In a flurry of activity in December, the Department of Commerce, Bureau of Industry and Security (BIS), updated licensing policies for countries near and far. The updates will have notable impacts on license exemption availability as described below.
Hong Kong no Longer a Separate Destination
On December 23, 2020, BIS issued a final rule (85 FR 83765) removing Hong Kong as a separate destination under the Export Administration Regulations (EAR). This follows the July suspension “all License Exceptions for Hong Kong that provide differential treatment as compared to those available to the People’s Republic of China (PRC).” The PRC imposed a new “national security law” in 2020 which reduced Hong Kong’s preexisting autonomy and increased the risk of diversion U.S. technology and hardware.
Changes to Country Groups for Ukraine-Removes an Exception
Mexico, and Cyprus Adds STA as an Exception but Cyprus still a D:5 Country
On December 28, 2020, BIS issued a final rule (85 FR 84211) which moves Ukraine from Country Group D to Country Group B and adds Mexico and Cyprus to Country Group A:6.
No changes were made to license requirements in the Commerce Country Chart. Under the EAR, Country Groups are used to determine eligibility for many license exceptions.
Ukraine’s addition to Country Group A:6 is unique, as it specifically excludes eligibility for License Exception GBS (§740.4 Shipments to Group B Countries) and License Exception TSR (§740.6 Technology and Software under Restriction), but other license exceptions available to Group B countries do become available. Under this change, General Prohibition Three (the Foreign-Produced Direct Product Rule) no longer applies to Ukraine. EAR §746.6 continues to restrict exports to the Crimea Region of Ukraine.
The addition of Mexico and Cyprus to Country Group A:6 authorizes the use of License Exception Strategic Trade Authorization (STA) §740.20(c)(2) (controls of lesser sensitivity).
Cyprus remains an ITAR §126.1 country (with a recently updated licensing policy) and is still included in Country Group D:5. Under EAR §740.2(a)(12) and (13), license exceptions are limited for 9×515 and 600 series items for Cyprus (and other D:5 countries)
These updates are based on: “(1) The Government of Ukraine’s continuing engagement with regional and international export control authorities; (2) Mexico’s multilateral export control regime memberships and national security approaches and interests compatible with the United States; and (3) Cyprus’ European Union membership and like-minded export controls.”
Sudan
On December 18, 2020, the Department of State published a notice rescinding Sudan’s designation as a State Sponsor of Terrorism. This change was previously announced in October, subject to a 45-day Congressional notification window. Sudan is currently the only country designated as requiring export licenses for Anti-Terrorism (AT) purposes on the Commerce Country Chart that is not subject to comprehensive restrictions. This requirement has not yet been removed.
After the re-designation of Cuba as a State Sponsor of Terrorism, the list now includes Cuba, Iran, North Korea, and Syria. All four are already subject to comprehensive export restrictions.