State and BIS Propose Rules to Revise USML Cat VIII & CCL, but "Tiering" on Hold, Etc.

Written comments on both proposed rules are due by December 22, 2011.

State Dept Proposed Rule

Proposed Rules Do Not Reflect Tiering

The Departments of State and BIS described in their respective Advanced Notices of Proposed Rulemaking (ANPR) in December 2010 the Administration’s plan to make the U.S. Munitions List and the Commodity Control List positive, tiered, and aligned so that eventually they can be combined into a single control list. The notices also called for the establishment of a “bright line” between the USML and the CCL to reduce government and industry uncertainty regarding export jurisdiction by clarifying whether particular items are subject to the jurisdiction of the ITAR or the EAR. While these remain the Administration’s ultimate Export Control Reform objectives, their concurrent implementation would be problematic in the near term. As a result, the Administration has decided, as an interim step, to propose and implement revisions to both the USML and the CCL that are more positive, but not yet tiered.

Proposed Revision of USML Category VIII

The State Department's proposed rule would revise USML Category VIII, covering aircraft and related articles, to establish a clearer line between the USML and the CCL regarding controls over military aircraft and related articles. The proposed revision would narrow the types of aircraft and related items controlled on the USML to only those that warrant control under the stringent requirements of the Arms Export Control Act (AECA). Proposed changes include:

Condensing categories. The propose rule would move similar articles currently controlled in multiple categories into a single category or subcategory. Other former Category VIII subcategories have been “reserved” because the State Department is proposing to change the jurisdictional status of the items covered therein so that they would become subject to the EAR.

Aircraft definition. This proposed rule would also more clearly define “aircraft” for purposes of the revised USML Category VIII.

Positive list of generic parts (with one exception). The most significant aspect of this more positive, but not yet tiered, proposed USML category is that it does not contain controls on all generic parts, components, accessories, and attachments that are "specifically designed" or modified for a defense article, regardless of their significance to maintaining a military advantage for the United States. Rather, it contains, with one principal exception, a positive list of specific types of parts, components, accessories, and attachments that continue to warrant control on the USML. The exception pertains to parts, components, accessories, and attachments “specially designed” for certain U.S.-origin aircraft that have low observable features or characteristics.

All other parts, components, accessories, and attachments “specially designed” for a military aircraft and other articles now subject to USML Category VIII would become subject to the new 600 series controls in Category 9 of the CCL.

(The Administration has also proposed revisions to the jurisdictional status of certain militarily less significant end items that do not warrant USML control, but the primary impact of this proposed change will be with respect to current USML controls on parts, components, accessories, and attachments that no longer warrant USML control.)

Proposed Definition for "Specially Designed"

For the purposes of this proposed rule, the draft definition for “specially designed” in the December 2010 ANPR should be used. The draft definition provided at that time is as follows: “For the purposes of this Subchapter, the term “specially designed” means that the end-item, equipment, accessory, attachment, system, component, or part (see ITAR 121.8) has properties that (i) distinguish it for certain predetermined purposes, (ii) are directly related to the functioning of a defense article, and (iii) are used exclusively or predominantly in or with a defense article identified on the USML.”

(BIS subsequently published on July 15, 2011, for public comment, the Administration’s proposed definition of “specially designed” that would be common to the CCL and the USML. The public provided more than 40 comments on that proposed definition on or before the September 13 deadline for comments. The Departments of State, Commerce, and Defense are now reviewing those comments and related issues, and the Departments of State and Commerce plan to publish for public comment another proposed rule on a definition of “specially designed” that would be common to the USML and the CCL.)

BIS Proposed Rule

Five New 600 Series ECCNs Would be Created

This proposed rule would create five new 600 series ECCNs in CCL Category 9 - 9A610, 9B610, 9C610, 9D610, and 9E610 - that would control articles the President determines no longer warrant control under USML Category VIII. This rule also would move items currently classified under ECCNs 9A018, 9D018, and 9E018 to the new ECCNs. Moving items from 018 ECCNs to the appropriate 600 series ECCNs would consolidate WAML and formerly USML items into one series of ECCNs.

License Exception STA or GOV

The rule would also create a new Supplement No. 4 to part 740 that would prohibit the use of License Exceptions STA or GOV to export or reexport, except to U.S. government agencies or personnel, ECCN 9D610 software and ECCN 9E610 technology (other than “build-to-print technology”) for the production of specific types of parts and components classified under ECCN 9A610.x.

License Exception STA under 740.20(c)(1) generally would be available for eligible end items and all other 600 series items if, at the time of export, reexport or transfer (in-country) the item is destined (i) for ultimate end use by the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, and search and rescue agencies of the “STA-36” countries or of the United States Government; or (ii) for the “production” or “development” of an item for ultimate end use by any of those foreign government agencies in any of the STA-36 countries, by the United States Government, or by any person in the United States. This condition means that exports and reexports to non-governmental end users in one of the STA-36 countries under STA would be permissible so long as the item at issue would ultimately be provided to, or for the production or development of an item to be provided to and for end use by, any of the foregoing agencies of a government of a STA-36 country, the United States Government, or any person in the United States.

This eligibility under License Exception STA is proposed because the U.S. Government recognizes that there would be a significant volume of desirable trade between and among private companies in the STA-36 countries regarding “600 series” end items that would ultimately be for use by one of the foregoing government agencies of an STA-36 country, the United States Government, and manufacturers in the United States.

State proposed rule available here. BIS proposed rule available here.

* edited 12/06/11 to clarify that control of parts based on their being "specially designed" is an exception.