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Export Regulatory and Policy Update Roundup: February 2025

Since our last roundup was followed by a change in administrations, we have seen a flurry of activity, a regulatory freeze, a few reversals and restorations, and some business as usual.  Read on for the notable export-related changes and proposals.

Department of State: DDTC / ITAR

USML Revisions Proposed, Effective September

The Department of State, Directorate of Defense Trade Controls (DDTC) proposed revisions of fourteen USML categories, ranging from minor corrections to developmental exoskeletons and foreign advanced military aircraft.

  • 90 FR 5594, published January 17, 2025 & effective September 15, 2025
  • Comments accepted through March 18, 2025
  • See our previous post for all the details.

Department of Commerce: BIS / EAR & CCL

Implementation of Certain Australia Group Decisions

The Department of Commerce, Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to implement changes agreed to by Australia Group (AG):

  • New controls on automated peptide synthesizers, dipropylamine, and neosaxitoxin
  • Revised controls on botulinum toxins, toxic gas monitors, and centrifugal separators
  • 89 FR 104408, published & effective December 23, 2024

Unmanned Aircraft Systems

BIS published an advance notice of proposed rulemaking (ANPRM) related to information and communications technology and services (ICTS) transactions integral to unmanned aircraft systems (UAS).

  • 90 FR 271, published January 3, 2025
  • Comments on 50 specific issues accepted through March 4, 2025
  • Press release

Connected Vehicles

BIS published a final rule related to ICTS transactions integral to connected vehicles.

  • Prohibits transactions involving Chinese or Russian origin Vehicle Connectivity System (VCS) hardware and software
  • 90 FR 5360, published January 16, 2025 & effective March 17, 2025
  • Press Release

Biotechnology Laboratory Equipment

BIS published an Interim Final Rule increasing controls on advanced biotechnology tools:

  • High-parameter flow cytometers and certain mass spectrometry equipment moved from ECCN 3A999 into new ECCN 3A069, with development and production technology controlled under new ECCN 3E069.

Due Diligence Measures for Advanced Computing Integrated Circuits

BIS published an Interim Final Rule providing additional due diligence procedures regarding advanced computing integrated circuits

Framework for Artificial Intelligence Diffusion

BIS published an Interim Final Rule relating to Artificial Intelligence (AI) hardware and models.

  • Revised controls on advanced computing integrated circuits (ICs)
  • New ECCN 4E091 for artificial intelligence (AI) model weights for certain advanced closed-weight dual-use AI models.
  • Updates Data Center Validated End User authorization
  • Expands and adds new related license exceptions
  • 90 FR 4544 published January 15, 2025, effective January 13, 2025
  • Comments accepted through May 15,2 025
  • Press Release

Export Enforcement 2024 Year in Review

BIS published its annual Year in Review, highlighting enforcement activities, including:

  • Indictments, convictions, and civil penalties
  • Release of the antiboycott Requester List and additions to the Entity List
  • Updates to guidelines, guidance, and best practices
  • Webinars and outreach
  • Press Release

Sanctions Programs

 ICC Sanctions Return

 Following an Executive Order, the Department of the Treasury, Office of Foreign Assets Control (OFAC) implemented sanctions on the International Criminal Court on February 6, 2025.  Similar sanctions had been in place from 2020-2021.

Cuba Restricted List Rescinded and Reinstated

The State Department’s Cuba Restricted List was rescinded on January 16, but republished and updated on February 6.  Cuba’s status as a State Sponsor of Terrorism was also briefly rescinded and reinstated.

 Civil Monetary Penalties

The Departments of State, Commerce, and Treasury each published their annual inflation adjustments for export-related civil monetary penalties.

 Executive Orders and Memos

America First Trade Policy

This January 20, 2025 memo included, among other directives:

  • A review of the United States export control system by the Secretary of State and the Secretary of Commerce including making recommendations
    • how to maintain, obtain, and enhance our Nation’s technological edge;
    • how to identify and eliminate loopholes in existing export controls; and
    • regarding export control enforcement policies and practices, and enforcement mechanisms to incentivize compliance by foreign countries.
  • The Secretary of Commerce was also directed to review Office of Information and Communication Technology and Services (ICTS) rulemaking on connected vehicles and consider whether ICTS controls should be expanded to additional connected products.

Unleashing Prosperity Through Deregulation

Executive Order 14192, dated January 31, 2025 (90 FR 9065) establishes a regulatory cap, considering both numbers and cost of regulations.  The impact on export compliance may be limited, however, as “regulations issued with respect to a military, national security, homeland security, foreign affairs, or immigration-related function of the United States” are excluded from the regulatory cap.

