BIS Issues Supplemental Guidance on Proposed Rule to Expand, Revise Export/Reexport Controls for China, Etc .

The Bureau of Industry and Security (BIS) has issued supplemental guidance to its July 6, 2006 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 (China), etc.

According to BIS, this guidance answers the questions that were most commonly raised at the public meetings that were held on the proposed rule. (See ITT's Online Archives or 08/09/06 news, 06080910, for BP summary announcing BIS' public meetings.)

The questions and answers relate to 1) the proposed new authorization validated end-user (VEU), 2) proposed restrictions on certain military end-uses in China, and 3) the proposed change in scope of the end-user certificate requirement for China.

Highlights of these questions and answers are as follows (partial list):

Proposed Authorization VEU (China and Other Countries)

Proposed authorization VEU would allow unlicensed export/reexport, etc. BIS states that the proposed authorization VEU would allow the export, reexport, and transfer of eligible items by all exporters and reexporters to specified end-users in eligible destinations, including China, without a license. BIS notes that VEU status is pertinent only to transactions where licenses would otherwise be required.

BIS also states that the proposed VEU authorization would be optional; those end-users not wanting such status would continue to be subject to the current export licensing requirements.

VEU requests would be reviewed to see if certain criteria met. BIS states that as an initial matter, prospective VEUs would need to meet a number of criteria, including a demonstrated record of engaging only in civil end-use activities. Specific factors to be evaluated would include the party's compliance with export controls; its capability to comply with the requirements for VEU; its agreement to on-site compliance reviews by representatives of the U.S. Government; and its relationships with U.S and foreign companies.

In addition, when evaluating the eligibility of specific end-users, agencies would consider the implementation of relevant export controls in the eligible destination.

VEU list to be published in EAR. BIS states that a list of validated end-users, eligible items, and eligible destinations would be published in proposed Supplement No. 7 to Part 748 of the EAR.

Proposed License for Items Known to be Destined for Military End-Use in China

New license for exports to China known to be destined for military end-use, etc. BIS states that the proposed rule would implement a new control on exports to China of items classified under 47 Export Control Classification Numbers (ECCNs) identified in proposed Supplement No. 2 to Part 744 of the EAR. These items would require a license to China when the exporter knows that such items are destined for a military end-use in China, or when the exporter is informed by BIS that such items are destined for such an end-use.

Military end-use would be defined to mean: incorporation into, or use for the production, design, development, maintenance, operation, installation, or deployment, repair, overhaul, or refurbishing of items: (1) Described on the U.S. Munitions List (USML); (2) Described on the International Munitions List (IML); or (3) Listed under ECCNs ending in "A018" on the Commerce Control List (CCL) .

BIS states that the proposed rule applies only to military end-uses, and does not specifically address military end-users. The items that would be subject to this military end-use restriction are based on careful interagency review of items listed on the CCL that currently do not require a license for export to China but have the potential to advance the military capabilities of China.

Proposed rule does not change de minimis requirements. BIS states that the proposed rule does not revise the de minimis requirements set forth in section 734.4 of the EAR.

Proposed China-Issued End-User Certificate for Licensed Transactions Over $5000

China end-user certificate requirements would be expanded. BIS states that to facilitate end-use checks and therefore facilitate increased U.S. exports of goods and technologies to China, the proposed rule would require exporters to obtain an End-User Certificate, issued by China's Ministry of Commerce, for all transactions requiring a license to China for any reason, in which the total value of items exceeds $5,000. (The current China End-User Certificate requirement applies only to items controlled for national security reasons.)

BIS states that the new requirement would also extend to those items that would require an export license under the proposed military end-use restriction described in proposed new section 744.21 of the EAR.

Procedures for exporters unable to obtain certificates are unchanged. BIS states that the procedures for exporters unable to obtain such end-user certificates are set forth in sections 748.9(d) and 748.12(d) of the EAR. The proposed rule does not propose to change such procedures.

(See ITT's Online Archives or 07/18/06 news, 06071820, for Part IV of the BP summary of the proposed rule, with links to the other parts.

See ITT's Online Archives or 10/20/06 news, 06102020, for BP summary of BIS' extension of the comment period on the proposed rule to December 4, 2006.)

BIS Supplemental Guidance (dated 10/13/06) available at http://www.bis.doc.gov/finalChina.html