Expediting Export: “600 Series” Articles and License Exception STA

We’ve previously written in this space about ways to take advantage of export license exceptions to more expeditiously serve you customers when exporting “600 Series” articles.  In this article, we’ll take a look at one very specific exception that can help you efficiently work around the license application process when you have a customer with consistent or regular need for certain parts.

License exception Strategic Trade Authorization (STA) authorizes exports to foreign nationals in lieu of an export license that would otherwise be required under the Bureau of Industry and Security (BIS) Export Administration Regulations (EAR). We have occasionally heard from members that after certain license applications they have received communication from BIS stating that the export for which they sought a license was eligible for license exception STA and asking why the exporter had not elected to use STA.  We have not heard of anyone being told they should be using STA, and the licenses were typically issued; these inquiries are generally informational by BIS.

STA is a useful license exception for those exporters doing regular, predictable business with a specific customer; for example a customer that requires a dozen units on a monthly basis, for which an export license is required.  When each export shipment requires a license both the exporter and BIS must spend time and resources processing that application.  STA allows the exporter to legally bypass that delay.

The transition of many formerly ITAR-controlled articles to the new “600 Series” ECCNs has resulted in a corresponding shift in license application processing burden away from the DDTC (good news for exporters of ITAR-controlled articles, whose average application processing time continues to decline) and toward BIS, which has seen an increase in license application processing times, as more controlled articles fall within BIS’s regulatory sphere.  One way BIS is able to reduce processing times and relieve some of its own burden is to encourage (correct) use of license exceptions.  For regular and predictable exports STA is a good way to save time and reduce costs for both exporter and BIS, hence BIS’s outreach after applications that appear to be a good fit for use of STA.

STA is a valuable—but under-utilized—license exception.  This is because unlike a number of other exceptions it requires quite a bit of up-front planning and coordination with the customer. Because of this additional effort, we must first understand how STA works generally, and then the specifics that apply to “600 Series” articles.

The License Exception STA Process

As a threshold matter, the exporter seeking to use exception STA must ensure that the article is controlled only for a reason identified in an authorizing paragraph of the regulation.  Articles controlled for reasons National Security (NS), Chemical or Biological Weapons (CB), Nuclear Nonproliferation (NP), Regional Stability (RS), Crime Control (CC), or Significant Items (SI) are authorized for destinations in Country Group A:5.  Those articles controlled only for reason NS and not otherwise restricted by the ECCN are authorized to Country Group A:6.

Once the exporter has determined that the destination is eligible for license exception STA the exporter must satisfy a series of conditions.  First, it must provide to the consignee the ECCN of each discrete article that will be shipped under exception STA. This is a one-time requirement for each article and the ECCN does not need to be provided for subsequent shipments, assuming all information remains accurate.

Next, after providing the ECCNs to the consignee, but prior to shipping any articles, the exporter must obtain and keep in its records a written Consignee Statement. One statement may be used for multiple shipments, provided the items, parties, party names, item descriptions, and ECCNs are the same and remain correct. The exporter must retain a record of each shipment made under each particular Consignee Statement.  Don’t forget the paperwork!

15 C.F.R. § 740.20(d)(2) provides the specific text that must be included in each Consignee Statement.  Among other things, the Consignee Statement must identify the articles, ECCNs, and parties to the transactions, and include clauses acknowledging the restrictions and responsibilities of the parties. Each Consignee Statement should use the exact template language stated in the regulation.

Finally, the exporter must notify the consignee in writing (email and fax are permissible) for each shipment under license exception STA.  The notice must clearly identify the shipment and identify the specific items (or whole shipments) that are being shipped pursuant to STA.

Note that different rules apply under STA for software and technology releases.

“600 Series” Restrictions

Though valuable, license exception STA does entail some obvious additional effort.  Even further considerations arise when using STA for the export of “600 Series” ECCNs.  Additional restrictions make sense when we recall the”600 Series” articles are those articles that until very recently were controlled under the ITAR and therefore merit a greater level of control.

 First, STA may not be used when the articles are specifically identified by the ECCN as ineligible.  Second, a “600 Series” article may be exported to a non-governmental person in a group A:5 country only if the ultimate end user is the armed forces or other governmental agency of the country; “600 Series” articles may not ship to non-governmental end-users under STA. Third, STA may not be used to export certain “600 Series” end items, such as a completed aircraft under 9A610.a or Major Defense Equipment when the value to be exported exceeds $25 million.

Finally, in order to export “600 Series” items under STA, the purchaser, intermediate and ultimate consignees, and end user must previously have been approved on a license or other approval issued by the DDTC or a general correspondence approval from BIS. The exporter must also ensure language specific to “600 Series” articles appears on the prior Consignee Statement.

Whew!

License exception STA can be a very useful tool for companies that do regular business with a customer and have to repeatedly apply for an export license for the same articles.  Given the amount of preparation involved, STA is not very useful for one-off or only occasional shipments.  But those exporters with regular supply contracts to foreign governments (for example) may find STA a very efficient way to reliably service their customer (without risking license delays or the occasional government shutdown).

Although it cannot be used for every article, STA does allow the exporter to save significant time and money by eliminating the need to prepare a license application and the delay in waiting for approval.  It is also among the more complex and technical of the export license exceptions.  Because of the complexities involved, companies seeking to take advantage of license exception STA are advised to consult with an export attorney to ensure proper compliance.