Archive for the ‘CCL’ Category

BIS Amends EAR & CCL to Implement Changes Made to the WA List

2018/11/26

The Bureau of Industry and Security (BIS) has implemented changes to the Export Administration Regulations (EAR) and the Commerce Control List (CCL) to implement changes made to the Wasaenaar Arrangement List of Dual-Use Goods and Technologies (WA List) which were agreed upon by all the governments participating in the Wassenaar Arrangement at the December 2017 Plenary meeting. This ruling also includes associated changes to the EAR and a few corrections. The rule became effective on October 24, 2018.

Relevant CCL Changes (final rule revised 50 ECCNS, ECCNs with editorial changes excluded below):

  • Category 0—Nuclear Materials, Facilities, and Equipment [and Miscellaneous Items] 0A617 Miscellaneous ‘‘Equipment’’, Materials, and Related Commodities
    • 0A617 paragraph y.3, containers for shipping or packing defense articles or items controlled by ‘‘600 series’’ ECCNs, is amended by narrowing the scope to International Organization for Standardization (ISO) intermodal containers or demountable vehicle bodies (i.e., swap bodies), but also expands the scope beyond ‘‘specially designed’’ by adding ‘‘or modified’’. As the term ‘modified’ is in single quotes, BIS is also adding the technical note that defines ‘modified,’ which was already existing text in Wassenaar Arrangement Military List of 2017 (WAML 17).
  • Category 1—Special Materials and Related Equipment, Chemicals, ‘‘Microorganisms’’, and ‘‘Toxins’’
    • 1C001: Subparagraph b is amended by moving the phrase ‘‘not transparent to visible light’’ to the beginning and adding more descriptive text ‘‘near-infrared radiation having a wavelength’’ to clarify the scope of the control. Also, the parameters are changed from ‘‘1.5 × 1014 Hz’’ to ‘‘810 nm’’ and ‘‘3.7 × 1014 Hz’’ to ‘‘2,000 nm (frequencies exceeding 150 THz but less than 370 THz)’’. (The frequency band is changed to the equivalent wavelength band to make the parameter easier to understand and not to change the scope of control.)
    • 1C608: WA agreed to add a Note specifying that WAML 8.c.1 does not apply to aircraft fuels—JP–4, JP–5 and JP–8. This rule adds this Note below 1C608.n ‘‘Any explosives, ‘propellants,’ oxidizers, ‘‘pyrotechnics’’, fuels, binders, or additives . . .’’ as well as bringing forth another Note from WAML 8.c.1 that specifies that aircraft fuels specified by WAML 8.c.1 are finished products, not their constituents.
  • Category 2—Materials Processing
    • 2A001 Note 2 at the beginning of the Items paragraph is amended by adding ‘‘(or national equivalents)’’, in order to help efficiently classify bearings using national standards that are equivalent to ISO 3290 as grade 5. 2B001 Machine Tools.
    • 2B006 heading is revised to add ‘‘position feedback units’’ and ‘‘electronic assemblies’’ to more accurately describe the scope of controls in Items paragraph .b.
      • Linear Variable Differential Transformer (LVDT) systems formerly in 2B006.b.1.b are moved to 2B206.d and no longer have a national security control.
    • 2B007 paragraph .a ‘‘[Robots] capable in real-time of full three-dimensional image processing or full three dimensional ‘‘scene analysis’’ to generate or modify ‘‘programs’’ or to generate or modify numerical program data’’ is removed and reserved because of insufficient connection to military capabilities. Robots of national security concern are controlled under 2B007.b, .c and .d.
    • 2B008 heading is amended by replacing ‘‘assemblies or units’’ with ‘compound rotary tables’ and ‘‘tilting spindles’’, as well as removing ‘‘or dimensional inspection or measuring systems and equipment’’ to align with revisions made to the List of Items Controlled in this ECCN.
      • Item paragraphs .a (linear position feedback units) and .b (rotary position feedback units) are removed and reserved, because this rule moves these items to 2B006.b.2 and .c, respectively.
      • Item paragraph .c is amended by replacing and cascading the parameter paragraphs, as well as moving the definition for ‘compound rotary table’ from part 772 to a Technical Note under this Item paragraph.
    • 2B206 is amended by adding Linear Variable Differential Transformer (LVDT) systems to Item paragraph .d, because this item is removed from 2B006.b.1.b. While LVDT systems are no longer controlled for national security reasons, they are still on the Nuclear Supplier’s Group (NSG) list under 1.B.3.b.2 and remain controlled for nuclear nonproliferation reasons on the CCL.
    • 2E003 paragraph .a (‘‘technology’’ for the ‘‘development’’ of interactive graphics as an integrated part in ‘‘numerical control’’ units for preparation or modification of part programs) is removed and reserved because of the advancement of technology.
      • Item paragraph .a is removed from License Exception TSR.
    • Category 3—Electronics Product Group A. ‘‘End Items’’, ‘‘Equipment’’, ‘‘Accessories’’, ‘‘Attachments’’, ‘‘Parts’’, ‘‘Components’’, and ‘‘Systems’’
      • 3A001 is amended by replacing ‘‘Electrical Erasable Programmable Read-Only Memories (EEPROMS), flash memories, and MRAMs’’ with ‘non-volatile memories’ and adding a Technical Note to define ‘non-volatile memories,’ to provide a more generic term for these types of memory integrated circuits.
        • Paragraph a.5.a ‘‘ADCs’’ and the Technical Note below a.5.a are amended by replacing the term ‘‘output rate’’ with the ‘‘sample rate’’ as measured points at the input, except for oversampling (defined as output sample rate), and the Technical Note identifies common ways manufacturers specify ‘sample rate.’ The definition for ‘‘sample rate’’ is added to part 772 ‘‘Definition of Terms. . . .’’
        • Item paragraph a.5.b.2.a, ‘‘settling time’’ parameter, is amended by adding ‘‘arrive at or within’’ to clarify the potentially ambiguous parameter with common usage and understanding of DAC specifications, so that it will not be misinterpreted to mean the time to deviate by the specific amount from the original level.
        • Intensity, amplitude, or phase electrooptic modulators, designed for analog signals, including electro-optic modulators having optical input and output connectors are added to new paragraph 3A001.i to address photonic components for analog Radio Frequency (RF) over fiber antenna remoting, and analog RF distribution of signals. One of the parameters for these items is ‘halfwave voltage’ (‘Vp’), which is defined in a Technical Note below the new paragraph. These items will be eligible for License Exception GBS; therefore, the GBS paragraph is revised to add Item paragraph .i.
      • 3A002 frequency parameter is raised from ‘‘exceeding 10 MHz’’ to ‘‘exceeding 40 MHz’’ for signal analyzers having a 3 dB resolution bandwidth (RBW) in Item paragraph c.1
      • 3B001 Mask ‘‘substrate blanks’’ with multilayer reflector structure consisting of molybdenum and silicon being ‘‘specially designed’’ for ‘Extreme Ultraviolet (EUV)’ lithography and being compliant with SEMI Standard P37 are added to new paragraph 3B001.j, because mask ‘‘substrate blanks’’ and the subsequent substrate blank with multilayer reflector structure are critical materials for EUV lithography 7. EUV lithography opens up integrated circuit fabrication at the most advanced state-of-the-art technology node. The definition for ‘Extreme Ultraviolet (EUV)’ is added to a Technical Note below Item paragraph j.2.
      • 3B002 Test Equipment ‘‘Specially Designed’’ for Testing Finished or Unfinished Semiconductor Devices Item paragraph .a is revised from ‘‘For testing S-parameters of transistor device at frequencies exceeding 31.8 GHz’’ to read ‘‘For testing S-parameters of items specified by 3A001.b.3’’ to remove potential overlapping controls for network analyzers (which measure Sparameters) described in 3A002.e, to harmonize the control text of equipment for testing S-parameters of transistors specified in paragraphs 3A001.b.3.a and 3A001.b.3.b (i.e., transistors that are below 31.8 GHz), and to remove ambiguity regarding the meaning of the phrase ‘‘transistor devices’’ by substituting the unambiguous reference to transistors specified by 3A001.b.3.
      • 3C002 wavelength for positive resists in Item paragraph a.1 is revised from ‘‘wavelengths less than 245 nm . . . .’’ to ‘‘wavelengths less than 193 nm . . . .’’ in order to match the material control with the lithography equipment parameters in 3B001.f.1.a.
      • 3C005 heading revised to move the items that were in the Heading to Items paragraph .a. Polycrystalline ‘‘substrates’’ or polycrystalline ceramic ‘‘substrates’’ are added to Item paragraph .b, because there are both military and commercial applications for microwave transistors fabricated on the engineered substrates. These newly added substrates will be controlled for NS:2 and AT:1 and have License Exception LVS ($3,000), GBS and CIV eligibility.
      • 3C006 heading is amended by adding ‘‘Materials, not specified by 3C001, consisting of a’’ at the beginning of the Heading in order to clarify the scope of the control.
        • The former language of 3C001, 3C005 and 3C006 has common elements that have led to some confusion around the control of silicon carbide wafers.
        • 3C992 heading is amended by replacing the wavelength range from ‘‘370 and 245 nm’’ to ‘‘370 and 193 nm.’’
