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U.S. Dual-Use Export Controls for the Aerospace Industry

U.S. Dual-Use Export Controls for the Aerospace Industry. Gene Christiansen Kelly Gardner U.S. Department of Commerce Bureau of Industry and Security. Dual-Use Export Controls Framework. What are you exporting? Where are you exporting? Who will receive your item?

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U.S. Dual-Use Export Controls for the Aerospace Industry

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  1. U.S. Dual-Use Export Controls for the Aerospace Industry Gene Christiansen Kelly Gardner U.S. Department of Commerce Bureau of Industry and Security Toulouse June 22, 2009

  2. Dual-Use Export ControlsFramework • What are you exporting? • Where are you exporting? • Who will receive your item? • For what will your item be used?

  3. Three Main Regulatory Agencies • U.S. Department of Commerce controls “dual-use” items • Items that may have both commercial and military applications • Not primarily for weapons or military related use • U.S. Department of State controls “defense articles” and “defense services” • Items specifically designed, developed, configured, modified or adapted for a military application • U.S. Department of the Treasury • Embargoes and assets controls

  4. Department of Commerce vs.Department of StateRegulations • U.S. Department of Commerce • Administers the Export Administration Regulations (EAR) • Control “dual-use” items described on the Commerce Control List (CCL) • U.S. Department of State • Administers the International Traffic in Arms Regulations (ITAR) • Control “defense articles” and “defense services” described on the United States Munitions List (USML)

  5. Main Agencies AdministeringExport Controls

  6. The Control Lists • The items on the CCL and the USML are largely determined by the multilateral export control regimes: • Australia Group (AG) • Chemical and biological weapons • Missile Technology Control Regime (MTCR) • Unmanned delivery systems capable of delivering weapons of mass destruction • Nuclear Suppliers Group (NSG) • Nuclear weapons • Wassenaar Arrangement (WA) • Conventional arms and dual-use goods and technologies

  7. Establishing Licensing Jurisdiction:Why is This Important? • Establishing licensing jurisdiction is the first step in determining the licensing requirements associated with your item • Jurisdictional uncertainty occurs frequently in the aerospace industry, primarily due to the military heritage of aircraft • The Department of Commerce (EAR) and the Department of State (ITAR) have differing licensing requirements • The exporter is responsible for obtaining licenses, when required, from the appropriate agency

  8. Commodity Jurisdiction Request • Used to obtain an official government determination when there is uncertainty as to whether an item is subject to the licensing jurisdiction of the Department of Commerce or the Department of State • Commodity Jurisdiction (CJ) Requests are submitted directly to the Department of State • CJ Requests are evaluated by the Departments of Commerce, Defense and State • The Department of State makes the final determination • Information on submitting a CJ request may be found at: http://www.pmddtc.state.gov/commodity_jurisdiction/index.html

  9. The CJ RequestSubmission • What was the original intent of the design? • Who funded the development? • Does the item have any unique characteristics? • What is the current market for the item? • Are there any performance equivalents? • If the item was originally under Department of State jurisdiction: • How has the item been modified and for what specific end-use? • How has the market for the item changes? • Provide any relevant jurisdiction history, as applicable

  10. There is comfort in having an official government document The expense of a challenge to jurisdiction or a violation can be significant The item is under Department of State jurisdiction during CJ review period Must register as a manufacturer/exporter of defense articles Must obtain Department of State export licenses Determinations can take significant amounts of time CJ RequestsThings to Consider

  11. What Are You Exporting? EAR Principles Toulouse June 22, 2009

  12. Some Important Terms • The EAR controls “exports”, “transfers”, and “reexports” of dual-use “items” • An “export” is an actual shipment or transmission of items outside the United States, or a release of technology or source code to a foreign national in the U.S. or abroad • A “transfer” is a shipment, transmission, or release of items subject to the EAR from one party to another party within a single foreign country • A “reexport” is an actual shipment or transmission of items subject to the EAR from one foreign country to another foreign country • “Items” are commodities, software, and technology

