This is Hamamoto from TIMEWELL.
"We want to export products incorporating U.S.-sourced components to a third country, but we're not sure whether EAR compliance is required." "We have no idea how to look up ECCN numbers." "The de minimis rule calculation method isn't quite clicking." Questions like these come up frequently from legal and compliance departments at Japanese companies conducting overseas transactions.
EAR (Export Administration Regulations) is the regulation administered by the U.S. Department of Commerce's Bureau of Industry and Security (BIS). It applies not only to direct exports from the United States, but also to re-exports of products containing U.S.-origin items to third countries. For Japanese companies using U.S.-made components, software, or technology, this is not someone else's problem.
In September 2025, the "Affiliate Rule" was announced, extending regulation to transactions with subsidiaries of Entity List-designated companies, and the scope of compliance continues to expand.
This article organizes the practical compliance checklist for EAR, how to read ECCN classifications, and worked examples of de minimis rule calculations.
What You Will Learn from This Article
- The 5 cases in which EAR applies to Japanese companies
- The ECCN classification system and how to read it
- How to calculate the de minimis rule, with concrete examples
- An EAR compliance checklist (15 items)
- Major regulatory changes from 2025 to 2026 and their impact
1. Understanding the Basic Structure of EAR
What Is EAR?
EAR regulates the export and re-export of U.S.-origin goods, software, and technology, as well as their domestic transfer.
The key point to grasp is that EAR's coverage is not limited to exports from the United States. Here is a summary of the cases in which Japanese companies are directly subject to EAR:
| Case | Specific example | Regulatory basis |
|---|---|---|
| Re-export of U.S.-origin items | Re-exporting U.S.-made semiconductors from Japan to China | EAR 734.3 |
| Incorporating U.S.-origin items | Exporting products incorporating U.S.-made ICs to a third country | EAR 734.4 |
| Use of U.S.-origin software | Exporting semiconductors designed using a U.S.-made EDA tool | EAR 734.4 |
| Manufacturing based on U.S.-origin technology | Exporting products manufactured under a technology license from a U.S. company | Direct Product Rule |
| Transactions with parties on sanctions lists | Exporting to Entity List-designated companies | EAR Part 744 |
Reading this and thinking "that doesn't apply to us"? If you are using even a single U.S.-made semiconductor or IC, there is a possibility it applies.
What Is EAR99?
Items that are subject to EAR but are not classified under any ECCN on the Commerce Control List (CCL) are classified as "EAR99." Most are low-risk civilian goods, and in most cases they can be exported or re-exported without a license.
However, even EAR99 items require a license when exported to Entity List-designated companies or when WMD-related end-use is suspected. Do not become complacent simply because a classification is EAR99.
How to solve export compliance challenges?
Learn about TRAFEED (formerly ZEROCK ExCHECK) features and implementation benefits in our materials.
2. How to Read ECCN Classifications
The Structure of ECCNs
An ECCN is a 5-character alphanumeric code. Once you learn how to read it, you can immediately get a sense of what type of item it covers just by looking at it.
Example: 3A001
3 ... Category number (Electronics)
A ... Product group (Equipment, Assemblies, Components)
001 ... Individual number including reason for control
The 10 CCL Categories
| Category | Coverage area | Examples relevant to Japanese companies |
|---|---|---|
| 0 | Nuclear materials, facilities, equipment | Nuclear-related equipment |
| 1 | Materials, chemicals, microorganisms, toxins | Special alloys, advanced materials |
| 2 | Materials processing | Machine tools, numerical control devices |
| 3 | Electronics | Semiconductors, integrated circuits, sensors |
| 4 | Computers | High-performance computers, digital devices |
| 5 | Telecommunications and information security | Cryptographic products, communications equipment |
| 6 | Sensors and lasers | Optical equipment, cameras |
| 7 | Navigation and avionics | GPS-related, gyroscopes |
| 8 | Marine | Underwater equipment, propulsion systems |
| 9 | Propulsion systems and space | Rockets, space-related components |
The 5 Product Groups
Each category is further subdivided by product group.
| Symbol | Group | Content |
|---|---|---|
| A | Equipment, Assemblies, Components | Equipment, assemblies, parts |
| B | Test, Inspection, Production Equipment | Test, inspection, manufacturing equipment |
| C | Materials | Materials |
| D | Software | Software |
| E | Technology | Technology |
"3A001" is Category 3 (Electronics), Group A (equipment and parts), item 001. Breaking it down this way makes the meaning of the code click immediately.