      • 3E001 Note 3 is added to exclude from 3E001 ‘Process Design Kits’ (‘PDKs’) unless they include libraries implementing functions or technologies for items specified by 3A001. A Technical Note is added below Note 3 to define ‘Process Design Kit’ (‘PDK’). PDKs do not provide knowledge about production tools.
    • Category 4—Computers
      • 4A003 Adjusted Peak Performance (APP) is raised from ‘‘exceeding 16 WT’’ to ‘‘exceeding 29 WT’’ in Item paragraph .b and in accordance with this revision the APP is raised to 29 in the AT control text in the License Requirements table and in two places in the Note to the table.
      • 4D001 Adjusted Peak Performance (APP) is raised from 16 Weighted TeraFLOPs (WT) to 29 WT in License Exceptions TSR and STA in accordance with the new APP level in 4A003.b. The APP control level is raised from ‘‘exceeding 8 WT’’ to ‘‘exceeding 15 WT’’ in Item paragraph b.1. These revisions continue to address the need to track incremental (e.g., ‘‘Moore’s Law’’) improvements in microprocessor technology.
    • Category 5—Part 1— ‘‘Telecommunications’’
      • 5A001 In the NS Column 1 paragraph of the License Requirements table, the order of the referenced Item paragraphs is corrected. For telecommunications equipment specially designed to withstand transitory electronic effects or electromagnetic pulse effects, the temperature range parameters is changed from ‘‘to operate outside the temperature range from 218K (-55 °C) to 397 K (124 °C)’’ to ‘‘below 218K (-55°C)’’ in Item paragraph a.3 or ‘‘above 397 K (124 °C)’’ in new Item paragraph a.4, which does not change the scope of control, but seeks to make the text easier to understand.
        • Because of technology advances, phased array antennae are increasingly being developed for civil telecommunications applications, including cellular, WLAN, 802.15, and wireless HDMI. Exclusion Note 2 is added in order to remove from control phased array antennae specially designed for those purposes.
      • Category 5—Part 2
        • 5A002 Paragraph .a is amended by replacing the phrase ‘‘where that cryptographic capability is usable without ‘‘cryptographic activation’’ or has been activated’’ with the phrase ‘‘where that cryptographic capability is usable, has been activated, or can be activated by means of ‘‘cryptographic activation’’ not employing a secure mechanism’’. The revision clarified that an item is controlled if (1) the ‘cryptography for data confidentially’ is usable from the beginning regardless of ‘‘cryptographic activation’’ (i.e., not dormant), (2) the cryptographic capability was previously dormant but is now usable (whether by ‘‘cryptographic activation’’ or by other means; or (3) the ‘‘cryptographic activation’’ mechanism is not secure (i.e., the cryptographic capability is not securely kept dormant). Items paragraph .b is amended by replacing ‘‘to enable’’ an item with ‘‘for converting’’ an item and replacing ‘‘to achieve or exceed the controlled performance levels for functionality specified by 5A002.a that would not otherwise be enabled’’ with ‘‘not specified by Category 5 —Part 2 into an item specified by 5A002.a or 5D002.c.1, and not released by the Cryptography Note (Note 3 in Category 5—Part 2), or for enabling, by means of ‘‘cryptographic activation’’, additional functionality specified by 5A002.a of an item already specified by Category 5— Part 2’’. This clarifies that a ‘‘cryptographic activation’’ mechanism is controlled by 5A002.b in two situations: (1) It converts an item classified outside of Category 5—Part 2 into a 5A002.a item (e.g., by activating ‘cryptography for data confidentiality’ capability in an item that was previously limited to performing ‘‘authentication,’’ or by activating encryption capability which disqualifies a product from the Cryptography Note exclusion (Note 3 in Category 5—Part 2)); or (2) it enables additional functionality specified in 5A002.a in an item that was already classified in Category 5—Part 2 (e.g., making additional encryption algorithms usable by the item, or that would change the item from being eligible or described under § 740.17(b)(1) into an item described under § 740.17(b)(2) or (3)).
        • 5D002 Paragraph .b of ECCNs 5D002 and 5E002 is amended by replacing ‘‘enable’’ with ‘‘for converting’’ and replacing ‘‘to meet the criteria for functionality specified by 5A002.a, that would not otherwise be met’’ with ‘‘not specified by Category 5—Part 2 into an item specified by 5A002.a or 5D002.c.1, and not released by the Cryptography Note (Note 3 in Category 5—Part 2), or for enabling, by means of ‘‘cryptographic activation’’, additional functionality specified by 5A002.a of an item already specified by Category 5— Part 2’’. These revisions are made to create mirroring entries consistent with the changes being made to 5A002.b.
      • Category 6—Sensors and Lasers
        • 6A002 Paragraph .f is added to establish a control for Read-Out Integrated Circuits (ROICs) to ensure that certain ROICs not controlled on the Munitions List, but that provide night vision capability, are controlled. In order to maintain consistent paragraph placement with the WA List this rule adds and reserves Items paragraph .e, so that ROICs can be added to Item paragraph .f. For consistency, Items paragraph .f is added to the Regional Stability controls (RS Column 1) in the License Requirements section, because 6A990, where ROICs were formerly controlled, was controlled for RS Column 1.
        • 6A003 paragraphs a.1 (high-speed cinema recording cameras) and a.2 (mechanical high speed cameras) are removed and reserved because of the advancement of technology. Item paragraph a.3.a (mechanical streak cameras) is also removed because of the advancement of technology. As a result of this change, electronic streak cameras are moved from Item paragraph a.3.b to a.3.
        • 6A004 Dynamic wavefront measuring equipment is added to Item paragraph .f, with parameters in subparagraphs and a Technical Note at the end to define ‘‘frame rate’’. The purpose of wavefront sensing is to measure the level of the wavefront aberration as it is transferred through an optical system, regardless if the source of that aberration is the optical system itself or something external to that system. Wavefront sensors are principally used as one of the main components of adaptive optics systems where they serve to close the control loop and feed the information about the required correction to deformable mirrors and beam steering mirrors in real-time, which are also controlled in this ECCN.
        • 6A005 Item paragraph f.1 (dynamic wavefront (phase) measuring equipment) is removed and reserved, because this item is moved to ECCN 6A004.f, because of its close association to the mirrors controlled in 6A004. A Nota Bene is added to point to the new Item paragraph where this item is controlled. Item paragraph f.2 (‘‘Laser’’ diagnostic equipment) is amended by replacing ‘‘capable of measuring’’ with ‘‘specially designed for dynamic measurement of’’ and replacing ‘‘equal to or less than’’ with ‘‘and having an angular ‘‘accuracy’’ of’’ to refine the scope of the entry. The phrase ‘‘(microradians) or less (better)’’ is added after ‘‘10 mrad’’ to clarify the unit. Item paragraph f.3 (Optical equipment and components) is amended by moving the phrase ‘‘coherent beam combination’’ for better readability. The ‘‘accuracy’’ parameter is cascaded down to Item paragraph f.3.b and a new ‘‘accuracy’’ parameter is added to f.3.a, so that the equipment is controlled if it meets either of the ‘‘accuracy’’ parameters.
      • Category 9—Aerospace and Propulsion
        • 9A002 Heading is amended by revising and moving the parameter ‘‘with an ISO standard continuous power rating of 24,245 kW or more and a specific fuel consumption not exceeding 0.219 kg/ kWh in the power range from 35 to 100%’’ to the Items paragraph and adding ‘‘designed to use liquid fuel and having all of the following (see List of Items Controlled),’’ to the Heading. Two parameters are added for this ECCN: Maximum continuous power and ‘corrected specific fuel consumption’. (These revisions therefore do not change the scope of the existing control text, but rather clarify it by making it clear that the specific fuel consumption of concern applies at the ‘‘turndown performance’’ of 35%.)
        • 9A004 The scope of Item paragraph f.1 (Telemetry and telecommand equipment) is clarified by adding ‘‘specially designed’’ and two specific end uses in order to eliminate data processing equipment for mission data, such as GPS, science data, communication and broadcasting, since this data is not meant to be controlled under 9A004.f.1. The scope of Item paragraph f.2 (Simulators) is narrowed by adding ‘‘specially designed for ‘verification of operational procedures’ of ‘‘spacecraft’’.
        • 9D004 Paragraph .b (‘‘Software’’ for testing aero gas turbine engines, assemblies, ‘‘parts’’ or ‘‘components’’) is amended by removing the parameter and cascading subparagraphs with specific features or functions, such as ‘‘specially designed’’ for testing aero gas turbine engines . . . , to clarify and focus (narrow) the scope of control. A Note is added above Item paragraph .c to exclude software for operation of the test facility or operator safety, or production, repair or maintenance acceptance-testing . . .’’