Multiple USML Categories Revised Effective September 15, 2025

On January 17, 2025, the Department of State, Directorate of Defense Trade Controls (DDTC) issued an interim final rule (90 FR 5594) which revises fourteen United States Munitions List (USML) categories.  Unless another rule is issued in response to comments, the revisions will be effective September 15, 2025.  Previously proposed changes to USML Categories IV and XV are not addressed in this rule.

The rule revises a list of definitions in §121.0 and revises USML categories as follows:

Category II – Guns and Armament
Corrects a typographical error in Note 2 to paragraph (a)(5)

Category IV – Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines
Revises paragraph (c) to clearly control equipment specially designed for improvised explosive devices (IEDs)

Category V – Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents
Makes minor revisions and corrections

Category VII – Ground Vehicles
Revises Note 3 to USML Category VII to clarify the types of vehicles controlled to include systems described as robots:

Ground vehicles include any vehicle meeting the control parameters, regardless of: the surface upon which the vehicle is designed to operate (e.g., highway, off-road, amphibious, or rail); the manner of control of the vehicle (e.g., manual, remote, or autonomous); or the mode of locomotion of the vehicle (e.g., wheeled, tracked, or multi-pedal).

Category VIII – Aircraft and Related Articles
Clarifies catch-all controls for specially designed parts for specific U.S. and non-U.S. origin aircraft.  VIII(h)(1) parts will not be released from VIII(h)(1) through subsequent use in USML Category XXI or “foreign advanced military aircraft.”

Foreign advanced military aircraft, as newly defined in § 121.0, include non-U.S. origin aircraft and foreign derivatives of U.S. origin aircraft, either in development or entering production after 2023, with one or more of the following advanced military capabilities: Active Electronically Scanned Array (AESA) fire control radar, integrated signature management, electronic warfare systems, or the ability to engage targets beyond visual range (BVR).

The new rule supersedes and terminates the temporary modification to USML Category VIII last extended in November, which was focused on parts used in the South Korean KF-21 aircraft.  It also further revises the list of U.S.-origin aircraft identified in VIII(h)(1), updating designations and adding the MQ-25 and RQ-170.

 Category IX – Military Training Equipment and Training
Removes and reserves paragraph (e)(2) as redundant.  IX(e)(2) technical data is already covered by IX(e)(1).

Category X – Personal Protective Equipment
Adds developmental exoskeletons to previously-reserved X(b) and revises the descriptions of body armor protective levels in X(a)(1).

Category XI – Military Electronics
Revises paragraph (c)(10) to remove certain anti-jam antennas and exclude Controlled Reception Pattern Antennas (CRPAs) for Position, Navigation, and Timing (PNT).  Both revisions are intended to support civil global navigation system resiliency.

Category XII – Fire Control, Laser, Imaging, and Guidance Equipment
Updates paragraph (d)(2)(ii) GPS receiving equipment to change references from “Precise Positioning Service” to “Protected Positioning Service.”

Category XIII – Materials and Miscellaneous Articles
Updates office names, revises armor protective levels and descriptions, and adds specific fluids to new paragraph (j)(3).

Category XIV – Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment
Adds nerve agents and a defoliant and clarifies CARC controls.

Category XIX – Gas Turbine Engines and Associated Equipment
Revises paragraphs (d) and (f)(1) to include additional Department of Defense-funded aircraft engines in development.  Revises paragraph (f)(2) to include related cooled structures for combustion chambers and liners.

Category XX – Submersible Vessels and Related Articles
Adds two new classes of uncrewed, untethered vessels and vehicles equipped with anti-recovery features and larger systems with significant range or endurance to new paragraphs (a)(9) and (10).

Category XXI – Articles, Technical Data, and Defense Services Not Otherwise Enumerated
Moves text from paragraph (a) into a new note and adds considerations for designating an article USML Category XXI.

Comments will be accepted through March 18, 2025.  Comments are requested especially for the following questions:

