Details of New BIS License Exception STA for Low-Risk Exports

(BIS' final rule is part of the Administration’s Export Control Reform Initiative that the President announced in August 2009. See ITT's Online Archives or 06/14/11 news, 11061416, for BP summary of a recent update on this initiative by government officials.)

Use of License Exception STA Is Optional, Other Exceptions Can be Used Instead

For exports, reexports, and transfers where STA is relevant, its use is optional. Parties may use other license exceptions that authorize a planned transaction or apply for a license if they prefer to do so.

In addition, the exception does not alter any of the General Prohibitions in the EAR against unlicensed exports, reexports, or transfers to proscribed end users, end uses, or destinations

Requires Statements and Notices to Assure Against Diversion

BIS states that the use of the exception is conditioned upon the creation and exchange by the parties to the transaction of statements and notifications designed to provide assurance against diversion of such items to other destinations.

CCL Limitations on Use of License Exception STA

BIS' final rule states that License Exception STA applies only to Commerce Control List based license requirements. Specific items and transactions that are not eligible for License Exception STA are as follows:

EI, SS, SL, MT, CW items. Items on the CCL that are subject to the encryption items (EI)¹, short supply (SS), surreptitious listening (SL), missile technology (MT), or chemical weapons (CW) reasons for control are not eligible for License Exception STA because of various requirements imposed by statutes, treaties or U.S. implementation of international commitments.

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), or because the destination is subject to an embargo or special restrictions in 15 CFR Part 746, are not eligible for License Exception STA.

5 ECCNs on execution, restraint devices, etc. Items in Export Control Classification Numbers 0A981, 0A982, 0A983, 0A985 or 0E982 are not eligible². Those ECCNs apply to equipment designed for the execution of human beings, specially designed implements of torture, law enforcement restraint devices, discharge type arms and devices designed to administer electric shocks and certain related technology. The human rights concerns associated with those items are sufficiently great to justify precluding use of License Exception STA.

7 ECCNs on pathogens, toxins, with exception. Items in ECCNs 1C351.a, .b, .c, .d.5, .d.6 or .e; 1C352; 1C353; 1C354; 1C360; 1E001 (for 1C351.a, .b, .c, .d.5, .d.6 or .e, 1C352, 1C353, 1C354 or 1C360) or in ECCN 1E351 may not be shipped pursuant to License Exception STA because those ECCNs cover certain pathogens and toxins that have potential uses in developing chemical or biological weapons.

Commodities in ECCN 1C351.d.1, .2, .3, .4, .7, .8, .9, or .10 are eligible for License Exception STA so long as the exports, reexports or transfers are limited to no more than 100 milligrams of any one toxin per shipment and no more than six shipments are sent to any one end user in any one calendar year.

Certain Category 9 items. License Exception STA may not be used for certain software and technology in Category 9 of the CCL as follows:

(A) License Exception STA may not be used for 9D001 or 9D002 “software” that is specially designed or modified for the “development” or “production” of:

(1) Components of engines controlled by ECCN 9A001 if such components incorporate any of the “technologies” controlled by 9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan or power turbines), 9E003.h; or (2) Equipment controlled by 9B001.

(B) License Exception STA may not be used for 9D001 “software” that is specially designed or modified for the “development” of “technology” controlled by 9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan or power turbines) or 9E003.h.

(C) License Exception STA may not be used for 9D004.f or 9D004.g “software.”

(D) License Exception STA may not be used for 9E001 “technology” according to the General Technology Note for the “development” of 9A001.b engines or components of engines controlled by 9A001.b if such components incorporate:

(1) Any of the “technologies” controlled by 9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan or power turbines) or 9E003.h;(2) Any of the 9D001 or 9D002 software in paragraphs (A) or (B) above.

(E) License Exception STA may not be used for 9E002 “technology” according to the General Technology Note for the “production” of components of engines controlled by 9A001.b if such components incorporate any of the “technologies” controlled by 9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan or power turbines) or 9E003.h.

(F) License Exception STA may not be used for "technology" in 9E003.a.1, 9E003.a.2, 9E003.a.3, 9E003.a.4, 9E003.a.5, 9E003.c, 9E003.i (other than technology for fan or power turbines), 9E003.h.

STA Encompasses Two Authorizations Based on Control Reasons/Destinations

License Exception STA provides two distinct authorizations³. One authorization allows exports, reexports or in country transfers to which any (or all) of six reasons for control apply to go to 36 destinations.

(The 36 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, and the United Kingdom.⁴ (The proposed rule also included Ukraine as a 37th destination.))

Another authorization allows less sensitive items where exports, reexports and in country transfers subject to only national security reasons for control to go to eight additional destinations.

(The 8 destinations in addition to the 36 are: Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan. (The proposed rule included only Albania and Israel.))

6 control reasons for 36 destinations. If the only reason(s) for a license requirement on the export, reexport or in country transfer is (are) national security (NS); chemical or biological weapons (CB); nuclear nonproliferation (NP); regional stability (RS); crime control (CC); or significant items (SI), exports, reexports and transfers (in-country) to 36 destinations⁴ as well as releases within a single country of software source code and technology to nationals of the same 36 destinations are authorized, unless otherwise excluded from License Exception STA.

NS less sensitive items to 8 add'l destinations. If the only reason for a license requirement on the export, reexport or in country transfer is national security (NS)⁵ and the item is not designated in the STA sensitive items exclusion paragraph in its ECCN, eight destinations(and nationals thereof) in addition to the 36 noted above are authorized. The STA exclusion paragraphs closely track the Sensitive List of the Wassenaar Arrangement. BIS' rule adds such paragraphs to 49 ECCNs.