  13. Items Subject to the EAR • All items in the U.S., unless subject to the exclusive jurisdiction of another agency • Foreign-origin items in the U.S. are subject to the EAR for export from the U.S. only • All U.S.-origin items, wherever located, unless subject to the exclusive jurisdiction of another agency or publicly available • U.S.-origin items remain subject to the EAR throughout the life of the item, until it is incorporated into a higher order assembly • Certain foreign-made items incorporating greater than the de minimis amount of controlled U.S. content • Certain foreign-made direct products of U.S.-origin technology • Certain activities of U.S. persons

  14. Exports vs. Reexports • The same rules apply to exports, transfers, and reexports, of U.S.-origin items • Same licensing requirements (except for certain sanctioned/embargoed countries) • Same License Exceptions, plus Additional Permissive Reexports (APR) • Same license application • For foreign-produced items, these rules extend to • Items having more than the de minimis amount of controlled U.S. content • Certain items that are the direct products of U.S.-origin technology • BIS published guidance on reexports: http://www.bis.doc.gov/licensing/reexportguidance.htm

  15. What Are You Exporting? Classifying Your Item on the CCL Toulouse June 22, 2009

  16. Classifying Your Itemon the CCL • The U.S. has adopted the EU Control List • Therefore, in most cases, multilaterally-controlled items are classified in the same way • Entries differ only in format: 9E3 becomes 9E003 • The U.S. also maintains some unilateral controls, which are incorporated into the CCL

  17. Classifying Your Itemon the CCL • The proper classification is essential to determining any licensing requirements associated with your item • Classification options: • Classify the item on your own: http://www.bis.doc.gov/licensing/do_i_needaneccn.html • Check with the item’s manufacturer or exporter • Submit a classification request to have BIS determine the classification for you: http://www.bis.doc.gov/licensing/bis_eccn.pdf

  18. Classifying Your Itemon the CCL • Entries on the CCL are alpha-numeric codes called Export Control Classification Numbers (ECCNs) • Each ECCN on the CCL provides: • A description of the technical parameters of a particular item or type of item • The control(s) associated with the item • Any License Exceptions for which the item is eligible

  19. Classifying Your Itemon the CCL • If your item does not fit within the technical parameters of any ECCN on the CCL, it is designated as “EAR99” • EAR99 items generally consist of low-technology consumer goods and do not require a license in most situations

  20. Commodity ClassificationRequest • Used to obtain official government confirmation of a dual-use item’s ECCN or EAR99 status • Commodity Classification Requests are submitted directly to the Department of Commerce • The Department of Commerce makes the final determination

  21. The Commodity Classification Request ApplicationEAR Section 748.3 • A Commodity Classification Request should include: • The model number(s) of item(s) to be reviewed • A description of the item(s) • Technical specifications for each of the item(s) in terms of the potential ECCN(s) • Brochures, drawings, pictures, etc., as appropriate • Any precedent cases, if known • A recommended classification

  22. Where Are You Exporting? Determining License RequirementsBased on Item and Destination Toulouse June 22, 2009

  23. Commerce License Requirements Based on Reason(s) for Control • All items on the CCL are controlled for specific reasons (e.g., NS, MT, CB, NP) • Each ECCN indicates the reason(s) the item is controlled • With the control reason(s) and the country of the consignee, the Commerce Country Chart fixes the licensing requirement • If there is no license requirement based on the Commerce Country Chart, you must still consider the destination, the end-user, and the end-use in order to rule out a license requirement • This is true for items classified on the CCL (i.e., items having an ECCN), and for items designated as EAR99

  24. Regime/Convention-based CB = Chemical & Biological Weapons CW = Chemical Weapons Convention EI = Encryption Item FC = Firearms Convention NP = Nuclear Nonproliferation NS = National Security MT = Missile Technology UN = United Nations Unilateral AT = Anti-Terrorism CC = Crime Control RS = Regional Stability Reasons for Control

  25. Commerce Country ChartSupplement No. 1 to EAR Part 738 http://www.access.gpo.gov/bis/ear/pdf/738spir.pdf

  26. License ExceptionsEAR Part 740 • Authorization to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license • Two types of License Exceptions: • List driven • Transaction driven http://www.access.gpo.gov/bis/ear/pdf/740.pdf

  27. List Driven GBS - Shipments to Country Group B countries TSR - Technology and software under restriction Transaction Driven TMP - Temporary imports, exports and reexports RPL - Servicing and replacement of parts and equipment AVS - Aircraft and vessels APR - Additional permissive reexports License Exceptionswith Aerospace Applications

