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AEB White Paper
Navigating the U.S. Export
Control Reform
Basic principles of the ECR and 5½ key points you need to know
Software, consultancy and services for global trade and supply chain management
A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Contents
Executive summary03
Introduction to the U.S. Export Control Reform (ECR)
04
Basic principles of the Export Administration Regulations (EAR)05
Determining jurisdiction
05
Export Control Classification Numbers (ECCN)
06
Identifying the correct ECCN
06
Understanding “De minimis” calculations
07
Being aware of the General Prohibitions
08
Main elements of the U.S. Export Control Reform
09
The “600 series” 09
Strategic Trade Authorization (STA)
09
Consolidated Screening List
10
5 ½ key points you need to know
12
1 “Specially Designed” 12
2 Transitioning from ITAR License Exemptions to EAR License Exceptions
13
3 Transition procedures
14
4 Paragraph (x)
15
5 Technology transfer after Export Control Reform
16
5 ½ Compliance through automation: how IT can help
17
What is a white paper?
18
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Executive summary
Under the U.S. Export Control Reform
manner to the ITAR, the ECR requires
(ECR), a very large number of items that
­European companies to understand aspects
were previously classified as munitions
of the EAR − including its licensing provisions
items under U.S. export controls laws and
and exceptions, its rules concerning the ­
regulations are currently being transferred
use of U.S.-origin technology in overseas
from the United States Munitions List
­development and production, and other
(USML), administered by the Department ­
­features − that they did not have to consider
of State, to the Commerce Control List
before.
(CCL), administered by the Department
of Commerce.
Due to the extraterritorial reach of U.S. export
control regulations, it is important that
This reform represents a significant
­non-U.S. companies are aware of their
development for European companies
­obligations and seek the relevant authorizations,
that utilize U.S.-origin goods, software,
even if they are not located in the U.S., in order
technology, and related services in a wide
to avoid non-compliance risks. Violations of
range of industry sectors including aerospace,
U.S. export control regulations may result
automotive, defense, information technology,
in severe criminal and/or civil penalties
telecommunications, and software development.
­including fines and even imprisonment
One of the U.S. Government’s ECR objectives
for those responsible such as managing
is to reduce the license burden on those
­directors or members of the managing
companies that export to allies and partners,
board.
and allow for more flexible controls under
the EAR. However, the changes will also
This paper provides an overview for companies
bring new challenges, including for non-U.S.
that are currently not familiar with the
companies.
EAR. It introduces the basic principles of
the EAR and highlights key changes resulting
Many of the companies affected by ECR
from the ECR, including the re-definition of
changes have been, prior to ECR, primarily
what it means for a product to be “specially
focused on dealing with the International
designed” for a military end-use, the new
Traffic in Arms Regulations (ITAR) that control
Strategic Trade Authorization, and the
the export and import of defense-related
­transition procedures relating to the items
­articles and services on the USML. Now that
that have moved from the USML to the CCL.
a large number of items are being transferred
to the CCL, these companies need to familiarize
We hope that this paper will provoke thought
themselves with the Export Administration
amongst those who wish to mitigate export
Regulations (EAR) as licenses may now be
control compliance risks in their supply
required from the Department of Commerce.
chains.
As the EAR is structured in a very different
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Introduction to the U.S. Export
Control Reform (ECR)
Following an interagency review of the U.S.
within a new export control classification
export control system in 2009, the Obama
number (ECCN), such as the new ‘600 series’
Administration launched an Export Controls
or ‘9Y515’ (for spacecraft/satellites). Only
Reform Initiative (ECR Initiative) with the
less sensitive items that previously were
aim of simplifying U.S. export controls
designated as military items will move from
while enhancing U.S. security.
the USML to the CCL. Licenses will still be
required for those items in many cases,
The ultimate goal of the reform is to consolidate
although the EAR contains certain “license
the two primary control lists – the USML
exceptions” that may be available, as detailed
and the CCL – into a single control list
further below.
administered by a single agency that will be
responsible for export controls. That objective
It is expected that there will be additional
is being achieved through a three phased
resources allocated to the enforcement of
process:
the EAR rules for items that have moved
PHASE 1
from the USML to the CCL.
