric codes.

13. THE COST OF NON COMPLIANCE EAR (Commercial Product) Criminal: $50K to $1 million or 5 times value of export, whichever is greater, per violation, 10 years imprisonment Civil: revocation of exporting privilege, fines $10K to $120K per violation Bass-Pro - $510K for shipping guns without a license Dr. Thomas Butler, Texas Tech – 2 years in prison for making fraudulent claims & unauthorized exports (biological agent)

14. Category 1 (Materials, Chemicals, Microorganisms, and Toxins ) 1C992.l – This most commonly relates to fire extinguishers, explosive cartridges associated with fire extinguishing systems.

15. Category 1 (Materials, Chemicals, Microorganisms, and Toxins ) 1A001.a – This most commonly relates to non organic flexible seals and gaskets and fuel bladders.

16. Category 1 (Materials, Chemicals, Microorganisms, and Toxins) 1C999.a – This most commonly relates to hardened steel ball bearings 3mm or larger

17. Category 6 (Sensors and Lasers) 6A998 – This most commonly relates to Weather Radar, Transponders, TCAS Computers

18. Category 7 (Navigation and Avionics ) 7A994 – This most commonly relates to Data Processor Units, TCAS Computers, Air Data Computers, etc.

19. RULE OF THUMB If it is electronic, and goes in the cockpit, it is likely a Category 6 or 7 item and will have the most restrictions on it for exports.

20. Category 9 (Propulsion Systems, Space Vehicles and Related Equipment) 9A991 – This most commonly relates to Gas Turbine Engines and Aircraft Parts and Components Not Elsewhere Specified.

21. EAR 99 (Items subject to the EAR that are not elsewhere specified) EAR 99 – This most commonly relates to non aviation specific items consumables.

22. MILITARY PRODUCT IS GOVERNED BY THE DEPARTMENT OF STATE

23. ITAR (INTERNATIONAL TRAFFIC in ARMS REGULATIONS) This is the governing law for categorizing your product and determining if a license requirement exists For Military Product. The Department of State uses ITAR Codes to Classify product. These are roman numerals.

24. THE COST OF NON COMPLIANCE • ITAR (Military Product) • Criminal: Up to $1 million per violation & 10 years imprisonment • Civil: seizure & forfeiture of article, revocation of exporting privilege, up to $500K fine per violation • ITT – $30M for exporting night vision materials without license • Raytheon fined $25M • Boeing fined $4.2M • Lockheed Martin fined $13M • Dr. J. Reece Roth, University of Tennessee & Atmospheric Glow Technologies, Inc.

25. Category VIII Ground support equipment, Aircraft spare parts, and Engine spare spares to include Airframe spare parts and landing gear spare spares

26. Category XI Electronic equipment such as radar, radio, command and control systems, computer systems and cryptographic equipment

27. A product cannot be controlled by both DOS and DOC. Only one government entity will control the license determinations of a product. If you ever need to know who controls a product, you can submit a Commodity Jurisdiction request, or “CJ”.

28. THE EXPORTER OF RECORD IS RESPONSIBLE FOR OBTAINING A LICENSE. THAT INCLUDES DETERMINING WHAT THE CLASSIFICATION OF THE PRODUCT IS. IF YOU SHIP U.S. MADE GOODS ANYWHERE IN THE WORLD, OR YOU SHIP PRODUCT OUT OF THE UNITED STATES YOU ARE THE EXPORTER OF RECORD.

29. Many changes are being implemented this fall through the President’s Export Reform Initiative. John Bushnell’s presentation from July 24th can be downloaded on the QUE Group website. That session covered the export classification changes and new exemptions and rules that impact the Aviation Industry

30. So now what? GET ON BOARDWith A Export Compliance Program. What are things an export compliance program consist of?

31. What’s In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Documentation and Record Keeping Other Export Related Elements Education

32. Monitor who you do business with. Customer Screening and Due Diligence

33. The End Use Certificate is a way for you to do your “Due Diligence” on the customer. All new customers should complete one of these and return it back to you as part of the account setup. Customer Screening and Due Diligence

34. Our website has a special page that provides answers To common questions. This is also where you can find Our end use certificate. Customer Screening and Due Diligence

35. You can find a link to this page at the bottom Of every page on the website. Customer Screening and Due Diligence

36. In the company records, we use field check box to indicate if the EUC has been filed. Our EUC is good for three years. Customer Screening and Due Diligence

37. We also use the Document Imaging Module to attached the signed EUC to the company record. Customer Screening and Due Diligence

38. At Worthington, when a new company is created, an Automated Notice is sent to the originator, and our accounting team. The notice has a report containing similar named companies. This can be done with Event Manager, or Third Party Crystal Report Tools. Customer Screening and Due Diligence

39. NOTE: You can also use the new “Add Unverified” capabilities in Company Management to force the review of new company records. This is very handy for controlling the verification of data, then once verified, the company record can be “activated” Customer Screening and Due Diligence

40. Our Accounting Team screens the new Company Names, Address and Persons For any potential flags using eCustoms Services. Once they are screened they are put on a watch list and we are alerted If their status changes. Customer Screening and Due Diligence

41. The Visual Compliance export control software screens many U.S. government lists, including: Department of Commerce Denied Persons [BIS] Department of Commerce Entity List [BIS] Department of Commerce "Unverified" List [BIS] Department of Treasury Specially Designated Nationals and Blocked Persons, including Cuba and Merchant Vessels, Iran, Iraq and Merchant Vessels, Sudan Blocked Vessels [OFAC] Department of Treasury Specially Designated Terrorist Organizations and Individuals Department of Treasury Specially Designated Narcotic Traffickers and Narcotics Kingpins Department of Treasury Foreign Narcotics Kingpins Department of Treasury Palestinian Legislative Council List (PLC) Department of State Designated Terrorist Organizations Department of State Terrorist Exclusion List (TEL) U.S. Federal Register General Orders Department of State Arms Export Control Act Debarred Parties Department of State International Traffic In Arms Regulations Munitions Export Control Orders Department of State Nonproliferation Orders Department of State Missile Proliferators Department of State Chemical and Biological Weapons Concerns Department of State Lethal Military Equipment Sanctions Foreign Persons Designated Under the Weapons of Mass Destruction Trade Control Regulations Customer Screening and Due Diligence

42. ALL Companies and People are screened to ensure They are not on the Denied Parties list and/or their country Is not embargoed. Customer Screening and Due Diligence

43. If a company is found to have violations or restrictions, we Place warnings on the company for all transactions. Customer Screening and Due Diligence

44. What’s In An Export Compliance Program? Customer Screening and Due Diligence Product Classifications and Control License Applications and Enforcement Documentation and Record Keeping Other Export Related Elements Education

45. The Part Master Record, Additional Info Tab, holds the pertinent Export Classification information. Product Classification and Control

46. Worthington has used the Screen Designer Module to simplify This for users, and made it mandatory for every part entered. Product Classification and Control

47. A summary index has been provided to help identify commonly Used codes. These are NOT all possible codes. Product Classification and Control

48. .. And, drop down menus have been added for easy input of Classification Codes Product Classification and Control

49. The ECO checkbox is there to indicate the classification has been Reviewed by the Export Compliance Office, and date-time stamps When it was reviewed. Product Classification and Control

50. Additionally, we want to track the source of the classification information, so we added a drop down selection box. Product Classification and Control