What are the best practices for calculating the value of controlled content in your reexports?

1 What is the de minimis rule?

The de minimis rule is a provision in the U.S. Export Administration Regulations (EAR) that exempts certain reexports of items subject to the EAR from license requirements or other restrictions, if the controlled U.S. content in those items is below a specified percentage of the total value. The percentage varies depending on the destination country and the export control classification number (ECCN) of the item. For example, the de minimis threshold for reexports to most countries is 25%, but it is 10% for reexports to countries subject to U.S. sanctions or embargoes, and 0% for reexports of items on the Commerce Control List (CCL) that are controlled for missile technology, nuclear nonproliferation, or chemical and biological weapons reasons.

2 How to determine the value of controlled content?

The value of controlled content in your reexports is the sum of the fair market values of all U.S.-origin items or foreign-made items that incorporate U.S.-origin content, that are subject to the EAR and require a license or authorization for the destination country. The fair market value is the price that a willing buyer would pay a willing seller in an arm's length transaction. You can use the invoice price, the cost of production, or other reasonable methods to estimate the fair market value, as long as you can document your calculation and justify it to the U.S. Bureau of Industry and Security (BIS) if requested. You should not include the value of any items that are not subject to the EAR, such as items that are designated as EAR99 or that qualify for license exceptions.

3 What factors to consider when applying the de minimis rule?

When applying the de minimis rule to your reexports, you need to analyze the origin, classification, and destination of your items, as well as the applicable export regulations and license requirements. To do this, you should be aware of the ECCN of your items and any U.S.-origin content incorporated in them. You should also check the Commerce Country Chart and the EAR Part 736 to see if a license or authorization is required for the destination country. Additionally, you should consult EAR Part 744 for any additional license requirements or restrictions based on the end-user or end-use of your items. Furthermore, you need to calculate the percentage of controlled U.S. content in your items and compare it with the de minimis threshold for the destination country. If it is equal to or below the threshold, you can apply the de minimis rule without a license or authorization; otherwise, you need to obtain one from the BIS or follow another applicable license exception or exemption. Be sure to keep records of your calculation and sources of information for at least five years.

4 Here’s what else to consider

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