In December 2022, the U.S. Department of State’s Directorate of Defense Trade Controls issued updated Compliance Program Guidelines. These Guidelines are an overview of an effective ITAR Compliance Program (ICP) and an introduction to defense trade controls.

The Guidelines are divided into eight sections:

1. Management Commitment
2. DDTC Registration, Jurisdiction & Classification, Authorizations, & Other ITAR Activities
3. Recordkeeping
4. Detecting, Reporting, & Disclosing Violations
5. ITAR Training
6. Risk Assessment
7. Audits & Compliance Monitoring
8. ITAR Compliance Manual

This article will focus on the first four sections: Management Commitment,

DDTC Registration, Jurisdiction & Classification, Authorizations, & Other ITAR Activities, Recordkeeping, and Detecting, Reporting, & Disclosing Violations.

This guidance is not an official part of the International Traffic in Arms Regulations. Instead, it serves as a way for the Directorate of Defense Trade Controls to express their expectations for export compliance. DDTC also understands that different companies have unique levels of ITAR activity and may need different approaches.

Management Commitment

Management commitment to export compliance sets the tone for the entire organization.  Management commitment can be expressed through communications to employees, as well as integration into performance evaluations, including both rewards and disciplinary actions. It can also be expressed through the maintenance of the ICP and its management commitment statement, as well as sufficient and well-organized staff who are given thorough training (to be discussed in our next article). Empowered Officials must be truly empowered. They must also be sufficiently trained to understand and perform their compliance responsibilities.

DDTC Registration, Jurisdiction & Classification, Authorizations, & Other ITAR Activities

The Directorate of Defense Trade Controls provides an overview of registration requirements and processes. They also go over the need to determine jurisdiction and classification of products, and obtain authorizations when required.  A written ICP should provide an overview of each of these areas as they pertain to the specific organization.  Important reminders include:

• Timely renewal of DDTC registrations
• Informing DDTC of material changes to registration (within five days of the event, or in some cases, 60 days before)
• Determining jurisdiction and classification of any product manufactured, exported, temporarily imported, or brokered (including self-classifications and Commodity Jurisdiction requests)
• How to prepare for and obtain authorizations, including export licenses, Technical Assistance Agreements, Manufacturing License agreements, retransfer requests, and license exemptions
• Restricted party screening (ECS offers the ECScreening service, which expands on and provides additional features not found in the Consolidated Screening List) and screening for proscribed countries (ITAR 126.1).
• Registration and authorization requirements for brokering (ITAR Part 129)
• Recording and reporting political contributions, fees, and commissions (ITAR Part 130)

There is also guidance on cybersecurity. The ITAR does not require organizations to have specific cybersecurity measures such as encryption. However, organizations are expected to take steps to protect technical data. ITAR §120.54 does include some specific standards for how technical data can be stored and transmitted internationally without being considered an ITAR “export.”

Recordkeeping

The ITAR requires recordkeeping in §122.5, but how it is implemented is up to your organization. However, records must be:

• Reproducible in paper format, if digital;
• Legible and readable;
• Unaltered once recorded or, if altered, with any alterations properly recorded, including who made them and when;
• Readily accessible if digital images; and
• Maintained for a period of five years from the expiration of the license or other approval, to include exports using an exemption, or from the date of the transaction.

Records must be maintained for:

• Licenses or other approvals;
• Licenses exemptions (including the Australia and UK treaties);
• Technical data exports;
• Oral, visual, or electronic exports;
• Certain information related to special comprehensive export authorizations;
• Exemptions involving employees who are dual and third-country nationals;
• Voluntary disclosures;
• Brokering recordkeeping requirements; and
• Political contributions, fees, and commissions.

If your organization is using ITAR exemptions, internal recordkeeping is the only way to justify the use of an exemption. Recordkeeping is both a specific and general responsibility and may be subject to a Technology Control Plan (TCP). If you are unsure of where to start, the Guidelines include a list of recordkeeping suggestions.

