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Export Control Reform Kicks Off Next Week – Be Ready

Posted in International Trade and Anti-Corruption Compliance, Uncategorized

On Tuesday, 15 October 2013, the most substantial changes in the history of the two U.S. export control regimes, the International Traffic in Arms Regulations (“ITAR”) and the Export Administration Regulations (“EAR”), go into effect. On that day, certain items formerly controlled under the ITAR begin “migrating” to the EAR.  While these changes should result in greater commercial opportunities for companies conducting international trade, there will be growing pains as the changes are implemented.

Though export controls are generally being relaxed, they are not being simplified.  Some of the major changes include: 

  • Some items previously controlled as Defense Articles under Category VIII (Aircraft and Related Articles) of the U.S. Munitions List (“USML”) will migrate from the U.S. Department of State’s jurisdiction (where they were controlled under the ITAR) to the jurisdiction of the U.S. Department of Commerce (where they will be controlled under the EAR).  While the defense aerospace community is the first to undergo such changes, other categories of the USML will experience similar transitions over time. 
  • USML Category XIX will be created to regulate Gas Turbine Engines and Associated Equipment that remain under the ITAR/State Department’s jurisdiction.
  • New “series 600” Export Control Classification Numbers (“ECCN”) will be created for the EAR’s Commerce Control List (“CCL”) in order to be ready to accept the items migrating from the USML to the CCL.  This is already being referred to within international trade circles as the “iTAR-mini” within the EAR.
  • The key concept of “Specially Designed” will be re-born at part 120.41 of the ITAR.  This term will have far-reaching effects on export jurisdiction and classification determinations under the new export regulations.  Your first step to understanding the new regulatory framework should be to grasp the “catch and release” methodology of “Specially Designed” under the ITAR.
  • EAR License Exception “Strategic Trade Authorization” (“STA”) will be revised to permit the export of many items migrating to series 600 ECCNs on the CCL. This is a positive result, as most of these items were previously subject to more restrictive licensing parameters under the ITAR.  However, ensuring proper usage (and deterring overuse/misuse) of license exception STA will likely become the major focus of the Commerce Department’s Office of Export Enforcement.
  • The EAR’s China Military End-Use Rule (EAR § 744.21) will undergo changes to key definitions and will expand to require licensing for all items migrating from the USML to series 600 ECCNs on the CCL (regardless of end use) before such items may be exported to China.

What’s Next?

  • On 25 October 2013, the current interim final rule regarding ITAR Brokering will become a final rule.
  • On 6 January 2014, certain items previously controlled as Defense Articles under USML Category VI (Vessels of War and Special Naval Equipment), Category VII (Tanks and Military Vehicles), Category XX (Submersible Vessels, Oceanographic and Associated Equipment), and Category XIII (Auxiliary Military Equipment), will migrate from the jurisdiction of the State Department to that of the Commerce Department in a manner similar to what will occur for USML Category VIII on 15 October 2013.
  • At some point in the future, the State Department will issue a final rule providing a revised definition of an ITAR Defense Service.  Don’t hold your breath, however.  Two proposed rules have been issued over the past couple of years, but it is unclear when a final rule will be issued.

For further information or an explanation about the matters discussed here, please contact any of the following attorneys in our International Trade Practice Group.

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