Zero percent U.S. content: de minimis and the Foreign Direct Product rules.
De minimis, the Foreign Direct Product rules, and why a German machine-tool maker with no American parts can still be inside the EAR.
Foundations · 22 Jul 2026
Sanctions and export controls overlap, but they ask different questions. Export-control analysis examines the item, its destination, end user, end use and the conduct involved. A foreign-made machine can fall within the Export Administration Regulations even with no U.S.-origin parts, if an applicable Foreign Direct Product rule's product and destination or end-user conditions are satisfied. 15 C.F.R. § 734.9; 15 C.F.R. § 736.2(a).
For foreign-produced items located abroad, this article examines two important routes: controlled U.S.-origin content and specified technology or production relationships. These are not a complete account of every way an item or activity can fall under the EAR.
Order of operations, and it matters
"Subject to the EAR" and "needs a license" are two different findings, and the regulation says so: if a foreign-produced item is subject to the EAR, "then you should separately determine the license requirements that apply." It adds, in terms, that "Not all transactions involving foreign-produced items that are subject to the EAR require a license," and that those which do "may be eligible for a license exception." Finding yourself inside the EAR is the beginning of the analysis, not the end of it. 15 C.F.R. § 734.9.
Route one: de minimis, which is about value
De minimis analysis measures controlled U.S.-origin content against the foreign item's value. The ordinary 10 percent and 25 percent thresholds are subject to the exceptions and encryption conditions in section 734.4(a)–(b). They do not displace a separately applicable FDP rule. 15 C.F.R. § 734.4.
| Threshold | Where it works | What it covers |
|---|
| 10 percent or less | Any destination, subject to the § 734.4(a)–(b) exceptions | Foreign-made commodities incorporating controlled U.S.-origin commodities or bundled with U.S.-origin software; foreign-made software incorporating controlled U.S.-origin software; foreign technology commingled with or drawn from controlled U.S.-origin technology |
| 25 percent or less | Destinations outside Country Groups E:1 and E:2 (15 C.F.R. pt. 740, supp. no. 1) | The same three categories, at the higher threshold |
Four things about that table trip people up.
- The exporter is responsible for the necessary calculations. For foreign software or technology, section 734.4(g) requires the method to be documented and retained, and says the records should show the basis of the values used. For commodities, keep an equally defensible calculation for the item under review. 15 C.F.R. § 734.4(e), (g).
- Unbundled software does not get the benefit. U.S.-origin software "is not eligible for the de minimis exclusion and is subject to the EAR when exported or reexported separately from" the foreign-made item. And the exclusion for bundled software reaches only CCL software controlled for anti-terrorism reasons only, or EAR99 software — for anything else "an independent assessment of whether the software by itself is subject to the EAR must be performed." 15 C.F.R. § 734.4(c)(1), (d)(1), notes.
- Commingled technology needs a filing before you rely on it. For foreign technology commingled with controlled U.S. technology, "you must file a one-time report" before relying on the exclusion. It is easy to discover this only after the exclusion has already been relied on. 15 C.F.R. § 734.4(c)(3), (d)(3).
- Some categories have no de minimis exclusion. Section 734.4(a) identifies, among other cases, specified encryption technology, certain 9E003 technology, and specified 9x515 or 600-series content for Country Group D:5. The detailed ECCN conditions matter; this paragraph is not a classification decision. 15 C.F.R. § 734.4(a).
And de minimis is not a sanctions answer
Section 734.4(a)(7) says it plainly: "Under certain rules issued by the Office of Foreign Assets Control, certain exports from abroad by U.S.-owned or controlled entities may be prohibited notwithstanding the de minimis provisions of the EAR." Clearing de minimis tells you about Commerce. It tells you nothing about OFAC. 15 C.F.R. § 734.4(a)(7).
Route two: the Foreign Direct Product rules, which ignore content entirely
This is the route that catches the company with nothing American in the box, and the opening sentence of the section is worth reading slowly:
Foreign-produced items located outside the United States are subject to the EAR when they are a "direct product" of specified "technology" or "software," produced by a complete plant or 'major component' of a plant that itself is a "direct product" of specified "technology" or "software," or, for specified foreign-produced items … contain an item produced by a complete plant or 'major component' of a plant that itself is a "direct product" of specified "technology" or "software."
15 C.F.R. § 734.9 (introductory text; mandatory, U.S. federal).
An applicable FDP rule can reach a foreign item produced by specified equipment even when the item contains no U.S. components. A "major component" includes equipment essential to production, including testing equipment. The equipment's relationship to the specified technology or software and the rule's other conditions still must be established. 15 C.F.R. § 734.9(a)(1)(i).
Illustrative path: specified technology or software → qualifying plant or major component → foreign-produced item. This path reaches the EAR only if the selected FDP rule's product and destination or end-user conditions are also met. Ordinary use of U.S. software somewhere in a supply chain is not enough by itself.
