Global Sourcing and Exporting of Technical Data

(Why Professional Development is Important)

© Frank Haluch 2011-2025


Anyone involved in international sourcing needs to be aware their home country has technical data export laws as well as the export laws of the country they are importing goods from. The purpose of this regulations is to maintain control of technical data that the government considers sensitive to national security.


In the U.S.A. the export of Technical Data is controlled by the U.S. Department of Commerce’s Bureau of Industry and Security using the Export Administration Regulations (EAR 15 Code of Federal Regulations parts 730-774).


Anyone in the U.S.A. involved in international sourcing needs to be at least aware that:

1. “When does release occur (CFR 734.15).

(a) Except as set forth in § 734.18, “technology” and “software” are “released” through:

(1) Visual or other inspection by a foreign person of items that reveals “technology” or source code subject to the EAR to a foreign person; or

(2) Oral or written exchanges with a foreign person of “technology” or source code in the United States or abroad.

(b) Any act causing the “release” of “technology” or “software,” through use of “access information” or otherwise, to yourself or another person requires an authorization to the same extent an authorization would be required to export or reexport such “technology” or “software” to that person.”*


2. “Violations of the Export Administration Regulations, 15 C.F.R. Parts 730-774 (EAR) may

be subject to both criminal and administrative penalties. Under the Export Control Reform Act of 2018 (50 U.S.C. §§ 4801-4852) (ECRA), criminal penalties can include up to 20 years of imprisonment and up to $1 million in fines per violation, or both. Administrative monetary penalties can reach up to $300,000 per violation or twice the value of the transaction, whichever is greater. In general, the administrative monetary penalty maximum is adjusted for inflation annually.


Violators may also be subject to the denial of their export privileges.. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.”**


A Fortune 100 company wanted to take drawings of low-tech parts to another country. An individual from the sourcing department mentioned a requirement for that country required a validated technical data license. To verify, in a meeting with the Department of Commerce, a staff member asked “does it contain a logo of your company on it?” It was a low tech item but the answer was "Yes." The Staff Member immediately said “it requires a validated technical data license, because your company would not spend money on a drawing of something that had no value”.


*CFR 734.15

**Penalties (doc.gov)


Sourcing is for Convergent Thinkers

Are suppliers entitled to windfall profits just because their variable costs have increased?

(Part II: Price Productivity Macro Analysis)


In Part I, Price Productivity Macro Analysis showed that an inflationary driven price increase potentially could contain a Windfall Profit for the supplier.  The example showed the proposed price increase was reduced by 20%.  Using the same example, this post digs deeper and demonstrates how a Price Productivity Micro Analysis produces 63.4% reduction in a proposed price increase.  Part I showed how a 10% price increase was countered with an 8% increase.  This post shows how the same 10% price increase is countered with a much lower 3.66% increase.

The analysis starts with the notification from the supplier stating: “Our costs increased by 10%, therefore, our price needs to increase by 10%.”

Step 1: With the Unit Price and estimated Variable Costs, the Contribution Margin is calculated using the simple formula:

Unit Price – Variable Costs = Contribution Margin

In our example: $12.50 - $10.00 = $2.50 (Highlighted in Orange below.)

Step 2: Variable Costs are made up of Direct Material, Direct Labor, and Variable Manufacturing Overhead.  To determine the impact of increased cost, the procurement professional inquires “What cost changed and by how much?”  For this example, the supplier indicates their variable costs have increased by 10%.

Step 3: Determine the percentage breakdown of Direct Material, Direct Labor and Variable Manufacturing Overhead that make up Variable Cost.  Using the supplier’s NAICS code, the most recent US Census Bureau Annual Survey of Manufactures and Quarterly Financial Report we can breakdown the percentages as 58.15%, 8.22% and 33.65% respectively.  (Highlighted in Yellow below.)

Step 4: Calculate a 10% price increase for each of the Variable Costs.  (Highlighted in Red below.)

Step 5: Find the price increase percent that maintains the Contribution Margin at $2.50.  As shown in the chart below in green highlight, a price increase of 3.66% will cover the 10% increase in Variable Costs while avoiding a Windfall Profit for the supplier.  The buyer counters the proposed price increase with an evidence-based $12.9576 offer and the negotiation begins.

A procurement professional can perform the above steps in as little as 10 minutes.  How many price increases were accepted over the last two years without an evidence-based challenge?

This example used the Price Productivity Micro worksheet found in the Cost Analysis section of Souring Apps (currently not available to new subscribers).  Once the NAICS was identified, the Price Productivity Calculator extracted information from the Sourcing Apps data base to calculated Step 3.  The NAICS used in this example was 31-33 Manufacturing.  The data base contains 648 NAICS codes and 13 years of US Census data.

Sourcing is for Convergent Thinkers!