BIS' Proposed Rule to Move USML Items to CCL Covers Specially Designed, Etc.

Written comments are due by September 13, 2011.

(This proposed rule is being issued as part of the Administration’s Export Control Reform (ECR) Initiative¹. See ITT's Online Archives or 07/13/11 news, 11071318, for BP summary announcing the availability of this proposed rule.)

Rule Would Create Processes to Transition Items from USML to CCL

This rule proposes to amend the EAR² to, among other things: (i) establish a regulatory framework for transitioning certain items from the U.S. Munitions List (USML) to the Commerce Control List (CCL); (ii) transfer an initial tranche of items from USML Category VII (Tanks and Military Vehicles) to the CCL; (iii) establish a process for making certain transferred items eligible for License Exception Strategic Trade Authorization (STA); (iv) establish new definitions for "specially designed," "end items," "parts," etc.; and (v) establish a new holding Export Control Classification Number (ECCN) in which items that warrant a significant level of control, but are not otherwise classified on the CCL, may be temporarily placed.

Says Proposed Framework Would be Consistent with Existing EAR

In December 2010, the State and Commerce Departments published advance notices of proposed rulemakings (ANPRs) on making the USML and CCL "tiered" and "positive" based on criteria developed during the ECR Initiative.

Such a "positive" USML requires a proper control structure to be put into place under the EAR to appropriately control the less significant items moved from the USML to the CCL. BIS states its proposed changes would create such a regulatory structure and are meant to be consistent with the existing EAR structure as much as possible.

BIS groups its proposed changes into the following four categories (see notice for full details):

Addition of "600 Series" on CCL to Control Former USML Items

"xY6zz" Control Series Would be Added to CCL to Control Former USML Items

In Supplement No. 1 to part 774 of the CCL, this rule proposes to add a new "xY6zz" control series to the CCL to control most items formerly on the USML moved to the CCL and to consolidate the thirteen existing WAML entries (i.e., those entries currently under "xY018") to this new "600 series." This new control series would be added to each of the 10 CCL categories and would fall after the "300 series" and before the "900 series" on the CCL.

This proposal would effectively create a "Commerce Munitions List," comprising distinct ECCNs, that allows for identification, classification, and control of items transferred from the USML that, based on their technical or other characteristics, are not classified under an existing ECCN that is subject to controls for any reason other than Anti-Terrorism (AT) reasons. BIS would retain the existing CCL Category (x) (i.e., 0 through 9) structure and the existing Group (Y) (i.e., A, B, C, D, and E) structure for the types of items that move to the CCL.

"600 Series" Would Generally be Controlled for Nat'l Security Reasons

This rule proposes that items in the "600 series" ECCNs would generally be controlled for National Security Column 1 (NS1) reasons, which means that a license would be required to export or reexport them to all countries except Canada (excluding items also controlled for Missile Technology (MT), Proliferation of Chemical and Biological Weapons Column 1 (CB1), and Firearms Convention (FC) reasons) unless a license exception were available. MT-, CB1-, and FC-controlled end items that would move from the USML would continue to be controlled for those respective reasons like all other such controlled items on the CCL.

Moved Multilateral Regime-Controlled Items Would Retain Their Control Reasons

Multilateral regime-controlled items moved from the USML to the CCL would retain their regime control parameters and reasons for control, even if added to an existing ECCN or added to a new "600 series" ECCN. Items in the "600 series" would generally also be controlled for Regional Stability Column 1, Anti-Terrorism Column 1, and United Nations Embargo reasons for control.

Similarly, items that were on the CCL prior to the creation of the "600 series" and that move into the "600 series" after implementation of this rule will retain the reasons for control to which those items were subject prior to the creation of the "600 series."

Series Would Capture WAML/Former USML End Items, Cover Parts, Accessories

Each of the new "600 series" entries would capture Wassenaar Arrangement Munitions List (WAML) and formerly USML end items that are not identified in either (i) the revised USML or (ii) another existing ECCN controlled for more than AT-only reasons.