Methodology developed for rebuilding
Other activities that have already taken
control lists – completed October 2010
place as part of the ECR include:
PHASE 2
Restructuring the USML and CCL – in
progress
PHASE 3
Merge USML and CCL into one single list
controlled by one agency – not yet started
Phase 1 has been completed and phase 2
The consolidation of 9 different party
screening lists from the Departments of
State, Commerce and Treasury to form
a single electronic list for companies to
screen against;
■■ The introduction of a new license exception
‘Strategic Trade Authorization’ (STA); and
■■ An ITAR policy change on screening
employees of approved end-users where
the employee is a dual or third country
national.
■■
is well underway with many of the USML
categories reviewed. Typically, the majority
of items moved to the CCL have been grouped
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Basic principles of the Export
Administration Regulations (EAR)
Determining jurisdiction
If the products or technical data are not
Determining which U.S. federal agency has
­covered by the USML, then the Department
jurisdiction over your products, technical
of Commerce will most likely have jurisdiction.
data and services is a key step in the process
The U.S. Government provides a step-by-step
of identifying whether a U.S. export license
guide to determine whether EAR applies, at
is required. Notably, EAR and USML
the following link:
­jurisdiction can apply merely on the basis
http://www.ecfr.gov/cgi-bin/retrieveECFR
that goods, software, or technology are of
?gp=&SID=3fe54a3b88721bbe887775ddf
U.S.-origin or contain U.S. content – there
cb1aed8&n=pt15.2.732&r=PART&ty=HTM
is no need for the product to be located in
L#se15.2.732_12
the United States, or for U.S. parties to be
involved in the export or re-export transaction.
However, for U.S.-origin goods already located
(A “re-export” occurs under U.S. trade controls
outside of the U.S., the following review process
law when an item is exported from a
is typically undertaken by companies
­destination located outside of the United
dealing with products that are potentially
States – for example, shipping a U.S.-origin
controlled as munitions items:
item from the United Kingdom to France is
classed as “re-export” under U.S. law.)
1. Review the USML;
2. If the USML does not apply then determine
The U.S. Department of State has export
if the EAR is applicable (based on an
control jurisdiction over the export of defense
­assessment including whether the item is
items under the ITAR, while the U.S.
of U.S. origin, or whether it contains
­Department of Commerce has export
­greater than de minimis U.S. content
­control jurisdiction over the export of
­dual-use items and items that have strictly
civilian or commercial uses under the EAR.
­under standards set forth in the EAR);
3. I f the EAR is applicable, then refer to
the CCL and the EAR Country Chart to
determine if a U.S. license is required.
For companies working in the aerospace,
Also consider whether any EAR license
defense and space sectors, a key initial step
exceptions are available.
is to determine whether the products and
technical data are listed on the USML. The
Notably, a non-U.S. company receiving
latest version of the USML is available online at:
and re-exporting U.S. controlled items is
https://www.pmddtc.state.gov/
­responsible for ensuring the correct
regulations_laws/documents/official_itar/
­jurisdiction and classification of the items
ITAR_Part_121.pdf
even if this information has been provided
to them by their supplier.
Companies that are unsure about whether
the USML covers their products may seek a
Commodity Jurisdiction (CJ) ruling from
the Department of State, which will determine
whether the product is captured under the
USML.
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Export Control Classification
Numbers (ECCNs)
The first character (digit) of the ECCN
Export Control Classification Numbers
second character identifies the product
­(ECCNs) are a fundamental component for
group. The ECCN 3A001, for example, would
determining whether a license is required
designate that the item is in the Electronics
from the Department of Commerce for (re-)
Design Development and Production category
export to a particular destination. The
and in the Systems, Equipment and
ECCN is a five character alphanumeric code
­Components product group of this category.
­identifies the category the item falls in; the
which identifies the technology parameters
and the capabilities of a dual-use item for
Five Product Groups
export control purposes. All ECCNs are
A. Systems, Equipment and Components
B. Test, Inspection and Production
Equipment
C. Material
D. Software
E. Technology
­listed in the CCL, which is divided into ten
broad categories that are further subdivided
into five product groups.
