Archive for the ‘EAR’ Category

India is Movin’ On Up…from A:6 to A:1

2018/09/27

By: Danielle Hatch

Effective August 3, 2018, the Bureau of Industry and Security (BIS) has removed India from Country Group A:6 and placed it in Country Group A:1 (Supplement No. 1 to Part 740) and Country Group A:5. In a nutshell, this change is going to expand the number of US goods that can be exported/reexported to India using NLR and License Exceptions STA, GOV, and APR…which is good news. Fun Fact: India is the 37th country to join Country Group A:5 (make sure to share that one).

The biggest change exporters/reexporters will actually “see” is the ability to use paragraph (c)(1) of License Exception STA for exports/reexports and transfers within India. Exporters with also find that the move to Country Group A:5 now allows License Exception paragraph (c) to be used on exports and transfers of some 600-series goods (not all; dependent on end use/user and other exceptions specified elsewhere).

Now that India is in Country Group A:1, License Exception GOV can be used for exports/reexports of goods to the Indian government agencies. Related to this, License Exception GOV can be used to authorize some 600-series items now that India is in Country Group A:5.

It should be noted that License Exception APR (paragraphs (a), (b) and (j)) are now open for India too. The new ruling also removed the “X” for India in the NS column 2 of the Commerce Country Chart (Supplement No. 1 to Part 738) which allows a large number of items that previously required a license or license exception to be exported/reexported to India under No License Required (NLR).

Breakdown of EAR Changes:

  • Part 738: BIS amends Supplement No. 1 to Part 738, Commerce Country Chart, by removing the license requirements for National Security Column 2 (NS2) reasons. Accordingly, this rule removes the ‘‘X’’ in NS Column 2 for India.
  • Part 740: BIS amends Supplement No. 1 to Part 740 to add, in alphabetical order, India to Country Groups A:1 and A:5.
  • Conforming 738 Amendments
    • Removal of the first sentence of footnote 7 to the Commerce Country Chart in Supplement No. 1 to Part 738, related to India. This amendment removes the requirement that exporters file in the Automated Export System when items controlled for Crime Control Columns 1 and 3 reasons, and Regional Stability Column 2 reasons were destined to India. As a conforming change,
    • Removal of the word ‘‘Also’’ from the second sentence of footnote 7 and capitalizes the ‘‘n’’ in ‘‘note’’ since it begins the sentence.
    • Paragraph (b)(3) of§ 738.4 removes the name ‘‘India’’ and replace it with the name ‘‘Chad.’’ The sample analysis used India as an example of a country with NS Column 2 controls. That reason for control no longer applies to India but currently applies to Chad.
  • Conforming 740 Amendments
    • Removal of India from Country Group A:6 to avoid creating conflicting eligibility criteria for STA provisions.
  • Part 743: India now is subject to reporting requirements for items controlled under Wassenaar, as set forth in Part 743, Special Reporting and Notification. Specifically, India is added, in alphabetical order, to Supplement No. 1 to Part 743, Wassenaar Arrangement Participating States.
  • Part 758: Removal of the requirement that exporters file in AES when items controlled for CC Columns 1 and 3 reasons and RS Column 2 reasons are destined to India. This reporting requirement had been instituted when the license requirement for such items was removed (see U.S.-India Bilateral Understanding: Additional Revisions to the U.S. Export and Reexport Controls Under the Export Administration Regulations; January 23, 2015; 80 FR 3463).
  • Part 772: India added, in alphabetical order, to the list of countries under the term Australia Group in § 772.1, Definitions of terms as used in the Export Administration Regulations (EAR). This updates the definition consistent with formal recognition of India’s membership in the AG in a BIS final rule, entitled ‘‘Implementation of the February 2017 Australia Group (AG) Intersessional Decisions and June 2017 Plenary Understandings; Addition of India to the AG’’ (83 FR 13849, April 2, 2018).

Final Rule: https://www.gpo.gov/fdsys/pkg/FR-2018-08-03/pdf/2018-16691.pdf


Export Control Amendments Proposed for Commercial Firearms, Ammunition and Related Products

2018/06/29

By: Thomas B. McVey, Esq., tmcvey@williamsmullen.com; Camden R. Webb, Esq., crwebb@williamsmullen.com; and Charles E. “Chuck” James, Jr., Esq., cjames@williamsmullen.com. All of Williams Mullen.