  1. How much would practitioners benefit from the Department defining the term “Controlled Reception Pattern Antennas (CRPAs)” as used in USML Category XI(c)(10)? Are there criteria, other than those described in the preamble of this rule, that may help better distinguish between CRPAs described in paragraph (c)(10)(v) and antennas described in paragraph (c)(10)(i)?
  1. The addition of paragraph (h)(1)(iii) to USML Category VIII ensures that parts, components, accessories, and attachments specially designed for aircraft listed in paragraphs (h)(1)(i) and (ii) are not released from paragraph (h)(1) due to their use in foreign advanced military aircraft described in paragraphs (a)(1) and (2) of USML Category VIII.
    1. The Department requests comment on its consideration of adding to paragraph (h)(1) a new paragraph (h)(1)(iv), to retain parts used in paragraphs (h)(1)(i) or (ii) aircraft even when they are used in “aircraft described in paragraph (a)(3) of USML Category VIII,” as the Department assesses that training aircraft described in paragraph (a)(3) often serve as proving grounds for future paragraph (a)(1) or (2) aircraft.
    2. The Department requests comment on its consideration of expanding paragraph (h)(1) to add parts, components, accessories, and attachments specially designed for the foreign advanced military aircraft listed in paragraph (h)(1)(iii), even if they are not utilized in an aircraft listed in paragraph (h)(1)(i) or (ii), commensurate with the Department’s regulation of similar items for the advanced U.S. aircraft described in paragraphs (h)(1)(i) and (ii). For example, what effect would describing these foreign articles in paragraph (h)(1) have on existing international defense industrial cooperation and supply chains?
  1. With this rule, the Department changes paragraph (d) of USML Category XIX to read “The following engines:” and then describes specific aircraft engines in paragraphs (d)(1) and (2). The Department requests comment on its consideration of changing that language to “The following engine series:” in order to more completely describe engines that provide a critical military or intelligence advantage.
  1. Paragraphs (d)(1) and (2) of USML Category XIX describe specific aircraft engines. The Department requests comment on its consideration of expanding that scope to include “military variants” of those engines, similar to its regulation of certain gas turbine engine parts in paragraph (f)(1)(i) of USML Category XIX for military variants of the listed engines.
  1. Are there commodities, services, or technical data closely related to these revisions that warrant ITAR control, but are currently either not described on the USML, or not described with sufficient clarity? If so, please provide examples and a concise explanation.
  1. Are there specific commodities, services, or technical data described on the USML following these revisions that are, or have previously been, in normal commercial use, that were previously transitioned to another agency’s jurisdiction, or that were previously determined not to be subject to the ITAR via a Commodity Jurisdiction determination? If so, please include supporting documentation.
  1. Are there specific commodities, services, or technical data described on the USML following these revisions for which civil use is proposed, intended, or anticipated in the next five years? Please include supporting documentation and a point of contact familiar with the details.
  1. Are there specific functions, performance levels, or characteristics related to these revisions that could better:
    1. Distinguish between the commodities that do, and do not, warrant ITAR control;
    2. Delineate the criteria for control, in lieu of using the term `specially designed’; or
    3. Align with the constructions or language used in other USML entries?
  1. Can any of these revisions be more concisely stated?

The Federal Register Notice contains additional details on how to submit comments.

The rule also notes that some items removed from a USML paragraph may still be described in other USML paragraphs or may become subject to the Department of Commerce’s Export Administration Regulations (EAR).  For items moving to EAR control, licenses may be submitted to the Department of Commerce, but will be held without action (HWA) until the effective date of the rule (currently September 15, 2025).  Existing DDTC licenses and other approvals may continue to be used.

Watch this space for more upcoming summaries of the winter flurry of rulemaking.

Export Regulatory and Policy Update Roundup: December 2024

As the year winds down, regulatory activity continues.  Most are rules that renew, formalize, or build on earlier actions, plus a small expansion of controls on items destined for Pakistan related to non-proliferation concerns.

Department of State: DDTC / ITAR

Temporary Modification of USML Category VIII(h)(1)

On November 26, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a final rule (89 FR 93170) which extends the temporary modification of United States Munitions List (USML) Category VIII (aircraft).

VIII(h)(1) currently controls “Parts, components, accessories, and attachments specially designed for the following U.S.-origin aircraft: The B-1B, B-2, B-21, F-15SE, F/A-18 E/F, EA-18G, F-22, F-35, and future variants thereof; or the F-117 or U.S. Government technology demonstrators.”

The temporary modification allows Category VIII(h)(1) to continue to control specially designed parts, components, accessories, and attachments for listed aircraft if also used in the KF-21 aircraft. Without this note, use of a part for one of the listed aircraft on the KF-21 would have released it form ITAR control.

Registration Fee Increase

On December 10, 2024, DDTC issued a final rule (89 FR 99081) which, effective January 9, 2025 will increase registration fees for manufacturers, exporters, and brokers.

Originally proposed in April, the new fee structure will be as follows:

  • Tier 1: $3000
    • New registrants and registrants with no authorization approvals
    • Increase from $2250
  • Tier 2: $4000
    • Registrants with five or fewer approvals
    • Increase from $2750
    • Previous threshold was ten approvals
  • Tier 3: $4000 + $1100 for each approval after the first five
    • Registrants with more than five approvals
    • Increase from $2750 + $250 for each approval after the first ten

Brokering registration fees remain tied to Tier 1, regardless of the number of brokering authorizations submitted or approved.  No additional fee is required for brokers already registered as manufacturers or exporters.  Limited discounts are available.