How to Look Up ECCNs
BIS's "Interactive Commerce Control List" (bis.gov) allows keyword search and category-based search. However, the most reliable approach is to directly confirm the ECCN with the product's manufacturer — the U.S. supplier. If internal classification is difficult, the option also exists to file a Classification Request with BIS.
3. How to Calculate the De Minimis Rule
What Is the De Minimis Rule?
The de minimis rule is an exemption provision: if the proportion of U.S.-origin content incorporated into a foreign product is below a certain threshold, EAR re-export controls do not apply. For Japanese companies incorporating U.S.-made components into their own products for export, this is the first rule to check.
Thresholds
| Export destination | De minimis threshold | Notes |
|---|---|---|
| General countries (most countries) | 25% | If U.S.-origin content is below 25%, EAR does not apply |
| Sanctioned countries (Cuba, Iran, North Korea, Syria, etc.) | 10% | Stricter threshold |
| State sponsors of terrorism | 10% | Same as above |
Calculation Method
The de minimis ratio formula is straightforward:
De minimis ratio = Acquisition price of U.S.-origin items / Fair market price of finished product × 100
Let's look at a concrete example. A company's product has a sale price of 1 million yen. Incorporated into it are a U.S.-made IC (acquisition price: 150,000 yen) and U.S.-made software (license fee: 50,000 yen).
Total U.S.-origin content = 150,000 yen + 50,000 yen = 200,000 yen
De minimis ratio = 200,000 yen / 1,000,000 yen × 100 = 20%
The ratio is 20%, which is below the 25% threshold for general countries, so EAR re-export controls do not apply. However, if the destination is a sanctioned country, the ratio exceeds 10%, making it subject to EAR controls. Be aware that the conclusion differs depending on the destination country — even for the same product.
Points to Watch in Calculations
| Point | Content |
|---|---|
| Price basis | Use acquisition price for U.S.-origin items; use fair market price for the finished product |
| Calculate per item type | Calculate incorporation ratios separately for goods, software, and technology |
| Excluded items | Cryptographic items and stealth technology cannot use de minimis |
| Direct products | Products manufactured based on U.S.-origin technology are subject to the separate "Direct Product Rule" |
| Considering value added | Value added through your own processing and assembly is included in the denominator |
Honestly, this de minimis calculation is the part that trips people up most often in practice. In particular, many companies get confused about the distinction from the "Direct Product Rule." When in doubt, don't hesitate to consult a specialist or contact BIS directly.
4. EAR Compliance Checklist
Here is a 15-item checklist organized into 4 phases for Japanese companies to verify their EAR compliance.
Pre-Transaction Verification Phase
| No. | Checklist item | What to verify |
|---|---|---|
| 1 | Does your product contain U.S.-origin items? | Verify all components, software, and technology |
| 2 | What is the ECCN for the U.S.-origin items? | Confirm with the supplier, or investigate using BIS's CCL |
| 3 | What is the de minimis ratio? | Calculate the proportion of U.S.-origin content |
| 4 | Is the Direct Product Rule applicable? | Is the product manufactured based on U.S.-origin technology? |
| 5 | What is the destination? | Verify whether controls apply using the Country Chart |
Transaction Screening Phase
| No. | Checklist item | What to verify |
|---|---|---|
| 6 | Who is the end-user? | Cross-reference against the Entity List |
| 7 | Verify affiliated entities of the end-user | Include subsidiaries with 50%+ ownership |
| 8 | What is the intended end-use? | Check for military use, nuclear-related use |
| 9 | Cross-reference against the DPL (Denied Persons List) | Verify the party is not a denied person |
| 10 | Verify intermediaries | Risk of shell companies, etc. |
License Determination Phase
| No. | Checklist item | What to verify |
|---|---|---|
| 11 | Can a license exception apply? | Check conditions for TMP, RPL, TSR, etc. |
| 12 | Is a license application required? | Overall determination based on ECCN, destination, and end-use |
| 13 | Applicability of deemed export | Technology disclosure to foreign nationals within the U.S. is also regulated |
Record Retention Phase
| No. | Checklist item | What to verify |
|---|---|---|
| 14 | Retention of transaction records | EAR requires record retention for 5 years |
| 15 | Record of red flags | Record any concerns identified during the transaction process |
5. Regulatory Changes from 2025 to 2026
The Affiliate Rule (Related Entity Rule)
Announced in September 2025, this rule extends regulation to transactions with entities that effectively control Entity List-designated companies. Subsidiaries in which the listed company holds 50% or more ownership are covered.