Every FDP rule is a two-part test
Each rule pairs a product test with a country, destination or end-user test. The following is a selected overview, not an exhaustive list. Consult the particular subsection; the direct-product and plant branches may specify different technology or software. 15 C.F.R. § 734.9.
| Fdp rule | Product scope, in outline | Country / end-user scope |
|---|
| National Security, § 734.9(b) (15 C.F.R. § 734.9(b)) | Direct product of specified U.S.-origin technology or software, or the separately defined plant branch; the resulting item must be subject to national security controls under its ECCN | Destination in Country Group D:1, E:1 or E:2 |
| 9x515, § 734.9(c) (15 C.F.R. § 734.9(c)) | Direct product of U.S.-origin 9D515/9E515 technology or software, or the separately defined 9E515 plant branch; resulting item specified in a 9x515 ECCN | Destination in Country Group D:5, E:1 or E:2 |
| 600 series, § 734.9(d) (15 C.F.R. § 734.9(d)) | Direct product of specified U.S.-origin 600-series technology or software, or the separately defined plant branch; resulting-item conditions differ between the branches | Destination in Country Group D:1, D:3, D:4, D:5, E:1 or E:2 |
| Russia / Belarus / occupied Crimea, § 734.9(f) (15 C.F.R. § 734.9(f)) | Direct product of U.S.-origin technology or software in any ECCN in product groups D or E of the CCL, or product of a plant that is; and the item is specified in any ECCN on the CCL or in supplement no. 6 or 7 to part 746 | "Knowledge" that the item is destined to Russia, Belarus or occupied Crimea — or will be incorporated into, or used in the production or development of, any part, component or equipment specified in an ECCN or in supplement no. 6 or 7 to part 746 and produced in or destined to them |
| Entity List, § 734.9(e); Russia/Belarus-Military End User and Procurement, § 734.9(g) (15 C.F.R. § 734.9(e), (g)) | Direct product of technology or software in specified ECCNs (paragraph (e)) or in any CCL product group D or E ECCN (paragraph (g)), or product of a plant that is | Paragraph (e) includes Entity List footnote 1, 4 or 5 branches and the separate § 734.9(e)(3)(ii) branch for qualifying unlisted advanced-node integrated-circuit facilities in Macau or Country Group D:5, subject to its knowledge and transaction conditions. Paragraph (g) is keyed to footnote 3. Apply the selected branch — see section 5 below |
The Russia rule is the one to read twice
The Russia/Belarus/Crimea product scope reaches specified direct products of U.S.-origin technology or software in CCL product groups D or E, with resulting items described in the CCL or supplements 6 or 7 to part 746. The destination test includes specified incorporation, production and development uses. Do not drop either limb, and read § 746.8, which the rule cross-references for license requirements, license review policy and license exceptions. 15 C.F.R. § 734.9(f).
Where the actual prohibitions live
Sections 734.9 and 734.4 decide scope. The general prohibitions sit in part 736, and three of the ten matter here.
- General Prohibition Two addresses covered foreign-made items with more than de minimis controlled U.S. content where the applicable control and destination create a license requirement. Merely exceeding the threshold is not the complete licensing test. 15 C.F.R. § 736.2(b)(2).
- General Prohibition Three — FDP rules. You may not, without a license or license exception, "export from abroad, reexport, or transfer (in-country) foreign-'direct products' or other foreign-produced items subject to the EAR pursuant to § 734.9 if such items are subject to a license requirement" in the listed parts. This is the enforcement edge of route two. 15 C.F.R. § 736.2(b)(3).
- General Prohibition Ten bars specified dealings in an item subject to the EAR with knowledge that a covered violation has occurred, is about to occur or is intended. Knowledge includes awareness of a high probability, and can be inferred from conscious disregard or willful avoidance; mere unanswered curiosity is not the regulatory definition. There are no part 740 license exceptions to this prohibition. 15 C.F.R. § 736.2(b)(10); 15 C.F.R. § 772.1 (Knowledge).
A part 740 license exception supersedes General Prohibitions One, Two and Three only if all of its terms and conditions are met — and, for General Prohibition Three, only if none of the restrictions in § 740.2 or § 744.11(a) apply. No part 740 license exception reaches General Prohibition Ten. 15 C.F.R. § 736.2(b)(1)–(3), (b)(10).
The affiliates rule is currently suspended
As checked on September 25, 2026, BIS's 50 percent affiliates expansion — the interim final rule of September 30, 2025 (90 Fed. Reg. 47201) — is stayed. The stay reaches all of that rule's amendments to parts 732, 734, 736, 744 and 748 of the EAR, not only the FDP rules. In section 734.9, the effective-date note stays the three sentences at the end of paragraph (e)'s introductory text and the two sentences at the end of paragraph (g)'s until November 9, 2026. The suspension rule schedules the affiliates provisions to return on November 10, 2026, absent a further extension. It is therefore wrong to present those sentences as operative today. 15 C.F.R. § 734.9, effective-date note; 90 Fed. Reg. 50857–58 (Nov. 12, 2025).
