Export Control Reform Is Happening Now: BIS Adds License Exception STA to EAR
By John Black
In the June 16, 2011 Federal Register, the Bureau of Industry and Security (BIS) created License Exception Strategic Trade Authorization (STA) in the Export Administration Regulations (EAR). At the heart of STA is the determination that requirements for export/reexport licenses issued by BIS are not the best way to serve the interests of US export control policy. The US Government apparently has determined that for the many of exports of many of the controlled items on the Commerce Control List (CCL), creating a License Exception STA information/paper trail between senders and recipients of controlled items serves US export control policy more effectively than requiring export or reexport licenses for those transactions.
This is a self-policing, honor system for compliance—don’t ask for export/reexport licenses, just tell the recipient how the items are controlled and get the recipient to agree not to violate the EAR.
OK, let’s take a look at this new STA in section 740.20 of the EAR.
Activities Covered by STA
STA applies to exports, reexports, and in-country transfers of eligible items to eligible countries. It also applies to deemed exports of eligible technology and source code to foreign nationals of eligible countries.
STA Eligible Countries
STA has two groups of countries. To avoid confusion with the EAR Country Groups defined in Supplement No. 1 Part 740, I will refer to these as “country clubs” not “country groups.” More items are STA-eligible for the first country club than for the second.
The members of STA Country Club 1 are listed in EAR 740.20(c)(1) and include destinations in or nationals of Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, or the United Kingdom.
The members of STA Country Club 2 are listed in EAR 740.20(c)(2) and include destinations in or nationals of Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, or Taiwan.
STA Eligible Items
First, paragraphs 740.20(2) points out limits on STA. First it reminds us that STA may not be used for transactions prohibited by the end-use controls (e.g., missile, nuclear, CBW) in EAR Part 744 or when the Part 746 Embargoes and Other Special Controls apply.
Then, paragraph 740.20(b)(2) gives us a list of a wide range of ECCNs and paragraphs within ECCNs that are not eligible for STA. If your item is listed there, then stop and don’t use STA. If your item is not listed there, go ahead and look at eligibility list for each of the two STA country clubs. Each STA country club has its own respective set of eligible items.
For STA Country Club 1, paragraph 740.20(c)(1) says the items have to be controlled for one or more of these reasons, but not for any other reasons:
· national security (NS);
· chemical or biological weapons (CB);
· nuclear nonproliferation (NP);
· regional stability (RS);
· crime control (CC), or
· significant items (SI).
For STA Country Club 2, paragraph 740.20(c)(2) says eligible items are those that are both:
1) Controlled only for national security (NS) reasons; and
2) Not described in an STA paragraph in the ECCN for the item. The STA paragraphs in ECCNs tell you which items are not STA eligible for Country Club 2.
Now, before you ask, let me tell you this: All of the STA eligible ECCNs are controlled for anti-terrorism (AT) reasons. AT controls do not limit STA eligibility. BIS wrote STA in a way that can be a bit confusing on this point. For the purpose of STA, either 1) ignore AT controls, or 2) remember that AT controls do not apply to any STA eligible countries so there really are not AT reasons of control.
STA Information/Paper Trail
License Exception STA replaces certain requirements for BIS approved export/reexport licenses with an information/paper trail. This paper trail must be established for every export, reexport and transfer under STA. These requirements are in paragraph 740.20(d).
Note: There is a special information/paper trail for deemed exports and reexports and it will be discussed below.
The three elements of the paper trail are:
Step 1): The sending party (exporter, reexporter, or transferor within a country) gives the recipient the ECCN for each item being sent under STA.
· The sender only has to give the ECCN information for each item once, as long as that information remains accurate. So, if I tell you today that model 323 is ECCN 5A001 today, I don’t have to tell you on subsequent shipments.
· Good news for recipients of my STA exports: The EAR says you can reply upon the ECCN classification I give you unless you know it is wrong. So, my French customer does not have to waste time verifying the ECCNs I give as long as the pass the laugh test.