On May 24, 2018 the State and Commerce Departments issued proposed regulations regarding the transfer of export jurisdiction for commercial firearms and ammunition from the International Traffic In Arms Regulations (“ITAR”) to the Export Administration Regulations (“EAR”).[1]  Specifically, the proposals would amend Categories I, II and III of the U.S. Munitions List (“USML”) to remove certain commercial firearms products, ammunition, and certain parts, components, accessories and attachments and transfer these items to the Commerce Control List (“CCL”) under the EAR.  This is the first step in the long-awaited process under export control reform to transfer firearms products that no longer warrant control as military products from ITAR to the less restrictive EAR.  This is welcome news to our clients and many in the firearms and firearms accessory market.  The following is a summary of a number of the proposed changes and the impact on companies dealing in these products.

At the outset, it should be recognized that these are proposed amendments – they are not the final versions of the regulations.  State and Commerce have provided these in proposed form and are requesting comments from interested parties during a 45-day comment period.  Upon the receipt of comments, the agencies may make further modifications to the proposals and must still issue final regulations.  Consequently, companies should be alert to any additional changes and not act on the proposed regulations until they become final.  Nevertheless, companies can become engaged in the process now by submitting comments with recommendations for further revisions and begin planning for the transition to the new regulatory program.  Many industry groups and advocacy organizations are encouraging their members to offer comments in support of the proposed regulations.

Amendments Under ITAR.  Under the proposed State Department rule, USML Category I, covering firearms and related articles, will be amended to remove non-automatic and semi-automatic firearms up to caliber .50 (12.7 mm) inclusive and certain parts, components, accessories and attachments “specially designed” for such articles.  The goal of such amendments is to remove common items like modern sporting rifles while continuing to control under ITAR “only defense articles that are inherently military or that are not otherwise widely available for commercial sale.”[2]  Such products would be transferred to be controlled under the EAR (discussed further below).  Certain products, however, would continue to remain on USML Category I and subject to ITAR that fit within the above parameters, including the following:

  • Firearms that fire caseless ammunition;
  • Fully automatic firearms to caliber .50 inclusive;
  • Firearms specially designed to integrate fire control, automatic tracking and automatic firing systems;
  • Fully automatic shotguns;
  • Silencers, mufflers, sound suppressors, and specially designed parts and components;
  • Barrels, receivers (frames), bolts, bolt carriers, slides, and sears, specially designed for the firearms in Category I;
  • High capacity (greater than 50 rounds) magazines, and parts and components to convert a semi-automatic firearm into a fully automatic firearm; and
  • Accessories and attachments specially designed to automatically stabilize aim (other than gun rests) or for automatic targeting.

Category II, covering guns and armaments, would be amended to specifically list the items subject to controls and to establish a “bright line” between the USML and the CCL for the control of these items.  Items removed and transferred to the CCL include engines for self-propelled guns and howitzers,[3] tooling and equipment for the production of articles controlled in USML Category II[4] and certain test and evaluation equipment.[5]  Items specifically remaining on the USML and subject to ITAR would include certain apparatus and devices for launching or delivering ordnance,[6] certain autoloading systems currently controlled under USML Category II paragraph (i), developmental guns and armaments funded by the Department of Defense[7] and specially designed parts and components of such developmental products.

Category III, covering ammunition and ordinance, would be amended to be consistent with Category I, including the removal of ammunition for small arms that were transferred out of Category I.  Category III would also be amended to remove the broad “catch-alls” previously covered and to specifically enumerate the remaining items to be controlled.

New Controls Under the EAR.  Items removed from the USML as described above would be transferred to be controlled under the EAR which is administered by the Bureau of Industry and Security (“BIS”) within the Commerce Department.  As part of this transfer, BIS has established 17 new export control classification numbers (“ECCN’s”) on the CCL to control items that were removed from the USML.

Items covered by these ECCN’s will continue to be subject to significant export restrictions.  For example, these items will require export licenses for exports, reexports and in-country transfers.  In addition, certain “technology” related to the transferred firearms, ammunition and related products will be controlled on the CCL – in many cases licenses will be required for the transfer of controlled technology out of the U.S. and the transfer or disclosure of controlled technology to foreign persons in the U.S.  Certain license exceptions would also be available for the transferred items (although the license exceptions under the EAR frequently differ from the license exemptions under ITAR).  As with ITAR licenses issued by DDTC, items exported under a license would only be authorized for the end user and end use specified on the license – any reexports or in-country transfers of such items beyond such authority will require specific additional license authorization from BIS.

Continued ITAR Controls On Brokering of Commercial Firearms.  Notwithstanding the changes described above, commercial firearms and ammunition would continue to be covered under the ITAR brokering requirements.  Specifically, the State Department proposed rule states that products listed on the U.S. Munitions Import List (used by the Bureau of Alcohol, Tobacco, Firearms and Explosives for administering controls on the permanent import of firearms products) will continue to be subject to the ITAR brokering requirements set forth in 22 CFR Part 129.  Category I(a) of the USMIL includes nonautomatic and semiautomatic firearms, to caliber .50 inclusive, and USMIL Category III(a) includes ammunition for such products.  Thus, despite the broad changes to USML Categories I and III under the proposed amendments, parties will still be subject to ITAR regulation for brokering and “facilitation” in the sale of commercial firearms products, including requirements for registration, obtaining advanced authorizations for certain transactions, reporting, recordkeeping and restrictions on brokering transactions involving the “proscribed” countries identified in 22 CFR §126.1.

