On April 28, 2020, the Department of Commerce, Bureau of Industry and Security (BIS), published three notices revising the Export Administration Regulations (EAR). These changes are intended to increase restrictions on exports to China, but will affect transactions involving other countries as well:
- 85 FR 23459 – Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People’s Republic of China, Russia, or Venezuela
- 85 FR 23470 – Elimination of License Exception Civil End Users (CIV)
- 85 FR 23496 – Modification of License Exception Additional Permissive Reexports (APR)
This rule comes after much delay as these changes have been anticipated since 2018 and we now have two final rules and one proposed rule from BIS.
Chinese Military End Use
Effective June 29, 2020 (85 FR 23459), EAR Part 744 will be amended to further restrict exports and reexports to China, as well as to Russia and Venezuela, when destined for a military end user or end use.
- 744.21 previously restricted exports to China for military end use, as well as exports to Russia or Venezuela for military end use or end users. By adding military end users in China, the new rule will apply the same limitations to all three countries. The new rule also broadens the definition of military end use to include additional items.
Items subject to the military end use or end user restrictions are identified by Export Control Classification Number (ECCN) in Supplement No. 2 to Part 744. The following ECCNs will be added to the supplement or their controls expanded: 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996, 8A992, 9A991 and 9B990.
Items restricted under the revised §744.21 will require a BIS license and be subject to a policy of denial. Previously, such applications were reviewed on a case-by-case basis, considering whether an export would make a material contribution to military capabilities and result in advancing military activities contrary to U.S. national security interests.
The rule also establishes a Regional Stability (RS) license requirement for any 9×515 or 600 series paragraph .y items destined for China, Russia, or Venezuela. There is an exception for the export or reexport of items to Russia for the International Space Station (ISS).
Finally, the rule amends the EAR to require Electronic Export Information (EEI) filings for any items destined China, Russia, or Venezuela regardless of value, unless shipped under License Exception GOV.”
Between the expanded definitions and “China’s widespread civil-military integration,” these revisions will require increased due diligence when evaluating end users in China.
For additional detail, refer to the Federal Register Notice.
Removal of License Exception CIV
Also effective June 29, 2020 (85 FR 23470), the §740.5 License Exception Civil End Users (CIV) will be removed from the EAR.
License Exception CIV currently allows exports and reexports of specifically identified CCL items controlled for National Security reasons to twenty three countries of national security concern when “destined to civil end-users for civil end-uses.”
License Exception CIV is not generally available—the license exception must be positively identified in the ECCN entry for the item in question. License Exception CIV is generally a counterpart to the Shipments to Country Group B Countries (GBS) or Technology and Software Under Restriction (TSR) exceptions, which allow similar exports to the EAR’s Country Group B.
In removing License Exception CIV, BIS is primarily concerned by “the increasing integration of civilian and military technology development in these countries of concern.” The removal of the license exception means that BIS licenses will be required for such transactions for all D:1 countries.
The rule also makes conforming changes to the EAR, largely removing the “CIV: Yes” or “CIV: No” indications from ECCNs.
The Commerce Country Groups are listed in Supplement No. 1 to Part 740.
For additional detail, refer to the Federal Register Notice.
Modification of License Exception APR
Finally, BIS issued a proposed rule (85 FR 23496) to modify the §740.16 License Exception Additional Permissive Reexports (APR).
License Exception APR currently allows the reexport of some controlled items from Country Group A:1 or Hong Kong, given certain conditions including an export authorization from the reexporting country. Because of concerns about these countries’ licensing review standards, APR may allow the reexports that would have been denied for export directly from the U.S.
The BIS proposal removes Country Group D:1 as eligible destinations under License Exception APR so that the U.S. government approval would be required for reexports to these countries of national security concern.
Comments may be submitted through June 29, 2020. In particular, BIS requests comments on how the proposal would impact current use of License Exception APR and the volume of transactions affected. Review the Federal Register Notice for the full proposed rule and how to submit comments.