Relevant EAR (Relevant changes listed below with editorial changes excluded):

  • Part 772: This rule removes 37 definitions from § 772.1 and adds them to the ECCNs where they are used. According to the WA drafting guidelines, if a term is only used in a single ECCN, then the definition must be in a Technical Note close to where that term is used.
  • Supplement No. 6 to Part 774: Sensitive List Paragraph (1)(i), ECCN 1A002, is amended by narrowing the scope from all of ECCN 1A002 to only subparagraph a.1 ‘‘ ‘‘Composite’’ structures or laminates made from an organic ‘‘matrix’’ and ‘‘fibrous or filamentary materials’’ specified by 1C010.c or 1C010.d’’, because the rest of the items in ECCN 1A002 do not warrant control on the Sensitive List as they are not key technologies.
  • Supplement No. 7 to Part 774: Very Sensitive List Paragraph (1)(i), ECCN 1A002, is amended by narrowing the scope from subparagraph .a to subparagraph a.1 (‘‘Composite’’ structures or laminates made from an organic ‘‘matrix’’ and ‘‘fibrous or filamentary materials’’ specified by 1C010.c or 1C0010.d), because the rest of the items in ECCN 1A002.a do not warrant control on the Sensitive List as they are not key technologies.
  • Section 740.16: License Exception APR is amended to remove a reference to ECCN 6A990 in paragraphs (a)(2) and (b)(2)(v), because ECCN 6A990 is removed from the CCL by this rule. ROICs are now specified in 6A002.f.
  • Section 740.20 License Exception STA is amended to remove reference to ECCNs 6A990 and 6E990 from paragraph (b)(2)(x), because these ECCNs are removed from the CCL. ROICs are now specified in 6A002.f and ROIC technology is specified in ECCNs 6E001 and 6E002.
  • Section 742.6: Regional Stability Paragraph (b)(1)(ii) is amended by removing reference to ECCN 6E990, because this ECCN is removed by this rule. ROIC technology is now controlled under ECCNs 6E001 and 6E002.
  • Section 744.9: Restrictions on Exports, Reexports, and Transfers (In-Country) of Certain Cameras, Systems, or Related Components Section 744.9 is amended by removing reference to ECCN 6A990 from paragraphs (a) and (b), because this ECCN is removed from the CCL. ROICs are now controlled under ECCN 6A002.f.

Federal Register Notice: https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-22163.pdf


Company Fined $155,000 for Screening Related Violations

2018/08/30

By: Danielle Hatch

Mohawk Global Logistics Corp. has been fined $155,000 for 3 violations of the Export Administration Regulations (EAR) related to exporting to companies on the Entity List.

Around August 2012 Mowhawk exported an LNP-20 Liquid Nitrogen Plant (EAR99 and valued at $33,587) to the All-Russian Scientific Research Institute of Experimental Physics (VNIIEF). The company had a screening process in place and when they screened VNIIEF they got a hit and the shipment was initially flagged. During the BIS investigation Mowhawk acknowledged that the export supervisor accidently overrode (or ignored) the red flag and the shipment was processed. Mowhawk filed EEI and listed the shipment as No License Required (NLR) which would have been accurate had the end user not been on the Entity List. Since VNIIEF is a denied party a license is always required to export any items subject to the EAR. This was the 1st of 3 total charges.

In February 2014 and August 2015, Mokhawk once again exported to an organization on the Entity List, but this time they were in China. The company exported Real-Time Back Reflection Laue Camera Detectors and Accessories (EAR99 and valued at $177,156) to the University of Electronic Science and Technology of China (UESTC). Once again, Mowhawk used screening software, but this time it failed to flag the transaction because Mowhawk didn’t screen UESTC’s full, unabbreviated name. This could be a common mistake, however, all of the documents that UESTC provided to Mowhawk clearly identified UESTC’s full name as it was listed on the Entity List along with an almost exact matching address. The shipment was processed in February 2014 and they filed EEI as NLR. As with the first charge, had the export not gone to someone on the Entity List a license likely would not have been required.

In August 2015 Mowhawk exported the same exact items to UESTC after they had been returned for warranty repair. This time, Mowhawk didn’t screen the transaction at all using their screening software and there was no EEI filed in connection with this particular export to UESTC. These transactions were charges 2 and 3.

Settlement Agreement:

  • Pay $135,000 in 3 separate payments
  • Payment of the remaining $20,000 is suspended as long as the company pays the $135,000 on time.
  • If payments are not received on time, BIS may issue an order denying all of Mowhawk’s export privileges
  • Mowhawk can’t take any action or make any public statement denying the allegations in the BIS Charging Letter or Order

Order and Charging Letter: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2018/1193-e2561/file


U.S. Departments of State and Commerce Propose Rules to Transition Firearms and Ammunition from the USML to the CCL

2018/06/29

(Source: Reeves & Dola LLP Alert, 1 June 2018. Available via jreeves@reevesdola.com)

By: Johanna Reeves, Esq., jreeves@reevesdola.com, 202-715-994; and Katherine Heubert, Esq., 202-715-9940, kheubert@reevesdola.com. Both of Reeves & Dola LLP

On May 24, 2018, the U.S. Departments of State and Commerce officially published proposed rules to transition most firearms and ammunition away from the export controls of the Department of State’s International Traffic in Arms Regulations (ITAR) over to the controls of the Department of Commerce’s Export Administration Regulations (EAR). In this alert, the second of four installments, we will examine the proposed revisions to the ITAR control list, the U.S. Munitions List (USML) Category I, and the Department of Commerce’s proposed companion rule amending the Commerce Control List (CCL).

Both the State and Commerce Departments are seeking written comments on the proposed rules, which will be accepted until July 9, 2018.  We strongly encourage industry to take time to carefully review the revised categories and provide actionable commentary to the proposed rules. This is a critical opportunity for industry to provide comments that would assist the government in reducing jurisdictional ambiguities and clarifying the articles that will remain subject to the ITAR. The specific instructions for submitting comments are included in each proposed rule.

Proposed Transitions from USML Cat. I to CCL

Title for this category will change from “Firearms, Close Assault Weapons and Combat Shotguns” to “Firearms and Related Articles.”

Articles Removed from USML Cat. I – State’s rule proposes to transition away from the USML non-automatic and semi-automatic firearms up to and including .50 caliber currently controlled under paragraph (a), as well as all parts, components, accessories and attachments specially designed for those firearms. These items will be subject to the EAR under newly created “500 series” Export Control Classification Numbers (ECCNs).

Commerce originally created the “500 series” as part of “Export Control Reform” under the Obama Administration to control items that had been from the USML or certain items on the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies Munitions List (the “Wassenaar List” or WAML). Compared to the “600 series” ECCNs, which control items of a military nature removed from the USML, the “500 series” contain items not appropriate for the 600 series control because they have predominant civil, recreational, law enforcement, or other non-military applications.

To capture the firearms and ammunition in USML Cats. I-III that will transition to the CCL, Commerce proposes in its companion rule to create a total of 17 new ECCNs. For the firearms, parts, components, accessories and attachments that will transition from USML Cat. I, the proposed new ECCNs are:

– 0A501 (Firearms and related commodities)

– 0A502 (Shotguns and certain related commodities)

– 0A504 (Optical sighting devices and certain related commodities)

– 0E501 (Technology for firearms and certain related items)

– 0E502 (Technology for shotguns)

– 0E504 (Technology for certain optical sighting devices)

Articles Still Controlled Under USML Cat. I – items that would remain under Category I are positively listed as follows, including the corresponding paragraph (Significant Military Equipment (SME) is designated with an asterisk (*)):

*(a) Firearms using caseless ammunition.

