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Archive for the ‘Export Reform’ Category

Jul

14

Major Rule Implementing Export Reform Released for Public Comment

Posted by Clif Burns at 9:15 pm on July 14, 2011

Category: Export Reform

Export Reform The Bureau of Industry and Security (“BIS”) is publishing in tommorow’s Federal Register a proposed rule setting forth the framework under which items removed from the USML will be treated in the Export Administration Regulations (“EAR”). I haven’t carefully studied all 132 pages, so there will be multiple postings on the proposed rule as I go through it with more care. This post will simply provide a top-level review of what is in the proposed new rule.

First, the commentary to the rule addresses, and dismisses, the supposed dichotomy between the United States Munitions List (“USML”) and the Commerce Control List (“CCL”). Common wisdom tends to distinguish the USML and the CCL by noting that the USML covers military items while the CCL deals only with dual-use items. That, however, is not strictly true. Items with ECCNs ending in 018 are items from the Wassenaar Arrangements military list that are not on the USML. For example, ECCN 9A018 controls non-armed all-wheel drive vehicles capable of off-road use with NIJ Level III ballistic protection. ECCN 0A919 covers certain foreign-produced military items incorporating certain cameras controlled under ECCN 6A003.

Under the proposed rule, items moved from the USML to the CCL will be put in a new “600 series” of ECCNs — that is ECCNs where the third digit is 6, such as, potentially, ECCN 3A601. Items in 018 series ECCNs, such as the Wassenaar Arrangement military items mentioned above, would also be put in one of the new 600 series ECCNs. Items in the 600 series would generally be controlled for National Security Column 1 (“NS1”) reasons which means that they would require a license for all destinations except for Canada. The new license exception STA would not automatically cover items in the 600 series but would require a specific eligibility determination by BIS. Requests for such determination may be made in license applications for 600 series items not already subject to such a determination.

Many of the items that are anticipated to be removed from the 600 series are parts and components of defense articles otherwise covered under the USML. The proposed rule would permit these 600 series parts to be exported under RPL provided that they are one-for-one replacement for parts in a USML defense article lawfully exported under the Arms Export Control Act.

There is much more of interest in the proposed rule, and I intend to devote several more posts to the details.

Public comments are due sixty days after publication of the notice in the Federal Register which, if the notice is published on July 15, will be ~~August~~ September 13, 2011.

UPDATE: Here is the link to the notice in the July 15 Federal Register.

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Jun

16

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

Posted by Clif Burns at 9:51 pm on June 16, 2011

Export Reform Today 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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May

12

Color Me Not Surprised

Posted by Clif Burns at 3:17 pm on May 12, 2011

Category: Export Reform

ABOVE: Ileana Ros-Lehtinen

Ileana Ros-Lehtinen, the Chairman of the House Foreign Affairs Committee and outspoken critic of any changes to the U.S. embargo on Cuba, today announced her opposition to the Obama administration’s proposed export control reforms.

Ultimately, new legislative authorities would be required to implement the administrationâ€™s plan â€“ a plan substantially at variance with the current statutory scheme for controlling defense articles under the Arms Export Control Act and dual-use items under the Export Administration Act, and requiring Committee review. To date, a compelling case has not been made for the wholesale restructuring of our current system, especially one that would include the creation of a costly and perhaps unaccountable new federal bureaucracy.

One might easily question Ms. Ros-Lehtinen’s expertise in the export area by merely pointing out that from her quote she appears to think that the lapsed Export Administration Act is still in force. I bet she still refers to BIS as the Bureau of Export Administration too.

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Dec

15

Proposed Category XII Reforms Leaked — But Not By WikiLeaks

Posted by Clif Burns at 11:10 pm on December 15, 2010

Category: DDTC • Export Reform

laser WikiLeaks has gotten the State Department so flustered that it is leaking its own documents. Today DDTC posted a working document discussing proposed changes to Category XII of the United States Munitions List (“USML”). The document had emblazoned on each page “For DTAG Discussion only, not for release outside of the DTAG.” Fortunately, there was no discussion of voluptuous Ukrainian nurses traveling with a certain flamboyant dictator. Instead, the only things of even remotely prurient interest in the document are things that would only cause the most hard-core export geeks to break a sweat.

Category XII(b) currently controls:

Lasers specifically designed, modified or configured for military application including those used in military communication devices, target designators and range finders, target detection systems, and directed energy weapons.

The DTAG working document would substantially narrow this category. Naturally the “specifically designed, modified or configured for military application” language would go the way of VHS recorders and CRT televisions. Instead three specific classes of lasers would be called out and placed in Tier 2:

a. (ITAR T2) Lasers designed exclusively for directed energy weapons.

b. (ITAR T2) Lasers for target designators containing standard or encoded designator pulse formats

c. (ITAR T2) Lasers specifically designed for infrared countermeasures.

Under this formulation, military communications lasers and target detection systems would not be controlled by the USML and directed energy weapon lasers would only be covered if the laser was exclusively designed for directed energy weapons. And since these lasers would be in Tier 2, these lasers would be exempt from license requirements to countries that are allies and strategic partners.

Even more interesting is the language relating to the proposed new controls on Gen3 night vision:

5. (ITART2) Gen3 image intensification tubes with a FOM of XXXX or more.

6. (ITAR T3) Gen 3 image intensification tubes with a FOM of XXXX or less.

You can spend all day looking for “FOM” in the current controls for night vision set forth in the USML, so it’s interesting to see this concept, long a mainstay of provisos for night vision export licenses, take a step out of the closet and take a bow. “FOM” stands for Figure of Merit which is a performance-based measure calculated from the number of line pairs per millimeter multiplied by the signal-to-noise ratio of the image intensifier tube. Although the FOM number is left blank in the draft, it is likely to around 1600 FOM. This will eliminate most controls on night vision with an FOM under 1600 by placing it in Tier 3 where licenses will only be required for the most sensitive destinations

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Dec

14

Export Reform: Boon for Engineers, Bane for Lawyers?

Posted by Clif Burns at 5:44 pm on December 14, 2010

Category: DDTC • Export Reform

blackboard One of the oft-stated goals of the White House’s export control reform initiative is to transform the United States Munitions List (“USML”) to a “positive” list like the Commerce Control List (“CCL”). Instead of squishy category descriptions like “any snark-qualified widget specifically designed, modified or configured for military application,” you would have a positive, easy-to-apply category description like “any snark-qualified widget, n.e.s., with a height-to-width ratio exceeding 16:9, a weight in excess of 2.4 kilograms, and made from teflon, gorilla tape, or travertine stone.”

Of course, the problem here is that the bright line description, in order not to be overly broad, may need to be so technical that the line is bright only to a highly skilled engineer trained in a particular technology and completely dark and unintelligible to everyone else. Exporters who have struggled with classification under the Commerce Control List are familiar with this phenomenon for high-performance computers, certain digital networking devices and the like.

Now enter the proposed revisions to USML Category VII released last week. In particular, let’s take a look at Category VII(c) which covers vehicle armor. Category VII(c)(7) under the proposed rule would cover “Composite armor with E_m > 1.4 and meeting NIJ Level III or better.” Well, that’s a breath of fresh air, you think, something that will be easy to apply by exporters, young and old.

Not so fast there, bucko. You haven’t seen the definition of E_m yet: