Assns Say State Dept's Proposed License Exception STA too Limited

(The proposed License Exception STA would allow exports, reexports, and transfers (in-country) of specified items to destinations determined to pose little risk or unauthorized use of those items. See ITT's Online Archives or 12/09/10 news, 10120921, for BP summary.

Associations that submitted comments include: the International Safety Equipment Association, American Association of Exporters and Importers, Semiconductor Industry Association, National Association of Manufacturers, and the Laser and Electro Optics Manufacturers' Association (LEOMA), etc.)

More Work is Needed to Make STA More Attractive and Useful to Companies

The NAM and other associations generally stated that more work is needed to make the STA more attractive and useful to companies. The NAM states that while BIS expects the STA exception to reduce its licensing burden by 3,000 licenses, this is not a large portion of the low-risk licensing volumes BIS currently faces. The association noted that the proposal may not be attractive to manufacturers as individual companies will only be able to use the STA for a small portion of their license volumes. Additionally, the NAM stated some companies believe the STA would place too many limitations on the export control classification number (ECCN) and destinations, while requiring burdensome consignee destination control statements that would likely lead many manufacturers to avoid using the STA.

BIS Should Move Away from Transactional Licensing, Use Other Policies Instead

The NAM stated that BIS should minimize the use of a transaction-by-transaction licensing of dual-use exports as U.S. collaboration with allies and partners, synchronization of control regimes around the world, intra-company trade, and the number of license applications increases. The SIA states that the current practice of "deemed" export licensing has resulted in major complications as the need to obtain transaction-by-transaction licenses for actual intra-company exports can negatively affect the operations of foreign sites or subsidiaries. In addition to STA, the NAM recommend that BIS develop licensing policies for items in the proposed tiers 2 and 3 that provide additional flexible authorization mechanisms such as validated end user, intra-company and program licensing, or use of an open license.

STA Could Antagonize Foreign Customers, Validated Export Licenses are Better

The SIA stated that the License Exception STA would impose significant requirements on exporters, reexporters, transferors and consignees. The association noted that their customers in allied nations rely on license exception Additional Permissive Reexports (APR) to proceed under the law and regulation of their home country in their export and transfer activities. Their customers would find it objectionable to have to instead submit to the extra-territorial jurisdiction of the U.S., when it is already often difficult to get foreign customers to agree to sign documents subjecting them to U.S. export controls. Associations state that to antagonize their customers under the proposed rule is too great a risk in order to avoid the administrative burdens of export licenses. In such circumstances, they recommend a validated export license than use License Exception STA.

Intra-Company Transfer License Exceptions Would be Better than STA

The SIA, NAM, and others supported the implementation of an intra-company transfer (ICT) license exception as a more constructive and attractive license exception compared to STA. Companies with a global reach are frequently required to transfer equipment, technology and other items to their foreign sites, which requires the case-by-case filing of license applications as well as requests for license renewals and upgrades. The SIA states that an ICT license exception would authorize U.S. companies to provide access to export-controlled technology, products and equipment within the perimeters of their global operations. It views the ICT as a way to minimize some of the problems associated with the rules for deemed and actual exports and as a way to provide companies with the flexibility they need.

(See ITT's Online Archives or 10/06/08 news, 08100630, for BP summary of BIS proposed rule to establish an intra-company transfer license exception.)

Redundancies for Consignee and Export Statements Should be Removed

The NAM asks BIS to amend the STA to remove duplicative requirements on consignees and exports by not requiring a prior consignee statement as the new requirements are already made available to both the government and consignees by the manufacturers.

For example, the proposed rule requirement for a completely new destination control statement for transactions undertaken pursuant to License Exception STA is viewed by the SIA as being unnecessary. The SIA states that all consignees who are party to such a transaction are already required to agree in writing to abide by U.S. export control laws and regulations¹. The requirement for the use of a different destination control statement for those items exported, reexported or transferred under the STA introduces more complexity into an export control system that is already overly complicated and contains too many redundancies.

¹Associations state that manufacturers already provide destination control statements, have processes in place that include informing the consignee not to export, reexport, or transfer items to any destination, use, or user prohibited by the Export Administration Regulations (EAR), and stating that the APR license exception is not applicable.

(See ITT's Online Archives or 03/23/11 news, 11032308, for BP summary of a BIS official's statement that BIS is near a final draft of the final STA rule, which is expected to be narrower and to include fewer countries than proposed.)