Yesterday the United States Department of the Treasury Office of the Foreign Assets Control (“OFAC”), offered guidance to those exporting medical devices under a one year specific license who need to replace parts on such medical devices that are found to be faulty or defective. The question is whether or not a US exporter can send replacement parts pursuant to a valid OFAC license as transaction that is ordinary to the sale of the whole medical device.

OFAC answered that yes they could, so long as the replacement part has been classified separately as EAR99 by the Department of Commerce (DOC) under the Export Administration Regulations, 15 CFR parts 730 et seq. In addition, the replacement part is shipped during the time in which the original license was valid. The US exporter would remain subject to the recordkeeping and reporting requirements of §§ 501.601 and 501.602 of the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501, including the requirement that all records of transactions conducted pursuant to the license must be made available to OFAC upon request.

It’s important to note that, “a commodity classification issued for the medical device as a whole would not necessarily cover the replacement part; however, if the commodity classification issued by Department of Commerce does specifically reference replacement parts, only those replacements parts that are covered by this classification would be eligible for export under this scenario.” Moreover the replacement of a defective component must be done on a one-for-one basis.

Although, seemingly a common sense question, issues like this can be tricky and I’m glad that OFAC has issued some guidance in regards to this matter. However useful this guidance might be there is still need to seek out effective counsel to help you navigate these types of questions. The big penalties OFAC has been dishing out lately should be enough to let you know that you have to be exceedingly cautious in all of your export operations.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.