Three Conditions Apply to License Exception STA Transactions

15 CFR 740.20(d) imposes three conditions on exports, reexports and transfers made pursuant to License Exception STA. (BIS' final rule also establishes an alternative set of conditions for releases within a single country of software source code and technology to foreign nationals, see below).

(1) Requirement to furnish ECCN - Exporters must furnish the consignee with the ECCN that applies to each item transferred under License Exception STA. Reexporters and transferors must provide subsequent consignees with the ECCN provided by the exporter or by prior reexporters or transferors. The ECCN need be furnished to each consignee only once for each item to be shipped under License Exception STA. So long as the furnished ECCN remains accurate, it need not be refurnished for subsequent shipments.

(2) Prior consignee statementand log - Exporters, reexporters and transferors must 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 paragraphs (a) or (b) 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; and
• Agrees to produce copies of this document and all other export, reexport or transfer records (i.e., the documents described in part 762 of the EAR) relevant to the items referenced in this statement to the U.S. Government, upon request, as set forth in 15 CFR 762.7. (Note that BIS states that one consignee statement may be used for multiple shipments.)

The final rule also requires the exporter, reexporter, or transferor to keep a log or other written record that identifies each shipment made under License Exception STA and identifies the specific consignee statement that is associated with each shipment. The exporter, reexporter and transferor must maintain the consignee’s written statement as well as a log or other written record.

(3) Notification to consignee of STA shipment - With each shipment under License Exception STA, the exporter (or reexporter or transferor as applicable) must notify the consignee in writing that the shipment is made pursuant to License Exception STA. The notice must either specify which items are subject to License Exception STA or state that the entire shipment is made pursuant to License Exception STA. The notice must clearly identify the shipment to which it refers. The written notice may be conveyed by paper documents or by electronic methods such as facsimile or email.⁶

Special Conditions for Releases of Source Code/Technology Within a Country

In response to comments on the proposed rule, BIS' final rule also imposes a different set of requirements under 15 CFR 740.20(d) on releases within a single country of software source code and technology to foreign nationals and provides a different notification procedure than that required for exports, reexports and other in-country transfers.

The releaser of the technology or source code must notify the recipient of the technology or source code of the restrictions on further release. The notification must either expressly inform the recipient that the EAR impose limits on further disclosure or must be in the form of an agreement in which the recipient agrees to limits on further disclosure. Any such agreement must impose limits that are equivalent to or more restrictive than all limits on further disclosure that are imposed by the EAR.

The notification must be in writing and a copy of it must be retained by the releaser and the recipient. The notification may be in a separate document or included in a document such as a contract or a nondisclosure agreement. If the document has an expiration date, it must provide that the restrictions on disclosure do not expire.

License Exception STA Precludes Subsequent Use of APR

BIS notes that use of License Exception STA precludes subsequent use of License Exception APR paragraphs (a) and (b) (15 CFR 740.16(a) and (b)) for items shipped pursuant to License Exception STA.

GOV Revised to Facilitate Pathogen, Toxin Exports in Absence of STA Eligibility

BIS notes that to facilitate the export of pathogens and toxins to governments of cooperating countries to facilitate collaborative responses to outbreaks of disease in the absence of eligibility under License Exception STA, License Exception GOV (Supplement No. 1 to 15 CFR 740.11) is also revised to remove the prohibition on use of License Exception GOV to export items controlled for chemical and biological weapons reasons (CB) to agencies of cooperating governments and to their embassies and consulates located in Country Group B (Supp. No. 1 to 15 CFR Part 740).

(See BIS' final rule for incidental amendments to cross references, Wassenaar Arrangement Reporting, and other incidental changes as a result of License Exception STA.)

¹The proposed rule did not exclude EI reasons from use of License Exception STA.

²The proposed rule only included ECCNs 0A981 and 0A983 as ineligible.

³BIS' proposed rule also proposed a third authorization to allow less sensitive items subject to only national security (NS) reasons for control to go to 125 additional destinations for civil end-uses. However, pursuant to comments received on the proposed rule, BIS has determined that this is unneeded because it repeats a restriction in 15 CFR Part 744 and creates an unreasonable burden.

⁴In April 2011, the Under Secretary of Commerce for Industry and Security designated Argentina, Austria, Finland, Ireland, South Korea, Sweden, and Switzerland as eligible destinations for export and re-export of items controlled for crime control (CC), not including ECCNs 0A981, 0A982, 0A983, 0A985 or 0E982, without a license under License Exception Strategic Trade Authorization.

⁵National security-controlled items that are ineligible for the latter authorization are identified by the new STA paragraphs in the “License Exceptions” sections of 49 ECCNs. (BIS notes that the STA exclusion paragraph therefore serves the opposite function of a typical list-based license exception paragraph. The typical license exception paragraph in an ECCN identifies items that are eligible for a license exception rather than those that are ineligible.

⁶The proposed rule proposed to require a special destination control statement that would apply to shipments made pursuant to License Exception STA to be placed on documents that accompany the shipment, and proposed to apply to reexports and transfers (in-country) abroad. BIS' final rule replaces the proposed destination control statement with a requirement that the exporter, reexporter or transferor, as applicable, notify the consignee in writing that the shipment is made pursuant to License Exception STA, as described above.

(See ITT's Online Archives or 06/01/11 news, 11060150, for BP summary of OMB approving this final rule.

See ITT's Online Archives or 05/20/11 news, 11052025, for BP summary of BIS officials discussing this final rule at a recent meeting.

See ITT's Online Archives or 03/24/11 news, 11032460, for BP summary of comments received on BIS' proposed rule.

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

BIS contact - William Arvin (202) 482-2440

(D/N 100923470-1230-03, FR Pub 06/16/11)

BIS' press release on this final rule is available here.