Impact On Firearms Companies.  The proposed changes will most likely affect many companies in the firearms industry in a number of ways including:

  • Export Classifications.  Companies will review the export jurisdiction and classification of their products to determine if they have been transferred to BIS jurisdiction and, if so, to determine the correct ECCN’s for their products.  This will apply to firearms, ammunition, parts, components, accessories and attachments.
  • Licenses For Products, Technology and Software.  As referenced above, companies will still be required to obtain export licenses for exports, reexports and in-country transfers for controlled products, technologies and software.  However, in many cases these will be from a different licensing agency under different licensing procedures.  Consequently, many companies will be amending their export compliance procedures to conform to these new requirements.
  • Registration.  There is no requirement for companies to register under the EAR, as exists under ITAR.  Of course, if companies still engage in activities regulated under ITAR (such as brokering commercial firearms products or the sale of items remaining in USML Categories I, II and III), they will be required to maintain their DDTC registration.
  • Defense Services.  There are reduced controls on performing services under the EAR as compared with those under ITAR.[8]
  • Temporary Imports.  The EAR does not contain controls on the temporary import of items subject to the EAR as required under ITAR.
  • Reports for Payments of Fees, Commissions and Political Contributions.  The EAR does not require exporters to file reports on the payment of political contributions, fees and commissions as under ITAR Part 130.
  • Items Still Regulated Under ITAR.  For items that remain listed on the USML after the amendments, such items will still be subject to ITAR and the requirements thereunder.

Status of Amendments.  As stated above, the amendments described in this alert are proposed changes only and not final amendments.  Parties have until July 9, 2018 to submit comments to State and Commerce on the proposed regulations.  Companies are encouraged to review the proposals carefully to assess how they will apply to their businesses as there is still opportunity to propose further amendments.  Officials at DDTC and BIS typically review the comments carefully and often adopt changes recommended by commenters.

While the transfer of commercial firearms products from ITAR to EAR controls is not yet concluded, the process has begun.  This is the time for companies to become engaged – in reviewing, commenting on and planning ahead for these changes.

[1] The proposed State Department rule is available here, and the proposed Commerce Department rule is available here.

[2] See State proposed rule p. 24,198.

[3] To be transferred to the CCL under ECCN 0A606.

[4] To be transferred to the CCL under ECCN 0B602

[5] To be transferred to the CCL under ECCN 0B602.

[6] To be included in a new USML paragraph (a)(4).

[7] To be included in new USML paragraph (a)(5).

[8] The performance of services is addressed in the EAR in 15 CFR §744.6(a)(1)(ii) and §744.6(a)(2).  In addition, the BIS proposed rule states as follows regarding defense services: “The EAR does not include a concept of “defense services,” and the “technology” related controls are more narrowly focused and apply in limited contexts as compared to the ITAR.”  See BIS proposed rule at p. 24,167.


U.S. Department of Justice (DOJ) – Enhanced Security Plan Sets Best Practices for Use of Cloud Services for Sensitive Data

2018/04/04

By:  Pablo LeCour, Partner, plecour@deloitte.co.uk; Tina Carlile, Senior Manager, ticarlile@deloitte.co.uk; and Ziyu Chin, Senior Consultant, ziyu.chin@deloitte.co.uk. All of Deloitte.

In December 2017 a global software company serving the telecommunications industry settled charges with the U.S. Department of Justice for violating U.S. controls on foreign access to sensitive data, including export controlled information. As part of the settlement, the company agreed to implement an Enhanced Security Plan designed to increase information security by regulating remote access to company networks and transfers of sensitive data.

The Enhanced Security Plan is a helpful benchmark for network providers seeking to protect sensitive information about U.S. telecommunications networks and other critical infrastructure.