Department of Commerce: BIS / EAR & CCL

Commerce Increases Controls on Pakistan

On November 26, 2024, the Department of Commerce, Bureau of Industry and Security (BIS) published a rule (89 FR 93164) adding export controls for certain items destined for Pakistan.

Effective immediately, the new rule adds a license requirement for items listed on the Commerce Control List under Export Control Classification Numbers (ECCNs) 1B999, 2A992, 2B999,1 3A992, 3A999, and 6A996, including:

  • Particle accelerators
  • Certain stainless or alloy pipes and valves
  • Certain pumps and welders
  • Oscilloscopes
  • Chromatographs and spectrometers
  • Magnetometers

The primary concern is whether items may be used in nuclear or missile activities, or may be diverted to any of the currently 162 Entity List members located in Pakistan.  Based on these concerns, the availability of license exceptions is also limited.

BIS also issued a press release on the new rule, which also notes the existence of specific Pakistan Due Diligence Guidance on the BIS website.

Advance Computing Foreign Direct Product Rule

On December 5, 2024, BIS issued an interim final rule (89 FR 96790) expanding the Foreign Direct Product (FDP) rules for advanced computing and semiconductor manufacturing items.  Effective December 2, 2024, comments will be accepted through January 31, 2025.

ICTS Supply Chain Rule

On December 6, 2024, BIS issued a final rule (89 FR 96872) on Securing the Information and Communications Technology and Services (ICTS) Supply Chain.  This follows an interim final rule published in 2021 and will be effective February 4, 2025.

The original rule was intended to provide a process to review information and communications technology and services (ICTS) supply chain transactions, “similar to the process by which entities may inform the Committee on Foreign Investment in the United States (CFIUS) of investments in U.S. businesses” and requested comments.  The new rule “responds to public comments on the interim final rule and finalizes the practices guiding review of ICTS Transactions, amending and, in some cases, removing terms or concepts which experience has shown to be unnecessary, inefficient, or ineffective.”

Export Regulatory and Policy Update Roundup: Fall 2024

In addition to recent proposals and changes for space-related export controls, here’s a wrap-up of other recent export-related actions.

Department of State: DDTC / ITAR

AUKUS Authorized Users Available         

As required for the new AUKUS Exemption at International Traffic in Arms Regulations (ITAR) § 126.7, the list of “authorized users” in Australia and the United Kingdom is now available in the Department of State, Directorate of Defense Trade Controls (DDTC)’s DECCS.  Currently including 87 entities, the authorized users are approved by their respective governments and the list is subject to change.

Precision Castparts Consent Agreement

DDTC announced a Consent Agreement with Precision Castparts:

Precision Castparts Corp. settled allegations that it violated the International Traffic in Arms Regulations (ITAR) in connection with unauthorized exports of technical data to foreign-person employees from Bhutan, Burundi, El Salvador, Honduras, Mexico, and Peru pertaining to tools (specifically, wax pattern and core dies) and wax patterns consumed in the subsequent production of casting blades used in gas turbine engines.

This is the third Consent Agreement from DDTC this year, following The Boeing Company and RTX Corporation.

Cyprus

Cyprus remains in the unique situation of being found in the ITAR § 126.1 list of proscribed destinations, but with an annually suspended status.   Under 89 FR 79140 (September 27, 2024), the Republic of Cyprus’ status as a proscribed destination is suspended from October 1, 2024, through September 30, 2025.

Department of Commerce: BIS / EAR & CCL

Data Center Validated End User Authorization

The Department of Commerce, Bureau of Industry and Security (BIS) expanded the Validated End User Authorization (VEU) at Export Administration Regulations (EAR) § 748.15 to include data centers.

Connected Vehicles Supply Chain

Notice of Proposed Rulemaking (NPRM) would “prohibit transactions involving Vehicle Connectivity System (VCS) hardware and covered software designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of the People’s Republic of China, including the Hong Kong Special Administrative Region (PRC), or the Russian Federation (Russia).”

  • Part of effort to secure the information and communications technology and services supply chain
  • 89 FR 79088, September 26, 2024
  • Press release

Implemented Export Controls (IEC)

At EAR § 740.24 License Exception Implemented Export Controls (IEC) authorizes exports, reexports, and transfers (in-country) of eligible items to, among, or within specified destinations.

Best Practices for Financial Institutions

BIS Issues Guidance to Financial Institutions on Best Practices for Compliance with the Export Administration Regulations

  • Recommendations include due diligence best practices, red flags, and a real-time screening.
  • Press Release, October 9, 2024

Department of Defense

Cybersecurity Maturity Model Certification (CMMC) Program

Under development since 2010, the CMMC Program is intended “to verify contractors have implemented required security measures necessary to safeguard Federal Contract Information (FCI) and Controlled Unclassified Information (CUI).”

