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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: An 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 Le Bourget June 17, 2009

  2. Dual-Use Export Controls:An Framework • 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 • U.S. Department of State • Controls “defense articles” and “defense services” • U.S. Department of the Treasury • Embargoes and assets controls

  4. Defense Articles and ServicesandDual-use Items • “Dual-use” items are items that may have both commercial and military applications • Not primarily for weapons or military related use • “Defense articles” and “defense services” are items specifically designed, developed, configured, modified or adapted for a military application

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

  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. What Are You Exporting? EAR Principles Le Bourget June 17, 2009

  10. 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

  11. 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

  12. 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

  13. What Are You Exporting? Classifying Your Item on the CCL Le Bourget June 17, 2009

  14. 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

  15. 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

  16. 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

  17. 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

  18. Where Are You Exporting? Determining License RequirementsBased on Item and Destination Le Bourget June 17, 2009

  19. 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

  20. 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

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

  22. 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

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

  24. 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

  25. 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

  26. 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

  27. Who Will Receive Your Item? End-User BasedLicense Requirements Le Bourget June 17, 2009

  28. 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

  29. 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

  30. 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

  31. For What Will Your Itembe Used? End-Use BasedLicense Requirements Le Bourget June 17, 2009

  32. 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

  33. 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

  34. 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) http://www.access.gpo.gov/bis/ear/pdf/744.pdf

  35. The BIS Licensing Process Le Bourget June 17, 2009

  36. Applying for a License • Electronic application via the BIS website: Simplified Network Application Process Redesign (SNAP-R) • SNAP-R gives you the ability to: • Submit export and re-export applications, and commodity classification requests, via the Internet in a secure environment • Receive same day acknowledgment of your submission • Obtain online validations (e.g., electronic facsimile of export license) http://www.bis.doc.gov/snap/index.htm

  37. The License Application • On the license application • Define the item(s) in terms of the technical parameter(s) of the ECCN(s) • Identify the specific end-use(s) • Provide any know information about the ultimate consignee/end-user(s) • Provide information on any internal controls in place to mitigate the risk of diversion or unauthorized end-use • All information provided in support of a license application is restricted to U.S. Government reviewers only

  38. Interagency Review • Ensures that the U.S. Government decision on a license application draws on the breadth and scope of the government’s expertise • Reviewing agencies have common national security and foreign policy interests, but unique perspectives • Reviewing Agencies: • Department of Commerce • Technical issues • Economic issues • Department of Defense • National defense issues – Brings the technical expertise of the Services focused on an individual export/reexport • Department of Energy • Nuclear issues • Department of State • Foreign policy issues

  39. License Review Period • Department of Commerce must review the application and refer it to the reviewing agencies within 9 days of receipt • Reviewing agencies have 30 days to respond with recommendations • If the reviewing agencies concur on the disposition of the license application, it will be: • Approved • Approved with conditions • Denied

  40. License Denials • Notice of intent to deny letter sent to the applicant • Applicant has 20 days to respond to the denial notice with additional information or arguments • If the applicant responds, the application will be reconsidered with the new information received from the applicant • If no response is received from the applicant within 20 days, the license denial is issued

  41. Your Responsibilitiesas a License Holder • Understand and comply with any license conditions • You will be given a chance to review and agree to all proposed license conditions before the license is approved/issued • Some license conditions should be shared with/agreed to by the consignee/end-user(s) • Be mindful of the license validity period • Usually two years, or for the quantity of the items approved, whichever comes first • Decrement the license as exports are made, and maintain the records for five years from the last shipment

  42. U.S. Dual-Use Export Controls for the Aerospace Industry Wrap-Up Le Bourget June 17, 2009

  43. Dual-Use Export Controls:A Summary • What are you exporting? • Establish licensing jurisdiction for your item • Determine the proper classification for your item • Where are you exporting? • The Commerce Country Chart fixes licensing requirements • Who will receive your item? • Prohibited/restricted end-user lists • What will your item be used for? • End-use controls • Applying for a license • SNAP-R

  44. BIS Export Control Initiatives • BIS has developed a regularized process for review of the items controlled on the CCL http://www.bis.doc.gov/policiesandregulations/cclreviewprocess.html • BIS has developed and published the basis of CCL controls and applicable EAR references http://www.bis.doc.gov/policiesandregulations/basis_of_ccl_controls.htm

  45. BIS Export Control Initiatives • BIS has developed a webpage where sources of publicly available information on Commodity Classifications can be found http://www.bis.doc.gov/commodityclassificationpage.htm • BIS has developed an “Online Training Room” that includes both instructional videos narrated by BIS staff and transcripts http://www.bis.doc.gov/seminarsandtraining/seminar-training.htm

  46. How to ObtainMore Information • BIS Website: www.bis.doc.gov • State DDTC Website: www.pmddtc.state.gov • Treasury OFAC Website: www.treasury.gov/offices/enforcement/ofac

  47. How to ObtainMore Information Gene Christiansen Email: gchristi@bis.doc.gov Phone: +1 202 482 2984 Fax: +1 202 482 3345 Kelly Gardner Email: kgardner@bis.doc.gov Phone: +1 202 482 0102 Fax: +1 202 482 3345

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