Many tech companies develop software using foreign technical personnel both inside and outside of the U.S. The use of a global technical workforce increases the risk of unauthorized access to U.S. controlled information, including sensitive network data and data critical to the U.S. domestic communications infrastructure. Unauthorized access has consequences from an export controls perspective – under the U.S. Export Administration Regulations (EAR) and U.S. International Traffic in Arms Regulations (ITAR) licenses might be required to store U.S. sensitive data in overseas servers or for non-U.S. persons to handle, transmit or access controlled software, technology or technical data that is subject to U.S. jurisdiction. The Enhanced Security Plan provides an example of how these information security requirements can be met by:

  • Requiring authentication and tracking of changes to systems software through code-signing and other means;
  • Restricting access, transmission and storage of certain sensitive data to U.S.-based servers and U.S.-based network infrastructure; and
  • Controlling access by non-U.S. persons and implementing procedures for the proper vetting and licensing of non-U.S. employees and agents.
  • Additionally, the Enhanced Security Plan recommends an effective compliance program that includes the following:
  • Appointing a Security Director with appropriate authority, reporting lines, independence, skills, and resources to ensure compliance;
  • Implementing a Security Policy that describes the management of user identity and access, and building systems that monitor unauthorized attempts to access and screen personnel;
  • Conducting periodic third-party audits of the security procedures and their implementation; and
  • Engaging a third-party auditor to ensure compliance.

Companies doing business with the U.S. government or in connection with critical U.S. infrastructure, as well as companies that handle or use export-controlled technology, software, technical data, and cloud or network services, should review the DOJ Enhanced Security Plan requirements and consider including them within their own compliance programs.


US Firms Part Ways with China’s ZTE Monitor

2018/02/08

In early 2017 China’s largest telecommunications company agreed to pay a nearly $900 million penalty to the US after entering a guilty plea for illegally shipping goods to Iran and North Korea. ZTE was charged with 380 violations of the EAR, including (1) Conspiracy (2) Acting with Knowledge of a violation in Connection with Unlicensed Shipments of Telecommunications Items to North Korea via China and (3) Evasion. The company also entered into a settlement with OFAC for violating the Iranian Transactions and Sanctions Regulations (“ITSR”; 31 CFR Part 560). More Information on these charges can be found here.

Part of the settlement with OFAC required the company to hire an initial independent compliance monitor approved by the US government for a three-year term. The monitor is responsible for preparing the initial three annual audit reports to be provided to the US government. In addition, ZTE had to hire an independent compliance auditor, also approved by the US government, for an additional three years to prepare the remaining three annual audit reports.

Guidepost Solutions and Larkin Trade International were hired in June 2017 by the US monitor, James Stanton, a Texas civil and personal injury lawyer in charge of the oversite regime for ZTE. Stanton’s job is to help evaluate ZTE’s US export controls compliance and sanctions laws, and mitigate any future violations. US District Judge Ed Kinkeade, who presided over the ZTE sanctions case, actually rewrote the agreement to put Stanton in charge of monitoring the company before signing off on the plea deal. It has been said that Stanton has a lack of experience in US trade controls and the order naming him is sealed, leaving the reasoning behind the judge’s decision unclear. This situation is a bit of an anomaly because generally, the Department of Justice chooses an independent monitor in corporate criminal cases from candidates proposed by the company, which is how the agreement was originally written before Judge Kinkeade rewrote it. ZTE and the Justice Department agreed to Judge Kinkeade’s choice and the changes to the monitorship agreement, sources said, because the plea had already been negotiated and filed in the judge’s court and a temporary license allowing ZTE to continue to obtain US made goods was about to expire.

In December 2017, rumors broke out that Guidepost Solutions and Larkin Trade International had resigned in August 2017 from the job of actively auditing ZTE. Although the exact reason is unclear, some say it was a result of  Stanton restricting their access to ZTE documents and officials, which ultimately hindered their ability to effectively monitor the company. Stanton’s first report was due to the US government last month and this report, as well as the subsequent 2 reports will decide whether the company is liable for an additional fine of $300 million or being added to the US denial list.

Nearly all parties related to the case, including Guidepost Solutions, Larkin Trade International, Judge Ed Kinkeade, and James Stanton have all declined requests for comments based on this news. Additional details about this story and the ties between Judge Kinkeade and James Stanton can be found at https://www.reuters.com/article/us-usa-zte-exclusive/u-s-experts-resign-from-monitoring-chinas-zte-corp-sources-idUSKBN1EG03R


Miltech, Inc. of Northampton, MA Receives 18 Charges of Alleged Export Violations

2017/11/15

By: Ashleigh Foor

On September 25, 2017, Miltech, Inc. of Northampton, MA was charged a civil penalty of $230,000 due to engaging in conduct prohibited by the EAR when it exported items subject to the EAR from the United States to China and Russia without the required BIS Licenses. On eighteen separate occasions between, on, or around October 14, 2011 and July 14, 2014, Miltech exported active multiplier chains, items classified under Export Control Classification Number (“ECCN”) 3A001.b.4 and valued in total at approximately $364,947, without seeking or obtaining the licenses required for these exports pursuant to section 742.4 of the EAR. These items are controlled on national security and anti-terrorism grounds.

