Reminder: Comments on BIS Proposed License Exception STA due Feb 7

Comments are due by February 7, 2011.

(The proposed rule would implement one part of the Administration’s Export Control Reform Initiative regarding the revision of licensing policies.)

License Exception Would be Optional

License exception STA would authorize exports, reexports and transfers (in-country) to destinations that pose little risk of unauthorized uses, and for which U.S. national security and foreign policy justify authorizing transactions without the delay and expense of obtaining an export license.

Use of this license exception would be optional. Parties would be free to use other license exceptions that would authorize a planned transaction or to apply for a license if they prefer to do so.

Proposed Limitations on Use of License Exception

License exception STA would apply only to Commerce Control List-based license requirements, and would not affect the requirements for License Exception ENC in 15 CFR 740.17.

Items and transactions that would not be eligible for License Exception STA are as follows:

Entity List, embargoed transactions, etc. Transactions in which a license is required because of an end-use, such as a proliferation end-use described in 15 CFR Part 744 or a proscribed end-user (such as a party on the Entity List in 15 CFR Part 744) - or because the destination is subject to an embargo or special restrictions in 15 CFR Part 746, would not be eligible for License Exception STA.

SS, SL, MT, CW items. Items on the Commerce Control List that are subject to the short supply (SS), surreptitious listening (SL), missile technology (MT) or chemical weapons (CW) reasons for control would not be eligible for License Exception STA because of various requirements imposed by statutes, treaties or U.S. implementation of international commitments.

ECCNs 0A981 and 0A983. Items in Export Control Classification Numbers (ECCNs) 0A981 and 0A983, which apply to equipment designed for the execution of human beings and specially designed implements of torture, also would not be eligible.

Reexports via License Exception APR Would Not be Permitted

BIS also proposes that items shipped pursuant to License Exception STA would not be allowed to subsequently be reexported pursuant to License Exception APR (Additional Permissive Reexports) under 15 CFR 740.16(a), which permits reexports from certain countries without additional U.S. Government authorization.

License Exception Would Encompass Three Authorizations

License exception STA would encompass three different authorizations, based on the reason(s) for control underlying the license requirements that would apply to the item in the particular transaction at issue, the destination, the sensitivity of the item and the end-use, as follows.

7 control reasons for 37 destinations. One authorization under proposed 15 CFR 740.20(c)(1) would allow items subject to any (or all) of seven reasons for control to go to 37 destinations¹.

If the only reason(s) for control that impose(s) a license requirement on the transaction is/are national security (NS); chemical or biological weapons (CB); nuclear nonproliferation (NP); regional stability (RS); encryption items (EI); crime control (CC) (but not ECCNs 0A981, 0A982, 0A983, 0A985 or 0E982); or significant items (SI), exports, reexports and transfers (in-country) to 37 destinations would be authorized.

As previously stated, two of the crime control ECCNs excluded from this authorization (0A981 and 0A983) involve human rights concerns of sufficient magnitude to justify exclusion. The other three excluded crime control ECCNs would continue to require a license to all destinations other than Canada.

NS less sensitive items to 2 add'l destinations. Another authorization under proposed 15 CFR 740.20(c)(2)(i) would allow less sensitive items subject to only national security (NS) reasons for control to go to two additional destinations. If the only reason for control that imposes a license requirement on the transaction is NS and the item is not designated in the STA sensitive items exclusion paragraph in its ECCN, two destinations in addition to the 37 noted above would be authorized: Albania and Israel.

The STA exclusion paragraphs closely track the Sensitive List of the Wassenaar Arrangement on Export Controls Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). This rule would add such paragraphs to 50 ECCNs.

NS civil end-use items to 125 add'l destinations. A third authorization under proposed 15 CFR 740.20(c)(2)(ii) would allow less sensitive items subject to only national security (NS) reasons for control to go to 125 additional destinations² for civil end-uses. If the only reason for control that imposes a license requirement on the transaction is NS, the item that is the subject of the transaction is not designated by the STA exclusion paragraph in its ECCN and the item is being exported, reexported or transferred (in-country) for a civil end-use³, 125 additional destinations would be authorized.

(BIS notes that the national security-controlled items that are ineligible for the last two authorizations would be identified by the new “STA exclusion paragraphs” in the “License Exceptions” sections of 50 ECCN entries on the Commerce Control List.)