According to JETRO reporting, a grace period with enforcement suspended runs from November 10, 2025 to November 9, 2026, but absent an extension, the rule takes effect on November 10, 2026.
The impact on Japanese companies is significant. Verifying whether a counterparty is a subsidiary of an Entity List-designated company is now a new requirement, expanding the scope of capital structure investigation and necessitating re-screening of existing counterparties. I believe investigations should begin while the grace period is still in effect.
Tightening of Advanced Semiconductor-Related Controls
Regulations on semiconductor manufacturing equipment continue to tighten. Since July 2023, when the Japanese government added advanced semiconductor manufacturing equipment to its export control items, the scope of regulation has only expanded in coordination with the United States.
Not Missing Red Flags
BIS specifies that when a company recognizes a red flag (a concerning sign) in a transaction, it must conduct additional investigation and must not proceed with the transaction until concerns are resolved.
Key warning signs not to miss: the customer refuses to disclose the intended end-use of the product; the product's capabilities do not align with the customer's stated business; unusual shipping routes or intermediaries are involved; unusual payment methods — such as remittance via a third country — are specified; the customer says they need no after-service or technical support.
If any one of these applies, stop and conduct additional investigation. Proceeding under pressure because "halting the transaction will affect sales" can lead to irreversible consequences.
6. TRAFEED (formerly ZEROCK ExCHECK) Support for EAR Compliance
The difficulty of EAR compliance for Japanese companies lies in the need to manage two regulatory frameworks simultaneously — Japan's FEFTA and the U.S. EAR. Complying with just one while violating the other is meaningless.
TIMEWELL's export control AI agent "TRAFEED (formerly ZEROCK ExCHECK)" (worried.jp) reduces the burden of this dual management.
The system automatically conducts cross-referencing against multiple countries' sanctions lists, including the U.S. BIS Entity List, SDN List, and DPL. It handles name variations in English, Chinese, Arabic script, and other languages, reducing the risk of missed matches in manual checks.
A concern level score of S, A, B, or C is calculated for each counterparty, and a report with supporting reference URLs is generated — making transparent why a particular assessment was reached. The batch screening function capable of processing 100 to 200 counterparties at once is also well-suited to the large-scale re-screening required for Affiliate Rule compliance.
Summary
EAR compliance is a topic that concerns every Japanese company dealing in U.S. products or technology.
Five key points. EAR's reach extends beyond direct exports from the United States to re-exports of products incorporating U.S.-origin items. ECCNs are 5-character codes composed of a category and a product group. The de minimis rule exempts products from re-export controls if U.S.-origin content is below 25% (10% for sanctioned country destinations). Investigations of counterparty capital structures should begin early, ahead of the November 2026 Affiliate Rule enforcement. When red flags are recognized, conduct additional investigation and retain records.
EAR compliance is not a one-time task — it requires ongoing management. The starting point is systematically understanding which regulations apply based on your company's product lineup, counterparties, and destination countries.
For those interested in streamlining export control management including EAR compliance, please visit TRAFEED (formerly ZEROCK ExCHECK) (worried.jp).
References
- BIS, "Export Administration Regulations (EAR)"
- BIS, "Interactive Commerce Control List"
- BIS, "Commerce Control List Overview and the Country Chart"
- CISTEC, "Introduction to U.S. Re-Export Controls"
- CISTEC, "EAR Re-Export Control Q&A Collection, Rev. 7" (August 2024)
- Business & Law, "Fundamentals of U.S. Export Administration Regulations (EAR)"
- TSR-PLUS, "EAR Fundamentals and Preparing for the September 2025 Amendment"
- JETRO, "Trump Administration Expands EAR Scope" (September 2025)
- Mori Hamada & Matsumoto, "International Trade Law Newsletter" (February 2025)