*(b) Fully automatic firearms to .50 caliber (12.7 mm) inclusive.

*(c) Firearms specially designed [emphasis added] to integrate fire control, automatic tracking, or automatic firing (e.g., Precision Guided Firearms (PGFs)), and specially designed parts and components therefor.

Note to paragraph (c): Integration does not include only attaching to the firearm or rail.

*(d) Fully automatic shotguns regardless of gauge.

*(e) Silencers, mufflers, and sound suppressors, and specially designed [emphasis added] parts and components therefor (flash suppressors move to CCL).

(f) [Reserved]

(g) Barrels, receivers (frames), bolts, bolt carriers, slides, or sears specially designed [emphasis added] for the articles in paragraphs (a), (b), and (d) of this category.

(h) Parts, components, accessories, and attachments, as follows:

(1) Drum and other magazines for firearms to .50 caliber (12.7 mm) inclusive with a capacity greater than 50 rounds, regardless of jurisdiction of the firearm, and specially designed [emphasis added] parts and components therefor;

(2) Parts and components specially designed for conversion of a semiautomatic firearm to a fully automatic firearm[emphasis added].

(3) Accessories or attachments specially designed to automatically stabilize aim (other than gun rests) or for automatic targeting, and specially designed parts and components therefor [emphasis added].

Technical Data and Defense Services – paragraph (i) specifies “technical data,” as defined in ITAR §120.10, and “defense services,” as defined in ITAR §120.9, directly related to the defense articles described in paragraphs (a), (b), (d), (e), (g), and (h) of Cat. I, and classified technical data directly related to items controlled in ECCNs 0A501, 0B501, 0D501, and 0E501 and defense services using the classified technical data. Exemptions will continue to be covered in ITAR §125.4.

Revised USML Cat. I will also include several notes to explain what items are excluded by the category (non-automatic and semi-automatic firearms up to and including .50 caliber; non-automatic shotguns; BB, pellet, and muzzle loading (e.g., black powder) firearms; and parts, components, accessories, and attachments of firearms and shotguns in paragraphs (a), (b), (d), and (g) of Cat. I that are common to non-automatic firearms and shotguns) and what is meant by firearm, fully automatic firearm or shotgun, or caseless ammunition.

The proposed rule also adds a new paragraph (x) to Cats. I, II and III to allow for ITAR licensing of commodities, software and technology subject to the EAR, which paragraph has already been added to all of the other USML categories that have gone through the rewrite process.  It is important to note that paragraph (x) is only available if those items EAR items are to be used in or with defense articles controlled in USML Cat. I, and the items are described in the purchase documentation submitted with the ITAR license application. Further, it is important to understand that such EAR items, even if included on an ITAR export license under USML Cat. I(x), would remain subject to the controls of the EAR, despite the appearance of the ITAR license.  Use of paragraph(x) is a licensing convenience only; it does not change the jurisdictional status of an item. Consequently, it will be incumbent on the U.S. exporter to properly educate its customers on the proper licensing authority, especially for reexport and retransfer requests.

CCL Controls

A key fact in the proposed rules is that the transition from USML to CCL will NOT result in a decontrol of firearms or ammunition. Firearms transitioning from the USML to CCL will be subject to controls under National Security (NS), Regional Stability (RS), Crime Control and Detection (CC), Firearms Convention (FC), United Nations Sanctions (UN) and Anti-Terrorism (AT). Indeed, the proposed rules make it abundantly clear that BIS will require licenses to export or reexport to ANY country firearms or other weapons that transitions from the USML to the CCL.

License exceptions, such as limited value shipments (LVS), government (GOV), baggage (BAG) and strategic trade authorization (STA) will be very limited for small arms formerly on the USML, so industry should carefully review the ECCNs in the proposed rule to see what license exceptions are available for each ECCN and the limitations.

Each new ECCN will be made up of technically specific subparagraphs in an enumerated “List of Items Controlled.” For example, the list of items controlled under ECCN 0A501 is comprised of paragraphs .a – .w, which identify the items classified under the particular paragraph. The ECCN also includes .x and .y paragraphs for parts and components. The .x paragraph operates like a catch-all, as it lists specially designed parts and components that are not controlled elsewhere. Conversely, the .y paragraph lists only those parts, components, accessories, and attachments that are controlled only for UN and AT reasons. Such items may be exported to nearly all destinations without a license. The parts and components captured by the .x paragraph, on the other hand, are subject to NS, RS, FC, UN, and AT and will likely require a license for most destinations.

It will be incumbent on the exporter (or temporary importer) to review every firearm and firearm part, component, accessory, and attachment in which it deals so as to determine the new classification once the rules become final. The specific license requirements, and the applicability of license exceptions, as well as any end-use or end-user restrictions, will depend on the specific subparagraph classification of the governing ECCN.

Specially Designed

A critical concept in the proposed revisions to the control lists is the term “Specially Designed.” This term has been reviewed, criticized, discussed, and analyzed in depth since it was first incorporated into the ITAR and the EAR in the initial implementation rules for Export Control Reform, which DDTC and BIS published in the Federal Register on April 16, 2013.

This term is NOT up for public comment at the present time, but to understand the proposed revisions to the USML and CCL control lists for firearms and ammunition, it is imperative to comprehend the term. Both the ITAR and EAR use the term, “Specially Designed” to remove the catch-all controls currently present in the USML Cats. I-III and to designate what parts, components, accessories and attachments are subject to either the ITAR or the EAR. We have highlighted the proposed use of “specially designed” in USML Cat. I in the list above.

It is important to note that the “specially designed” analysis is not applicable to the entire USML Category, as it can be used only if it is specified within a particular paragraph. As the revisions to Cat. I are intended to make the list a positive list and include only those articles that warrant control under the ITAR for the reasons stated previously, there should be a bright line between those articles subject to the ITAR and those subject to the EAR. Industry therefore must carefully review the full definition of “Specially Designed” and the application to the proposed revisions of Cat. I and provide comments that would assist the government in reducing jurisdictional ambiguities and clarifying the articles subject to the ITAR.

Industry should also review the ITAR order of review outlined in 22 C.F.R. § 121.1(b)), and the Order of Review Decision Tool available on DDTC’s website. BIS also provides an Order of Review Decision Tool on its website.

Industry should be forewarned not to underestimate the time intensive process of classifying the parts, components, attachments and accessories for firearms under the proposed rules. A critical component is the specially designed analysis, which itself is complex and difficult to understand immediately. It would be foolish to skip over classification, as license requirements, applicability of license exceptions, and restrictions are dependent on the classification, down to the specific ECCN paragraph. Further, export license applications will require identification of the specific subparagraph of control as well.  The days of simply identifying “paragraph (h)” for any and all parts and components are quickly coming to an end.

Brokering

In addition to the proposed revisions to the USML Cats. I-III, DDTC’s proposed rule identifies several “conforming changes” in other parts of the ITAR to remove references to firearms that will be controlled on the CCL. One such revision is to section 129.1 to clarify that regulations on brokering activities apply to defense articles and defense services designated on the USML as well as items described on the U.S. Munitions Import List (USMIL) for permanent import controls. The USMIL is promulgated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) pursuant to the permanent import provisions of the Arms Export Control Act. ATF’s regulations are in 27 C.F.R. Pt. 447, and the USMIL is in 27 C.F.R. § 447.21.

According to DDTC, “the items that will move to the CCL for export control purposes, yet are on the USMIL for permanent import purposes, remain subject to the brokering requirements of [ITAR] part 129 with respect to all brokering activities, including facilitation in their manufacture, export, permanent import, transfer, reexport, or retransfer.” 83 Fed. Reg. at 24199 (May 24, 2018). Approaching this from the catch and release analysis that has permeated export control reform, this is the “catch.” The proposed revision in section 129.2, however, adds the following release in a new paragraph (vii) for activities that are NOT considered brokering activities:

“Activities by persons to facilitate the export, reexport, or transfer of an item subject to the EAR that has been approved pursuant to a license or license exception under the EAR or a license or other approval under this subchapter.”

As written, this language is very broad because the clause “that has been approved” does not limit past approvals to the person engaging in the subject activities. Further, the past approvals may be from either an EAR or an ITAR authorization.