Generic "parts," "components," "accessories" and "attachments" moved from the USML would be controlled using a similar structure in each of the "600 series" ECCNs that would be added to the CCL. Former USML "parts," "components," "accessories and attachments" that are not: (i) identified in the revised, positive USML; (ii) specifically identified in a new 600 series entry; or (iii) described in another ECCN controlled for more than AT-only reasons would be controlled at the end of each new corresponding 600 series ECCN as "parts," "components," "accessories and attachments" ‘specially designed’ for (i) items controlled elsewhere in that ECCN or (ii) defense articles controlled in the corresponding USML category."

Would Expand ECCN 0A919 to Include 10% or More Foreign-Made Munitions Items

The EAR controls the reexports of certain foreign-made munitions items that incorporate ECCN 6A003.b.4.b cameras that are not otherwise subject to the International Traffic in Arms Regulations (ITAR). This rule proposes expanding ECCN 0A919 to also include foreign-made munitions items that incorporate more than 10% "600 series" controlled content.

Comments Sought on Processing Timeframe for "600 Series" License Apps

BIS states that license decisions under the EAR must be made within 39 calendar days, although the average processing time for BIS in 2011 has been 31 calendar days. For licenses processed by the State Department, the average processing time has been generally around 17 calendar days. BIS welcomes public comments on an appropriate processing time for license applications involving these "600 series" items, in light of these timeframes. If commenters recommend a shorter review period, it would be useful if they also specify what processing times would be appropriate and identify any unique aspects of the "600 series" that may necessitate a need for a shorter review period, as well as the historical timeframes of the State Department's processing of license applications involving such items.

Creation of Process to Make Transferred Items Eligible for STA Exception

This rule proposes to amend 15 CFR 740.20 by adding new paragraph (g) to create a new interagency process through which license applicants could request License Exception Strategic Trade Authorization (STA) eligibility for "600 series" "end items" (as opposed to "parts," "components," "accessories," or "attachments") classified in an ECCN "xA6zz" entry at the same time that they submit license applications covering such items. This new interagency review process would be a key component of the new control structure that is included in this proposed rule for addressing the movement of items from the USML to the CCL and ensuring that the governments of the STA-36 destinations would have access to these "600 series" "end items" once an interagency review and determination is made that such "end items" should be exportable under License Exception STA.

With respect to the timeframe for U.S. Government reviews of License Exception STA eligibility requests pursuant to proposed section 740.20(g), BIS states that it welcomes public comments, particularly in light of the connection between license applications involving "600 series" items and License Exception STA requests.

Creation of New Miscellaneous ECCN 0Y521 Equivalent to USML Cat XXI

Would Add New ECCN 0Y521 for Miscellaneous Items Not Yet Controlled

As a mechanism for situations in which an item that warrants control is not controlled yet (e.g., as with an emerging technology), this rule proposes the addition of a new, miscellaneous ECCN to the CCL, similar to USML Category XXI (Miscellaneous Articles).

This new temporary holding classification would be included in Supplement No. 1 to part 774 in ECCNs 0A521, 0B521, 0C521, 0D521 and 0E521 (the 0Y521 ECCNs). The 0Y521 ECCNs would be designed as a temporary "holding" category for items not elsewhere classified on the CCL for which the U.S. Government is determining an appropriate control.

Creation of New Definition of "Specially Designed"

New Definition of "Specially Designed" Would be Created for ECCNs, USML

The Administration has determined that it cannot completely eliminate "specially designed" as a control parameter. The term is commonly used in the multilateral export control regimes’ control lists upon which much of the CCL and USML are based. A basket category for controlling militarily less significant items "specially designed" for defense articles that move to the CCL is still necessary to achieve the larger national security objectives of the reform effort.

Therefore, the proposed rule would create a new definition of "specially designed" to apply to (i) 600 series ECCNS, (ii) existing ECCNs using the term, and (iii) revised USML categories using the term.