Commerce Control List Categories
0 = Nuclear Materials Facilities &
Equipment [and Miscellaneous Items]
1 = Materials, Chemicals,
­Microorganisms and Toxins
2 = Materials Processing
3 = Electronics Design Development
and Production
4 = Computers
5 = Telecommunications and
­Information Security
6 = Sensors and Lasers
7 = Navigation and Avionics
8 = Marine
9=A
erospace and Propulsion
Identifying the correct ECCN
There are several ways to determine the
3=E
lectronics Design Development
and Production
A=S
ystems,
Equipment and
Components
3A001
3. R
equest an official classification from
BIS
ECCN for your product:
Low-level technology, consumer goods, etc.
1. Contact the manufacturer, producer or
are generally not listed on the CCL. Such
developer to request the ECCN
2. Self-classify
items are designated under the ECCN EAR99
and will generally not require a license for
The U.S. Department of Commerce,
export or re-export. EAR99 items may,
­Bureau of Industry and Security (“BIS”)
however, require a license if they are
has provided a decision tool to assist
­destined for an embargoed or sanctioned
­self-classification:
country, addressed to a party of concern,
http://www.bis.doc.gov/index.php/
or in support of a prohibited end-use.
export-control-classificationinteractive-tool
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Understanding “De minimis”
calculations
determines whether the item is subject to
A “see through” principle applies under
are intended to be exported to and, in some
the ITAR. This means that a single ITAR
cases, the ECCN of the item.
EAR differs depending on where the goods
component in an assembly remains subject to
ITAR controls regardless of its incorporation
Some examples of this include:
into the finished product or assembly. In
contrast, when EAR-controlled hardware,
software, or technology are incorporated
into a foreign made (foreign to the U.S)
assembly, the “de minimis” calculation
process is used to determine whether the
finished product or assembly is subject to
EAR.
EAR de minimis calculations are typically
based on a fair market value of the product
and the controlled components / technology
contained within. The threshold which
“600 series” & 9Y515 .a - .x items: 0%
to Country Group D:5, 25% to all other
destinations.
■■ “600 series” & 9Y515 .y items: 0% to
China, Russia, Venezuela or Country
Group E:1, unlimited to all other
destinations.
■■ Non-“600 series” & non-9Y515 items:
10% to Country Group E:1, 25% to all
other destinations.
■■ Non-“600 series” & non-9Y515 AT only:
10% to Country Group E:1, unlimited to all
other destinations.
■■ EAR99: 10% to Cuba, N. Korea and Syria
(except food and medicines), unlimited to
all other destinations.
■■
GENERAL PROHIBITION TWO
Being aware of the General
Prohibitions
Re-export and export from abroad of
The EAR lists 10 General Prohibitions and,
foreign-made items incorporating more
if one or more apply, (re-)export must not
than a de minimis amount of controlled
be made without approval from the U.S.
U.S. content (U.S. Content Re-exports).
Department of Commerce in the form of an
export license or an EAR License Exception.
GENERAL PROHIBITION THREE
Re-export and export from abroad of
The 10 General Prohibitions are listed within
foreign-produced direct products of U.S.
the Electronic Code of Federal Regulations
technology and software (Foreign-Produced
(ECFR):
Direct Product Re-exports).
http://www.ecfr.gov/cgi-bin/text-idx?SID=
GENERAL PROHIBITION FOUR
2d66443dde0919544032311c0e9e4449
(Denial Orders) — Engaging in actions
&node=se15.2.736_12&rgn=div8
prohibited by a denial order.
GENERAL PROHIBITION FIVE
GENERAL PROHIBITION ONE
Export and re-export of controlled
Export or re-export to prohibited end-uses
or end-users (End-Use End-User).
U.S.-origin items to listed countries.
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
GENERAL PROHIBITION SIX
GENERAL PROHIBITION NINE
Export or re-export to embargoed
Violation of any order, terms, and
destinations (Embargo).
conditions (Orders, Terms, and Conditions).
GENERAL PROHIBITION SEVEN
GENERAL PROHIBITION TEN
Support of Proliferation Activities
Proceeding with transactions with
(U.S. Person Proliferation Activity).
knowledge that a violation has occurred
GENERAL PROHIBITION EIGHT
or is about to occur (Knowledge Violation
to Occur).