Electronic Export Information Filings to Automated Export System

A critical change in the proposed rules lies within the Department of Commerce proposed rule relating to the Electronic Export Information (EEI) filings to Automated Export System (AES). According to the proposed rule, AES filings would be required for exports of all firearms transitioned to the CCL from the USML, regardless of value or destination. This requirement would also extend to temporary exports under license exceptions TMP or BAG.

In addition, the rule proposes to expand the required data elements of AES filings to include serial numbers, make, model, and caliber for such firearms. Industry should carefully evaluate the impact this requirement will have on operations and include in comments to the proposed rules.

Temporary Imports

The proposed Commerce rules set out a new process in 15 C.F.R. 758.10 for temporary imports of items subject to both the EAR and the USMIL. The process would impose entry clearance requirements for firearms temporarily imported into the United States for a period not to exceed 1 year, and then would require the use of the TMP license exception for the return export.

For the inbound transaction, U.S. Customs and Border Protection would be charged with collecting identifying information necessary to track the items temporarily imported, such as the list of firearms with serial numbers, model, make, quantity, and value, as well as other import and supporting documents. For the export, a license would not be required, but CBP would match the export to the information received upon entry. Firearms may not be imported from or ultimately destined to certain proscribed or restricted countries, and the proposed rule includes language that would instruct importers to contact CBP at the port of import or export for the proper procedures to provide any data or documentation required by BIS. Commerce is seeking comment from industry on this proposed new process.

This brings to a close this second installment of our four-part series on the proposed rules transitioning firearms and ammunition from the USML to the CCL. In our next two alerts we will examine the proposed revisions to USML Cats. II and III and the new EAR controls.


Smoking Hot: Proposed Changes to USML Categories I, II, and III

2018/05/30

By: Rick Phipp

On top of the background buzz regarding the ZTE zigzag, the latest shoe has dropped in the ongoing export control reforms. Three shoes actually, since we can now read about the proposed move of certain items controlled in Categories I, II, and III on the U.S. Munitions List (USML) over to the Commerce Control List (CCL). Long awaited by U.S. gun and ammunition manufacturers and exporters, these proposed rules describe how articles the President determines no longer warrant control under USML would be controlled on the CCL and by the Export Administration Regulations (EAR) and describe more precisely articles warranting export and temporary import control on the USML.

As part of export control reforms under the Obama administration, the executive branch completed transfers of items in the following categories from the USML to the CCL and created Category XIX (gas turbine engines):

  • Category IV (launch vehicles, guided and ballistic missiles, rockets, torpedoes, bombs, and mines);
  • Category V (explosives and energetic materials, propellants, incendiary agents, and their constituents);
  • Category VI (surface vessels of war and special naval equipment);
  • Category VII (ground vehicles);
  • Category VIII (aircraft and related articles);
  • Category IX (military training equipment and training);
  • Category X (personal protective equipment);
  • Category XI (military electronics);
  • Category XII (fire control, laser, imaging, and guidance equipment);
  • Category XIII (materials and miscellaneous articles);
  • Category XIV (toxicological agents, including chemical agents, biological agents, and associated equipment);
  • Category XV (spacecraft and related articles);
  • Category XVI (nuclear weapons related articles);
  • Category XVIII (directed energy weapons); and
  • Category XX (submersible vessels and related articles).

Left remaining were changes to Categories I-III (firearms, close assault weapons and combat shotguns, guns and armament, and ammunition/ordnance).

Under the proposed rules published by BIS and the State Department, a number of new ECCNs are created to address transferred items and the relevant USML categories are revised to describe more precisely the articles warranting continued control on the USML. The interagency review process focused on identifying items that were either (i) inherently military and otherwise warranted control on the USML, or (ii) if of a type common to non-military firearms applications, possessed parameters or characteristics that provide a critical military or intelligence advantage to the U.S., and are almost exclusively available from the U.S. If one or both points were met, the article remained on the USML.  Essentially, commercial items widely available for purchase and less sensitive military items were transferred in the proposed rules. Links to the proposed rules are as follows: State Department and Commerce Department.

There will be a 45-day period following publication in the Federal Register in which the agencies will accept comments regarding the proposed rules. Exporters and manufacturers of articles currently controlled under USML Categories I-III should review the proposed rules to consider how they may be impacted. Comments may be submitted via the Federal eRulemaking Portal: http://www.regulations.gov or via email to DDTCPublicComments@state.gov with the subject line, “ITAR Amendment – Categories I, II, and III.”

Source


BIS Corrects ECCNs 0D606, 0E606, and 8A609

2018/02/08

Source: Federal Register

On December 27, 2017 BIS published a final rule (82 FR 61153) which made corrections to certain provisions of the EAR, including the CCL. The corrections were editorial in nature and did not affect any license requirements. In a nutshell, the original text in 0D606 and 0E606 was erroneously replaced with the text for 0D614 and 0E614. This rule fixes the issue and reinstates paragraph (2) of the Special Conditions for STA in 8A609.

ECCNs 0D606 and 0E606: The December 27 rule amended ECCN subparagraphs 0D606.a and 0E606.a to include references to ECCNs 0B606 and 0C606. During drafting, the License Requirements section and the text following the revised subparagraphs for both ECCNs was exchanged with the text for ECCNs 0D614 and 0E614, respectively. In order to follow the guidelines of the original preamble, this correction to the December 27 rule restores the original License Requirements section and the text of ECCNs 0D606 and 0E606 following subparagraph a in both ECCNs. In addition, this rule replaces the incorrect reference to 0D606 with 0E606 in the Special Conditions for STA of ECCN 0E606.

ECCN 8A609: The December 27 rule amended ECCN 8A609 by revising the title reference in these ECCNs to match the current title of § 740.20(g) and in doing so inadvertently removed paragraph (2) of the Special Conditions for STA. This rule restores paragraph (2) of the Special Conditions for STA in ECCN 8A609.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-01-08/pdf/2018-00059.pdf


BIS Revises CCL and Corresponding EAR Parts to Implement WA 2016 Plenary Agreements

2017/10/16

By: Ashleigh Foor

A final ruling by the Bureau of Industry and Security (BIS) revises the Commerce Control List (CCL) and corresponding parts of the Export Administration Regulations (EAR) to implement changes made to the Wassenaar Arrangement List of Dual-Use Goods and Technologies (WA List). The CCL identifies certain items subject to Department of Commerce jurisdiction and is maintained, as part of its EAR, by the BIS. These changes were agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies at the December 2016 WA Plenary meeting. The objective of The Wassenaar Arrangement is to improve regional and international security and stability by implementing effective export controls on strategic items. This rule revises the Export Control Classification Numbers (ECCNs), controlled for national security reasons in each category of the CCL, to match the CCL with the agreements reached at the 2016 Plenary meeting. Any associated changes were also made to the EAR.

As of August 15, 2017, the following is to be expected:  (1) The effective date for amendatory instruction 30 (ECCN 4A003 in Supplement No. 1 to part 774) is September 25, 2017; and (2) the effective date for amendatory instruction 2 (Sec.  740.7 of the EAR) is November 24, 2017.

Background:

The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies is a group of 41 governments that believe in promoting responsibility and transparency in the global arms trade, and want to prevent destabilizing accumulations of arms. As a Participating State, the United States has committed to controlling for export all items on the WA control lists. The lists were first created in 1996 and have been reviewed and updated annually thereafter. Proposals for changes to the WA control lists that generate consensus are approved by Participating States at annual Plenary meetings. Participating States are expected to abide by the agreed list changes as soon as possible after approval. By implementing the WA list changes, the US ensures they have a level playing field with their competitors in other WA Participating States.

Revisions to the Commerce Control List Related to WA 2016 Plenary Agreements:

Revises (50) ECCNs: 1A004, 1A007, 1B001, 1C007, 1C608, 1E001, 1E002, 2A001, 2B001, 2B005, 2B991, 2D992, 2E003, 3A001, 3A002, 3A991, 3B001, 3C001, 3E001, 3E002, 3E003, 4A003, 4D001, 4D993, 5A001, 5B001, 5E001, 5A002, 5A003, 5D002, 5E002, 6A001, 6A003, 6A005, 6A008, 6D003, 6E003, 7D003, 7D004, 7E001, 7E003, 7E004, 8A002, 8C001, 9A001, 9A004, 9A515, 9B002, 9B009 and 9E003.

License Exception eligibility additions: 3A001.b.12 to LVS, and 3A001.a.14 to GBS.

License Exception eligibility expansion: TSR and STA for ECCNs 4D001 and 4E001.

