Over the last few months, beginning on October 15, 2013, the Obama Administration has finally begun implementing a long-awaited major restructuring of US export controls to transfer primary jurisdiction of various regulated products and services from the Department of State to the Department of Commerce. The following is a template that you can use as a starting point for a Client Alert that briefly explains the changes and ends with guidance to your client to work with you to review and, if necessary, update their internal export control compliance procedures and training. For further details on export control compliance, see Gutterman, Business Transactions Solutions §§ 102:1 et seq.
CLIENT ALERT: OBAMA ADMINISTRATION CONTINUES ROLLOUT OF MAJOR US EXPORT CONTROLS RESTRUCTURING—TIME TO IDENTIFY CHANGES IN YOUR PROCEDURES
As of October 15, 2013, in what has been touted as the most significant milestone of the Obama Administration’s Export Control Reform Initiative (“ECR”), many items previously regulated by the Department of State due to their placement in Categories VIII (aircraft) and XIX (gas turbine engines) of the ITAR U.S. Munitions List (“USML”) were moved to control by the Department of Commerce as “600 Series” items (named for the middle digit (“6”) of the new item) under its Commerce Control List (“CCL”) as part of the Obama Administration’s efforts to ease some of the historical restrictions that had been imposed on exporting US products and services and create a more flexible export control regime. All of the items that were moved were placed in CCL Category 9 (Propulsion Systems, Space Vehicles and Related Equipment) and thus their export control classification numbers (“ECCN”) would begin with “9” and then be followed by the appropriate product group letter (A-E), “6” as the middle digit and then ending with two last characters that will generally track the Wassenaar Arrangement Munitions List. These new 600 Series ECCNs will remain subject to control for various reasons including national security, regional stability, anti-terrorism, missile technologies and UN embargoes.
The Obama Administration explained that the controls as restructured were no longer overly broad generic controls that captured everything, but instead were detailed, enumerated lists that imposed controls based on the sensitivity of the item and the destination. For example, the most sensitive items (i.e., bombers, fighters, unmanned aerial vehicles, and their key subsystems, parts, and components) remained on the USML and thus continued to be subject to the most stringent controls used under the country’s export controls regime, while less sensitive items, mostly parts and components like cockpit gauges, steel brake wear pads and fuel filters, were moved to the more flexible authorities available through the CCL and, in fact, many of the items moved to the CCL became eligible for export without specific licenses if intended for the ultimate end-use by the governments of 36 US allies and partners (although such exports carry with them additional compliance requirements). It should be noted that all items on either list remain subject to the same US arms embargoes.
A similar transfer of control from the USML to the “600 Series” became effective on January 6, 2014 for items previously found in USML Categories VI (Surface Vessels of War and Special Naval Equipment), VII (Ground Vehicles), XIII (Materials and Miscellaneous Articles) and XX (Submersible Vessels and Related Articles) and on January 2, 2014 it was announced that revisions to USML Categories IV (Missiles, Launch Vehicles), V (Explosives), IX (Military Training Equipment), X Protective Personnel Equipment), and XVI (Nuclear Testing Equipment) would go into effect on July 1, 2014.
The Obama Administration has estimated that a significant percent of the items that had previously been subject to the licensing requirements imposed under the USML will now be controlled under the CCL “600 Series” and that his means that companies subject to US export controls should systematically review their matrices of products and technologies to determine whether they will be subject to the USML or the CCL going forward and work with their vendors and customers to ensure that items are properly characterized taking into account the restructured regulatory regime. Exporters may find that shipments may include items that remain on the USML, and thus still require export licenses, and parts and components for those items that are now covered by the CCL and which can be shipped without an export license. All of this means that exporters will need to carefully review all of their export control compliance procedures, policies and agreements and train personnel involved with exports in how to successfully and efficiently navigate the new requirements. Please contact our offices at your earliest convenience so we can set up a time to discuss any necessary changes to your export control compliance procedures and training.