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Latest U.S. Export Control Reform Updates

Certain Items Controlled by ITAR to be Transferred Off the USML

August 22, 2011

On July 15, 2011, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a proposed rule: Control of Items the President Determines No Longer Warrant Control under the United States Munitions List (USML) (Proposed Rule). The Proposed Rule is the next significant step in the Obama Administration’s Export Control Reform initiative (Export Control Reform).

The Proposed Rule creates a framework within Export Control Reform for transferring Defense Articles and related Technical Data and Defense Services listed on the USML over to the Commerce Control Listing (CCL). The USML is controlled under International Traffic in Arms Regulations (ITAR), whereas the CCL is controlled under U.S. Export Administration Regulations (EAR). Items on the USML identified for potential transfer to the CCL are comprised of largely generic parts and components that are no longer considered to possess a significant military or intelligence advantage to the U.S. (Potential Transfer Items).

Businesses that have products, services, or technology customarily listed on the USML and controlled by the ITAR should check to see if one or more of their items have been selected as Potential Transfer Items for possible transfer to the CCL.

Items listed on the USML are all subject to the same ITAR export controls without variation. Meaning that they all require an export license or other export control authorization for their export, unless an exemption applies.

In contrast, EAR export controls over CCL-listed items are tailored and more flexible. Depending on the technical specifications of a particular item covered by the CCL, an export license may not be required to particular destinations or an export license may not be required to various groups of allied, partner or other countries so long as certain conditions are fulfilled. Other CCL-listed items, however, may be subject to worldwide or nearly worldwide export controls under EAR.

This means that businesses traditionally familiar with exporting USML-listed items under ITAR export controls may now find themselves with items in their product, service or technology portfolios that are listed on the CCL and subject to EAR export controls. In fact, depending on their product, service or technology mix, certain businesses may find themselves subject to ITAR compliance for one item, while being subject to EAR compliance for another.

None of the Potential Transfer Items, however, will be transferred to the CCL until the Obama Administration has had time to review and consider the public comments that are submitted about the Proposed Rule.

The Proposed Rule describes how the Potential Transfer Items moved to the CCL, along with certain items currently listed on the CCL having military application, would be listed and controlled in a new “600 series” for each CCL category. The 600 series would be called the Commerce Munitions List (CML). The CML would allow the BIS to implement unique EAR export controls on CML items given their inherent military nature. The Proposed Rule is not a step in “decontrolling” the Potential Transfer Items, but rather a step in tailoring EAR export controls on items based on their level of military significance or inherent military utility. This is consistent with the goals of Export Control Reform to create three-tiered control criteria (i.e., Tiers 1, 2, and 3) that would subject all items controlled by ITAR and EAR to one unified export license policy.

The Proposed Rule is now subject to a public review and comment period. No indication has been given thus far as to when the final rule on this subject would be published. The Obama Administration strongly encourages businesses subject to U.S. export controls to review the Proposed Rule closely, test how it would work on the products, services and technology they export, and prepare thoughtful comments and suggestions for consideration by the BIS on the Potential Transfer Items as well as other aspects of the Proposed Rule.

Miller Canfield stands ready to assist with: (i) construing the impact of the Proposed Rule upon your business and your export control compliance program and (ii) developing public comments on the Proposed Rule for submittal to the BIS.

For further information please contact Miller Canfield’s Export Control Team. Visit our Export Control webpage at millercanfield.com/exportcontrols for prior articles and alerts, as well as subsequent updates on Export Control Reform.

Joseph D. Gustavus
+1.248.267.3317
gustavus@millercanfield.com