Expert Analysis on ECR and Regulation Changes:
There are many unpleasant aspects to applying the International Traffic in Arms Regulations (ITAR), but determining license requirements is not one of them. If an item is a defense article described by the U.S. Munitions List (USML), exporting it from the U.S. requires a Department of State license perhaps 99 percent of the time (with the remaining one percent permitted by exemption). Outside the U.S., where most ITAR exemptions are unavailable, the proportion of retransfers requiring specific authorization is probably even higher. The basic rule is simple – if the item is ITAR-controlled, expect to need a license. Simple, yes, but also quite burdensome.
This article is the second in a series of articles examining how U.S. export control reform impacts non-US firms. In the last installment, we introduced readers to this subject with a step-by-step guide to the application of U.S. export controls outside the U.S. In this and future articles, we will introduce case studies in export control reform and identify answers to common questions.
In my experience helping those tasked with keeping non-US firms compliant with the US regulations as an instructor with the Export Compliance Training Institute, I have found it helpful to break down this challenging subject matter into bite size pieces. Consider this an introduction to analysis under the Export Administration Regulations outlining the steps a reexporter should work through to reach US reexport decisions.
Now, the US Government has decided to change satellite spacecraft controls so that the USML controls only the most sensitive satellites/spacecraft and related items, while shifting the less sensitive items to the CCL. Importantly, the revised USML Category XV uses performance capabilities and functions as the basis for defining which items warrant ITAR export controls-Category XV does not focus on whether the item is designed for military or commercial applications. So, in some cases, the new Category XV will not control certain satellites designed for the military, and it will control satellites designed for commercial applications. It is not important who you designed it for or who is going to use it. The important decisive factors are capabilities and functions.
1. Reform makes exporting transitioned items from the US to Canada especially simple
A key feature - perhaps the key feature - of Export Control Reform is that many items which were once controlled (or assumed to be controlled) under the International Traffic in Arms Regulations have or will instead come under the scope of the Export Administration Regulations.
When the Export Control Reform Initiative truly began to come into fruition last year, License Exception STA received a lot of attention. This, despite the fact that it is not a new exception, having been introduced more than two years earlier in 2011 to create what Under Secretary of Commerce Eric Hirschhorn called a "license free zone." And in that two year period exporters had been getting accustomed to using License Exception STA to ship microwave solid state amplifiers (ECCN 3A001.b.4), thermal imaging cameras (ECCN 6A003.b) and other similarly sensitive products in situations which previously would have required an export license. Now, actually using License Exception STA to export 600 series items is a whole other story, replete with frustrations involving additional limitations and conditions on top of this exception's preexisting burdensome requirements.
For the unfortunate souls beyond the borders of the United States tasked with complying with the U.S. Government's bewildering web of regulations on non-U.S. transactions, President Obama's Export Control Reform (ECR) initiative sure must have seemed like a godsend when it was announced in 2010. Clearer control lists! More reasonable licensing polices! And, to be fair, there is a lot to like about the reality of ECR. But in the midst of all the excitement (OK, let's be realistic, mild interest), it would be easy for a reexporter to overlook a number of surprises.
A longer and more technical U.S. Munitions List. Dozens of new Export Control Classification Numbers. A 1,588 word Export Administration Regulations definition of "specially designed" (the International Traffic in Arms Regulations manage a definition of the same term in a comparatively brief 987 words). A license exception (STA) with enough limitations and conditions to leave even the most grizzled ITAR veteran fondly recalling her DSP-5-related repetitive stress injury. All are consequences of the recent revisions to the ITAR and EAR. The Obama Administration's approach to Export Control Reform is largely succeeding in its aims to refashion the US export control system in a more sensible, more reasonable and less ambiguous direction. But, by this stage, it should be clear to even the not-so-keen observer that riding along with these very real and not to be understated improvements is an unwelcome passenger - increased complexity.
Don’t submit another application for an ITAR agreement, agreement amendment, or in furtherance of license until you review the new Agreement Guidelines on the DDTC website.
As I contemplated the 82 pages (each with three columns of the smallest font size I can read) of the Commerce Department Federal Register notice, I glanced at the corresponding 20 page State Department FR notice (same 3 columns and small font) sitting on my desk. Yep, over one hundred pages of regulatory notices that will have a dramatic impact on my job, and yours, especially if you deal with the ITAR items that will be list shifted from the USML to the CCL.
The rules changed. Did you change? Are you complying with the new rules? Most likely, you are—at best—partially complying with the new rules.
Ten Years After was a great band in its day. And I know many of you enjoy a 10-year-old Merlot. Call me eccentric, but for me, there is nothing better than sitting in the sun in late August savoring a revised regulation that has been 10 years in the making. I just finished the savoring, so now I will begin the writing.
Top 5 Export Reform Action Items