Miltech received 18 charges of 15 C.F.R. § 764.2(a) for engaging in prohibited conduct. $180,000 of the $230,000 penalty must be paid within 30 days, and the remaining $50,000 will be suspended and waived after two years if Miltech fulfills the terms of its settlement agreement and this order.  The company will not be debarred if penalty is paid as agreed and Miltech complies with other terms of this settlement.


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


Export and Recordkeeping Violations Nets $700,000 Fine for Axis Communications

2017/07/19

By: Ashleigh Foor

On June 9, 2017 a total of 15 charges were brought against Chelmsford, MA company, Axis Communications, Inc, resulting in a $700,000 fine and a thorough audit of its entire export controls compliance program.

Thirteen of the charges were from exporting thermal imaging cameras without the required licenses on, around, or between the dates of March 16, 2011 and July 15, 2013. Axis exported thermal imaging cameras controlled by the Export Administration Regulations (EAR) from the United States to Mexico. Valued at $391,819, these exports required export license. Thermal imaging cameras, classified under Export Control Classification Number 6A003.b.4, are controlled for national security and regional stability reasons.

Axis also received two charges for failing to comply with EAR recordkeeping requirements. In mid-June of 2013, when these thermal imaging cameras were being shipped from the United States to Mexico, Axis allegedly did not keep the required documents and invoices connected to these exports. The EAR requires companies to retain these transaction documents. Axis’ failure to do so, in addition to its thirteen charges of exporting without a required license, resulted in a civil penalty of $700,000 and an order to undergo an external audit of the company’s export controls compliance program. Axis was required to hire an unaffiliated third-party consultant with an expertise in U.S. export control laws to conduct the audit. The order, given June 9, 2017, stated the company would be put on an export denial list unless fine is paid as arranged and audit is completed with results submitted.


Changes for the Implementation of the International Trade Data System

2017/05/11

After consideration of the comments received, the Census Bureau revised and added certain provisions to address the concerns of commenters and to clarify the requirements related to the implementation of the International Trade Data System (ITDS). These changes will be effective July 18, 2017. The changes made in this Final Rule are as follows:

