BIS & State Issue Proposed USML to CCL Transition Plans: Part I - Changes to BIS Licenses and Exceptions

The Bureau of Industry and Security and the State Department issued their proposed transition plans for items transitioning from the U.S. Munitions List to the Commerce Control List, pursuant to the Obama Administration’s Export Control Reform (ECR) initiative. In addition, the BIS proposed rule would (1) extend the validity of BIS licenses from two to four years; (2) broaden license exceptions to conform to State’s International Traffic in Arms Regulations exemptions; (3) amend license exceptions for government uses and temporary exports (4) proposed a revised de minimis rule for 600-series USML-CCL transfers; and (5) make additional changes that BIS deems necessary to implement ECR, such as changes to reporting thresholds for the Automated Export System.

Comments on the BIS proposed rule and State’s proposed policy statement are due by Aug. 6.

(This is Part I of a two-part summary of State and BIS’ proposed transition rule, covering changes to BIS licenses. See future issue of ITT for summary of the transition plan, revisions to the de minimis rule for 600-series items, changes to reporting thresholds for AES, etc.)

BIS License Validity Period Would be Extended from Two Years to Four

BIS’ proposed rule would extend the validity period of BIS licenses from two years to four years, with some exceptions, unless otherwise specified on the license at the time that it is issued. BIS said it is proposing this change because current ITAR licenses are currently valid for four years, as compared to two years under the EAR. Exporters may request an extended validity period beyond four years, BIS said, and such requests would be reviewed on a case-by-case basis.

BIS Licenses Would Allow Direct Shipments to Approved End Users

BIS also proposes to change its licenses to allow direct shipments to approved end users. BIS said this change would harmonize the EAR and the ITAR, because BIS licenses generally designate one ultimate consignee and may have many designated end users, but State authorizations may designate multiple foreign end users.

Congressional Notification for Major Defense Equipment Transactions

The proposed rule would require exporters to notify BIS of major defense equipment (MDE) transactions, i.e., any item of significant military equipment having a nonrecurring research and development cost of more than $50 million or a total production cost of more than $200 million. BIS would then notify Congress of such transactions.

BIS said such transactions for EAR items are not required to be notified to Congress because they are for ITAR items. Nonetheless, BIS proposes to institute the procedure.

Changes to Specific Exceptions Include Limiting STA, Broadening TMP and TSU

BIS said it proposed revisions to license exceptions for government uses and temporary export that streamline and update unduly complex or outmoded provisions, pursuant to its regulatory review plan. BIS also said it proposed changes to some license exceptions to broaden certain provisions to implement ECR. Highlights of the proposed changes include:

(BIS said it has no authority to change the scope of license exceptions available for items controlled for missile technology (MT) reasons because of statutory restrictions. Also, license exceptions for specific items, such as firearms, that have not yet been proposed for control under the Export Administration Regulations, will likely be addressed in rules related to those items, it said.)

Strategic trade authorization. BIS proposed to limit use of the Strategic Trade Authorization (STA) license exception to foreign parties that have already received U.S. items under a license issued by either BIS or State. BIS said this change would ensure such parties will have been vetted by a U.S. licensing process. For purchasers, intermediate consignees, ultimate consignees, and end users that have not been vetted, a license would be required even for STA-eligible items, it said, but once that license has been issued, subsequent eligible exports may be made under STA.

Repair and replacement. BIS’ proposed rule would be revised to allow export or reexport of spare parts to be held abroad for future use of up to $500 in total value, and to remove the requirement that the ability to return serviced commodities and software to replace defective or unacceptable U.S.-origin equipment be limited to the original exporters, in order to conform to the ITAR.

Temporary exports. BIS proposed to amend the license exception for temporary imports, exports and reexports (TMP) to say the following:

• Temporary exports under license exception TMP to a U.S. subsidiary, affiliate, or facility abroad would no longer be limited to exports to Country Group B countries in order to make TMP consistent with the ITAR.
• A shipment originating in Canada or Mexico that incidentally transits the U.S. en route to a delivery point in the same country would not require a license, and a shipment by air or vessel from one location to the U.S. to another location in the U.S. via a foreign country would not require a license.

Governments. This rule would add the Wassenaar Arrangement’s Sensitive and Very Sensitive Lists to the EAR as Supplement Nos. 6 and 7 of Part 774, and amend license exception GOV, which previously referred to the items on those lists, to refer instead to these proposed supplements in order to shorten and simplify the text of this license exception. Additionally, BIS’ proposes rule would:

• Exclude software prohibited by proposed Supplement No. 4to part 740¹ from eligibility for GOV
• Expand GOV to authorize items consigned to non-governmental end users, such as U.S. government contractors, acting on behalf of the U.S. government in certain situations, subject to written authorization from the appropriate agency and additional export clearance requirements.
• Add provisions for exports made under the direction of the Department of Defense.
• Expand the scope of countries eligible to receive items on the Sensitive List to include the 36 countries listed as eligible for license exception STA.

Technology and software. BIS’ proposed rule would revise the license exception for Technology and Software- Unrestricted (TSU) to explicitly include training information in authorized operation technology, as it is in the ITAR. BIS also proposes to add TSU authorization for the release of software and technology in the U.S. by U.S. universities to their bona fide and full-time regular foreign national employees and other foreign nationals, as well as an authorization for copies of technology previously authorized for export to the same recipient, to correspond with similar authorizations in the ITAR.

BIS said the authorization would be subject to EAR end-use restrictions and would not be available for encryption-related software controlled for “EI,” other software and technology controlled for “MT.” It also would not be available for nationals of countries subject to U.S. arms embargoes for 600 series items, BIS said.

¹Proposed Supplement No. 4 to Part 740, part of BIS’ November 7, 2011 proposed rule on transfer of aircraft from the USML to the CCL, would prohibit using license exception STA or provisions of license exception GOV other than those authorizing exports and reexports to personnel and agencies of the U.S. Government to export, reexport or transfer software and technology (other than “build-to-print technology”) for the development or production of specified ECCN 9A610.x items. Ref: See ITT’s Online Archives 11110604 for summary.

BIS proposed rule (FR Pub 06/21/12) available here.