State, BIS Publish Revised Proposed Definitions of 'Specially Designed'

June 18, 2012 by Brian Feito|Top News

The State Department and the Bureau of Industry Security issued proposed rules containing their definitions of the term “specially designed’ as it appears in the Commerce Control List and the U.S. Munitions List. The State and BIS proposed rules would amend the International Traffic in Arms Regulations and the Export Administration Regulations to create a two-paragraph, “catch and release” definition that would initially define items that are “specially designed” for military applications, then provide exceptions to prevent the definition from overreaching.

BIS also issued a request for comments on the feasibility of creating an exhaustive list of controlled items instead of using the term “specially designed.”

Comments on both proposed rules are due by Aug. 3. Comments on BIS’ request for comments on the creation of an exhaustive list are due by Sept. 17.

(All three Federal Register notices are currently on public inspection, and are set for publication in the Register on June 19.)

BIS Says Definition Necessary to Control USML to CCL Transfers

As part of the Export Control Reform (ECR) initiative, State decided to revise the USML to make it more positive. Concurrently, State and BIS have been publishing proposed rules moving items from the USML to the CCL. BIS, however, said it cannot immediately remove all references to the term “specially designed” and replace it with lists of specific items because multilateral export control regimes rely on the term significantly. Also, BIS has not developed such lists, it said, and such an effort would take many years and require the approval of multilateral regimes. Finally, BIS said it will still use the term in order to avoid inadvertently de-controlling items that have been proposed to move from the USML to the CCL, because the USML relies on many catch-all controls.

BIS Says Definition to Objectively Define “Specially Designed”, Capture USML-CCL Items, Etc.

BIS said this proposed “specially designed” definition would (1) capture the items currently captured under the ITAR “specifically designed, modified, or configured” for a military application catch-all; (2) benefit industry and government because it would confine the term’s use to a single set of regulations for a large volume of items; (3) objectively design the catch-all term “specially designed” and consistently apply carve-outs for items with predominantly civil applications and items that do not have significant military or intelligence applicability; etc.

Nine Objectives Set Out in July 2011 Rule for Proposed Definition

BIS and State said BIS’ July 15, 2011 proposed rule included nine objectives for a revised “specially designed’ definition, as follows:

Preclude multiple or overlapping controls of similar items within and across the two control lists;
Be easily understood and applied by exporters, prosecutors, juries, and the U.S. Government, for example, by using objective, knowable, and clear requirements that do not rely upon a need to investigate and divine the intentions of the original designer of a part or the predominant market applications for such items;
Be consistent with definitions used by the multilateral export control regimes;
Not include any item specifically enumerated on either the USML or the CCL and, in order to avoid a definitional loop, do not use “specially designed” as a control criterion;
Be capable of excluding from control simple or multi-use parts such as springs, bolts, and rivets, and other types of items the U.S. Government determines do not warrant significant export controls;
Apply to both descriptions of end items that are “specially designed” to have particular characteristics and to parts and components that were “specially designed” for particular end items;
Apply to materials and software because they are “specially designed” to have a particular characteristic or for a particular type of end item;
Not increase the current control level to “600 series” control or other higher end controls of items (i.e., not move items currently subject to a lower control status to a higher level control status), particularly current EAR99 items, which are now controlled at lower levels; and
Not, merely as a result of the definition, cause historically EAR-controlled items to become ITAR controlled.

BIS said it believes this proposed definition, as well as State’s companion definition meet these nine objectives.

Proposed Definitions use Two-Paragraph, “Catch and Release” w/ Definition and Exceptions

Both proposed definitions adopt a two-paragraph “catch and release” format, where paragraph (a) contains broad bases for items to be “specially designed,” and paragraph (b) contains various exceptions to an item’s being “specially designed.” State said the exclusions under paragraph (b) would play an important role, because paragraphs (a)(2) and (3) are broad enough to capture all the defense articles that would be potentially “specially designed,” but in practice would capture a larger set of parts, components, accessories, and attachments than is intended. Paragraph (b) would then work to release from inclusion specific and non-specific parts, components, accessories, and attachments, consistent with existing U.S. export control and international commitments, it said. Both State and BIS said their proposed rules are substantially similar.