Detecting, Reporting, & Disclosing Violations

While the major goal of a compliance program is to avoid violations, it is also important to detect violations when they happen, encourage reporting throughout the organization, and submit voluntary disclosures to DDTC when appropriate. The quality of the organization’s compliance program and efforts to report and contain violations are very important.  Management should communicate the seriousness of export violations by reminding employees of civil and criminal penalties and other potential consequences.  This should be balanced with the need to encourage reporting without retribution.

Additional detail on all of these elements is available in the Guidelines themselves.  Watch this space for our review of the remaining elements: ITAR training, risk assessment, audits and compliance monitoring, and the ITAR compliance manual.  Every element is crucial to the success of your export compliance program.

As always, if you need help with meeting, understanding, or tailoring any export compliance obligations, ECS is here to help!

Since our last post, there have been actions throughout the various export control agencies that may impact your business.  Ranging from the new Conventional Arms Transfer Policy to tweaks to the USML and CCL to CFIUS country policies to new sanctions, we have the highlights below.

White House: CAT Policy

The White House released an updated Conventional Arms Transfer (CAT) Policy on February 23, 2023.  Formalizing the administration’s current practice, the new policy covers ITAR-controlled defense articles as well as EAR-controlled 600-series items and commercial firearms.  It increases emphasis on human rights concerns while continuing to take in to account other considerations such as effects on partner capacity, regional stability, risk of diversion, and the defense industrial base.  The State Department also published a fact sheet on the CAT Policy.

Department of State: DDTC / ITAR

The Department of State, Directorate of Defense Trade Controls (DDTC) issued International Traffic in Arms Regulations (ITAR) Compliance Program Guidelines (pdf) on December 5, 2022.  See our newsletter for a summary!

Cyprus temporarily removed from § 126.1:

• Republic of Cyprus’ status as a proscribed destination is suspended from October 1, 2022, through September 30, 2023
• 87 FR 71250, November 22, 2022

ITAR controls temporarily suspended for certain capacitors described in the U.S. Munitions List (USML) Category XI.

• Applies to capacitors that have a voltage rating of one hundred twenty-five volts (125 V) or less
• Effective November 21, 2022 to May 22, 2023
• 87 FR 74967, December 7, 2022

Proposed Amendment to the Definition of Activities That Are Not Exports, Reexports, Retransfers, or Temporary Imports

• “First, subject to certain conditions, the taking of defense articles outside a previously approved country by the armed forces of a foreign government or United Nations personnel on a deployment or training exercise is not an export, reexport, retransfer, or temporary import.”
• “Second, a foreign defense article that enters the United States, either permanently or temporarily, and that is subsequently exported from the United States pursuant to a license or other approval under this subchapter, is not subject to the reexport and retransfer requirements of this subchapter, provided it has not been modified, enhanced, upgraded, or otherwise altered or improved or had a U.S.-origin defense article integrated into it.”
• 87 FR 77046, December 16, 2022

Consolidation and Restructuring of Purposes and Definitions

• Finalizes 2022’s interim final rule reorganizing ITAR definitions
• Includes review of comments and minor changes
• 88 FR 12210, February 27, 2023

Department of Commerce: BIS / EAR & CCL

Pakistan Due Diligence Guidance

• BIS website, September 9, 2022

Implementation of Additional Export Controls: Certain Advanced Computing and Semiconductor Manufacturing Items; Supercomputer and Semiconductor End Use; Entity List Modification

• New ECCNs 3A090 and 4A090
• Changes to license requirements, license exceptions, and foreign direct product rule
• New End-Use and End-User Control for “Supercomputers” Under § 744.23 of the EAR
• Additions to Entity List
• 87 FR 62186, October 13, 2022
• BIS background page, including press release, presentations, webcast, and FAQs
• Updated to apply to Macau (88 FR 2821, January 18, 2023)

Revisions to the Unverified List; Clarifications to Activities and Criteria That May Lead to Additions to the Entity List

• 87 FR 61971, October 13, 2022

Implementation of Australia Group Decisions From 2021 and 2022 Virtual Meetings: Controls on Marine Toxins, Plant Pathogens and Biological Equipment