In transit shipments and items to be unladen
from vessels or aircraft (In transit). (This
Source: bis.doc.gov.
prohibition only applies to transits through
a small number of countries: Armenia,
Azerbaijan, Belarus, Cambodia, Cuba,
Georgia, Kazakhstan, Kyrgyzstan, Laos,
Mongolia, North Korea, Russia, Tajikistan,
Turkmenistan, Ukraine, Uzbekistan, and
Vietnam.)
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Main elements of the
U.S. Export Control Reform
The “600 series”
and consequently licenses from Commerce
One of the most significant changes
will be required to export and re-export
­introduced with the Export Control Reform
most “600 series” items (except to Canada),
is the addition of the “600 series” to the
unless an EAR License Exception is available.
CCL. The “600 series” is comprised of less
sensitive military items that were formerly
Given the special nature of these items, a
captured under the USML and hence subject
heightened control structure is in place for
to the ITAR. Moving these items to the CCL
“600 series” items that is not applicable to
allows for more flexible controls under the
other items on the CCL. Some examples
EAR so they can be exported to NATO
­include the following restrictions for “600
countries and other U.S. allies more easily.
series” items:
The “600 series” derives its name from the
■■
3rd character of the ECCN, e.g. 9A610.
These items have moved from the jurisdiction
of the U.S. Department of State, Directorate
of Defense Trade Controls (DDTC) to the
Bureau of Industry and Security of the U.S.
Department of Commerce. This does not
mean, however, that these items no longer
require a license for export. “600 series”
Information on all exports must be filed in
AES regardless of value or destination.
■■ Special limitations and restrictions apply
to the License Exceptions available for
these items.
■■ There is no de minimis threshold for
­foreign-made items that incorporate
­U.S.-origin “600 series” items destined
for countries subject to U.S. arms
­embargoes.
■■ Special reporting under the Wassenaar
­Arrangement for certain “600 series”
items.
items retain their nature as military items
Strategic Trade Authorization (STA)
and “600 series” items to STA-eligible
The revised license exception Strategic
­countries without a transaction-specific
Trade Authorization (STA) of the EAR is
­license, provided certain conditions are met.
­designed to ease trade between the United
Note that some ECCNs and some reasons
States and its allies and close partners.
for control are excluded from the STA.
Some transactions that would have been
conducted under a license prior to the
Given the sensitive nature of some of the goods
Export Control Reform may now be possible
involved, certain enhanced compliance
under this exception, thus reducing the
­requirements apply to the STA. For example,
­administrative burden on exporters
prior to receipt of STA-eligible items, foreign
­including those that regularly supply “600
importers must provide a statement that
series” items for end-use to U.S. allies.
they will not ship or transfer in violation of
the U.S. EAR including any relevant end-use
The STA allows export, re-export, and
and end-user restrictions. They must also
transfer (in-country) of certain dual-use
certify that: they are aware the items are to
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
be shipped under the STA; they have been
­Defense Equipment” that can be shipped
informed of the ECCN and which party this
with the STA. Additionally, the purchaser,
was by; and there are no subsequent License
intermediate consignee, ultimate consignee,
Exception Additional Permissive Reexports
and end-user must all have previously been
(APR) (a) or (b) shipments. They also need
approved on a license issued by BIS or the
to maintain appropriate records and agree
DDTC.
to provide relevant documents to the U.S.
Government upon request.
BIS has made a tool available online to help
companies determine if they are eligible for
Any subsequent re-exporter or transferor
the STA:
must notify any subsequent consignee of
http://www.bis.doc.gov/index.php/
each item shipped under the authority of
interactive-sta-compliance-tool
STA and furnish the ECCN of the item.
Additional safeguards apply to “600 series”
items including value limits on “Major
Consolidated Screening List
Screening all parties involved in a transaction
is a fundamental part of a company’s U.S.
trade controls compliance programme. The
U.S. Government has consolidated 9 different
screening lists from the Departments of State,
Commerce and Treasury that can be used as
a single resource for screening.