  • Amend the proposed rule to remove the definition and filing requirement for the used electronics indicator.
  • Section 30.1(c) is amended to revise the definition of ‘‘Carrier’’ to include a Non Vessel Operating Common Carrier (NVOCC) as an example of a carrier because the Automated Export System Trade Interface Requirements allows the Standard Carrier Alpha Code of a NVOCC to be reported.
  • Section 30.1(c), is amended to add the definition of ‘‘U.S. Postal Service customs declaration form’’ to identify the shipment document used for exports by mail.
  • Section 30.1(c), is amended to revise the definition of ‘‘Commercial loading document’’ to include the U.S. Postal Service customs declaration form as an example of a commercial loading document.
  • The note to § 30.2(a)(1)(iv) is amended to add Country Group E:2 to ensure consistency with the Export Administration Regulations (EAR).
  • Section 30.2(c) is amended to clarify the application and certification process by dividing the section based on the filing method, AESDirect or methods other than AESDirect. As a result, the title was amended to read as ‘‘Application and Certification Process’’ as opposed to ‘‘Certification and Filing Requirements.’’
  • Section 30.3(e)(2) is amended to add language requiring the authorized agent to provide the filer name in addition to the Internal Transaction Number (ITN) and date of export as proposed in the NPRM, when requested by the U.S. Principal Party in Interest in a routed transaction.
  • Section 30.4(b)(2)(v) is amended to read ‘‘mail’’ rather than ‘‘mail cargo’’ and the phrase ‘‘filing citation or exemption legend’’ will be revised to read ‘‘proof of filing citation, postdeparture filing citation, AES downtime filing citation, exemption or exclusion legend.’’
  • Section 30.8(a) is amended to more accurately reflect U.S. Postal Service operations.
  • Section 30.16(d) is amended to add Country Group E:2 to ensure consistency with the EAR.
  • Section 30.28 is amended to add language removed from 30.28(c) to the opening paragraph.
  • Section 30.29(a)(2) is amended by clarifying that a license value is only required to be reported for shipments licensed by a U.S. Government agency.
  • Section 30.29(b)(2) is amended to replace the term ‘‘commercial document’’ with the defined term ‘‘commercial loading documents’’.
  • Section 30.37(y) is amended to add Country Group E:2 to ensure consistency with the EAR.
  • Delete Appendices B, C, E and F because the Appendices were initially created to assist the trade in transitioning from the Foreign Trade Statistics Regulations (FTSR) to the FTR and are no longer necessary. As a result of deleting Appendices B, C, E, and F, Appendix D is redesignated as Appendix B. Program Requirements In addition to the above changes the Census Bureau is amending relevant sections of the FTR in order to comply with the requirements of the Foreign Relations Act, Public Law 107–228. The following sections of the FTR are amended to revise or clarify export reporting requirements and are unchanged from the Notice of Proposed Rulemaking of March 9, 2016, titled Foreign Trade Regulations: Clarification on Filing Requirements (RIN 0607– AA55):
  • In § 30.1(c), revise the definition of ‘‘AES applicant’’ to remove the text ‘‘applies to the Census Bureau for authorization to’’ and ‘‘or its related applications’’ because the registration will no longer go through the Census Bureau. Rather, the registration will be submitted to CBP through its Web site or through ACE and will be processed by CBP. In addition, related applications will be eliminated.
  • In § 30.1(c), revise the definition of ‘‘AESDirect’’ to clarify the appropriate parties that can transmit Electronic Export Information (EEI) through the AES, clarify that all regulatory requirements pertaining to the AES also apply to AESDirect, and eliminate the reference to the URL.
  • In § 30.1(c), revise the definition of ‘‘AES downtime filing citation’’ to remove filing requirements from the definition.
  • In § 30.1(c), remove the definition of ‘‘AES participant application (APA)’’ because the APA is no longer used for filers to obtain access to the AES.
  • In § 30.1(c), revise the definition of ‘‘Annotation’’ to remove the word ‘‘placed’’ to eliminate the implication of a manual process and add ‘‘or electronic equivalent’’ to allow for an electronic process.
  • In § 30.1(c), add the definition of ‘‘Automated Commercial Environment (ACE)’’ to identify the system through which the trade community reports data.
  • In § 30.1(c), revise the definition of ‘‘Automated Export System (AES)’’ to clarify that AES is accessed through the Automated Commercial Environment.
  • In § 30.1(c), revise the definition of ‘‘Bill of lading (BL)’’ to distinguish between the responsibilities of the carrier and the authorized agent.
  • In § 30.1(c), revise the definition of ‘‘Container’’ to make the language consistent with Article 1 of the Customs Convention on Containers.
  • In §30.1(c), remove the definition of ‘‘Domestic exports’’ because this term is not used in the FTR and add the definition of ‘‘Domestic goods.’’
  • In § 30.1(c), revise the definition of ‘‘Electronic Export Information (EEI)’’ to reference the Shipper’s Export Declaration itself as opposed to the information collected on the SED.
  • In § 30.1(c), revise the definition ‘‘Fatal error message’’ by removing the following sentence to remove the regulatory requirements from the definition: ‘‘The filer is required to immediately correct the problem, correct the data, and retransmit the EEI.’’
  • In § 30.1(c), revise the term ‘‘Filers’’ to ‘‘Filer’’ and revise the definition to reduce redundancy.
  • In § 30.1(c), remove the definition of ‘‘Foreign exports’’ because this term is not used in the FTR and add the definition of ‘‘Foreign goods.’’
  • In § 30.1(c), remove the definition for ‘‘Non Vessel Operating Common Carrier (NVOCC)’’ because the term is not referenced in the FTR.
  • In § 30.1(c), revise the definition of ‘‘Proof of filing citation’’ by removing the word ‘‘placed’’ to eliminate the implication of a manual process and allow for an electronic process.
  • In § 30.1(c), remove the definition of ‘‘Reexport’’ because the term is not used for statistical purposes in the FTR.
  • In § 30.1(c), revise the definition of ‘‘Service center’’ to clarify the role of a service center as it pertains to the FTR.