• Affects ECCNs, 1C350, 1C351, 1C353, 1C354, 1E001, 2B352
• 88 FR 2507, January 17, 2023

Implementation of 2021 Wassenaar Arrangement Decisions

• Implements the remaining controls agreed to during the December 2021 WA Plenary meeting by revising the CCL, as well as certain EAR provisions, including License Exception Adjusted Peak Performance (APP). This final rule also makes corrections to align the scope of Significant Item (SI) license requirements throughout the EAR and makes a revision to License Exception Strategic Trade Authorization (STA).
• Affects ECCNs 0A988, 1A613, 1C006, 2E003, 3A001, 3A002, 4A003, 4D001, 4E001, 5A003, 6A005, 6A008, 6D003, 7D003, 9A004, 9B001, and 9E003.
• 88 FR 12108, February 24, 2023

Additional Sanctions on Russia, Belarus, and Iran

• Russia & Belarus: expands industry sector sanctions and luxury goods sanctions. Refines existing export controls on Russia and Belarus. (88 FR 12175, February 27, 2023)
• Iran: imposes license requirements for a subset of EAR99 items identified by HTS code that are destined to Iran, regardless of whether a U.S. person is involved in the transaction, due to potential use on Iranian Unmanned Aerial Vehicles (UAVs). The rule also adds a new foreign direct product (FDP) rule specific to Iran.  (88 FR 12150, February 27, 2023)

Committee on Foreign Investment in the United States (CFIUS)

Excepted Foreign States and Excepted Real Estate Foreign States now include Australia, Canada, New Zealand, and the United Kingdom

• Refer to Treasury’s Part 800 and Part 802 lists, last updated February 13, 2023.

2023 Inflation Adjustments for Commerce, State, and OFAC Penalties

Department of State

•  127.10(a)(1)(i) change from $1,272,251 to the greater of $1,200,000 or the amount that is twice the value of the transaction that is the basis of the violation
•  127.10(a)(1)(ii) increase from $925,041 or five times the amount of the prohibited payment, whichever is greater to $996,685, or five times the amount of the prohibited payment, whichever is greater.
•  127.10(a)(1)(iii) increase from $1,101,061 to $1,186,338.
• 88 FR 1505, January 11, 2023

Department of Commerce

• International Emergency Economic Powers Act (2007) increase from $330,947 to $356,579
• Export Controls Act of 2018 (2018) increase from $328,121 to $353,534
• 88 FR 3, January 3, 2023

Office of Foreign Assets Control (OFAC)

• Trading With the Enemy Act increase from $97,529 to $105,083
• International Emergency Economic Powers Act (2007) increase from $330,947 to $356,579
• 88 FR 2229, January 13, 2023

As always, if you need more information or assistance in any of these areas, ECS is here to help!

Blizzard of Sanctions Hits Russian Businesses: US Government Restrictions Continue to Expand

Following the Russian invasion of Ukraine in February, we saw a near-daily ratcheting-up of sanctions intended to target the Putin regime, Russian oligarchs, and others identified as supporters.  The highlights of this ever-changing effort are outlined below.

Two Crucial Takeaways

1. Continuous screening of customers and other business connections is a must-do.  Sanctions lists are subject to significant change on a daily basis.
2. For any transaction involving or destined for Russia or Belarus, very careful review and analysis is required.  If other countries are involved (particularly Canada, the UK, and the EU), additional sanctions programs may also apply.

Executive Orders

The White House released several executive orders, including investment and financing bans related to the Russian energy sector; import bans on Russian fish, seafood, alcoholic beverages, and non-industrial diamonds; export bans on luxury goods:

• Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts To Undermine the Sovereignty and Territorial Integrity of Ukraine (Executive Order 14066 of March 8, 2022)
• Executive Order on Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression (Executive Order 14068 of March 11, 2022)

As of March 31, 2022, the Secretary of the Treasury, in consultation with the Secretary of State, has determined that the financial services sector and the aerospace, electronics, and marine sectors of the Russian economy to sectoral sanctions under Executive Order 14024 (April 15, 2021).