The suspension was one of the U.S. commitments in the November 2025 U.S.–China trade arrangement. White House fact sheet (Nov. 1, 2025). The published BIS suspension rule stays the Affiliates Rule through November 9, 2026 and schedules its provisions to return on November 10, absent a further amendment. A political announcement about the trade arrangement does not itself amend the EAR. Recheck the operative rule before relying on that scheduled return date.
Do not import OFAC's ownership rule into the EAR
The stay does not suspend OFAC's separate 50 percent blocking rules — for example, 31 C.F.R. § 587.406 in the Russia program — or the remaining EAR controls. Check the actual Entity List entry, applicable FDP footnote, transaction parties, end use and other restrictions. Ownership remains relevant information, but the stayed affiliates sentences are not a current basis for automatic coverage. 15 C.F.R. § 734.9.
What a mid-cap can do about it
Ask suppliers for evidence of the relevant production relationship. Certifications can help identify facts that are not visible in your bill of materials; they do not transfer your compliance responsibility.
- Ask for supplier certifications and know their limits. Section 734.9(a)(2) contemplates a written certification from a supplier that an item "would be subject to the EAR if future transactions meet the destination or end user scope" of an FDP rule, and BIS publishes a model certificate in supplement no. 1 to part 734. It is expressly not required, and BIS says it is not the end of diligence: the certificate "may assist" in "resolving potential red flags," but "BIS does not view this as the only step to be completed during a company's due diligence process." 15 C.F.R. § 734.9(a)(2).
- Classify properly, then check the country scope. Check the selected rule’s classification, destination, end-user and end-use conditions; an ECCN and Country Group alone do not resolve every branch. Without a defensible classification you cannot use the two-part structure to rule anything out.
- File the one-time report before relying on commingled technology de minimis. Not after. 15 C.F.R. § 734.4(c)(3), (d)(3).
- Record the calculation and its assumptions. Section 734.4(g) expressly addresses foreign software and technology records and points to the part 762 recordkeeping requirements; examine the applicable recordkeeping requirements for the item and transaction. 15 C.F.R. § 734.4(g).
- Investigate relevant red flags. The knowledge standard includes conscious disregard and willful avoidance, so document how material uncertainties were resolved. 15 C.F.R. § 772.1 (Knowledge).
- Remember BIS can simply tell you. Under § 734.9(a)(3), BIS may inform persons, individually or by amending the EAR, that foreign-produced items are subject to the EAR. Specific notice is given only by, or at the direction of, named senior BIS officials; oral notice is followed in writing within two working days — and "the absence of BIS notification does not excuse the exporter from compliance with other requirements of this section." 15 C.F.R. § 734.9(a)(3).
A practical review records classification, controlled content or production relationship, destination, end user and end use, then determines licensing. Recheck the rules on the transaction date, especially the scheduled affiliates-rule change.
Lineage requires a classification, the selected rule’s destination, end-user and end-use conditions, and a supplier record. Keep a classification record for each product — who classified it, on which technical facts, and when it was last reviewed — so the analysis can be rebuilt when the product or the rule changes. Where the questions reach screening, end-use and end-user controls, or the compliance program around them, Contact Zimmermann Law to talk it through.
Sources: Checked September 25, 2026 against official text. All regulations and Federal Register rules below are mandatory U.S. federal authority within their scope; the White House fact sheet is an executive-branch statement, not law. No particular item classification, country membership or Entity List match is determined. 15 C.F.R. § 734.4 — de minimis; paragraphs (a)–(g). 15 C.F.R. § 734.9 — selected FDP rules, including the effective-date note. 90 Fed. Reg. 47201 (Sept. 30, 2025) — affiliates rule; 90 Fed. Reg. 50857–58 (Nov. 12, 2025) — one-year stay. 15 C.F.R. § 736.2 — General Prohibitions Two, Three and Ten; 15 C.F.R. § 772.1 (Knowledge). 15 C.F.R. pt. 740, supp. no. 1 (Country Groups). 31 C.F.R. § 587.406 — OFAC 50 percent rule, Russian Harmful Foreign Activities Sanctions Regulations. White House fact sheet (Nov. 1, 2025) — U.S.–China arrangement, including the affiliates-rule suspension. References to particular ECCNs and FDP conditions are descriptions of the cited scope provisions, not independent classifications. Other FDP rules, license exceptions and end-use restrictions require transaction-specific review.
This post is for general information and is not legal advice.
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