DDTC Publishes First Long Awaited Open General Licenses
On July 20, 2022, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a Federal Register Notice (87 FR 43366) establishing two open general licenses.
Open General License No.1 and Open General License No. 2 authorize the retransfer and reexport of unclassified defense articles “the Governments of Australia, Canada, or the United Kingdom, and to members of the Australian and United Kingdom communities (as defined in ITAR §§ 126.16(d) and 126.17(d)) and Canadian-registered persons (as defined in ITAR § 126.5(b)).” Both are subject to recordkeeping requirements and specific restrictions.
DDTC considers the open general licenses to be part of a pilot program, from August 1, 2022 to July 31, 2023 and may be extended or amended. According to DDTC FAQs, they “are designed primarily to support the mission readiness of Australia, Canada, and the UK by facilitating defense trade activity related to the maintenance, repair, and storage of unclassified defense articles deployed or in-inventory, rather than supporting the acquisition of new equipment or capabilities.”
For more information, refer to DDTC’s fact sheet, new FAQs, and the Federal Register Notice.
CCL Updates: Wassenaar Implementation and Marine Toxin Proposal
On August 15, 2022, the Department of Commerce, Bureau of Industry and Security published a rule (87 FR 49979) amending the Commerce Control List (CCL) to reflect controls agreed to at the December 2021 Wassenaar Arrangement Plenary meeting.
The changes are centered on four technologies which BIS considers “emerging and foundational technologies” under the Export Control Reform Act (ECRA). Specifically, the new controls relate to:
- Two substrates of ultra-wide bandgap semiconductors (Gallium Oxide (Ga2 O3) and diamond);
- Electronic Computer Aided Design (ECAD) software specially designed for the development of integrated circuits with any Gate-All-Around Field-Effect Transistor (GAAFET) structure; and
- Pressure gain combustion (PGC) technology for the production and development of gas turbine engine components or systems.
The rule affects the following Export Control Classification Numbers (ECCNs):
- Revises 3C001.d-.f, 3C005.a and .b, 3C006, and 3E003 for two substrates (Ga2 O3 and diamond) of ultra-wide bandgap semiconductors
- Revises 9E003.a.2.e for PGC technology.
- Creates new ECCN 3D006 for Software for ECAD for the development of Integrated Circuits (ICs) with GAAFET.
Future changes based on the 2021 Plenary meeting are still anticipated. For more information, refer to BIS’s press release on the topic and the Federal Register Notice. The rule is effective August 15, 2022, except for instruction 5, concerning the addition of Export Control Classification Number (ECCN) 3D006, which is effective October 14, 2022. Comments regarding the implementation of ECCN 3D006 must be received by BIS no later than September 14, 2022.
On May 23, 2022, BIS published a proposed rule (87 FR 31195) which would add certain naturally occurring marine toxins to ECCN 1C351 due to concerns about potential exploitation for biological weapons purposes. Specifically, the ECCN would include the marine toxins brevetoxin, gonyautoxin, nodularin and palytoxin and conforming changes would be made to the EAR. Comments were accepted through June 22, 2022.
NATO Accession Anticipated for Finland and Sweden
With NATO accession for Finland and Sweden underway, we are seeing questions about how this will affect the ITAR. While Finland and Sweden are expected to join NATO, the process has not been finalized. The ITAR definition of NATO will also need to be amended to include the addition of these two strategically important countries. Once that is complete, some of the notable sections that will be affected include:
- § 123.9(e) “Reexports or retransfers of U.S.-origin components incorporated into a foreign defense article to NATO, NATO agencies, a government of a NATO country, or the governments of Australia, Israel, Japan, New Zealand, or the Republic of Korea”
- § 123.15(a) Higher Congressional Notification thresholds for NATO, Australia, Israel, Japan, New Zealand, and the Republic of Korea
- § 123.27 Special licensing regime for export to U.S. allies of commercial communications satellite components, systems, parts, accessories, attachments and associated technical data.
- § 124.2 defense services exemption
As Finland and Sweden are European Union members, they are already eligible for the § 126.18(d) exemption for transfers by foreign entities to nationals of NATO, the EU, Australia, Japan, New Zealand, or Switzerland.
Sudan Business Advisory Issued
The Department of State, together with the Departments of the Treasury, Commerce, and Labor issued a business advisory for U.S. businesses operating in Sudan. The primary concern involves human rights issues that may arise when conducting business with Sudanese State-Owned Enterprises (SOEs), including companies under military control.
Of note:
Businesses and individuals operating in Sudan and the region should undertake increased due diligence related to human rights issues and be aware of the potential reputational risks of conducting business activities and/or transactions with SOEs and military-controlled companies. U.S. businesses and individuals should also take care to avoid interaction with any persons listed on the Department of the Treasury’s Office of Foreign Assets Controls’ (OFAC) list of Specially Designated Nationals and Blocked Persons (SDN List).
This advisory relates specifically to SOEs and military-controlled companies. The U.S. government does not seek to curtail or discourage responsible investment or business activities in Sudan with civilian-owned Sudanese counterparts.
The advisory provides important background on the role of the military and SOEs in Sudan, particularly following the military’s seizure of power in October 2021.
While Sudan is no longer subject to Anti-Terrorism (AT) controls for items on the CCL, it is still subject to an arms embargo under ITAR §126.1(v) and EAR Country Group D:5
Reminder: ITAR Reorganization Rule 1 to Take Effect September 6
The first ITAR reorganization rule, which will consolidate most definitions into Part 120, will take effect September 6, 2022.
The rule primarily consolidates and organize definitions currently distributed throughout the ITAR into Part 120, eliminating redundant text in the process. While DDTC has stated that the rule does not make substantive revisions or impose new requirements, there are some changes that reflect longstanding policy.
The DDTC website and Defense Export Control and Compliance System (DECCS) are in the process of being revised to reflect the reorganization and are expected to be fully updated by September 9, 2022.
For more information on the changes, please refer to our previous blog post on the topic.