  • Tiered model based on the type and sensitivity of relevant information.
  • Levels include self-assessment, third party assessment, and government assessment.
  • Phased implementation, with four phases over three years.
  • 89 FR 83092, October 15, 2024
  • Effective December 16, 2024

Department of the Treasury: OFAC

 Recordkeeping Requirements Extended to Ten Years

 The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has extended recordkeeping requirements for sanctions-related transactions from five years to ten years to match the related statute of limitations.

  • Statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA), and the Trading with the Enemy Act, (TWEA) was extended from five to ten years in April 2024.
  • Includes transactions authorized under general or specific licenses after April 24, 2019
  • Effective March 12, 2025
  • 89 FR 74832, September 13, 2024

Maritime Shipping Industry Sanctions Guidance

OFAC issued scenario-based guidance to the maritime shipping industry.

  • Scenarios identifying new or common fact patterns include deceptive shipping practices, Specially Designated Nationals (SDNs) on trade documentation, obscured or complex ownership structures, and mid-voyage notification of sanctions risk.

Press Release, October 31, 2024

State and Commerce Departments Propose Spacecraft Control Changes

On October 23, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) and Department of Commerce, Bureau of Industry and Security (BIS) issued a pair of proposed rules (89 FR 84482) and (89 FR 84784) which would revise controls on space-related exports under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR).  Generally, the proposed changes are intended to support the U.S. space industrial base consistent with U.S. national security and foreign policy.  Spacecraft used for remote sensing, servicing, and fundamental research are of particular interest.

Proposed ITAR Revisions

The DDTC Proposed Rule would primarily revise US Munitions List (USML) Categories IV and XV.  Any company with USML Category IV or XV products should review the proposed rules carefully.

Proposed changes include:

  • Revised/added definitions
  • Reorganizes parts controlled under USML Categories IV and XV
  • New license exceptions under ITAR § 126.8:
    • Official Space Agency Exemption (for USG space programs, excluding their launch vehicles)
    • Space Activity Exemption (includes limited articles and services, space launch telemetry, on-orbit fundamental research, and services related to on-orbit transmissions)
    • Space Tourism and Research Exemption (certain transfers of manned spacecraft for space tourism or in support of fundamental research)
    • Special Licensing Provision for Defense Articles Incorporated Into Spacecraft Subject to the EAR

USML Category XV controls on spacecraft would exclude certain NASA, remote sensing, Position, Navigation, and Timing (PNT), autonomous collision avoidance-capable, and servicing spacecraft.  New paragraphs control “spacecraft capable of non-cooperative grappling or docking, in-orbit construction of other defense articles, and deploying multiple spacecraft into different orbits.”  Descriptions of various spacecraft systems and components would also be reorganized and revised.

Revisions to USML Category IV were also proposed, including the definitions and control thresholds for:

  • MANPADS (Man-Portable Air-Defense Systems)
  • Anti-tank missiles
  • Rockets
  • Bombs
  • Mines
  • Grenades
  • Loitering munitions
  • Kinetic kill vehicles
  • Post-boost vehicles
  • Hypersonic glide vehicles
  • Re-entry vehicles
  • Launch platforms
  • Rocket, SLV, and missile power plants
  • Non-nuclear warheads for rockets, bombs, and missiles (e.g., explosive, kinetic, EMP, thermobaric, shape charge, and fuel air explosive (FAE))
  • Systems, subsystems, parts, components, accessories, attachments, or associated equipment

Proposed EAR Revisions

The BIS Proposed Rule would make conforming changes to the Commerce Control List (CCL) for items no longer controlled by the USML and create a license exception Commercial Space Activities (CSA).

CCL changes include revisions to descriptions of spacecraft and related systems in Export Control Classification Number (ECCN) 9A515 (Spacecraft and related commodities), a new 9C515 for some spacecraft materials, and revisions to software and technology controls under 9D515 and 9E515.

New license exception under EAR § 740.26 for Commercial Space Activities (CSA), similar to the proposed ITAR exemption, would provide a licensing exception for official space agency programs and space tourism and research.

Comments on both proposed rules will be accepted through November 22, 2024.  The Federal Register Notices (89 FR 84482) and (89 FR 84784) contain additional details on how to submit comments.  Both notices includes summaries of comments provided in response to a pair of 2019 advanced notice of proposed rulemaking and provide additional questions for which comments are specifically requested.  DDTC also requests comments on satellite signature reduction “to facilitate industry efforts to reduce the apparent magnitude, as viewed from Earth, of satellite brightness.”

