BIS Issues Final Rule to Implement 500 Series “Not Otherwise Listed” ECCNs

(The 0Y521 series was described in BIS’ July 15, 2011 proposed rule that identified a framework for how articles, which the President determines as part of the Administration’s Export Control Reform (ECR) Initiative, no longer warrant control on the USML, would be controlled under the CCL. In this rule, however, the 0Y521 provisions are being published in final form, with corresponding changes, separate from the other July 15 rule proposals. BIS said public comments on the other July 15 proposals remain under BIS review. See ITT’s Online Archives 11071519 for summary of BIS’ July 15 proposed rule, and 12031610 for summary of BIS Regulations and Procedures Technical Advisory Committee meeting where the issuance of this rule as final, separate from other proposals from the July 15 rule, was discussed.)

0Y521s Are Items Not Listed in CCL that BIS, DoD & State Determine Should be Controlled

The amended regulations state that items subject to the EAR that are not listed elsewhere in the CCL, but which the Department of Commerce, with the concurrence of the Departments of Defense and State, has determined should be controlled for export because the items provide at least a significant military or intelligence advantage to the U.S. or for foreign policy reasons are classified under ECCNs 0A521, 0B521, 0C521, 0D521, and 0E521.

BIS said these items are typically emerging technologies (including emerging commodities, software, and technology) that are not yet included in the CCL, so such items are listed on the CCL in 0Y521 ECCNs while the U.S. Government determines whether classification under a revised or new ECCN, or an EAR 99 designation (i.e., items listed subject to the EAR which are not listed on the CCL), is appropriate.

Items that the U.S. Government determines during the 0Y521 review process that are more appropriately captured under the USML Category XXI (Miscellaneous Articles) or other USML control will be controlled as such.

1-Year Time Limit for 0Y521 Classification; Product EAR99 Unless Reclassified or Extended

BIS said items classified under ECCN 0Y521 will stay so-classified for one year from the date that a final rule amending the EAR by identifying the item is published in the Federal Register, unless the item is re-classified under a different ECCN or the 0Y521 classification is extended. According to BIS, during this time, the U.S. Government will determine whether it is appropriate to submit a proposed control to the applicable export control regime (e.g., the Wassenaar Arrangement) for potential multilateral control, with the understanding that multilateral controls are preferable when practical. BIS may extend the 0Y521 classification of an item by two one-year periods (e.g., for a total period of three years). To extend the classification beyond three years, the Under Secretary for Industry and Security must determine to do so.

Items become EAR99 if not reclassified or extended. New 15 CFR 742.6(a)(7)(iii) says items classified under an ECCN 0Y521 entry must be reclassified under another ECCN within one calendar year from the date they are listed in Supplement No. 5 to Part 774 of the EAR. If such reclassification does not occur within that period, classification under an ECCN 0Y521 entry expires, and such items are designated EAR99 items unless either the CCL is amended to impose a control on such items under another ECCN or the ECCN 0Y521 classification is extended.

Two one-year extensions if seeking multilateral controls. New 15 CFR 742.6 Part (a)(7)(iii) also states that BIS may extend an item’s ECCN 0Y521 classification for two one-year periods (i.e., up to a total period of three years), provided that the U.S. Government submitted a proposal to the relevant multilateral regime(s) to obtain multilateral controls over the item.

Extension beyond three years at discretion of BIS Under Secretary. The final rule says further extension beyond three years may occur only if the Under Secretary for Industry and Security makes a determination that such extension is in the national security or foreign policy interests of the U.S. Any extension or re-extension of control of an ECCN 0Y521 item, including the determination by the Under Secretary, shall be published in the Federal Register.

0Y521s Subject to “Nearly Worldwide” License Requirements; GOV & Case-by-Case Exceptions

The final rule said ECCN 0Y521 items will be subject to a nearly worldwide license requirement (i.e., for every country except Canada), with a case-by-case license review policy, through regional stability (RS Column 1) controls, with no license exception eligibility other than License Exception GOV for U.S. Government personnel and agencies, or an item-specific license exception granted by BIS and identified in Supplement No. 5 to Part 774.

Case-by-case license review. BIS said the license review policy will be used to evaluate on a case-by-case basis whether the export or reexport could contribute directly or indirectly to any country’s military capabilities in a manner that would destabilize a region’s military balance contrary to the foreign policy interests of the U.S.

Item-specific license exceptions on a case-by-case basis. BIS states that, in a change from the July 15 proposed rule, BIS will have the authority to apply additional license exceptions on an item-specific basis at any time if the DoD and State Department concur with such application. Specifically, BIS’ new rule amends 15 CFR 740.2 (Restrictions on all License Exceptions) to add new paragraph (a)(14), which states that:

Items classified under ECCNs 0A521, 0B521, 0C521, 0D521, and 0E521 may only be authorized by License Exception GOV for U.S. Government personnel and agencies, for or an item-specific license exception identified in Supplement No. 5 to Part 774 for a particular ECCN 0Y521 item. A new note to this paragraph states that item-specific license exception availability is specific to each ECCN 0Y521 entry in Supplement No. 5 to Part 774 and may not be used for any other ECCN 0Y521 entries in the Supplement. The U.S. Government makes a determination at the time items are classified under the 0Y521 ECCNs regarding whether any license exceptions will be available, in addition to License Exception GOV.

0Y521s Excluded from Part 756 Appeals Process

BIS states that, as the U.S. Government’s decision to identify an item as in ECCN 0Y521 is a classification based on a determination of whether the item has significant military or intelligence advantage to the U.S. or for foreign policy reasons, not a classification of the item’s technical characteristics, ECCN 0Y521 classifications are excluded from the Part 756 appeals process. BIS said parties would nonetheless be encouraged to provide to BIS information and comments about the item and the ECCN 0Y521 controls on it.

New Supplement No. 5 to 15 CFR Part 774 Contains List of 0Y521s

The technical description and list of such items appear in Supplement No. 5 to part 774 -- Items Classified Under ECCNs 0A521, 0B521, 0C521, 0D521, and 0E521.

(Changes from the proposed rule include: (1) a specific requirement in the regulations that second or third-year extensions require that the U.S. has submitted a proposal for multilateral control for the item; (2) the potential for further extension of ECCN 0Y521 controls beyond three years for a specific item at the discretion of the Under Secretary for Industry and Security; (3) the potential availability of additional license exceptions on an item-specific basis; (4) use of product group specific terminology (i.e., commodity, material, software, or technology) for each of the respective 0Y521 ECCNs.)