Saving Clause:

Shipments of items that were removed from license exception eligibility or eligibility for export, reexport, or transfer (in-country) without a license as a result of this regulatory action that were already en route aboard a carrier or on dock for loading on August 15, 2017 may proceed to that destination under the previous license exception eligibility or without a license as long as they have been exports, reexports, or transfers (in-country) before October 16, 2017.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-08-15/pdf/2017-16904.pdf


Revisions to EAR Parts 742, 744, 772, & 774

2017/08/03

The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to reflect changes to the Missile Technology Control Regime (MTCR) Annex that were agreed to by MTCR member countries back in October 2016.

Changes:

§ 742.5 (Missile technology)

  • In § 742.5 (Missile technology), this final rule revises the first sentence of paragraph (a)(2), which describes the definition of ‘‘missiles.’’ The term ‘‘missiles’’ is a defined term in § 772.1, but for ease of reference the first sentence of this paragraph (a)(2) restates the definition.

Conforming Change to § 742.5(a)(2)

  • This final rule makes conforming changes in paragraph (a)(2) of § 742.5, by replacing the term ‘‘ballistic missile systems’’ with the term ‘‘ballistic missiles’’ (MTCR Annex Change, Category I: Item 1.A.1., Luxembourg 2016 TEM), and by replacing the term ‘‘cruise missile systems’’ with the term ‘‘cruise missiles.’’ (MTCR Annex Change, Category I: Item 1.A.2., Luxembourg 2016 TEM).
  • This final rule also makes a conforming change by replacing the term ‘‘unmanned air vehicles’’ with the term ‘‘unmanned aerial vehicles.’’ (Conforming Change to MTCR Annex). Substantively, there is no difference between the old and revised terms, but this final rule makes these conforming changes to ensure consistent use of the terminology throughout the EAR. These conforming changes are described in more detail in the next three paragraphs, describing the changes that this final rule makes to the EAR definitions of ‘‘missiles’’ and ‘‘unmanned aerial vehicles.’’

Conforming Change to § 744.3

  • This final rule makes conforming changes in § 744.3 by changing the term ‘‘ballistic missile systems’’ to ‘‘ballistic missiles’’ (MTCR Annex Change, Category I: Item 1.A.1., Luxembourg 2016 TEM), and changing the term ‘‘cruise missile systems’’ to ‘‘cruise missiles.’’ (MTCR Annex Change, Category I: Item 1.A.2., Luxembourg 2016 TEM). These conforming changes are described in more detail in the next two paragraphs describing the changes that this final rule makes to the EAR definitions of ‘‘missiles’’ and ‘‘unmanned aerial vehicles.’’
  •  In addition, this final rule makes conforming changes in § 744.3 by replacing the term ‘‘unmanned air vehicles’’ with ‘‘unmanned aerial vehicles’’ wherever this term appears in this section. (Conforming Change to MTCR Annex). Substantively, there is no difference between the old and revised terms, but this final rule makes these conforming changes to ensure consistent use of the terminology throughout the EAR.
  • Lastly, this final rule removes the first reference to ‘‘and’’ in the section heading for the parenthetical phrase providing an illustrative list of examples of rocket systems. This ‘‘and’’ is removed because it is not needed to convey the meaning of the list of examples of rocket systems. These conforming changes are clarifications and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.

Changes and Conforming Amendments in § 772.1 (Definitions of Terms as Used in the Export Administration Regulations (EAR))

  • In § 772.1, this final rule amends the definition of the term ‘‘missiles.’’ (MTCR Annex Change, Category I: Item 1.A.1., Luxembourg 2016 TEM). Under the definition of ‘‘missiles,’’ this final rule revises the term ‘‘ballistic missile systems’’ by removing the word ‘‘systems’’ and adding an ‘‘s’’ to ‘‘missile.’’
  • This final rule revises the definition of ‘‘missiles’’ to reflect changes in the description of complete rocket systems in the MTCR Annex. The final rule revises the term ‘‘ballistic missile systems’’ by removing the word ‘‘systems,’’ thus referring only to the flight vehicle.
  • This final rule makes this change to conform to the other items in the illustrative list of ‘‘missiles,’’ and to clarify that a missile is covered under these entries that use this control text, regardless of whether it is part of a larger system (e.g., a system including the flight vehicle and ground support equipment such as launch, recovery, and flight control equipment). This final rule also makes conforming changes to the same terms used in ECCNs 2B018 and 5A101, as described below.
  • This final rule also makes a conforming change in the ECCNs for the use of the term ‘‘unmanned air vehicles,’’ which this final rule replaces with ‘‘unmanned aerial vehicles.’’ (Conforming Change to MTCR Annex). Substantively, there is no difference between the two formulations of the term, but this final rule makes these conforming changes to ensure consistent use of the terminology throughout the EAR.
  •  Lastly, this final rule removes the last sentence of the definition and adds it as a note to the definition. This clarifying change is made because the sentence is more appropriately included as a note to the definition. These changes correspond with the U.S. interpretation of the controls, and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.

Revised Term for Unmanned Aerial Vehicle

  • In addition, in § 772.1, this final rule amends the definition of the revised term, ‘‘unmanned aerial vehicle.’’ (MTCR Annex Change, Category I: Item 1.A.2., Luxembourg 2016 TEM). Under the definition of ‘‘unmanned aerial vehicle,’’ this final rule revises the term ‘‘cruise missile systems’’ by removing the word ‘‘systems’’ and adding an ‘‘s’’ to ‘‘missile.’’
  • The definition of ‘‘unmanned aerial vehicles’’ has been updated to reflect changes in the description of unmanned aerial vehicles in the MTCR Annex. The term ‘‘Cruise missile systems’’ has been changed by removing the word ‘‘systems,’’ thus referring only to the flight vehicle. This change both conforms to the other items in the illustrative list of unmanned aerial vehicles, and clarifies that an unmanned aerial vehicle is covered under these entries that use this control text, regardless of whether or not it is part of a larger system (e.g., a system including the flight vehicle and ground support equipment such as launch, recovery, and flight control equipment).
  • This final rule also makes conforming changes to similar text used in ECCNs 2B018 and 5A101 described below. These changes correspond with the U.S. interpretation of the controls, and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.updated to reflect changes in the description of unmanned aerial vehicles in the MTCR Annex. The term ‘‘Cruise missile systems’’ has been changed by removing the word ‘‘systems,’’ thus referring only to the flight vehicle. This change both conforms to the other items in the illustrative list of unmanned aerial vehicles, and clarifies that an unmanned aerial vehicle is covered under these entries that use this control text, regardless of whether or not it is part of a larger system (e.g., a system including the flight vehicle and ground support equipment such as launch, recovery, and flight control equipment).
  • This final rule also makes conforming changes to similar text used in ECCNs 2B018 and 5A101 described below. These changes correspond with the U.S. interpretation of the controls, and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.

Amendments to the Commerce Control List (CCL)

ECCN 1C107

  • This final rule amends ECCN 1C107 by revising the introductory text of paragraph d. and adding a paragraph d.3 in the List of Items Controlled section.
  • This final rule also adds a Note and a Technical Note to ECCN 1C107.d.3 to clarify the scope of paragraph d.3. (MTCR Annex Change, Category II: Item 6.C.6., Busan 2016 Plenary). Specifically, in the introductory text of ECCN 1C107.d, this final rule removes the phrase ‘‘silicon carbide materials’’ and adds in its place the phrase ‘‘high-temperature materials.’’ This change is made because of the addition of certain bulk machinable ceramic composite materials that this final rule adds to ECCN 1C107 under new ‘‘items’’ paragraph d.3. Ultra High Temperature Ceramic Composites (UHTCC) are materials that combine Ultra High Temperature Ceramics (UHTC) with fiber reinforcement. The UHTCs can be used in environments that exhibit extremes in temperature, chemical reactivity, and erosive attack. The combination of the UHTC and fiber reinforcement can mitigate some of the traditional drawbacks associated with ceramics, including a tendency to fracture. Typical end uses for these composites are leading edges for hypersonic vehicles, nose tips for re- entry vehicles, rocket motor throat inserts, jet vanes, and control surfaces, which this final rule adds as examples in the new control text.
  • This final rule also adds a note to 1C107.d.3 to make clear that the UHTC materials that do not have fiber reinforcement are not caught under this control. Additionally, this final rule adds a technical note to 1C107.d to provide examples of UHTCs which are included. This change is expected to result in an increase of 1– 3 applications received annually by BIS. This very small increase is because this material is not widely used or exported, but specific to the end uses described in the control text.

