Jun

16

Another BIS Rule That Does Not Mean What It Says It Means


Posted by at 9:51 pm on June 16, 2011
Category: BISExport Reform

Export ReformToday the Bureau of Industry and Security (“BIS”) published a final rule, effective immediately,* implementing the new license exception Strategic Trade Authorization (STA). Under this new license exception, licenses will not be required for exports to 36 countries, including Canada, France, German, Japan and the United Kingdom, of items classified under all but about 30 ECCNs. Exporters relying on license exception STA will be required, among other things, to get certain written assurances from the party receiving the export.

Of course, the new rule follows a long tradition of badly drafted rules in the EAR. The crucial part of the rule reads as follows:

Exports, reexports, and in country transfers in which the only applicable reason(s) for control is (are) national security (NS); chemical or biological weapons (CB);nuclear nonproliferation (NP); regional stability (RS); crime control (CC), and/ or significant items (SI) are authorized for destinations in or nationals of Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, or the United Kingdom.

But wait a minute. With the exception of items subject to control of the Nuclear Regulatory Commission and a handful of Crime Control items, virtually all of the other ECCNs have anti-terrorism (AT) as a reason for control. By not mentioning AT in the list of control reasons eligible for the new exception, the rule, literally and exactly read, means that STA cannot be used for almost every ECCN on the Commerce Control List.

To make things worse, BIS admits that this would be the result if the rule is interpreted to mean what it says but then says that the rule doesn’t mean what it says. Seriously.

Although most ECCNs include antiterrorism as a reason for control, that reason for control currently imposes a license requirement for only five destinations, none of which is eligible for STA. Although the absence of a reference to antiterrorism controls in License Exception STA might cause some readers to conclude erroneously that items controlled for antiterrorism reasons may not be shipped under license exception STA, adding such a reference might cause some readers to conclude erroneously that exports, reexports, and in country transfers to which antiterrorism controls do apply may be consummated under License Exception STA. The latter error has greater potential for harm than the former. Therefore, BIS does not believe that a change to the regulatory text on this point is desirable.

Except this latter “error” — that a reference to AT in the rule would make people think that they could use the AT exception to send things to, say, Cuba — is easily avoided because none of the AT countries are included as permissible destinations for the license exception. So, don’t read the rule literally but read it as if AT was listed as one of the controls eligible for the STA exception even though that’s not what the rule says.

This is why export lawyers will never be lacking for work.

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5 Comments:


Excellent analysis in pointing out the literal implications of this new license exception. You should know better than to apply logic to governmental regulations. Hopefully, BIS will reconsider based on your points made and clarify the STA exception accordingly.

Comment by Mark Stiffler on June 17th, 2011 @ 9:26 am

So, the BIS is saying 1) industry can’t read a list of countries 2) they don’t read/understand their own country group lists/country chart and 3) aren’t serious about any kind of reform.

I think export compliance officers have a good bit of job security too.

Comment by LDM on June 17th, 2011 @ 4:37 pm

Do you think that this could be a move to set up the possibility of placing AG, WA, and NSG all under a single XC regime, or for BIS to internally view them as one in the same?

Comment by Tim on June 18th, 2011 @ 10:42 am

Thank you so much, Clif. I waited to review this new exception until you’d weighed in. I always appreciate your expertise!

Comment by Chris W. on June 20th, 2011 @ 1:59 pm

All of which begs the question: What happens to you when some ambitious ICE agent, bored with deporting illegal aliens, and/or an ambitious AUSA, decide to focus on the actual words of the regulation rather than the “preamble” language in the Federal Register? Of course, the cogniscenti will have read this blog, or at least the Federal Register. But how many ordinary folks, or even lawyers, will know to read the preamble language? I really expected better of the present leadership at BIS.

Comment by Mike Deal on June 20th, 2011 @ 7:32 pm