The following lists have been consolidated:
Denied Persons List – Individual and
­entities that have been denied export
­privileges – Department of Commerce
■■ Unverified List – End-users who BIS has
been unable to verify in prior transactions
– Department of Commerce
■■ Entity List – Parties whose presence in a
transaction can trigger a license requirement
supplemental to those elsewhere in the
Export Administration Regulations (EAR) –
Department of Commerce
■■ Nonproliferation Sanctions – Parties
that have been sanctioned under various
­statutes – Department of State
■■ AECA Debarred List – Entities and
­individuals prohibited from participating
­directly or indirectly in the export of defense
articles, including technical data and
­defense services – Department of State
■■
Specially Designated National List – Parties
who are subject to asset blocking measures
under U.S. sanctions regulations –
­Department of the Treasury
■■ Foreign Sanctions Evaders List – Foreign
individuals and entities determined to
have violated, attempted to violate,
­conspired to violate, or caused a violation
of U.S. sanctions on Syria or Iran, as well
as foreign persons who have facilitated
deceptive transactions for or on behalf
of persons subject to U.S. Sanctions –
­Department of the Treasury
■■ Sectoral Sanctions Identifications (SSI)
List – Parties operating in sectors of the
Russian economy with whom U.S. persons
are prohibited from transacting in, providing
financing for, or dealing in new debt or
equity with a maturity of longer than 90
days – Department of the Treasury
■■ Palestinian Legislative Council (PLC) List
– Individuals of the PLC who were elected
on the party slate of Hamas, or any other
Foreign Terrorist Organization (FTO), Specially
Designed Terrorist (SDT), or Specially
­Designated Global Terrorist (SDGT) –
­Department of the Treasury
■■
If a party to a transaction is matched
against the Consolidated Screening List,
­additional investigation is required to
­understand what this means for the
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
­continuation of the process. It could mean
­national employees of foreign end-users.
the transaction cannot continue at all, an
The rule eliminated the need to obtain prior
authorization is required from the U.S.
approval for transfers of unclassified defense
government, or other restrictions apply.
articles (including unclassified technical data)
It should be noted that part of this process
employees of foreign business entities, foreign
when using the Consolidated Screening List
government entities, or international
is to ensure it is holding the most current
­organizations that are approved end-users
data. If the date on any updated individual
or consignees (including approved
list is more recent than the date on the
sub-­licensees) for such defense articles.
­consolidated list, then the individual list
Use of the exemption is subject to fulfilling
prevails and must be used.
certain screening and recordkeeping
to dual national or third country national
requirements. In particular, in lieu of
Screening of dual or third country
employees
prior approval, the rule requires eligible
As part of the ECR, in August 2011, the
procedures to prevent diversion to
­Department of State added a new license
destinations, entities, or for purposes other
­exemption (126.18) for transfers of defense
than those authorized by the applicable
articles to dual national or third country
export license or other ­authorization.
companies and o­rganizations to implement
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
5½ key points you need to know
1 “Specially Designed”
Under ITAR, the “specially designed” criteria
One of the key changes introduced with the
may be used in an ECR-revised USML category
U.S. Export Control Reform is a definition
and when the term is used in the control
for the term “specially designed” which
text of a specific USML entry. If the control
addresses previous ambiguity between
text of the USML entry does not state
the respective interpretations of the
­“specially designed”, then this criteria
­Departments of Commerce and State
­cannot be used. Note that “specially designed”
regarding “design intent”.
is not the same as „specifically designed or
modified“ and therefore these terms cannot
The creation of a single common definition
be used interchangeably.
under EAR and ITAR (with minor differences
in wording between the two) will make it
The Departments of State and Commerce have
­easier for the exporting community to identify
made available tools that help companies
whether their products are subject to export
decide whether they should apply the
controls as “specially designed” items. With
­“specially designed” definition to their
the new changes, the determination is now
­products under ITAR and EAR respectively:
conceived to be an objective and sequential
http://www.pmddtc.state.gov/licensing/
process of analysis by answering a series of
dt_SpeciallyDesigned.htm
yes/no questions.
http://www.bis.doc.gov/index.php/
The full EAR sequential analysis for
specially-designed-tool
­“specially designed” is set forth in Part 772
of the regulations:
http://www.bis.doc.gov/index.php/
forms-documents/doc_view/838-772
Additional guidance on the order of review
of “specially designed” can be found in
­Supplement No. 4 to Part 774 of the EAR:
https://www.bis.doc.gov/index.php/
forms-documents/doc_download/987-774
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
2 Transitioning from ITAR License
­Exemptions to EAR License Exceptions
ITAR, then it should also be possible to use
a license exception under the EAR.