Department of the Treasury/OFAC

The Department of the Treasury, Office of Foreign Assets Control (OFAC) has implemented sanctions on specific Russian individuals and entities.  These affect transactions by U.S. persons anywhere in the world, any persons in the U.S., and others with a U.S. nexus (e.g., clearing transactions through a U.S. bank).

Countries affected include Russian Belarus, and Russian-controlled areas in Ukraine, as well as Russian-linked entities worldwide.  General licenses may be available, but are generally focused on wind-down and divestment.

For more information, refer to the following OFAC pages which contain comprehensive information on listings, regulations, and general licenses:

• Russian Harmful Foreign Activities Sanctions
• Belarus Sanctions
• Ukraine-/Russia-related Sanctions

Department of Commerce/BIS

The Department of Commerce, Bureau of Industry and Security (BIS) has been very actively implementing new sanctions related to the conflict through revisions to the Export Administration Regulations (EAR):

• §734.9 Revised Foreign Direct Product (FDP) Rule for Russia and Belarus.
  • 734.9(f) – Russia/Belarus FDP rule
  • 734.9(g) – Russia/Belarus-Military End User FDP rule

• For both rules, BIS is publishing a positive list of countries not subject to the rule because they have implemented substantially similar restrictions on their own.
• §744.21 Russia & Belarus Military End User rules – now cover all items subject to the EAR “other than food and medicine designated EAR99.”
• §746.5 Russian Industry Sector Sanctions: now include Russian oil refinery sector.
• §746.8 Sanctions Against Russia: Impose a license requirement for all items in Commerce Control List (CCL) Categories 3-9, with a presumption of denial.
• Moved forty-five Russian entities from the Military End-User (MEU) List to the Entity List with an expanded license requirement of all items subject to the EAR (including foreign-produced items subject to the Russia-MEU FDP rules).
• Added 91 entities to the Entity List, located in Belize, Estonia, Kazakhstan, Latvia, Malta, Russia, Singapore, Slovakia, Spain, and United Kingdom.
• New limits on license exceptions for Russia & Belarus
• Finally amended Supplement No. 1 to Part 740 Country Groups to add Russia to Country Group D:5.  This change was technically already in effect since the ITAR §126.1 listing February 2021.  Ethiopia is still missing, but technically part of Country Group D:5.

Most changes are reflected directly in the EAR, often with Federal Register Notices published with retroactive effective dates.  For additional background, notable Federal Register Notices and press releases include:

• U.S. Department of Commerce & Bureau of Industry and Security Russia and Belarus Rule Fact Sheet (Press Release) (February 24, 2022)
• Commerce Imposes Sweeping Export Restrictions on Belarus for Enabling Russia’s Further Invasion of Ukraine (Press Release) (March 2, 2022)
• Implementation of Sanctions Against Russia Under the Export Administration Regulations (EAR) (87 FR 12226) (March 3, 2022)
• Expansion of Sanctions Against the Russian Industry Sector Under the Export Administration Regulations (EAR) (87 FR 12856) (March 8, 2022)
• Imposition of Sanctions Against Belarus Under the Export Administration Regulations (EAR) (87 FR 13048) (March 8, 2022)
• Further Imposition of Sanctions Against Russia With the Addition of Certain Entities to the Entity List (87 FR 13141) (March 9, 2022)
• Commerce Restricts the Export of Luxury Goods to Russia and Belarus and to Russian and Belarusian Oligarchs and Malign Actors in Latest Response to Aggression Against Ukraine (Press Release) (March 11, 2022)
• Imposition of Sanctions on `Luxury Goods’ Destined for Russia and Belarus and for Russian and Belarusian Oligarchs and Malign Actors Under the Export Administration Regulations (EAR) (87 FR 14785) (March 11, 2022)
• Resources on Export Controls Implemented in Response to Russia’s Invasion of Ukraine (Webpage) (Updated March 18, 2022)