BIS Rules Effective Immediately

Also on October 23rd, BIS published a final rule (89 FR 84766) and an interim final rule (89 FR 84770), both effective the same day, remove license requirements for Australia, Canada, and the United Kingdom and reduce licensing requirements over 40 countries.

The first removes controls on some spacecraft and related items when exported or reexported to Australia, Canada, and the United Kingdom.  Following the BIS AUKUS rule in April, 9×515 spacecraft and related items that involved remote sensing or space-based logistics, assembly, or servicing still required licenses to all destinations worldwide pursuant to § 742.6(a)(9).  This requirement is now removed.

The second removes license requirements for certain spacecraft components to over 40 countries, reduces license requirements for less sensitive components to most destinations, and broadens license exception GOV to support NASA cooperative programs.

The main revisions include:

  • Changing controls on 9A515.x from NS1 and RS1 to NS2 and RS2
  • Adding items to 9A515.y
  • Adding software and technology exclusion for standards-related activity
  • Changes to 9A004

Comments on the interim final rule will be accepted through November 22, 2024 (see the FRN for details).

New DDTC Rules: AUKUS Exemption, Defense Services Proposal, and Non-Exports

State/DDTC Enacts AUKUS Exemption   

On August 20, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued an interim final rule (89 FR 67270) creating a new International Traffic in Arms Regulations (ITAR) license exception to support the AUKUS (Australia, the United Kingdom, and the United States) Trilateral Security Partnership.  This follows the proposed rule issued in May.  The new exemption, located at ITAR § 126.7, will be effective September 1, 2024.

The new exemption includes four main elements:

  1. Creates an exemption to the requirement to obtain a license or other approval from DDTC prior to any export, reexport, retransfer, or temporary import of defense articles, the performance of defense services, or engaging in brokering activities… between or among authorized users… within Australia, the United Kingdom, and the United States” (new § 126.7, previously reserved);
  2. Includes a “list of defense articles and defense services excluded from eligibility for transfer under the proposed new exemption” (affects multiple USML categories, identified in Supplement No. 2 to Part 126);
  3. Expands the 126.18 exemptions regarding intra-company, intra-organization, and intra-governmental transfers to employees who are dual nationals or third-country nationals to allow for the transfer of classified defense articles to certain dual nationals who are authorized users or regular employees of an authorized user within the United Kingdom and Australia” (new § 126.18(e)); and
  4. Revises the section on expediting license review applications by referencing new processes for Australia, the United Kingdom, and Canada. (126.15).

The exemption is limited to authorized users and with an excluded list of articles and defense services, which is a similar approach to the existing Canadian Exemption (§ 126.6) as well as the Australia and UK Defense Trade Cooperation Treaty exemptions (§ 126.16 and § 126.17).  The proposed exemption does not amend the treaty exemptions, but is intended to be broader in scope and easier to use.

A list of “authorized users” in Australia and the United Kingdom will be available in DDTC’s DECCS.  Authorized users will be approved by their respective governments.

Transfer values must also be less than the § 123.15 Congressional Notification thresholds and may not involve the manufacturing abroad of significant military equipment (also for Congressional Notification reasons).

The interim final rule includes various changes from the proposed rule, including the removal of a requirement to obtain nontransfer and use assurances (Form DSP-83) for significant military equipment (SME), as these will be covered through the “authorized user” process.  The Excluded Technologies List was also significantly revised.

The interim final rule includes a request for comments, which will be accepted through November 18, 2024.  The Federal Register Notice contains additional details on how to submit comments.  Summaries and responses to previous public comments are also included.

The State Department posted a fact sheet on the new exemption.  DDTC also posted a fact sheet and FAQs on their website.

This exemption follows the Department of Commerce, Bureau of Industry and Security (BIS) which issued an interim final rule on April 19, 2024 implementing changes to the to the Export Administration Regulations (EAR).

State/DDTC Proposes Revision to Defense Services

On August 15, 2024, DDTC issued a proposed rule (89 FR 60980) which would revise the ITAR definition of defense services and related controls.  It would revise the existing definition of defense services found at ITAR § 120.32 and USML Category IX (Military Training Equipment and Training).

As proposed, the definition would read as follows:

§ 120.32 Defense service.

(a) Defense service means:

(1) The furnishing of assistance, including training or consulting, to foreign persons in the development (including, e.g., design), production (including, e.g., engineering and manufacture), assembly, testing, repair, maintenance, modification, disabling, degradation, destruction, operation, processing, use, or demilitarization of a defense article; or

(2) The furnishing of assistance, including training or consulting, to foreign persons, regardless of whether a defense article is involved, as described in USML Category IX(s)(2) or (3) in § 121.1 of this subchapter.