  • In § 30.1(c), revise the term ‘‘Shipment reference number’’ to read as ‘‘Shipment Reference Number (SRN).’’
  • In § 30.1(c), revise the definition of ‘‘Split shipment’’ to incorporate the revised timeframes addressed in FTR Letter #6, Notice of Regulatory Change for Split Shipments.
  • In § 30.1(c), revise the term ‘‘Transportation reference number’’ to read as ‘‘Transportation Reference Number (TRN).’’
  • Revise § 30.2(a)(1)(iv)(A) to ensure consistency with the Department of Commerce, Bureau of Industry and Security regulations.
  • Revise § 30.2(a)(1)(iv)(C) to add language which notes that the filer must reference the Department of State regulations for exceptions to the filing requirements for goods subject to the ITAR.
  • Revise § 30.2(b)(3) to remove the reference to ‘‘30.4(b)(3)’’ and add ‘‘30.4(b)(4)’’ in its place.
  • Revise § 30.3(e)(2) to add paragraph (xv) ‘‘Ultimate consignee type’’ to clarify that the authorized agent is responsible for reporting the ultimate consignee type in a routed export transaction.
  • Revise § 30.4(b)(2)(v) to reference only mail shipments by removing the words ‘‘and cargo shipped by other modes, except pipelines’’ because all other modes are covered in paragraph (vi). In addition, revise language to replace ‘‘exporting carrier’’ with ‘‘U.S. Postal Service’’ and remove the reference to § 30.46 because pipeline language has been added to § 30.4(c)(2).
  • Revise § 30.4(b)(3) to indicate that the USPPI or authorized agent must provide the proof of filing citation, post departure filing citation, AES downtime citation, exemption or exclusion legend to the carrier.
  • Revise § 30.4(c) by removing the introductory text.
  • Revise § 30.4 by adding paragraphs (c)(1) to address current post departure filing procedures and (c)(2) to address pipeline filing procedures.
  • Revise the title of § 30.5 to be ‘‘Electronic Export Information filing processes and standards’’ to accurately reflect the information that remains in this section because the AES application and certification process are removed.
  • Revise § 30.5 to remove the introductory text and remove and reserve paragraphs (a) and (b) because the certification process is now addressed in § 30.2(c).
  • Remove § 30.5(d)(3) to remove outdated requirements.
  • Revise § 30.5(f) to amend outdated information.
  • In § 30.6, revise the introductory text to add language indicating that additional elements collected in ITDS are mandated by the regulations of other federal government agencies.
  • Revise § 30.6(a)(1) to include the definition of the USPPI for consistency with the format for other data elements.
  • Revise § 30.6(a)(1)(iii) to clarify the use of an Employer Identification Number (EIN) and include the Data Universal Numbering System (DUNS) number as an acceptable USPPI ID number.
  • Revise § 30.6(a)(1)(iv) to clarify whose contact information should be provided in the AES for the USPPI.
  • Revise § 30.6(a)(5)(i) to clarify the country of ultimate destination to be reported with respect to shipments under BIS and State Department export licenses.
  • Revise § 30.6(a)(5)(ii) and add paragraphs (A) through (C) to clarify the country of ultimate destination to be reported with respect to shipments not moving under an export license.
  • Revise § 30.6(a)(11) by removing paragraphs (i) and (ii) because domestic goods and foreign goods are now included in § 30.1(c) as definitions.
  • Revise § 30.6(a)(19) to conform with the revised term ‘‘Shipment Reference Number (SRN).’’
  • Revise the title of § 30.6(b)(14) to conform with the revised term ‘‘Transportation Reference Number (TRN).’’
  • Revise § 30.6(c) to add paragraph (3) to include the original ITN field. Adding the original ITN field will assist the export trade community and enforcement agencies in identifying that a filer completed the mandatory filing requirements for the original shipment and any additional shipment(s).
  • Remove § 30.10(a)(1) and (2) because the electronic certification notice is no longer provided.
  • In § 30.28, revise the introductory text to incorporate the revised timeframes addressed in FTR Letter #6, Notice of Regulatory Change for Split Shipments.
  • Revise § 30.28(a) to allow for an electronic process and incorporate the revised timeframes.
  • Revise § 30.28 by removing paragraph (c) because this information is included in the introductory text.
  • Revise § 30.29(a)(1) to remove the phrase ‘‘non-USML goods’’ and add the phrase ‘‘goods not licensed by a U.S. Government agency and not subject to the ITAR’’ in its place.
  • Revise § 30.29(a)(2) to remove the phrase ‘‘USML goods’’ and add the phrase ‘‘goods licensed by a U.S. Government agency or subject to the ITAR’’ in its place.
  • Revise § 30.29(b)(2) to remove the phrase ‘‘non-USML’’ and add the phrase ‘‘goods not licensed by a U.S. Government agency in its place.
  • Revise §30.29(b)(2) to remove the phase ‘‘USML shipments’’ and add the phrase ‘‘goods licensed by a U.S. Government agency in its place.
  • Revise § 30.36(b)(4) to ensure consistency with the Export Administration Regulations.
  • Revise the titles to Subpart E and § 30.45, revise paragraphs 30.45(a), (a)(1) and (b), remove and reserve paragraph 30.45(a)(2) and (a)(3), and remove 30.45(c) through 30.45(f) to ensure consistency with the CBP regulations.
  • Revise § 30.46 through 30.49 by removing and reserving these sections.
  • Revise the introductory text in § 30.50 to replace ‘‘Automated Broker Interface (ABI)’’ with ‘‘Automated Commercial Environment (ACE)’’.
  • Revise the introductory text in § 30.53 to provide more detail for classifying goods temporarily imported for repair and remove paragraphs 30.53(a) and 30.53(b).
  • Revise § 30.74 paragraph (c)(5) to indicate the new division name and revise the address.
  • Redesignate Appendix D as Appendix B. Revise the title to read ‘‘Appendix B to Part 30—AES Filing Citation, Exemption and Exclusion Legends’’ and remove ‘‘I. USML Proof of Filing Citation’’, ‘‘XII. Proof of filing citations by pipeline’’, and renumber remaining entries.
  • Revise new Appendix B numbers III and IV to clarify the dates listed in the examples are the dates of export.
  • Remove Appendices C through F because they are no longer needed to help transition the trade community from the Foreign Trade Statistics Regulations to the Foreign Trade Regulations.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-04-19/pdf/2017-07646.pdf