  28. Country Considerations • The EAR maintains strict licensing requirements for the following sanctioned/embargoed countries: • Cuba • Iran • North Korea • Sudan • Syria http://www.bis.doc.gov/policiesandregulations/regionalconsiderations.htm

  29. U.S. Department of the TreasuryOffice of Foreign Assets Control • The U.S. Department of the Treasury’s Office of Foreign Asset Controls (OFAC) administers and enforces economic and trade sanctions against targeted: • Foreign governments • Individuals (e.g., terrorists, narcotics traffickers) • Entities (e.g., charities linked to terrorist groups, drug front companies) • Practices (e.g., WMD proliferation, trade in non-certified rough diamonds) • In certain instances, BIS and OFAC controls overlap

  30. Licensing Authorities for Reexportsto Certain Countries • Reexports of CCL items to Iran: OFAC • Reexports of EAR99 items to Iran: • by a non-U.S. persons BIS • by a U.S. Person OFAC • Reexports of all items to Sudan: OFAC • Reexports of CCL items to Sudan: BIS & OFAC • Reexports of all items to Cuba: BIS • Reexports of all items to Syria: BIS • Reexports of all items to North Korea: BIS

  31. Who Will Receive Your Item? End-User BasedLicense Requirements Toulouse June 22, 2009

  32. Who Will Receive Your Item?End-User Controls • Certain individuals and organizations are prohibited from receiving U.S. exports, and others may only receive goods if they have been licensed • This includes items that would not normally require a license based on the ECCN and Commerce Country Chart or based on an EAR99 designation

  33. Who Will Receive Your Item?End-User Controls • The U.S. Government publishes various end-user lists, which identify certain individuals and organizations that • Are prohibited from receiving U.S. exports; • May only receive goods if they have been licensed; or • Constitute a “Red Flag” that should be resolved prior to carrying out a transaction

  34. End-User Lists • Denied Persons List http://www.bis.doc.gov/dpl/thedeniallist.asp • Entity List http://www.access.gpo.gov/bis/ear/pdf/744spir.pdf • Unverified List http://www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html • Specially Designated Nationals List http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf • Nonproliferation Sanctions http://www.state.gov/t/isn/c15231.htm • Debarred List http://www.pmddtc.state.gov/compliance/debar.html

  35. For What Will Your Itembe Used? End-Use BasedLicense Requirements Toulouse June 22, 2009

  36. For What Will Your Item be Used?End-Use Controls • In addition to the “list based” and “end-user” controls, BIS implements a series of end-use controls • Some end-uses are prohibited, while others may require a license

  37. End-Use ControlsEAR Part 744 • Restrictions on certain nuclear end-uses • Restrictions on certain rocket systems and unmanned air vehicles end-uses • Restrictions on certain chemical and biological weapons end-uses • Restrictions on certain maritime nuclear propulsion end-uses • Restrictions on certain exports to and for the use of certain foreign vessels or aircraft • Restrictions on certain exports and reexports of general purpose microprocessors for “military end-uses” and to “military end-users” • Restrictions on certain “military end-uses” in the People's Republic of China (PRC) http://www.access.gpo.gov/bis/ear/pdf/744.pdf

  38. Restrictions on Certain Rocket Systems and UAV End-Uses • A license is required to export, reexport, or transfer all items subject to the EAR if, at the time of export, you know that the item: • Will be used in the design, development, production, or use of rocket systems or UAVs capable of a range of at least 300 km in or by a country listed in Country Group D:4 (see Supplement No. 1 to EAR Part 740) • Will be used in the design, development, production or use of any rocket systems or unmanned air vehicles in or by a country listed in Country Group D:4, but you are unable to determine: • The characteristics (i.e., range capabilities) of the rocket systems or UAVs, or • Whether the rocket systems or UAVs, regardless of range capabilities, will be used in a manner prohibited above • Will be used, anywhere in the world (except by governmental programs for nuclear weapons delivery of NPT Nuclear Weapons States that are also members of NATO) in the design, development, production or use of rocket systems or UAVs, regardless of range capabilities, for the delivery of chemical, biological, or nuclear weapons