Note to paragraph (a):

For military training previously described in this paragraph, see paragraph (a)(1) and USML Category IX(s)(2) and (3).

Compared to the current § 120.32, the proposed rule would add “consulting” as a type of assistance and “disabling” and “degradation” to the list of services.  The new USML Category IX(s) defense services would be:

(s) Defense Services, as follows:
(1) [Reserved]
(2) Assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves intelligence activities, including through planning, conducting, leading, providing analysis for, participating in, evaluating, or otherwise consulting on such activities, for compensation, except for the following types of assistance:

(i) Furnishing of medical, translation, financial, insurance, legal, scheduling, or administrative services, or acting as a common carrier;

(ii) Participation as a member of a regular military force of a foreign nation by a U.S. person who has been drafted into such a force (see also § 124.2(b) of this subchapter);

(iii) Training and advice that is entirely composed of general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities;

(iv) Information technology services that support ordinary business activities not specific to a particular business sector;

(v) Any lawfully authorized investigative, protective, or intelligence activity of a law enforcement or intelligence agency of the United States or of a territory, possession, State, or District of the United States, including political subdivisions thereof; or

(vi) Maintenance or repair of a commodity or software.

(3) Assistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves the following, other than as specified in paragraph (s)(3)(iv) of this category:

(i) The organization or formation of military or paramilitary forces; (ii) Military or paramilitary operations, by planning, leading, or evaluating such operations; or

(iii) Military or paramilitary capabilities through advice or training, including formal or informal instruction.

(iv) Assistance in paragraphs (s)(3)(i) through (iii) of this category does not include:

(A) Furnishing of medical, translation, financial, insurance, legal, scheduling, or administrative services, or acting as a common carrier;

(B) Participation as a member of a regular military force of a foreign nation by a U.S. person who has been drafted into such a force (see also § 124.2(b) of this subchapter); or

(C) Training and advice that is entirely composed of general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities.

Comments will be accepted through September 27, 2024.  The Federal Register Notice contains additional details on how to submit comments.

The proposed rule is intended to complement recent Export Administration Regulations (EAR) controls over U.S. person activities related to foreign military, security, and intelligence services.  These controls have also seen recent proposals to expand controls in 89 FR 60985 and 89 FR 60998 (comments for both accepted through September 27, 2024).

State/DDTC Addresses Sovereign Deployments and Previously Imported Foreign Defense Articles        

On August 15, 2024, DDTC issued a final rule (89 FR 66210) amending the ITAR definition of activities that are not exports, reexports, retransfers, or temporary imports.  The new rule, initially proposed in December 2023, will be effective September 16, 2024.  These changes largely formalize longstanding policy.

The new rule adds two paragraphs to ITAR § 120.54 (Activities that are not exports, reexports, retransfers, or temporary imports):

1. Sovereign deployments:

(a)(6) The taking of a defense article subject to the reexport or retransfer requirements of this subchapter on a deployment or training exercise outside a previously approved country, provided:

(i) There is no change in end-use or end-user with respect to the defense article;

(ii) The defense article is transported by and remains in the possession of the previously authorized armed forces of a foreign government or United Nations military personnel; and

(iii) The defense article is not being exported from or temporarily imported into the United States;

2. Foreign defense articles:

(a)(7) The transfer of a foreign defense article previously imported into the United States that has since been exported from the United States pursuant to a license or other approval under this subchapter, provided:

(i) The foreign defense article was not modified, enhanced, upgraded, or otherwise altered or improved in a manner that changed the basic performance of the item prior to its return to the country from which it was imported or a third country;

(ii) A U.S.-origin defense article was not incorporated into the foreign defense article; and

(iii) The defense article is not being exported from or temporarily imported into the United States.

Paragraph (a)(6) is meant “to clarify long-standing policy regarding reexports and retransfers outside of the United States of properly authorized defense articles previously exported from the United States and in the possession of the armed forces of a foreign government or United Nations military personnel.”

Paragraph (a)(7) is meant to eliminate “the need to submit reexport and retransfer requests for activities that are routinely approved and to provide clarity regarding subsequent control of unmodified foreign-origin defense articles that have been subject to ITAR control while in the United States.”

As the explanation within the rule states:

Like foreign persons who generally become subject to U.S. laws and regulations when they enter the United States, foreign defense articles that enter the United States generally become subject to U.S. laws and regulations, including the ITAR, while in the United States. However, U.S. laws and regulations generally do not govern the activities of foreign persons abroad. Similarly, foreign defense articles that leave the United States are no longer subject to the ITAR under the circumstances described in paragraph (a)(7).