Exporting to Hong Kong? Don’t Forget Your Written Proof for Hong Kong!

2017/05/11

By: John Black

Effective April 19, 2017, the Bureau of Industry and Security (BIS) has new documentation requirements for export and reexports under licenses and license exceptions to and from Hong Kong.

BIS will  require persons planning on exporting and reexporting to Hong Kong any items subject to the Export Administration Regulations (EAR) and controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons to obtain, prior to the export or reexport, a copy of a Hong Kong import license or a written statement from the Hong Kong Government that such a license is not required. The purpose of this change is to require that the Hong Kong Government issue an import license as an acknowledgement that sensitive EAR-controlled items are entering Hong Kong and as an agreement to prevent unauthorized reexport or transfer of those items to prohibited destinations. Interestingly, the prohibited destination that most concerns the US is the People’s Republic of China (PRC). The EAR treats Hong Kong as a separate “country” from the PRC even though the PRC, the United Nations, and nearly everybody else in the world considers Hong Kong to be part of the PRC because Hong Kong is part of the PRC.

Leaving behind the interesting point that the EAR treats Hong Kong as if it is not part of the PRC, there are a lot of details in this new rule. In addition what was described above, this rule will also require persons planning on reexporting from Hong Kong any item subject to the EAR and controlled for NS, MT, NP column 1, or CB reasons to obtain a Hong Kong export license or a statement from Hong Kong government that such a license is not required.

View full details of the rule at http://www.learnexportcompliance.com/News/The-Export-Control-Update-February-2017.aspx#EAR

BIS FAQs Related to Rule: https://bis.doc.gov/index.php/policy-guidance/foreign-import-export-license-requirements/hong-kong

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-19/pdf/2017-00446.pdf


ITAR Corrected and Additions to Parts 120, 121, 122, 124, 126 and 127

2017/01/31

Effective December 5, 2016, the Department of State has amended the International Traffic in Arms Regulations (ITAR) to clarify recent revisions due to Export Control Reform (ECR), the scope of disclosure of information submitted to the Directorate of Defense Trade Controls (DDTC), the policies and procedures regarding statutory debarments, as well as correcting administration and typographical errors.

The following changes have been made following this final rule:

  • A definition of ‘‘classified’’ is moved from § 121.1(e) to § 120.46;
  • The structure of § 121.1(a)–(e) is realigned, with paragraphs (a) and (b) revised to clarify the existing requirements for United States Munitions List (USML) controls, and paragraphs (c), (d) and (e) removed;
  • Thirteen USML categories are amended to clarify that commodities, software, and technology subject to the Export Administration Regulations (EAR) and related to defense articles in a USML category may be exported or temporarily imported on the same license with defense articles from any category, provided they are to be used in or with that defense article;
  • In three places within the USML, the word ‘‘enumerated’’ is replaced with the word ‘‘described’’ to make the language consistent with changes directed in the Final Rule published at 79 FR 61226, Oct. 10, 2014;
  • Section 122.4(c)(4) is revised to permit the Directorate of Defense Trade Controls (DDTC) to approve an alternative timeframe, not less than 60 days, to the current 60-day requirement for registrants to provide a signed amended agreement;
  • Section 124.2(c)(5)(v) is revised to correct errors to the USML category references for gas turbine engine hot sections, from VI(f) and VIII(b) to Category XIX;
  • Section 124.12 is amended in paragraph (a)(9) to update the name of the Defense Investigative Service to Defense Security Service;
  • Section 126.9 on Advisory Opinions and Related Authorizations is amended to correct paragraph (a);
  • Paragraph (b) of § 126.10 is amended to clarify the scope of control and disclosure of information, however, notwithstanding the changes to paragraph (b) it is the Department’s policy not to publicly release information relating to activities regulated by the ITAR except as required by law or when doing so is otherwise in the interest of the United States Government; and;
  • Section 127.7(b) is amended to clarify the policies and procedures regarding statutory debarments (addressing inadvertent omissions resulting from a prior amendment to that section), and § 127.11 is amended to make conforming revisions to paragraph (c) omitted from prior amendment to that section.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2016-12-05/pdf/2016-28406.pdf