Department of State/DDTC

The Department of State, Directorate of Defense Trade Controls (DDTC) returned Russia to the International Traffic in Arms (ITAR) §126.1 prohibited destinations list in February 2021.  On February 25, 2022, DDTC announced that the areas of the “so-called Donetsk People’s Republic (DNR) or Luhansk People’s Republic (LNR) regions of Ukraine” are also considered prohibited destinations.  Belarus was already a longstanding member of the §126.1 list.  Since the §126.1 listing amounts to a general prohibition on ITAR activity, we are watching for updates but not expecting significant changes.  No official policy has been announced for prioritizing license review for end-users in Ukraine.  Transactions should also be reviewed for risk of diversion to Russia or Russian-held areas.

On February 2, 2022, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a proposed rule (87 FR 5759) that would make multiple revisions to the International Traffic in Arms Regulations (ITAR).  The most significant of these revisions would scale back the longstanding approach toward determining the nationality of foreign persons, to an approach more in line with the Export Administration Regulations (EAR).

Currently, the ITAR definitions of export and reexport include the statement:

Any release… of technical data to a foreign person is deemed to be an [export or reexport] to all countries in which the foreign person has held or holds citizenship or holds permanent residency.

Under these definitions, current nationality is considered as well as any other nationality, even if no longer held.  The result of this is that foreign persons originally from a third country, particularly those from § 126.1 prohibited destinations, are either barred from ITAR work or require more complex authorizations.

The revised definitions state:

Any release… of technical data to a foreign person is deemed to be an export to all countries in which the foreign person holds citizenship or permanent residency.

It will remain possible for a foreign person to have multiple nationalities, but will not require consideration of former nationalities.

The proposed approach is much closer to the EAR definitions, which state:

Any release… is a deemed [export or reexport] to the foreign person’s most recent country of citizenship or permanent residency…

The proposed definition is also in line with the definition of U.S. person, which looks only at whether someone is a U.S. citizen, permanent resident, or one of a limited set of other immigration statuses.  A lawful permanent resident of the U.S. who once held another foreign nationality, including from a § 126.1 country, is unambiguously a U.S. person.

The proposed rule also makes a series of corrections and clarifications to:

• 126.5(b) (Canadian exemptions),
• 126.18(c)(2) (Exemptions regarding intra-company, intra-organization, and intra-governmental transfers to employees who are dual nationals or third-country nationals), and
• 127.12 (Voluntary disclosures).

For additional information and how to submit comments, please refer to the Federal Register Notice.  Comments will be accepted through April 4, 2022.  As it is a proposed rule, the changes will not take effect until a final rule is published.

Cambodia Added to ITAR §126.1 Prohibited Destinations

On December 9, 2021, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a new rule (86 FR 70053) that adds Cambodia to the International Traffic in Arms Regulations (ITAR) § 126.1 list of prohibited destinations.  After Russia and Ethiopia, this is the third country added to § 126.1 this year.

The primary rationale of the new listing is the military presence and other activities in Cambodia by the People’s Republic of China, particularly the construction of exclusive-use facilities on the Gulf of Thailand.  Corruption and human rights abuses were also identified as concerns leading to the § 126.1 listing (see the OFAC advisory below for more background).

Cambodia is now listed in § 126.1(o) with case-by-case exceptions related to conventional weapons destruction and humanitarian demining activities.

While the main effect of this change will be that defense articles may no longer be exported or reexported to or imported from Cambodia, there are a number of follow-on effects of the §126.1 listing that companies need to be aware of, including:

• Proposed and final sales: Broad prohibition includes proposals and presentations as well as actual sales and exports.
• Disclosures: An affirmative duty to immediately inform DDTC of any “proposed, final, or actual sale, export, transfer, reexport, or retransfer of articles, services, or data.”
• Exemptions: Most exemptions are not available for § 126.1 countries.
• Dual/Third Country Nationals: § 126.18(c)(2) will require screening for substantive contacts with Cambodia.
• Brokering: Additional restrictions under Part 129.

