BIS Proposes to Expand, Revise its Export/Reexport Controls for China, Etc. (Part II)

The Bureau of Industry and Security (BIS) has issued a proposed rule to amend the Export Administration Regulations (EAR) by expanding and revising U.S. licensing requirements and licensing policy on exports and reexports of goods and technology to the People's Republic of China (PRC), etc.

This is Part II of a multi-part series of summaries of this proposed rule, and highlights the preamble's description of BIS' proposed revision and expansion of certain license review policies and license requirements, and its proposed revision of certain end-user certificate requirements. See ITT's Online Archives or 07/10/06 news, 06071015, for Part I, which announced the issuance of the proposed rule. See future issues of ITT for additional summaries.

Proposed Revision of License Review Policy and Expansion of License Requirements

According to BIS, this proposed rule would revise and clarify U.S. licensing review policy and add new license requirements as follows:

Policy would approve exports for civil applications, deny exports that contribute to advancement of PRC military capabilities, etc. BIS states that to strengthen U.S. efforts to prevent U.S. exports to the PRC that would make a material contribution to the PRC's military capabilities, it is proposing revisions to its licensing review policy for items controlled on the CCL for reasons of national security (i.e., controlled pursuant to the Wassenaar Arrangement), set forth in 15 CFR 742.4(b)(7).

Specifically, BIS' proposed rule would amend 15 CFR 742.4(b)(7) to reaffirm that the overall national security policy of the U.S. for exports to the PRC of these items is to approve exports for civil applications but generally to deny exports that will contribute to the advancement of Chinese military capabilities.

In addition, BIS proposes to also review license applications for items controlled for chemical and biological proliferation, nuclear nonproliferation and missile technology under 15 CFR 742.2, 742.3 and 742.5, respectively, in accordance with the licensing policies in both paragraph (b) of the particular proliferation section and 15 CFR 742.4(b)(7) when those items are destined to the PRC.

New export control proposed for exports to PRC of otherwise unlicensed CCL items, if destined for military end-use, etc. Consistent with this revised policy and U.S. commitments as a Participating State in the Wassenaar Arrangement, BIS states it is proposing to implement a new control on exports to the PRC of certain CCL items that otherwise do not require a license to the PRC when the exporter has knowledge, as defined in 15 CFR 772.1 that such items are destined for military end-use in the PRC or is informed that such items are destined for such an end-use. (See BIS proposed rule for proposed definition of "military end use.")

BIS states that the additional items that would be subject to this military end-use restriction would be based on interagency review of items listed on the CCL that currently do not require a license for export to the PRC but have the potential to advance the military capabilities of the PRC. This new control would be set forth in proposed 15 CFR 744.21 and would cover general prohibitions, additional prohibitions, license exceptions, license application procedures, license review standards, etc.

According to BIS, applications to export, reexport, or transfer items controlled pursuant to proposed 15 CFR 744.21 would be reviewed on a case-by-case basis to determine whether the export, reexport, or transfer would make a material contribution to the military capabilities of the PRC and would result in advancing the country's military activities contrary to the national security interests of the U.S. BIS states that other end-use controls in 15 CFR Part 744 would continue to apply.

Proposed Revision of End-User Certificate Requirements

BIS states that this proposed rule also proposes that the requirement for exporters to obtain PRC End-User Certificates from the Ministry of Commerce of the PRC be modified as follows:

Proposed end-user certificate requirement for exports to PRC exceeding value threshold. According to BIS, exporters would be required to obtain an End-User Certificate, issued by the PRC Ministry of Commerce, for all items that require a license to the PRC for any reason and exceed a total value of $5,000 per single ECCN entry. Consistent with the existing Regulations, BIS will continue to require End-User Certificates for all computer exports to the PRC that require license applications, regardless of the dollar value of the export.

Exporters would not have to submit PRC End-User Certificates with license applications. This revised requirement would be set forth in revised 15 CFR 748.10. To minimize the impact that this expanded support documentation requirement will have on exporters, BIS also proposes to eliminate the requirement that exporters submit PRC End-User Certificates to BIS as required support documentation provided with the license application. Instead, this rule would require exporters to include the serial number of the PRC End-User Certificate in an appropriate field of the license application, and to retain the PRC End-User Certificate in accordance with the recordkeeping provisions of the EAR.

These changes would be set forth in 15 CFR 748.9, 15 CFR 748.10, and 15 CFR 748.12.

- written comments due by November 3, 2006

BIS contact - Bernard Kritzer (202) 482-0092

BIS proposed rule (FR Pub 07/06/06, D/N 060622180-6180-01) available at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-10504.pdf.