ECCN 1C111

  • This final rule amends ECCN 1C111 by revising paragraphs b.2 in the List of Items Controlled section to add a CAS (Chemical Abstract Service) Number. CAS Numbers are numerical identifiers assigned by the Chemical Abstracts Service (CAS) to every chemical substance described in open scientific literature, including organic and inorganic compounds, minerals, isotopes and alloys. The inclusion of CAS Numbers will make it easier to identify the materials controlled under this ‘‘items’’ paragraph of 1C111.
  • This final rule revises paragraph b.2 to add the CAS Number (CAS 69102–90–5) after the material ‘‘Hydroxy-terminated polybutadiene (including hydroxyl- terminated polybutadiene) (HTPB).’’ (MTCR Annex Change, Category II: Item 4.C.5.b., Busan 2016 Plenary). This change is not expected to have any impact on the number of license applications received by BIS.

ECCN 2B018

  • This final rule amends ECCN 2B018 by revising the ‘‘MT’’ paragraph in the table in the License Requirements section by revising the term ‘‘ballistic missile systems’’ to remove the term ‘‘systems’’ and add an ‘‘s’’ to the term ‘‘missile.’’ (MTCR Annex Change, Category I: Item 1.A.1., Luxembourg 2016 TEM).
  • In addition, in the same ‘‘MT’’ paragraph, this final rule revises the term ‘‘cruise missile systems’’ to remove the term ‘‘systems’’ and add an ‘‘s’’ to the term ‘‘missile.’’ (MTCR Annex Change, Category I: Item 1.A.2., Luxembourg 2016 TEM).
  • Lastly, this final rule makes conforming changes in the same ‘‘MT’’ paragraph by replacing the term ‘‘unmanned air vehicles’’ with ‘‘unmanned aerial vehicles’’ wherever this term appears in this section. (Conforming Change to MTCR Annex). Substantively, there is no difference between the old and revised terms, but this final rule makes these conforming changes to ensure consistent use of the terminology throughout the EAR. These are conforming changes for the changes described above to the definitions of ‘‘missiles’’ and ‘‘unmanned aerial vehicles.’’ This is a clarification and will not change any scope of control. This change is not expected to have any impact on the number of license applications received by BIS.

ECCN 2B109

  • This final rule amends ECCN 2B109 by revising the list of examples included in the second technical note. This final rule expands the list of examples to include interstages, because interstages can also be manufactured using the flow forming machines described in ECCN 2B109. (MTCR Annex Change, Category II: Item 3.B.3., Busan 2016 Plenary). This change is not expected to have any impact on the number of license applications received by BIS, because this is only a change to the list of examples of products that can be made by this type of machine, and it does not change the scope of control.

ECCN 5A101

  • This final rule amends the heading of ECCN 5A101 by revising the term ‘‘ballistic missile systems’’ to remove the word ‘‘systems’’ and add an ‘‘s’’ to ‘‘missile.’’ (MTCR Annex Change, Category I: Item 1.A.1., Luxembourg 2016 TEM).
  • The final rule revises the heading by revising the term ‘‘cruise missile systems’’ to remove the word ‘‘systems’’ and add an ‘‘s’’ after ‘‘missile.’’ (MTCR Annex Change, Category I: Item 1.A.2., Luxembourg 2016 TEM). These are conforming changes for the changes described above to the definitions of ‘‘missiles’’ and ‘‘unmanned aerial vehicles.’’
  • In addition, this final rule revises the heading of ECCN 5A101 to create a separate parenthetical phrase for the illustrative list of examples that are unmanned aerial vehicles. This final rule does this by removing the examples of ‘‘cruise missiles, target drones, and reconnaissance drones’’ from the list of examples that followed the terms ‘‘unmanned aerial vehicle or rocket systems’’ in the heading and adding those examples immediately after the term unmanned aerial vehicle. This final rule retains the rest of the examples from the parenthetical that follows the term ‘‘rocket systems,’’ which will make it clearer that this parenthetical list is an illustrative list of ‘‘rocket systems.’’ (Conforming Change to MTCR Annex). These are clarifications and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.

ECCN 7A103

  • This final rule amends ECCN 7A103 by adding a definition for ‘‘inertial measurement equipment and systems’’ for purposes of ECCN 7A103. In addition, this final rule revises ‘‘items’’ paragraph a and adds Note 3 in the List of Items Controlled section. (MTCR Annex Change, Category II: Item 9.A.6., Luxembourg 2016 TEM).
  • This final rule makes these changes to remove the ambiguous term ‘‘other equipment.’’ Instead, the locally defined term ‘‘inertial measurement equipment or systems’’ that the final rule adds to ECCN 7A103, along with an illustrative list of such equipment and systems, clarifies which types of equipment containing the specified accelerometers or gyros are caught by this entry.
  • This final rule also removes the phrase ‘‘and systems incorporating such equipment’’ because this phrase has been removed from the MTCR Annex. The changes this final rule makes to ECCN 7A103 to increase the clarity of the control should make the control more precise and rule out items not strictly used for navigation purposes. This change is expected to result in a decrease of 3 to 5 license applications received annually by BIS.
  • Lastly, this final rule updates and amends ECCN 7A103 by removing Related Controls paragraph (2), which is no longer accurate after changes were made to the EAR to correspond with changes made to USML Category XII (especially for unmanned aerial vehicles (UAVs) ) that became effective December 31, 2016 (See October 12, 2016, (81 FR 70320) final rule). In addition, this paragraph (2) can be removed because the USML Order of Review and CCL Order of Review will provide sufficient guidance on where items that are subject to the ITAR are classified under the USML and where items that are subject to the EAR are classified in either the ‘‘600 series’’ or in other ECCNs in Category 7 of the CCL.
  • Lastly, as a conforming change to the removal of paragraph (2), this final rule redesignates Related Controls paragraph (3) as new Related Controls paragraph (2).

ECCNs 9A101, 9E101, and 9E102

  • This final rule amends ECCN 9E101 by revising the Related Controls paragraph in the List of Items Controlled section to make a conforming change for the use of the term ‘‘unmanned air vehicles,’’ which this final rule changes to ‘‘unmanned aerial vehicles.’’
  • In addition, this final rule amends ECCN 9E101 and 9E102 by revising the headings of these two ECCNs to make conforming changes for the use of the term ‘‘unmanned air vehicles,’’ which this final rule changes to ‘‘unmanned aerial vehicles.’’ Substantively, there is not a difference in the two formulations of the term, but for consistency with how the term is used in other parts of the EAR, this final rule makes these conforming changes. (Conforming Change to MTCR Annex). This is a clarification and will not change any scope of control. These changes are not expected to have any impact on the number of license applications received by BIS.

New ECCN 9B104 and Related Conforming Amendments to 9D101, 9E001, and 9E002

  • This final rule adds new ECCN 9B104 to control certain aerothermodynamic test facilities. The facilities controlled under this new ECCN 9B104 are those that are usable for rockets, missiles, or unmanned aerial vehicles capable of achieving a ‘‘range’’ equal to or greater than 300 km and their subsystems, and having an electrical power supply equal to or greater than 5 MW or a gas supply total pressure equal to or greater than 3 MPa.
  • This final rule adds this new ECCN 9B104 to complement the controls that already exist for aerodynamic test facilities in order to fully cover the types of ground test facilities necessary to reproduce the flight environments that occur during the reentry phase. Plasma arc jet and plasma wind tunnel facilities simulate the atmospheric reentry thermal effects due to high velocity around the vehicles and are key to the qualification of vehicle thermal protection subsystems. This final rule includes values for electrical power supply and gas supply total pressure in new ECCN 9B104 to exclude commercial systems of a similar nature from this new ECCN.

Related Definition as part of new ECCN 9B104 to define the term ‘‘aerothermodynamic test facilities’’

  • This definition specifies that these facilities include plasma arc jet facilities and plasma wind tunnels for the study of thermal and mechanical effects of airflow on objects. (MTCR Annex Change, Category II: Item 15.B.6., Luxembourg 2016 TEM). As a conforming change to the addition of ECCN 9B104, this final rule adds 9B104 to the heading of ECCN 9D101 and revises the ‘‘MT’’ paragraph in the table in the License Requirements section of ECCNs 9E001 and 9E002 to add 9B104. The headings of ECCNs 9E001 and 9E002 do not need to be revised to add technology for 9B104, because those two technology ECCNs apply to 9B ECCNs, except for those specifically excluded in the ECCN headings. These changes are expected to result in an increase of no more than 1 application received annually by BIS, because such systems and their software and technology are exported infrequently.

