Our “EAR”... to the ITAR
Answers to your questions about U.S. export controls
from
ECS expert trainers and consultants.
Updating on our previous post on the proposed revisions to USML Categories I, II, and III, the proposed rules to transfer articles from the firearms, artillery, and ammunition categories from State Department to Commerce Department jurisdiction have been published.
The proposed rules were officially published in the Federal Register on May 24, 2018 at 83 FR 24166 (Commerce Department) and 83 FR 24198 (State Department). Comments will be accepted under both notices until July 9, 2018.
Nearly two years after Export Control Reform stalled without reaching the remaining three categories, the Departments of State and Commerce have simultaneously published proposals to revise United States Munitions List (USML) Categories I, II, and III (firearms, artillery, and ammunition). Click here for the Department of State proposal and click here for the Department of Commerce proposal.
The rationale for the review is that:
The Department of State is engaged in an effort to revise the U.S. Munitions List so that its scope is limited to those defense articles that provide the United States with a critical military or intelligence advantage or, in the case of weapons, are inherently for military end use. The articles now controlled by USML Categories I, II, and III that would be removed from the USML under this proposed rule do not meet this standard, including many items which are widely available in retail outlets in the United States and abroad.
Currently written broadly, USML Categories I, II, and III cover most firearms, artillery systems, and ammunition. They also include catch-all parts and components categories (e.g., I(h) “Components, parts, accessories and attachments for the articles in paragraphs (a) through (g) of this category.”). Items no longer controlled under the USML would be controlled by the Department of Commerce’s Export Administration Regulations (EAR) and listed on the Commerce Control List (CCL).
The eagerly-awaited USML Category I revision would include the following, notably excluding most “non-automatic or semi-automatic firearms”:
x. Commodities, software, and technology subject to the EAR (see §120.42 of this subchapter) used in or with defense articles. Note to paragraph (x): Use of this paragraph is limited to license applications for defense articles where the purchase documentation includes commodities, software, or technology subject to the EAR (see §123.1(b) of this subchapter)
Note 1 to Category I: Paragraphs (a), (b), (d), (e), (g), (h), and (i) of this category exclude: any non-automatic or semi-automatic firearms to .50 caliber (12.7 mm) inclusive; non-automatic shotguns; BB, pellet, and muzzle loading (e.g., black powder) firearms; and parts, components, accessories, and attachments of firearms and shotguns in paragraphs (a), (b), (d), and (g) of this category that are common to non-automatic firearms and shotguns. The Department of Commerce regulates the export of such items…
The proposed Category II revision includes expanded technical notes and specifications for control and enumerate the parts and components that will remain on the USML. The proposed Category III is rewritten to control ammunition based on technical attributes rather than merely being “for the articles in Categories I and II.” Both Category I and Category II will include paragraphs controlling developmental products funded by the Department of Defense.
Other sections of the International Traffic in Arms Regulations (ITAR) would be amended due to existing references to “firearms” that would be overbroad with a revised Category I. These include the firearms exemptions in §123.17, which would no longer be subject to the ITAR.
Concurrently, the Department of Commerce would create new Export Control Classification Numbers (ECCNs) for the items leaving the USML. Items currently controlled in Category II would be controlled under new “600 series” ECCNs “to control items of a military nature” and Category I and III items would be controlled under new “500 series” ECCNs “because, for the most part, they have civil, recreational, law enforcement, or other nonmilitary applications.” Conforming to the new ECCNs, seven existing ECCNs would be revised and nine removed. Various other changes would be made throughout the EAR.
Notably, from the Department of Commerce proposal:
This proposed rule does not deregulate the transferred items. BIS would require licenses to export, or reexport to any country a firearm or other weapon currently on the USML that would be added to the CCL by this proposed rule. BIS would also require licenses for the export or reexport of guns and armament that would be controlled under new ECCN 0A602, such as guns and armaments manufactured between 1890 and 1919 to all destinations except Canada. As compared to decontrolling firearms and other items, in publishing this proposed rule, BIS, working with the Departments of Defense and State, is trying to reduce the procedural burdens and costs of export compliance on the U.S. firearms industry while allowing the U.S. Government to enforce export controls for firearms appropriately and to make better use of its export control resources.
Comments on the proposed revisions may be submitted to the Department of State until 45 days after the publication of the Federal Register Notice—likely June 30, 2018 or later. Comments are specifically requested regarding any possible gaps in control between the revised USML and CCL, items whose jurisdiction is unclear under the revision, the time needed for industry to implement any final rule, and any other regulatory burden. Comments may be submitted via the Federal eRulemaking Portal at http://www.regulations.gov under Docket DOS-2017-0046 or by email to DDTCPublicComments@state.gov with the subject line, “ITAR Amendment – Categories I, II, and III.”
Comments may be submitted to the Department of Commerce on the same timeline via the Federal eRulemaking Portal at http://www.regulations.gov under Docket BIS-2017-0004 or by mail, referencing RIN 0694-AF47 to:
Regulatory Policy Division
Bureau of Industry and Security
U.S. Department of Commerce
Room 2099B
14th Street and Pennsylvania Avenue, NW
Washington, DC 20230
Update, May 25, 2018
The proposed rules were officially published in the Federal Register on May 24, 2018 at 83 FR 24166 (Commerce Department) and 83 FR 24198 (State Department). Comments will be accepted until July 9, 2018.
On May 8, 2018, the White House announced the termination of U.S. participation in the Joint Comprehensive Plan of Action (JCPOA) with Iran. Previously suspended sanctions, particularly related to Iran’s energy, petrochemical, and financial sectors will be re-imposed subject to a wind-down periods for existing business.
The Department of the Treasury released a follow-on statement including the following:
As soon as is administratively feasible, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) expects to revoke, or amend, as appropriate, general and specific licenses issued in connection with the JCPOA. At that time, OFAC will issue new authorizations to allow the wind down of transactions and activities that were authorized pursuant to the revoked or amended general and specific licenses. At the end of the 90-day and 180-day wind-down periods, the applicable sanctions will come back into full effect.
OFAC also posted FAQs on the re-imposition of sanctions. Notably, the 90-day wind-down period that ends on August 6, 2018 includes:
ii. Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP); and
iii. Activities undertaken pursuant to General License I relating to contingent contracts for activities eligible for authorization under the JCPOA SLP.
The 180-day wind-down period that ends on November 4, 2018 includes shipping, shipbuilding, petroleum, and energy sectors. Other categories of business are distributed between the two wind-down periods.
Due to the wind-down periods, sanctions and license revocations were not yet officially implemented. The full FAQs may be found here.
For ITAR purposes, Iran was and remains a prohibited destination subject to a policy of denial under Section 126.1. The Department of Commerce Export Administration Regulations (Section 746.7) include both Commerce Department and OFAC licensing requirements for Iran.