The listing was effective on the date of publication, December 9^th.  Cambodia had previously been removed from the list of prohibited destinations in 1994.

Cambodia Faces New EAR Restrictions

Also on December 9, the Department of Commerce, Bureau of Industry and Security (BIS) issued a new rule (86 FR 70015) making parallel changes to the Export Administration Regulations (EAR).

Based on the same rationale provided in the § 126.1 notice, Cambodia has been added to the following EAR lists:

1. Countries subject to the licensing policy in EAR § 742.4(b)(7) (review policy for national security controlled items, based on risk of diversion to military end user or end use),
2. Countries subject to military end use and end user controls in § 744.21,
3. Countries subject to military intelligence end use and end user controls in § 744.22, and
4. Countries subject to a U.S. arms embargo under Country Group D:5.

Five Countries Now Subject to MEU

Cambodia joins Burma, China, Russia, and Venezuela as subject to the military and military intelligence end use and end user controls.  Although no entity in Cambodia has yet been identified as a “Military End User” (MEU) in Supplement No. 7 to Part 744, it is important to note that the MEU List is not an exclusive list of parties subject to the MEU restrictions.  Careful evaluation of potential exports to those five countries is advised.  Even business entities may be considered “military end users” which are defined broadly to include “any person or entity whose actions or functions are intended to support ‘military end uses.’”

Although apparently due to oversight, BIS has not formally added Russia or Ethiopia to Country Group D:5, they are both considered D:5 countries because the ITAR § 126.1 list is controlling (see Footnote 1 to Country Group D).

OFAC Publishes Cambodia Business Advisory

In a related development, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) published a business advisory for Cambodia on November 10, 2021.

The “Cambodia Business Advisory on High-Risk Investments and Interactions” was issued “to caution U.S. businesses currently operating in or considering operating in Cambodia to be mindful of interactions with entities and sectors potentially involved in human rights abuses, criminal activities, and corrupt business practices.”  Specific business sectors include financial, real estate, casino, infrastructure, manufacturing, and timber as well as entities involved in trafficking persons, wildlife, and narcotics.  Forced labor is a particular concern for manufacturing.

The advisory details known problems in Cambodia, as well as relevant U.S. laws and regulations related to financial and supply chain and links to a number of U.S. government reports on the situation in Cambodia.  This report preceded the ITAR and EAR actions described above, but remains relevant for activities that are not specifically prohibited.

Ethiopia Sanctions and 126.1

Following the announcement of sanctions targeting the conflict in Ethiopia on September 17, the Department of State, Directorate of Defense Trade Controls (DDTC) announced on its website that it intends to add Ethiopia to ITAR §126.1 and revise the entry for Eritrea.

While the main effect of this change will be that defense articles may no longer be exported or reexported to Ethiopia (where approvals would already have been unlikely), there are a number of follow-on effects of the §126.1 listing that may catch some companies by surprise.  Such effects include the following:

• Proposed and final sales: Broad prohibition includes proposals and presentations as well as actual sales and exports.
• Disclosures: An affirmative duty to immediately inform DDTC of any “proposed, final, or actual sale, export, transfer, reexport, or retransfer of articles, services, or data.”
• Exemptions: Most exemptions are not available for §126.1 countries.
• Dual/Third Country Nationals: §126.18(c)(2) will require screening for substantive contacts with Russia.
• Brokering: Additional restrictions under Part 129.

Through its addition to §126.1, Ethiopia will also be added to the Commerce Department’s Export Administration Regulations (EAR) Country Group D:5.

Ethiopia will be the second addition to §126.1 this year, following Russia’s listing in March.

Cyprus §126.1 Revision Extended

In other ITAR §126.1 news, last year’s temporary modification of the policy towards Cyprus was extended for another year.  The modification potentially allowing the export of non-lethal defense articles and services is now in effect until September 30, 2022, unless extended (86 FR 54044).