One of the guiding principles established by
the export control agencies – the Departments
To ensure that the “600 series” items are not
of Commerce, State, and Defense – is that as
more strictly controlled under the EAR, BIS
a result of the ECR, the rules governing the
has undertaken a comprehensive review of
thousands of “600 series” items that have
license exceptions to harmonize them with
moved across from USML to CCL should not
ITAR exemptions.
be more restrictive than they were prior to
the reform. This also means that if it was
The following license exceptions are
possible to use an exemption under the
­available for “600 series” items:
Exception
Description
LVS § 740.3
Low value shipments ($1500 for most 600 series commodity ECCNs)
TMP § 740.9
Temporary exports (tools of trade, exhibition/demonstration, certain exports to U.S. person’s
facility abroad); certain returns of items temporarily in the U.S.; temporary exports of personal
protective equipment
GOV § 740.11
Personnel and agencies of USG, including contractor support personnel; certain shipments for
or on behalf of USG and DoD-directed shipments; cooperating governments; NATO agencies
and Cooperating Governments
TSU § 740.13
Operation technology/software; sales technology; technology/source code in the U.S. to
bona fide, full-time regular employees of U.S. universities; copies of technology previously
authorized
BAG § 740.14
Certain personal protective equipment with U.S. person’s baggage or effects
STA § 740.20
600 series for Country Group A:5
Exporters should review their operations to
exceptions, particularly STA, go beyond the
assess whether the move to the more flexible
exemptions previously available under the
EAR regime might potentially open up new
ITAR.
business opportunities. The above license
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3 Transition procedures
Option 1: Grandfathering
During the transition period as commodities
Grandfather the existing ITAR licenses,
are moved from the USML to the CCL, there
­agreements or other approvals beyond the
is the challenge of deciding which authorization
effective date of final rule. Grandfathering
to apply, and from which jurisdiction.
is a concept which allows for the use of the
original authorization from the Department
There are a number of options available
of State to continue to be used for (re-)export
when deciding which authorization to use
even after the commodities have moved
when re-exporting items that have moved
from the USML to the CCL. The rules of
from the USML to the CCL during the
­application depend on the type of
­transition period. The decision is influenced
­authorization held, the expiry of the
by a number of factors including the expiry
­authorization, and whether there has been
date of existing authorizations and the
an amendment to the authorization. The
­effective date of the final ruling from the
­following table details this:
DDTC (https://www.pmddtc.state.gov/
ECR/index.html).
Authorization
Contains only items transitioning to CCL
Contains both transitioning and
non-transitioning items
DSP-5
May use for up to 2 years after effective
date of transition unless license expires, is
otherwise invalidated, or is returned. May
amend (through a DSP-6) after effective date
on case-by-case basis.
Valid for all items until expiration. May
amend (through a DSP-6) after effective date
on case-by-case basis.
DSP-61
DSP-73
Valid until expiration. May amend (through
a DSP-62 or 74) after effective date on
case-by-case basis.
Valid until expiration. May amend (through
a DSP-62 or 74) after effective date on
case-by-case basis.
May use for up to 2 years after effective
date of transition unless agreement expires.
May amend after effective date if defense
services are being provided and an
agreement is necessary.
May use for up to 2 years after effective
date of transition unless agreement expires.
Agreement may be kept valid beyond the
2 year period by submitting amendment
to ­authorize transitioning items under
§ 120.5(b).
TAA
MLA
WDA
Source: https://www.pmddtc.state.gov/faqs/ecr.html#f
It is worth noting that the limitations and
to the CCL. This may be a good reason to
provisos of the ITAR authorization used
consider option 2 below as the preferred
­apply even if the commodities have moved
­option.