Three Conditions Would Apply to License Exception Transactions

Proposed 15 CFR 740.20(d) would also impose three conditions that would apply to transactions made pursuant to License Exception STA:

(1) Requirement to furnish ECCN - Exporters would be required to furnish the consignee with the ECCN that applies to each item transferred under License Exception STA. Reexporters and transferors would be required to provide subsequent consignees with the ECCN provided by the exporter or prior reexporters or transferors.

(2) Prior Consignee Statement - Exporters, reexporters and transferors would be required to obtain from their consignees, prior to the shipment, a written statement identifying the items to be shipped and restating the ECCN(s) provided to the consignees by the exporters, reexporters or transferors. The statement must also acknowledge that the consignee:

• Is aware that items will be shipped pursuant to License Exception STA;
• Has been informed of the description of the items and their ECCN(s) by the exporter, reexporter or transferor;
• Understands that shipment pursuant to License Exception STA precludes subsequent use of paragraph (a) of License Exception APR for the items;
• Agrees not to export, reexport or transfer these items to any destination, end-use or end-user prohibited by the EAR;
• Agrees that, for items subject to a civil end-use restriction, the only end-use of the items will be civil; and
• Agrees to provide copies of this document and all other export, reexport or transfer record (i.e., the documents described in 15 CFR Part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7.

(3)Destination Control Statement - Exporters, reexporters and transferors using License Exception STA would be required to use a special destination control statement that applies to shipments made pursuant to License Exception STA. Like the destination control statement requirement that currently applies to most exports of items listed in specific entries on the CCL, the destination control statement that applies to License Exception STA would have to be placed on documents that accompany the shipment.

Unlike the current destination control statement, this new destination control statement would apply to reexports and transfers (in-country) abroad. In addition to noting that the shipment is subject to the EAR and that any further disposition must be in accordance with those regulations, this new destination control statement would include the ECCN applicable to each item, explicitly state that the shipment is being made pursuant to License Exception STA and explicitly state that subsequent exports or reexports under paragraph (a) of License Exception APR are prohibited.

¹The 37 destinations are: Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, Ukraine and the United Kingdom.

²The 125 additional destinations are: Algeria, Andorra, Antigua and Barbuda, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Comoros, Congo (Republic of the), Costa Rica, Djibouti, Dominica, Dominican Republic, East Timor, Ecuador, El Salvador, Equatorial Guinea, Ethiopia, Fiji, Gabon, Gambia (The), Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Honduras, Hong Kong, India, Jamaica, Jordan, Kazakhstan, Kenya, Kiribati, Kosovo, Kuwait, Kyrgyzstan, Laos, Lesotho, Liechtenstein, Macedonia (Former Yugoslav Republic), Madagascar, Malawi, Maldives, Mali, Malta, Marshall Islands, Mauritania, Mauritius, Mexico, Micronesia (Federated States of), Moldova, Monaco, Mongolia, Montenegro, Morocco, Mozambique, Namibia, Nauru, Nepal, Netherlands Antilles, Nicaragua, Niger, Nigeria, Oman, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Rwanda, Saint Kitts & Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Sao Tome & Principe, Saudi Arabia, Senegal, Seychelles, Singapore, Solomon Islands, South Africa, Surinam, Swaziland, Taiwan, Tajikistan, Tanzania, Thailand, Togo, Tonga, Trinidad & Tobago, Tunisia, Turkmenistan, Tuvalu, Uruguay, Uzbekistan, Vanuatu, Vatican City, Western Sahara, and Zambia.

³Civil end-use is defined as an end-use that is not a military end-use as defined by 15 CFR 744.21(f) or a proliferation activity described and prohibited by 15 CFR Part 744.

(See BIS' proposed rule for complete proposed regulations, including proposed revision and cross-references to Wassenaar Arrangement reporting requirements, proposed notes on the use of and exclusions to License Exception STA, etc.

See ITT's Online Archives or 12/09/10 news, 10120914, for original BP summary of the proposed rule.

See ITT's Online Archives or 09/10/10 news, 10091012,for BP summary of a BIS official's announcement of this upcoming proposed license exception at the 2010 Annual Export Controls Update Conference.

See ITT's Online Archives or 04/21/10 news, 10042125, for BP summary of the Administration’s announcement of plans to fundamentally reform the U.S. export control system.

See ITT's Online Archives or 08/31/10 news, 10083113, for BP summary of details of the Administration’s first steps toward implementation of export control reform.)

(D/N 100923470-0569-01, FR Pub 12/09/10)