A summary of the proposed definition, without the examples and notes contained within, is as follows (note that in many cases BIS refers to controlled “items” while State refers to controlled “commodity”):

Begin at “catch,” then see if item is “released.” Both State and BIS said that, when applying this proposed definition, begin with paragraph (a)(1) and proceed through each subsequent paragraph. If an item/commodity would not be controlled by paragraph (a), then it is not necessary to work through paragraph (b).

“Catch” to define “specially designed” items/commodities. Proposed paragraph (a) says an item/commodity is “specially designed if, as a result of development,¹ it: (1) has “properties peculiarly responsible for achieving or exceeding the performance levels, characteristics, or functions” described in the relevant USML paragraph (“relevant USML paragraph or ECCN in the case of the BIS proposed definition); (2) is a part or component necessary for an enumerated (“enumerated or referenced” in the BIS rule) commodity or defense article to function or designed; or, (3) is an accessory or attachment used with an enumerated (“enumerated or referenced” in the BIS rule) commodity or defense article to enhance its usefulness or effectiveness.

“Release” to create exceptions for certain items/commodities. If an item/commodity meets the criteria of paragraph (a), the following exceptions are contained in paragraph (b) to specially designed (only one exception need apply):

It is enumerated in a USML paragraph
It is a single unassembled part of a type commonly used in multiple types of commodities not enumerated on the USML or CCL, such as fasteners, basic hardware, wire, and solder.
It has the same form, fit, and performance capabilities as a part, component, accessory, or attachment used in or with a commodity that: (1) is or was in “production”² (that is, not in development); and, (2) is not enumerated on the USML (or, in the case of the BIS rule, is not enumerated on the USML or is enumerated in an ECCN that is controlled only for antiterrorism (AT) reasons).
Was or is being developed with a reasonable expectation of use in or with both controlled commodities and non-controlled commodities, or use in or with commodities that are not controlled.
Was or is being developed with no reasonable expectation of use for a particular application.

(Both proposed definitions contain numerous notes, definitions, and examples. See notices for detailed definitions and explanations.)

Comments Requested on Objectives, Int’l Obligations, “Bright Line”, Etc.

BIS and State are requesting comments on whether BIS’ proposed definition meets the nine objectives set out in the BIS July 15, 2011, proposed rule and whether this proposed definition would be consistent with the Missile Technology Control Regime’s definition of “specially designed”, as well as whether State’s proposed definition provides a “bright line” and whether it is applicable to all USML categories, respectively.

Separate BIS Request for Comments on Feasibility of Exhaustive List Instead of “Specially Designed”

BIS is also requesting comments on the feasibility of positively identifying “specially designed” “components” on the CCL so as to decrease the use of the term, which appears extensively throughout the CCL, and thereby facilitate enhanced public compliance with the Export Administration Regulations. Specifically, BIS said it is evaluating whether it is feasible to create exhaustive lists of the “specially designed” “components” referred to in certain ECCNs on the CCL that currently use “specially designed” catch-all paragraphs, and seeks public input to assist in this evaluation.

BIS said it does not believe a similar approach is needed for “parts” controlled on the CCL, but BIS also requests public comments regarding whether a similar approach should also be evaluated for “parts” controlled on the CCL.

If BIS ultimately determines that such lists might be beneficial, it said, it intends to submit these findings to the appropriate multilateral export control regimes in the normal course of list proposal changes.

(See ITT’s Online Archives 11071519 for summary of its July 15, 2011 rule, including portions dealing with a proposed “specially designed" definition. See also ITT’s Online Archives 10121021 and 10120921 for summary of State and BIS’ initial requests for comments on the ECR initiative.

See ITT’s Online Archives 12061312 for June 12 comments by a former BIS Rugulations and Procedures Technical Advisory Committee member saying that “specially designed” should be removed from the CCL entirely.)

¹For the purposes of these definitions, “development” is related to all stages prior to serial production, such as design, design research, prototypes, etc.

²For the purposes of these definitions, “production” means all production stages, such as product engineering, manufacture, integration, assembly, inspection, etc.

BIS proposed rule defining “specially designed" (FR Pub 06/19/12) available here.

State proposed rule defining “specially designed" (FR Pub 06/19/12) available here.

BIS request for comments on the feasibility of creating a list of controlled items instead of using “specially designed” (FR Pub 06/19/12) available here.