A Specially Designed Item Has CCL Number & Exceeds Performance Levels

Under the proposed definition, a “specially designed” item, other than a "part" or "component," would be an item that is enumerated on the CCL and, as a result of "development," has properties peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or functions of the referenced item identified in the CCL.

For the purposes of this definition, an item would not be considered "specially designed" if it is separately ‘enumerated’ in an USML subcategory or an ECCN that does not have "specially designed" as a control criterion.

Items that are not separately "enumerated" for purposes of this definition would also not be considered "specially designed" in any category of the CCL if they are: single unassembled parts (screws, bolts, nuts, etc.); specifically excluded from control on the USML or the CCL; a part or component of an end-item in serial production and not enumerated on the USML or CCL; etc. (See proposed rule for additional details.)

(BIS notes that this definition is not applicable to the similar phrase "specifically designed" which is used throughout the USML, or to the phrase "especially designed or prepared for" in use throughout the Nuclear Regulatory Commission regulations.)

Comments Sought on Whether New Definition Would Cause Change in Controls

The Administration believes this proposed definition would accomplish the regulatory and definitional harmonization objectives of the State and Commerce Departments' December 2010 ANPRs. BIS particularly seeks public comments on whether there would be any anticipated change in controls based on adoption of this definition, relative to the current situation where "specially designed" is only defined for MT-controlled items.

Public Encouraged to Apply Definition as May Not be Able to After Final Rule

Through this proposed definition, if an item is "specially designed" today, it would continue to be "specially designed" after adoption of this definition. If it is not "specially designed" today (meaning prior to adoption of the definition included in this rule), it also should not, except in rare cases, become "specially designed" after adoption of this definition in a final rule.

As a result, BIS strongly encourages the public to apply the proposed definition to items, particularly "end items," "parts" and "components," it believes are or are not currently covered by "specially designed" and report to BIS any instances in which the proposed definition produces different results from the current definition. Such comments should describe the item and why the commentor believes that the item at issue is not now "specially designed" but would be as a result of the application of the new definition.

Other Changes to Assist in Structural Alignment of USML and CCL

Would Revise CCL Product Group A Headings

As a conforming change, this proposed rule would update the product group heading for A in each Category of the CCL. This proposed change would help with the structural alignment of the CCL and USML by ensuring these terms and control lists’ product group headings are used in a consistent way. Specifically, this proposed rule would change the product group A heading as set out in the proposed amendments. (See proposed rule for additional details.)

New Definition of "Materials" Would be Added

This proposed rule would add a new definition of the term "materials" as it is used in the CCL Product Group C heading and in other parts of the EAR. Under the new definition, "materials" would include "any list-specified crude or processed matter that is not clearly identifiable as any of the types of items defined in section 772.1 under the defined terms, "end item," "component," "accessories and attachments," "part," "software," "system, "equipment," or "facilities."

¹In 2010, the Administration launched its Export Control Reform (ECR) Initiative to streamline the export process and create a single export licensing system with responsibility over commercial exports. The December 2010 Commerce and State Department advance notice of proposed rulemakings on the CCL and the USML are part of this ECR Initiative. (See ITT's Online Archives or 12/09/10 and 12/10/10 news, 10120921 and 10121021, for BP summaries of the December rulemakings.)

²This rule proposes to amend the following parts of the EAR (15 CFR): 730, 732, 734, 738, 740, 742, 743, 744, 746, 748, 756, 762, 770, 772 and 774.

(See ITT’s Online Archives or 06/16/11 news, 11061613, for BP summary announcing the expected July 2011 publication of BIS proposed rule on process for transitioning items from USML to CCL.

See ITT's Online Archives or 06/16/11 news, 11061620, for BP summary of BIS' final rule adding a new License Exception STA to the EAR.)

BIS contact -- Timothy Mooney (202) 482-2440

(D/N 110310188-1335-01, FR Pub 07/15/11)