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A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
Option 2: Maintain DDTC authorization
until effective date of ECR rule
Continue to use the existing authorizations
Option 4: Obtain DDTC license,
agreement or other approval if eligible
under 120.5 (b) of ITAR
issued from the Department of State under
There are situations where exports of
ITAR until the effective date of the ECR rule
­commodities controlled under the CCL can
(when the commodities move from the
continue to be authorized by the DDTC.
USML to the CCL). If this option is chosen,
These involve situations where:
the activity of identifying authorizations,
and where necessary applying for licenses
from BIS, must take place ahead of time so
that the authorizations are in place and ready
for use from the effective date of the rule.
Option 3: Obtain BIS license, use
license exception, or No License
Required (NLR) where eligible
Where an authorization does not already
exist and the effective date of the ruling has
passed, the authorization should be obtained
from BIS. A non-U.S. company can apply
­directly to BIS for licenses and can make
The purchase documentation (e.g.
purchase order, contract, letter of intent,
or other appropriate documentation)
­includes both defense articles described
on the U.S. Munitions List and items on
the CCL;
■■ The commodities, software, and technical
data subject to the EAR are for end-use in
or with the USML defense article(s)
­proposed for export; and
■■ The license application separately
­enumerates the commodities, software,
and technical data subject to the EAR
in a USML “(x)” paragraph entry.
■■
Source: ITAR Part 123.1 (b)
full use of exceptions.
4 Paragraph (x)
software, and technical data subject to the
With the introduction of the U.S. ECR,
EAR when they are used in or with defense
­aerospace and defense exporters have
articles controlled in the relevant USML
raised concerns that the transfer of some
­category. These must be described in
­military-related items from the USML to
the purchase order or other contract
CCL will result in them having to apply
­documentation submitted with the ITAR
more frequently for both EAR and ITAR
­license application.
­licenses for a single military program. To
address these concerns, as noted above, the
Although such commodities, software, and
State Department now has authority to
technical data subject to the EAR may be
issue licenses for certain items that are
­included on an ITAR license, paragraph (x)
subject to EAR.
items remain subject to the EAR for any
subsequent transactions. This may present a
Under the ECR, the revised USML categories
challenge for classification of goods held in
will now include a “paragraph (x)” which
a material master database.
­allows for ITAR licensing for commodities,
15
A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
5 Technology transfer after Export
Control Reform
Chinese nationality or dual nationality. The
In the same way that hardware has been
whether a license is required; it could be
­re-classified and moved from the USML to
­v isual, oral (in person or telephone),
the CCL, technology and technical data has
­documented, or electronic.
method of transfer is irrelevant in determining
also undergone the same re-classification
process. It would be typical that technology
The ITAR and EAR continue to take disparate
associated with hardware that has been
approaches to determining the applicability
­re-classified from the ITAR to the EAR also
of the “deemed re-export” rules to non-U.S.
moves jurisdiction from the ITAR to the
persons. The ITAR considers all countries
EAR. It is important, however, that both the
of citizenship, permanent residence, and
hardware and technology or technical data
birth, while the EAR generally focuses on
are classified individually to determine the
the most recent country of citizenship or
correct jurisdiction for control.
permanent residence.
In order to better align the rules under
In the absence of harmonization between
EAR and ITAR, there has been significant
ITAR and EAR for dual and third country
efforts toward the harmonization of terms,
nationals, BIS has issued guidance which
definitions and concepts. One area that has
supports a more harmonized approach to
not yet been harmonized, however, concerns
ensure that more restrictive controls are not
transfers known as “deemed re-exports.”
required under EAR than would have been
required for the same items in the same
A “deemed re-export” is the term used to
­circumstances under ITAR.
describe the transfer of controlled technology
or technical data to a dual or third country
This guidance allows for the terms as defined
national (from a U.S. perspective), even if
in ITAR sections 124.16 and 126.18 to be
that transfer occurs strictly within the
­applicable when re-exporting “600 series”
­territory of a given country (hence, the term
items, technology, and technical data under
“deemed”). Thus, a “deemed re-export”
EAR.
may apply if, for example, a UK company
­receives controlled U.S.-origin technology,
Source: http://www.bis.doc.gov/index.
and then shares that technology within its
php/policy-guidance/deemed-exports/
own UK offices with an individual who is of
deemed-reexport-guidance1.
