ABOVE:A380 Cockpit

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The Bureau of Industry and Security (“BIS”) has asked for comment on a proposal to eliminate the de minimis rule, in certain instances, with respect to products classified under Category 7A of the Commerce Control List and controlled for missile technology (“MT”) reasons. The de minimis rule permits re-exports of foreign manufactured goods containing U.S. origin components when those components constitute only de minimis content, as defined by the rule, of the final product.

The concern which has prompted the proposed limitation is that the avionics and navigational items controlled by Category 7A for MT reasons might be diverted by foreign governments and be used for missile proliferation. The proposed rule excepts U.S.-origin components incorporated into “standard equipment in FAA (or national equivalent) certified civilian transport aircraft.” The reason for this exception is that in that case there is less likelihood of diversion because, in large part, it seems unlikely that foreign companies or governments would buy civilian aircraft simply to strip out the navigation and avionics in order to incorporate such items into a national missile program. In the case of aircraft components, however, the likelihood of diversion into missile programs is thought to be higher.

The proposed exception is not clearly explained by BIS, but I think it would work like this. If a U.S.-origin Category 7A item controlled for MT reasons is exported to be incorporated in an aircraft component, that component can’t then be re-exported to a third country even if it is to incorporated as standard equipment in an FAA-certified aircraft. However, if the U.S.-origin component is incorporated into the aircraft component and that component is incorporated as standard equipment in an FAA-certified civilian aircraft in the same country, then the de minimis rule would apply to exports of the aircraft.

Comments are requested on what impact this would have on, among other things, the decision by foreign manufacturers to use U.S. components and estimates of U.S. jobs that might be affected by the rule. The deadline for comments, which can be filed by email at [email protected], is January 20, 2009.

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