ECCN 9D104

  • This final rule amends ECCN 9D104 by adding a note to the List of Items Controlled section. This note clarifies that ECCN 9D104 also includes specific software for the conversion of manned aircraft to an unmanned aerial vehicle. (MTCR Annex Change, Category II: Item 1.D.2., Luxembourg 2016 TEM). This change is expected to result in an increase of 1 to 2 applications received annually by BIS, because, although this software was already controlled here, the note will clarify the scope of ECCN 9D104.

Savings Clause : Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting or reexporting carrier, or enroute aboard a carrier to a port of export or reexport, on July 7, 2017, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR) so long as they are exported or reexported before August 7, 2017. Any such items not actually exported or reexported before midnight, on August 7, 2017, require a license in accordance with this rule.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-07-07/pdf/2017-14312.pdf


House Budget Committee Proposes Moving BIS to State

2017/08/03

(Source: U.S. House Budget Committee Report)

The following is an excerpt (pages 49-50) from the U.S. House Budget Committee, Building a Better America: A Plan for Fiscal Responsibility.

Building a Better America recommends a different path for the Department of Commerce.

Our budget supports the recent Presidential directives established by the Trump Administration to combat the regulatory burden placed on manufacturers and streamline the permitting review and approval processes. The Memorandum on Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing (“Memorandum on Manufacturing”) provides for stakeholder engagement and feedback from the nation’s domestic manufacturers, in an effort to highlight unnecessary regulatory burdens and other administrative policies, practices, and procedures that inhibit economic growth and job creation. Our budget makes the following recommendations:

* Eliminate Corporate Welfare Programs in the Department of Commerce. Subsidies to businesses distort the economy, impose unfair burdens on taxpayers, and are especially problematic given the federal government’s fiscal situation. Programs under consideration for elimination could include the following:

  • The Hollings Manufacturing Extension Program. This program subsidizes a network of nonprofit extension centers that provide technical, financial, and marketing services for small and medium-size businesses. The private market generally provides these services. The program, which was supposed to be self-supporting, derives two-thirds of its funding from non-Federal sources.
  • The International Trade Administration [ITA]. This Department of Commerce agency provides trade-promotion services for U.S. companies. The fees it charges for its services do not cover the costs. Businesses can obtain similar services from state and local governments and the private market. Congress should eliminate the ITA or require it to charge for the full cost of these “Trade Promotion Authority” services.
  • The National Network for Manufacturing Innovation. This program, previously known as the Advanced Manufacturing Technology Consortia, provides federal grants to support research for commercial technology and manufacturing. As stated in the Heritage Foundation’s The Budget Book: “Businesses should not receive taxpayer subsidies; these long-lived and unnecessary subsidies increase federal spending and distort the marketplace. Corporate welfare to politically connected corporations should end.”

 

* Eliminate Overlap and Consolidate Necessary Department of Commerce Functions Into Other Departments. Since its establishment in 1903, the Commerce Department has expanded in size and scope to include many activities better suited at other agencies. The Department of Commerce and its various agencies and programs are rife with waste, abuse, and duplication. This budget recommends the following dissolution, delegation of authority, and consolidation measures:

  • Consolidate National Oceanic and Atmospheric Administration functions into the Department of the Interior;
  • Establish the U.S. Patent and Trademark Office as an independent agency;
  • Eliminate the International Trade Administration; o Delegate trade enforcement activities to the International Trade Commission;
  • Consolidate the Bureau of Industry and Security into the Department of State;
  • Eliminate the Economic Development Administration;
  • Consolidate trade adjustment activities within the Department of Labor, which has a duplicate program;
  • Consolidate the Minority Business Development Agency into the Small Business Administration;
  • Consolidate the National Institute of Standards and Technology and the National Technical Information Services within the National Science Foundation; o Consolidate the National Telecommunication and Information Administration into the Federal Communications Commission as an independent agency; and
  • Consolidate the United States Census Bureau and the Bureau of Economic Analysis into the Department of Labor’s Bureau of Labor Statistics.

AES Changes Impacted by Export Control Reform Implementation Rules

2017/03/30

(Source: census@subscriptions.census.gov, 22 February 2017.)

On July 28, 2016 and October 12, 2016, the Department of Commerce, Bureau of Industry and Security published final rules (available at here and here) that became effective December 31, 2016. As a result of these rules, the following changes were made to the Automated Export System (AES) in order for exporters and authorized agents to successfully report electronic export information in the AES.
(1) The Addition of “600 series” Export Control Classification Numbers (ECCN)

600-series ECCNs 1A607, 1B607, 1C607, 1D607, 1E607, 6B619, 6D619, 6E619, 7A611, 7B611, 7D611, and 7E611 were added to the AES ECCN reference table. See the following instructions to determine which “600 series” ECCNs are eligible for certain license types. By using any of the License Exceptions or “No License Required” (NLR), you are certifying that the terms, provisions, and conditions described in the EAR have been met.

  • C30 (BIS license), C40 (TMP), C41 (RPL), C42 (GOV), and C59 (STA) – All “600 series” ECCNs listed above are eligible to the extent permitted under part 740 of the EAR.
  • C33 (NLR) – All “600 series” ECCNs listed above are eligible only if exported to Canada. Some of these “600 series” items were previously authorized under an International Traffic in Arms Regulations (ITAR) Canadian exemption (SCA).
  • C35 (LVS) – The following “600 series” ECCNs are eligible: 1B607, 6B619, 7A611, and 7B611.
  • C44 (TSU) – The following “600 series” ECCNs are eligible: 1D607, 1E607, 6D619, 6E619,7D611, and 7E611.

 

If the “600 series” ECCNs are reported under any other license type, AES will generate a fatal error (FATAL ERR 666-ECCN MUST BE FROM APPROVED LIST) back to the filer. Please note that under 758.1 of the EAR, an AES filing is required for exports of items classified under “600 series” ECCNs, regardless of the value of the item or destination.
(2) Items subject to the EAR, including “600 series” ECCNs that are licensed by the State Department under the International Traffic in Arms Regulations (ITAR)

Under a delegation of authority, the State Department may license an item subject to the EAR on an ITAR license pursuant to new section 120.5(b) of the ITAR. If this occurs, the AES filer must report the ECCN (including “600 series” ECCNs) or the EAR99 designation in the ECCN field in AES, even if the license type is S05 (DSP-5). All other fields associated with license type S05 are required, such as registration number, significant military equipment indicator, DDTC eligible party certification indicator, USML category code, DDTC unit of measure and DDTC quantity.

A complete list of all of the AES License Type codes and reporting instructions for these types can be found at here.

For questions regarding these upcoming AES changes, please contact the Bureau of Industry and Security by email at ECR_AES@bis.doc.gov or at one of the phone numbers below.

  • Office of Technology Evaluation (located in Washington, DC): (202) 482-4933
  • Outreach and Educational Services Division (located in Washington, DC): (202) 482-4811
  • Western Regional Office (located in Irvine, CA): (949) 660-0144
  • Northern California branch (located in San Jose, CA): (408) 998-8806

BIS Removes Certain Nuclear Nonproliferation Column 2 Controls

2017/01/31

This rule removes remove nuclear nonproliferation (NP) Column 2 license requirements from certain pressure tubes, pipes, fittings, pipe valves, pumps, numerically controlled machine tools, oscilloscopes, and transient recorders on the Commerce Control List (CCL).

As a result of the changes made by this rule, some of these items are no longer listed under an Export Control Classification Number (ECCN) on the CCL. However, such items remain subject to the EAR under the designation EAR99. This rule also creates four new ECCNs to maintain anti-terrorism (AT) controls on certain affected commodities and related ‘‘software’’ and ‘‘technology.’’ All items subject to the EAR, regardless of whether they are listed on the CCL, may require a license for reasons described elsewhere in the EAR (e.g., license requirements based on end-user/end-use controls, embargoes, or other special controls).

The Bureau of Industry and Security (BIS) published this final rule on November 25, 2016, however, ‘software’’ ‘‘specially designed’’ for the ‘‘development,’’ ‘‘production,’’ or ‘‘use’’ of items previously controlled under ECCN 3A292 will continue to be classified and licensed by BIS under the designation EAR99 through January 31, 2017. As of February 1, 2017, such ‘‘software’’ will be classified and licensed by BIS under ECCN 3D991.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-11-25/pdf/2016-28039.pdf