Cyprus, a member of the European Union since 2004, was originally listed in §126.1 with the objective to prevent an arms race on the island.  Cyprus is currently divided between the Republic of Cyprus and the internationally unrecognized Turkish Republic of Northern Cyprus, a division which followed the 1974 Turkish invasion.  The relaxed §126.1 policies are based on the cooperation of Cyprus on additional U.S. foreign policy objectives of anti-money laundering and denial of ports for Russian military vessels.

USML Category XI(b) Extended for Five Years

In what had become an annual or biennial event, on August 30, 2021 DDTC published a notice (86 FR 48021) continuing the current text controlling intelligence-analytics software in USML Category XI(b).  DDTC and its interagency partners have been unable to resolve how Category XI controls such software, and are now deferring to a wholesale revision of the category expected by 2026.

Export Control Reform measures were originally scheduled to remove “software” from XI(b) as well as the capability to analyze and produce information from the electromagnetic spectrum.  Some software would remain controlled under XI(d).  Based concerns that a revised category would no longer clearly control “certain intelligence-analytics software,” DDTC has continued to “amend” XI(b) to maintain the original text.

DTAG Meeting Announced

On September 24, 2021, DDTC published a notice (86 FR 53137) announcing that the next Defense Trade Advisory Group (DTAG) open meeting will be on November 4, 2021.  The meeting will be held virtually with discussion on the following topics:

(1) Advise on best practices for conducting internal audits to evaluate ITAR compliance programs, and

(2) provide sources for recordkeeping and reporting requirements for all licenses, agreements, and exemptions, as well as industry perceptions of the return on investment of said requirements, plus any recommendations for improvement.

The meeting is open the public and accepts questions by email.  For more information on the meeting including how to register, please refer to the Federal Register Notice.

Commerce Revises EAR Controls

On August 19, 2021, the Department of Commerce, Bureau of Industry and Security (BIS) published a rule (86 FR 46590) making corrections and clarifications to the “0x5zz” firearms Export Control Classification Numbers (ECCNs), including edits, new notes, and some changes to the ECCNs effective September 30, 2021.  Refer to the Federal Register Notice for more information.

On October 5, 2021, BIS published two separate rules (86 FR 54807 and 86 FR 54814).  The first rule makes a series of targeted editorial corrections and clarifications throughout the Export Administration Regulations (EAR).  The second establishes controls on nucleic acid assembler and synthesizer software under new ECCN 2D352, implementing an Australia Group decision from May 2021.  BIS also issued a press release on the new control.

On October 6, 2021, BIS and the Nuclear Regulatory Commission (NRC) issued companion rules (86 FR 55492 and 86 FR 55476) transferring responsibility for licensing exports of deuterium for non-nuclear end use from the NRC to BIS.  Exports of deuterium for nuclear end use remain under NRC jurisdiction.  The revision affects ECCN 1C298, which currently includes graphite, and will take effect December 6, 2021.

DDTC Proposes Revised Definition of “Regular Employee”

On May 27, 2021, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a proposed rule (86 FR 28503) to revise the International Traffic in Arms Regulations (ITAR) §120.39 definition of “regular employee.”  Following temporary measures adopted for the COVID-19 pandemic, the proposed amendment would permanently “allow certain individuals to work remotely, and further proposes to clarify the contractual relationships that meet the definition of regular employee.”  Significantly, the “criterion that an individual must work at a company’s facilities will be removed in the revised definition to allow for remote work.”  The proposed rule also clarifies the treatment of contract employees and the meaning of “long term contractual relationship” as well as consideration of security clearances and secondment.

“Regular employee” is a key definition in the ITAR §126.18 exemptions for dual nationals and third country nationals (DN/TCNs).  Under the 126.18 exemptions, foreign companies can allow access to ITAR-controlled articles and technical data by employees who are nationals of other countries without DDTC approval when the specific conditions are met.

Comments on the proposed definition will be accepted through July 26, 2021.  Please refer to the Federal Register Notice for the full proposal and how to comment.

In a related action, DDTC published a rule (86 FR 30778) on June 10, 2021 temporarily extending the suspension of certain ITAR provisions “to provide for continued telework operations during the current SARS-COV2 public health emergency.”  The suspension is intended to continue until the regular employee final rule is published.