  39. Restrictions on Certain ExportsTo and For the Use of Certain Foreign Vessels or Aircraft • A license is required to export or reexport any item subject to the EAR to, or for the use of, a foreign vessel or aircraft, whether an operating vessel or aircraft or one under construction, unless a License Exception or the designator “NLR” permits the shipment to be made: • To the country in which the vessel or aircraft is located • To the country in which the vessel or aircraft is registered, or will be registered in the case of a vessel or aircraft under construction • To the country, including a national thereof, which is currently controlling, leasing, or chartering the vessel or aircraft

  40. Restrictions on Certain Military End-Uses in the PRC • A license is required to export, reexport, or transfer items controlled under 31 ECCNS when the items are intended for a “military end-use” in the PRC • “Military end-use” means: • Incorporation into a military item described on the USML, the Wassenaar Munitions List, or items listed under ECCNs ending in “A018" on the CCL of the EAR • For the “use”, "development", or “production” of military items described on the USML or the Wassenaar Munitions List, or items listed under ECCNs ending in “A018" on the CCL • “Deployment” of items classified under ECCN 9A991 (certain aircraft)

  41. Reexport ControlsandTechnology and Software Transfers Toulouse June 22, 2009

  42. What is Subject toCommerce Reexport Controls? • U.S.-origin items, wherever located • Foreign-produced items, if • The items have more than the de minimis amount of controlled U.S. content • The items are the direct products of certain U.S.-origin technology or software

  43. Reexports ofU.S.-Origin Items • Confirm classification • Identify the reason(s) for control • Consult the Commerce Country Chart • If “X” in the box, then • Check for possible License Exception, or • Submit a license application • Review end-user controls • Review end-use controls

  44. Reexports of Foreign-Made Items:De Minimis • A license is required to reexport foreign-made items incorporating, commingled with, or drawn from controlled U.S.-origin items • Exceeding 10% for Cuba, Iran, North Korea, Sudan, and Syria • Exceeding 25% for all other destinations • The same percentages are applied for commodities, technology, and software (i.e., no “mixing”) • There is a one-time reporting requirement for technology http://www.access.gpo.gov/bis/ear/pdf/734.pdf

  45. De MinimisOne Time ReportSupplement No. 2 to EAR Part 734 • Unique to foreign-made technology incorporating controlled U.S. technology • Submitted prior to reexport relying on calculations • Includes: • Description of the foreign technology • Description of the fair market value of the foreign technology • Rational and basis for the valuation of the controlled U.S. content • Contact info: name, title, address, phone, fax • If you do not receive any feed back from BIS in 30 days, you may rely on your calculations

  46. De Minimis Exclusions • There is no de minimis level for foreign-made commercial primary or standby instrument systems and automatic flight control systems integrating QRS11-based Micromachined Angular Rate Sensors • U.S.-origin technology required for the development or production of certain gas turbine engine components or systems (controlled by ECCN 9E003.a.1-10 and .h) does not lose its U.S.-origin when redrawn, used, consulted, or otherwise commingled abroad in any respect with other software or technology of any other origin

  47. EAR99 and De Minimis • EAR99 items are calculated as controlled for U.S. content when exporting to an embargoed destination • Most EAR99 items are also calculated as controlled for U.S. content when exporting to Syria

  48. Direct Products ofU.S.-Origin Technical Data • If your product is the direct product of U.S. controlled technology, it will be subject to U.S. export law if: • The foreign-made item is controlled for National Security (NS) reasons and • The foreign-made item is the direct product of U.S. technology or software that requires a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR (Technology and Software Under Restriction) • Foreign produced direct products require a license for reexport to destinations in Country Groups D:1 and E:2 (See Supplement No. 1 to EAR Part 740) http://www.access.gpo.gov/bis/ear/pdf/732.pdf

  49. Technology and SoftwareTransfers • Subject to U.S. law if: • U.S.-origin • Exceeds the de minimis level • Follow the same procedures as for hardware (i.e., classification, reason(s) for control, Commerce Country Chart, License Exceptions) • If a license is required (regular reexport) • Use a letter of explanation - See Supplement No. 2 to EAR Part 748 (o)(2) • Letter of assurance • If a license is required (deemed reexport) • Follow the guidance in Supplement No. 2 to EAR Part 748 (s) and (t) • Validity periods

  50. The BIS Licensing Process Toulouse June 22, 2009

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