16
A E B W h i t e P a p e r : N a v i g a t i n g t h e U. S . E x p o r t C o n t r o l R e f o r m
5 ½ Compliance through automation:
how IT can help
create a new transaction or modify
If you want to play it safe, you shouldn’t rely
in the background. At every step of the
on manual processes to keep you on the
­process. The persons responsible for export
right side of U.S. law. First of all, it’s very
controls compliance should automatically
time-consuming. What’s more, covering all
be notified by e-mail should any possible
the aspects required to demonstrate control
export control issues be identified.
­information, it is automatically screened
including real time visibility, validation and
control, data capture and archive, and finally
Today’s powerful export control screening
being able to demonstrate compliance during
functions refer to and search through latest
an audit is very difficult to achieve with
national, EU and U.S. regulations supporting
­manual processes on their own.
determination of whether a license is required,
or whether the goods can be shipped without
The right software solution helps you meet
restrictions. Furthermore, these solutions help
the requirements effectively and affordably,
with the proper and effective management
checking all export processes for possible
of licenses and detailed record-keeping
embargoes and licensing requirements under
required for audit purposes.
EU law and U.S. EAR & ITAR. Wherever
you manage your export processes – for
Export control automation should be
­example, in your ERP, or in your supply
­embedded in the overall global trade and
chain software.
­logistics processes of an organization, and
solutions should offer open interfaces to
Ideally, such export control compliance
make it possible to integrate the software
­solutions are integrated directly into your
into any system as foundation for end-to-
business workflow so that whenever you
end processes and overall transparency.
17
AEB White Paper: Navigating the U. S. Export Control Reform
What is a white paper?
AEB defines a white paper as a document
analyzed and explained by our experts. A
providing qualified, unbiased information on
white paper reflects current understanding at
a particular topic. White papers may deal
the time it is written – subsequent changes in
with laws and regulations, standards,
the underlying circumstances cannot be
technologies, solutions, or processes –
ruled out.
About AEB: Expertise for SCM,
customs, and IT
AEB is a global enterprise with over 400
shipments all the way to their final
employees and 5,000 customers. AEB helps
destination.
businesses standardize and automate supply
chain processes with the ASSIST4 integrated
AEB is headquartered in Stuttgart, with
software suite and through consulting and
offices in Hamburg, Düsseldorf, Munich,
other professional services. AEB solutions
and Soest and development centers in Mainz
integrate global trade and logistics
and Lübeck.
processes, embedding customs clearance,
AEB has international offices in the United
export controls, and preference management
Kingdom (Leamington Spa), Singapore,
in solutions that manage the global supply
Switzerland (Zurich), Sweden (Malmö), the
chain. The result is a faster, smoother, more
Netherlands (Rotterdam), the Czech
efficient flow of goods. ASSIST4 also brings
Republic (Prague), France (Paris), and the
greater transparency to the supply chain and
United States.
makes it possible to monitor and control
© AEB GmbH
Published by:
AEB GmbH | Julius-Hölder-Straße 39 | 70597 Stuttgart
Phone: +49-711-72842-399 | Fax: +49-711-72842-333
[email protected] | www.aeb.com/de
18
AEB (International) Ltd
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Tachbrook Park
Leamington Spa
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Phone: +44 1926 801250
Fax: +44 1926 801251
E-mail: [email protected]
www.aeb.com/uk
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1 North Bridge Road
#14-01, High Street Centre
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Phone: +65 63379300
Fax: +65 63379667
E-mail: [email protected]
www.aeb.com/sg
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Baltzargatan 21
211 36 Malmö
Phone: +46 40 85011
E-mail: [email protected]
www.aeb.com/se
AEB Nederland
Rivium Boulevard 301-320
2909 LK Capelle aan den IJssel
Phone: +31 88 3131700
Fax: +31 88 3131799
E-mail: [email protected]
www.aeb.com/nl
AEB Germany
Headquarters
Phone: +49 711 72842 300
E-mail: [email protected]
AEB Switzerland
Phone: +41 43 211 1060
E-mail: [email protected]
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Phone: +43 662 261051
E-mail: [email protected]
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