Russia: 126.1 Policy and Country Group D:5

Following the addition of Russia to ITAR §126.1, DDTC has released a fact sheet summarizing the effect of the listing and several FAQs, with particular attention to the effect on commercial space launches.

The Department of Commerce has not yet amended the Export Administration Regulations (EAR) Country Group D:5, which parallels ITAR §126.1.  However, Country Group D:5 includes the following note:

If there are any discrepancies between the list of countries in this table and the countries identified by the State Department as subject to a U.S. arms embargo (in the Federal Register), the State Department’s list of countries subject to U.S. arms embargoes shall be controlling.

Even without a formal EAR amendment, D:5 should be understood to contain Russia.

CCL Wassenaar Updates

On March 29, 2021, the Department of Commerce, Bureau of Industry and Security (BIS) published a rule (86 FR 16482) to revise the Commerce Control List (CCL) to implement changes to the Wassenaar Arrangement List of Dual-Use Goods and Technologies (WA List) that were decided upon at the December 2019 Wassenaar Arrangement Plenary meeting.  Other changes from the December 2019 meeting were published in 2020.

The recent changes are largely related to eliminating reporting requirements and license exceptions for some encryption items, but also include revisions to twenty-two Export Control Classification Numbers (ECCNs) (0A502, 0A503, 0A606, 1A002, 1A005, 1A006, 1A613, 1B002, 1C001, 1C002, 1C006, 1C010, 2A001, 3B001, 3E002, 5A002, 6A004, 6A005, 6A008, 9A011, 9D515, and 9E003).

Opportunity to Influence Export Controls: BIS Seeks Technical Advisory Committee Members

On April 28, 2021, BIS published a notice (86 FR 22390) announcing the recruitment of candidates for its seven Technical Advisory Committees (TACs).  These committees advise the Commerce Department on the technical parameters and administration of export controls in the following areas of responsibility:

1. Information Systems TAC: CCL Categories 3 (electronics), 4 (computers), and 5 (telecommunications and information security)
2. Materials TAC: CCL Category 1 (materials, chemicals, microorganisms, and toxins)
3. Materials Processing Equipment TAC: CCL Category 2 (materials processing)
4. Sensors and Instrumentation TAC: CCL Category 6 (sensors and lasers)
5. Transportation and Related Equipment TAC: CCL Categories 7 (navigation and avionics), 8 (marine), and 9 (propulsion systems, space vehicles, and related equipment)
6. Emerging Technology TAC (identification of emerging and foundational technologies that may be developed over a period of five to ten years with potential dual-use applications)
7. Regulations and Procedures TAC (focuses on the EAR and its implementation)

TAC members are appointed by the Secretary of Commerce, serve terms of not more than four years, and must obtain secret-level security clearances prior to appointment.  Resumes will be accepted through September 30, 2021.  For more information, including how to apply, please refer to the Federal Register Notice.

UAE Removed from Treasury Antiboycott List

On April 8, 2021, the Department of the Treasury published a notice (86 FR 18374) removing the United Arab Emirates (UAE) from the list of countries which “require or may require participation in, or cooperation with, an international boycott.”

This list is routinely published for the purposes of compliance with Part 999 of the Internal Revenue Code of 1986, which includes reporting requirements for certain activities in the listed countries.

The UAE was removed following its August 2020 repeal of a law mandating a boycott of Israel and subsequent actions.  Last December’s version of the antiboycott list included a comment that anticipated the UAE’s removal following its normalization of relations with Israel.

The remaining countries on the list are:

• Iraq
• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• Yemen

While this removes one set of requirements specifically required for the UAE, EAR Part 760 (Restrictive Trade Practices or Boycotts) continues to apply to transactions with any country.

In addition, on June 9, 2021, BIS published an interpretation to Supplement No. 17 to Part 760 (86 FR 30535) which clarifies that some requests from the UAE are no longer presumed to be boycott-related if made after August 16, 2020.  This only addresses a presumption and the general requirements of Part 760 continue to apply.