EAR de minimis needs a calculation ledger

Check whether a percentage test is available

The direct answer is to treat de minimis as a scoped regulatory calculation, not as a standing percentage attached to a product. Section 734.4(c) provides a 10-percent rule for the specified reexports to any country, while section 734.4(d) provides a 25-percent rule for the specified reexports to destinations outside Country Groups E:1 and E:2. Both provisions are subject to the exceptions and special conditions in section 734.4. The destination, foreign-made item type, U.S.-origin input type, classification, and form of reexport therefore belong in the calculation record before a threshold is selected.

Section 734.4(a) identifies circumstances with no de minimis level, including several item-, technology-, destination-, and end-use combinations. Section 734.4(b) adds special conditions for certain Category 5, Part 2 items. A workflow should test those branches before dividing one value by another. When a no-de-minimis branch or unmet special condition applies, a low arithmetic percentage does not create the exclusion. The record should retain the exact paragraph tested, its inputs, the source version, and the reviewer disposition instead of storing only 0, 10, or 25 percent.

Build a destination-specific numerator

Supplement No. 2 says to classify each U.S.-origin item incorporated into the foreign-made product, then identify which of those items would require a BIS license if exported or reexported, in the form received, to the foreign-made product's destination. It directs the analyst to the Commerce Country Chart and Part 746 controls for that identification, with stated exclusions, and says not to use Part 744 to identify controlled U.S. content for this calculation. Items that could go to the destination NLR or under License Exception GBS are not counted in the numerator, and commodities subject only to short-supply controls are also excluded.

That makes the numerator a governed selection from the bill of materials rather than the value of every U.S.-origin input. The ledger should preserve each input's identity, origin basis, ECCN, form received, destination, applicable reason for control, license determination, inclusion or exclusion, value, evidence source, and decision date. Supplement No. 2 also limits when content is treated as incorporated: the U.S.-origin item must be essential to the foreign equipment's functioning, customarily included in its sale, and reexported with it. Technology and source code used to design or produce a foreign-made commodity or software are not treated as incorporated for this purpose.

Keep the denominator and valuation method reconstructable

The numerator's value is the fair-market price of the controlled U.S.-origin content in the market where the foreign product is produced. The denominator is the fair-market price of the foreign-made product in the market where it is sold. Actual cost to the foreign manufacturer and actual cost to the buyer will often supply those values, but Supplement No. 2 requires fair-market adjustments when affiliated parties use below-market pricing. If arm's-length data are unavailable, the analyst needs another reliable method, such as comparable market prices or production-and-distribution costs.

The EAR does not prescribe one accounting system, but the valuation method must be consistent with the business's practice. Reported fair-market values cannot be depreciated or reduced through accounting conventions. Values can be historical or projected, yet projected values remain usable only while the documentation supports them. A repeatable record therefore needs the valuation market, currency and conversion date, related-party status, pricing evidence, method, assumptions, effective period, version, and trigger for recalculation. Changing either value or method without that lineage can move the ratio while hiding why.

Store the ratio as one step in the scope decision

Supplement No. 2 gives the arithmetic: divide the total value of controlled U.S.-origin content by the foreign-made item value and multiply by 100. A result equal to or below the applicable de minimis level means the foreign-made item is not subject to the EAR under that calculation. The conclusion should preserve the numerator total, denominator, percentage without hidden rounding, selected threshold, destination and country-group version, calculation date, item configuration, reviewer, and supporting records. Product, sourcing, classification, destination, and valuation changes should create a new version rather than overwrite the earlier decision.

Foreign technology needs an additional control. Sections 734.4(c) and (d) and Supplement No. 2 require a one-time report before relying on the technology de minimis rules. The supplement describes the report's valuation rationale and submission details and provides a 30-day report-and-wait process. A system should distinguish report prepared, submitted, BIS contact received, reliance permitted, and later instruction. A percentage alone cannot establish that the reporting condition was satisfied.

Keep de minimis and Foreign Direct Product paths separate

Part 734 describes multiple ways a foreign-produced item can become subject to the EAR. The de minimis rules in section 734.4 address controlled U.S.-origin content. The Foreign Direct Product rules in section 734.9 use separate product and destination, end-user, or end-use tests. A conclusion that a product is below a de minimis threshold does not by itself resolve those FDP pathways. The decision record should show which scope paths were evaluated, which were inapplicable, which remained unresolved, and which source version governed each test.

This separation also keeps the current analysis distinct from Trade Controls Brief's Bosch enforcement coverage. That report examined BIS's stated FDP basis, Huawei-related scope, screening, release controls, and evidence in one enforcement matter. The governed object here is the reusable 734.4 and Supplement No. 2 content-calculation ledger: threshold eligibility, numerator population, denominator valuation, arithmetic, technology reporting, and versioned decision evidence. Counsel should resolve transaction-specific scope, classification, licensing, exceptions, and interactions among EAR provisions.

Enterprise buyer test

Translate this change into the exact population, record type, workflow stage, decision owner, effective date, and evidence that could be affected. Ask current or prospective providers to demonstrate the named workflow with representative data and an exception—not a polished feature tour. Record what official documentation establishes, what a provider states, what the team observes, and what remains unresolved.

A defensible review also identifies the dependency outside the product. Authority interpretation, policy configuration, data quality, integrations, human judgment, approval rights, release governance, training, and retained evidence may remain customer or service responsibilities. The evaluation should preserve those boundaries instead of treating a technology claim as the complete operating model.

What we will watch next

Trade Controls Brief will watch the named source and affected market records for later evidence that changes status, scope, availability, implementation timing, workflow consequence, or the limits of the initial report. A later announcement does not silently overwrite this dated account; the change ledger preserves the sequence.