BIS Issues Proposed Rule to Establish "Intra-Company Transfer" License Exception
The Bureau of Industry and Security has issued a proposed rule to establish a new License Exception "Intra-Company Transfer" (ICT) to allow an approved parent company and its approved wholly-owned or controlled in fact entities to export, reexport, or transfer (in-country) many items on the Commerce Control List (CCL) among themselves for internal company use without individual export licenses.
Comments on this proposed rule are due by November 17, 2008.
License Exception ICT Would be Limited to Approved Applicants, Certain ECCNs
BIS is proposing that eligibility for License Exception ICT be restricted to approved eligible applicants and those Export Control Classification Numbers (ECCNs) that are authorized by BIS.
Exports, reexports, and in-country transfers for any purpose other than internal company use would not be authorized under License Exception ICT. (See BIS notice for complete restrictions.)
Proposed Requirements to Qualify for License Exception ICT
In order to be considered for License Exception ICT, BIS proposes to require eligible applicants to meet the following requirements:
ICT control plan. A parent company1 and the entities that it wholly owns or controls in fact2 would be required to maintain an internal control plan (ICT control plan). Upon implementation of the ICT control plan, the parent company would be required to submit the plan to BIS for review.
Additionally, the eligible applicant would be required to submit documentation showing that the ICT control plan has been implemented. Such documentation should include a representative sample of records showing effective compliance with the screening, training, and self-evaluation elements of the ICT control plan. (See BIS notice for complete proposed requirements for the ICT control plan.)
List wholly-owned/controlled in fact entities. The eligible applicant parent company would be required to list the wholly-owned entities and controlled in fact entities that the applicant parent company intends to be eligible users or eligible recipients of this license exception. The eligible applicant parent company would also be required to disclose its relationship with each entity that is intended to be an eligible user and/or eligible recipient.
List ECCNs. The eligible applicant parent company would be required to list the ECCNs of the items it plans to export, reexport, or transfer (in-country) under ICT; and provide a narrative describing the purpose for which the requested ECCNs will be used and the anticipated resulting commodities, if applicable.
BIS audits. The eligible applicant parent company would be required to provide a signed statement by a company officer of the eligible applicant parent company stating that each entity will allow BIS to conduct audits on the use of License Exception ICT.
Principal place of business. The eligible applicant must be incorporated in or have its principal place of business in a country listed in Supplement No. 4 to 15 CFR Part 740.
Terms of ICT Authorization for Approved Parent Companies Would be Specified
Upon reaching a decision, BIS would inform the eligible applicant parent company in writing if it may use this license exception. BIS would specify the terms of the ICT authorization, including identifying the wholly-owned or controlled in fact entities of the eligible applicant parent company that may use ICT and the ECCNs of the items that may be exported, reexported, or transferred (in-country) for internal company use under ICT.
After receiving authorization, approved parent companies and their approved wholly-owned or controlled in fact entities, if covered under the ICT control plan, may use this license exception to export, reexport, or transfer (in-country) approved commodities, software, and/or technology among themselves for internal company use only.
Proposed Annual Reporting Requirements, Biennial Audits
Parent companies authorized to use License Exception ICT would be required to submit an annual report to BIS on the use of this license exception by itself and by its approved wholly-owned or controlled in fact entities, which would include the following:
the name, nationality, and date of birth of each foreign national employee who has received technology or source code under this license exception.
the names of those foreign national employees who previously received technology or source code under this license exception and have ended their employment.
a certification to BIS that the approved eligible applicant parent company and its approved eligible users and eligible recipient entities are in compliance with the terms and conditions of ICT.
BIS would also conduct audits approximately once every two years of approved eligible applicant parent companies and their approved wholly-owned or controlled in fact entities to ensure proper compliance with License Exception ICT. If BIS would have reason to believe that an entity is improperly using ICT, BIS may conduct an unannounced audit at its discretion that is separate from the biennial audit.
Proposed Revision, Suspension, Revocation of ICT Exception Without Notice
As proposed, BIS may revise, suspend, or revoke authorization to use License Exception ICT in whole or in part, without notice. Factors that might warrant such action may include, but are not limited to: use of ICT for other than internal company use, release of controlled items to unauthorized entities or destinations, failure to maintain the ICT control plan initially submitted to BIS as part of the application, and failure to comply with reporting and recordkeeping requirements.
(Note that the proposed License Exception ICT is part of BIS' regulatory agenda for the final six months of the Bush Administration. See ITT's Online Archives or 08/20/08 news, 08082020, for BP summary of this agenda.)
1For purposes of License Exception ICT only, "parent company" would mean any entity that wholly-owns or controls in fact a different entity, such as a subsidiary or branch. The parent company may be incorporated in and conduct its principal place of business inside the U.S. outside of the U.S., with certain location restrictions. The parent company itself may also have an ultimate parent company, meaning the parent company is wholly-owned or controlled in fact by another entity or other entities.
2For purposes of License Exception ICT only, the term "controlled in fact" would mean the authority or ability of an entity, which has been routinely exercised in the past, to establish the general policies or day-to-day operations of a different organization, such as a subsidiary, branch, or office. (See BIS notice for details.)
(See ITT's Online Archives or 09/15/08 news, 08091535, for BP summary of this proposed rule being submitted for OMB review.
(See ITT's Online Archives or 01/30/08 news, 08013020, for BP summary of the President's signing of a package of export control directives to ensure that the export control policies and practices of the U.S. support the 2006 National Security Strategy.
See ITT's Online Archives or 01/23/08 news, 08012330, for BP summary of a Deemed Export Advisory Committee report recommending policy changes, including creating a category of "trusted entities" that qualify for streamlined treatment after meeting certain criteria.)
BIS contact - Steven Emme (202) 482-2440
BIS proposed rule (D/N 071213838-81132-01, FR Pub 10/03/08) available at http://edocket.access.gpo.gov/2008/pdf/E8-23506.pdf