Step 2): Prior to sending items under STA, the sender gets an STA “Consignee Statement” from the recipient.
· The sender gets the “Consignee Statement” once and may use it to make multiple shipments/transfers as long as it continues to accurately describe the parties, items and ECCNs.
· The sender keeps a log of all STA shipments/transfers with a reference to the specific “Consignee Statement” used for each shipment/transfer.
· The EAR gives you the wording of “Consignee Statement” :
[INSERT NAME OF CONSIGNEE]:
(i) Is aware that [INSERT DESCRIPTION AND APPLICABLE ECCNS OF ITEMS TO BE SHIPPED] will be shipped pursuant to License Exception Strategic Trade Authorization (STA) in § 740.20 of the United States Export Administration Regulations (15 CFR 740.20);
(ii) Has been informed of the ECCNs noted above by [INSERT NAME OF EXPORTER, REEXPORTER OR TRANSFEROR];
(iii) Understands that items shipped pursuant to License Exception STA may not subsequently be reexported pursuant to paragraphs (a) or (b) of License Exception APR (15 CFR 740.16(a) or (b));
(iv) Agrees not to export, reexport or transfer these items to any destination, use or user prohibited by the United States Export Administration Regulations; and
(v) Agrees to provide copies of this document and all other export, reexport or transfer records (i.e., the documents described in 15 CFR part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7.
Step 3): The sender notifies the recipient of STA shipment/transfer.
· With every shipment/transfer the sender gives a written STA notice in paper or electronic form.
· The notice must identify which items in the shipment are moving under STA.
Special STA Information/Paper Trail for Deemed Exports/Reexports
STA authorizes deemed exports and reexports of eligible technology and source code. Paragraph 740.20(d)(4) describes the information/paper trial requirement for deemed exports and reexports:
· The party releasing the technology or source code must give the recipient a written notice of the restrictions on further release of the technology or source code.
· The written notice must either inform the recipient that the EAR impose limits on further disclosure or must be in the form of an agreement in which the recipient agrees to limits on further disclosure consistent with EAR requirements.
· The releasing party and the recipient must keep a copy of the written notice.
· The notification may be in a separate document or included in a document such as a contract or a nondisclosure agreement. If the document has an expiration date, it must provide that the restrictions on disclosure do not expire.
Don’t Forget the Dreaded Wassenaar Reporting Requirement
Yep, that’s right. A significant number of STA exports may require Wassenaar reporting as required by Part 743 of the EAR. (Interesting note: Part 743 is the only odd numbered part in the EAR.)
Fortunately, the EAR does not require Wassenaar reporting for reexports or in-country transfers. (The government of the reexporting country may require Wassenaar reporting for the transaction if the government participates in the Wassenaar Arrangement).
So What Is the Final Analysis of STA?
Now, your job, if you choose to accept it, is to determine the extent to which STA is useful to your company. I highly recommend you read EAR section 740.20 to understand STA after you read this article. If you have some extra time, read the Federal Register notice to see the background and explanation of why BIS created STA the way it did and what it hopes to accomplish.
First, it may be that STA does not help you. Maybe, your items were already NLR eligible or eligible for a different license exception for countries in the STA country clubs. If your items are eligible for License Exception GBS, it probably is easier for you to continue to use GBS than to start using STA. Or, maybe your items are excluded from STA eligibility—for example, they are controlled for MT reasons.
Second, if you determine STA may be useful, then you have to put in place compliance procedures for STA. This means, among other things, procedures for
· Updating your classification matrix to show STA eligibility,
· Sending ECCN information to recipients,
· Obtaining STA Consignee Statement,
· Keeping logs of STA shipments/transfers, matching each activity with a Consignee Statement,
· Sending STA shipment/transfer notifications.
· Wassenaar reporting,
· Keeping records of all of the documents and activities under STA.
Good luck.
For the Federal Register notice go to: http://www.access.gpo.gov/bis/fedreg/pdf/76fr35276.pdf
