Export Regulations Are Changing! Is Your Export License Still Valid?

We have previously written on this blog about the upcoming changes to the State Department’s International Traffic in Arms Regulations (ITAR) and Bureau of Industry and Security’s Export Administration Regulations (EAR).  The transition of many United States Munitions List (USML) items (controlled by the State Department’s DDTC) to the Commerce Control List (CCL) 600 Series ECCNs (controlled by the Commerce Department’s BIS) is intended to ease export compliance and allow the State Department to better focus its resources on those items with the greatest national security implications.

The amendments to the regulations concerning the export of these certain defense-related articles articles go into effect on October 15, as a significant number of articles formerly found on the USML transition to the CCL, and the USML itself transitions to a positive list of controlled articles.

With the pending transition of articles formerly exported under a DDTC permanent export license (DSP-5) to BIS control, we have had a number of members ask about the status of DDTC-issued export licenses after the new rules become final on October 15.  Export licenses issued by the DDTC are typically valid for four years, so it will be important for distributors with DDTC-issued export licenses to know for how long, and under what circumstances, those licenses authorizing export of new 600 Series ECCNs remain valid.  (Previously issued BIS export licenses will not be affected by the change.)

Because the ITAR is generally more restrictive than the EAR, the BIS has largely deferred to the transition plan established by the DDTC in its final rule.  The DDTC transition plan contemplates the two possible scenarios in which articles covered by a DDTC export license transition to the 600 Series ECCNs such that they be regulated by the EAR in the future.

The first scenario considers an export license in which ALL articles that are included on the issued export license transition to the CCL. Such a license will remain valid for two years from the effective date of the final rule (October 15, 2013), which means October 15, 2015, or until the license expires, whichever occurs first.  Until that time, there is no need to apply for a new export license and the distributor may rely on the export license as usual.

The second scenario considers an export license in which only some of the articles included on the license transition to the CCL, but others remain on the USML and subject to the ITAR.  In this case, the export license will remain valid until it expires, whether the expiration date is prior to October 15, 2015 or not.  This means that those distributors who find a DSP-5 now lists a mix of USML and CCL items may continue exporting pursuant to that license beyond the October 15, 2015 cutoff date, assuming the license has not previously expired.

Of course, in both cases a license may still be voluntarily returned to the DDTC or otherwise suspended, revoked, or terminated.

Ultimately, in the short term, those distributors exporting pursuant to a DDTC export license issued prior to October 15, 2013 may continue to export under the terms of their validly issued export licenses.  The key factor is that if it is determined that all articles authorized on the license have transitioned to the CCL, then the distributor may only continue to export under the license until October 15, 2015 at the latest.  After October 15, 2015, distributors wishing to continue to export those articles must apply to BIS for the appropriate export licenses, or ship under a valid exception.  Export licenses that continue to authorize at least one article still on the USML will be valid until expiration, at which point application must be made to BIS for future export licenses.

Export issues can often be confusing, even without the challenges of new amendments to the governing regulations.  We have significant experience in handling export compliance matters, so if you have any questions regarding the October 15 transition, or regarding export compliance in general, feel free to call our office with your export concerns.

New Export Rules Released – Should Provide Clearer Guidance to Aircraft Parts Exporters

The rules for exporting aircraft parts are changing!

This morning, the State and Commerce Departments released sweeping new regulations that should make it easier for exporters to identify which regulatory regime applies to dual-use parts and other parts that have caused aircraft parts distributors to be confused about compliance.

The International Traffic in Arms Regulations (ITARs) have traditionally applies to all aircraft parts that are designed, manufactured or modified for use on defense related aircraft (this language comes from Category VIII of the United States Munitions List or USML).  The problem with this definition has been that it often leaves no way for a aircraft parts distritor to conclusively identify which parts really are ITAR-controlled.  For example, a component that was designed for a defense related aircraft but then was later used in civilian aircraft might be ITAR-controlled.  This has included component that was designed for a defense related aircraft but then never used on defense related aircraft (e.g. where the designer lost a bid for a defense contract, and later manufactured the component solely for civilian aircaft).  Another class of problem parts is parts that are dual-use (the part fits on both civilian and defense related aircraft).

This has been a priority for the aviation community – changing the regulations to provide clearer guidance abouut which regulations control the export of any given aircraft part.

Non-Engine Parts

The new regulations, while not perfect, nonetheless do seem to provide clearer guidance.  The revised regulations modify USML Category VIII (the USML Category that applies to aircraft and aircraft parts).  The new langauge creates a “positive list” of parts that will continue to be regulated under the ITARs.  This positive list will include ():

• Parts for the B–1B, B–2, F–15SE, F/A–18E/F/G, F–22, F–35 and the F–117;
• Certain high velocity gearboxes;
• Defense-specific parts, like tail hooks, wing folding systems and bomb racks;
• Certain technical related to export-controlled items;
• Classified items;
• “Commodities, software, and technical data subject to the EAR (§ 120.42 of this subchapter) used in or with defense articles controlled in this category.”

This last category could prove to be a problem if it serves as a back-door to State Department assertion of control over parts that do not seem to fit the other USML-regulated categories but that the State Department argues are “used … with defense articles.”  Otherwise, though, the shift to a positive list should provide much clearer guidance to exporters of aircraft parts.

Note that there is another category of aircraft parts that are regulated under the ITARs.  Inertial navigation systems (INS), aided or hybrid inertial navigation systems, Inertial Measurement Units (IMUs), and Attitude and Heading Reference Systems (AHRS) that are designed for defense aircraft and their parts will be regulated under the ITAR.

Engine Parts

Certain engines and their parts will be controlled under USML Categopry XIX.  Most of these engines appear to have characteristics that are uniquely associated with (1) defense related aircraft and/or (2) armed or military unmanned aerial vehicle systems, cruise missiles, or target drones.

• Certain engines are called-out by designation: GE38, AGT1500, CTS800, TF40B, T55, TF60, and T700 engines.  These will all be ITAR-controlled engines;
• Digital engine control systems controls (FADEC) and Digital Electronic Engine Controls (DEEC) that are specially designed for engines controlled Category XIX will be controlled;
• Parts for any of these engines: AE1107C, F101, F107, F112, F118, F119, F120, F135, F136, F414, F415, J402, GE38, TF40B, and TF60;
• Hot section parts, uncooled turbine blades, vanes, disks, tip shrouds, combustor cowls, diffusers, domes, shells and engine monitoring systems specially designed for any engine controlled under Category XIX;
• Certain technical related to export-controlled items;
• Classified items.

To address the many items that are being moved from State Department’s export control to the Commerce Department’s export control, the Commerce Department has established a new set of ECCNs – the 600 series ECCNs.  Items subject to these ECCNs will have heightened restrictions associated with them – they will often require licenses and the will generally always be required to be disclosed through AESDirect (common exceptions will not apply).

The regulations will require that exports of items on the CCL be accompanied by a Destination Control Statement (DCS) identifying the items as subject to the EAR.  The recommended language for this DCS is:

‘‘These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.’’

For each ‘‘600 Series’’ item being exported, in addition to the DCS, the ECCN must be printed on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad.

The Commerce Department regulations can be found online at http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08352.pdf.

The State Department regulations can be found online at http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08351.pdf.

These new rules will be effective as of October 15, 2013.  Remember that you must remain in compliance with the current regulations until the new regulations take effect!