The Federal Register Notice includes the new text and responses to comments from the proposed rule.

Commerce Updates: Firearms, Countries, and Turkey Antiboycott Advisory

BIS Revises Firearms License Requirements

On April 30, 2024, the Department of Commerce, Bureau of Industry and Security (BIS) issued an interim final (89 FR 34680) making to the Export Administration Regulations (EAR) to revise firearms license requirements. 

Overall, the new rule makes the following changes:

  • Identifies semi-automatic firearms under new Export Control Classification Numbers (ECCNs);
    • ECCN 0A506 controls semi-automatic rifles
    • ECCN 0A507 controls semi-automatic pistols
    • ECCN 0A508 controls semi-automatic shotguns, and
    • ECCN 0A509 controls certain “parts,” “components,” devices, “accessories,” and “attachments” for items controlled under ECCNs 0A506, 0A507, and 0A508.
  • Adds additional license requirements for Crime Control and Detection (CC) items, thereby resulting in additional restrictions on the availability of license exceptions for most destinations;
  • Amends license review policies so that they are more explicit as to the nature of review that will accompany different types of transactions and license exception availability (including adding a new list of high-risk destinations);
  • Updates and expands requirements for support documentation submitted with license applications; and
  • Better accounts for the import documentation requirements of other countries (such as an import certificate or other permit prior to importation) when firearms and related items are authorized under a BIS license exception.

Effective July 1, 2024, BIS also revoked “existing licenses for the export and reexport of firearms and related items to non-government end users in destinations identified in supplement no. 3 to part 742 ” and modified other licenses to expire on May 30, 2025.

The new Supplement No. 3 to part 742 (High-Risk Destinations for Firearms and Related Items) includes:

  • The Bahamas
  • Bangladesh
  • Belize
  • Bolivia
  • Burkina Faso
  • Burundi
  • Chad
  • Colombia
  • Dominican Republic
  • Ecuador
  • El Salvador
  • Guatemala
  • Guyana
  • Honduras
  • Indonesia
  • Jamaica
  • Kazakhstan
  • Kyrgyzstan
  • Laos
  • Malaysia
  • Mali
  • Mozambique
  • Nepal
  • Niger
  • Nigeria
  • Pakistan,
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Suriname
  • Tajikistan
  • Trinidad and Tobago
  • Uganda
  • Vietnam
  • Yemen

Complete details can be found in the Federal Register Notice.  Comments were accepted through July 1, 2024.

BIS Updates Country Information

On May 10, 2024, BIS issued a final rule (89 FR 40369) updating country names, license requirements, and Country Group D:5 as follows:

  • Updates country names of Swaziland (now Eswatini), Macedonia (The Former Yugoslav Republic of) (now North Macedonia), and Turkey (now Türkiye).
  • Corrects license requirements for Australia and the United Kingdom following the publication of the BIS AUKUS rule and the firearms rule (above).
  • Updates Country Group D:5 to remove Cyprus (currently annually suspended as a member of the ITAR § 126.1 prohibited destination list) and finally add Russia (added to §126.1 in 2021).  Of note, when there is a discrepancy between Country Group D:5 and ITAR § 126.1, § 126.1 controls.  Additional changes were made to remove redundant references to Russia.       

BIS Issues Turkey Antiboycott Advisory

On May 14, 2024, BIS issued a press release following the Turkish government’s recent announcement that it will suspend all exports and imports to and from Israel.  The press release reminds U.S. persons that “taking certain actions in furtherance or support of an unsanctioned foreign boycott maintained by a country against a country friendly to the United States and require reporting of receipt of a boycott-related request to BIS.”  In particular, U.S. companies operating in Turkey should be aware of potential boycott requests originating in that country.  Examples of recent boycott requests are posted on the BIS website.

Prohibited actions and reporting requirements are defined in EAR Part 760.  More information is also available from the BIS Office of Antiboycott Compliance (OAC).  The U.S. Department of the Treasury administers additional restrictions.

Following Commerce/BIS, State/DDTC Proposes AUKUS Exemption! 

On May 1, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a proposed rule (89 FR 35028) to create a new license exception to support the AUKUS (Australia, the United Kingdom, and the United States) Trilateral Security Partnership.

The proposed exemption includes four main elements:

  1. Creates “an exemption to the requirement to obtain a license or other approval from the Department’s Directorate of Defense Trade Controls (DDTC) prior to any export, reexport, retransfer, or temporary import of defense articles; the performance of defense services; or engagement in brokering activities between or among authorized users within Australia, the United Kingdom, and the United States” (new § 126.7, currently reserved);

  2. Includes a “list of defense articles and defense services excluded from eligibility for transfer under the proposed new exemption” (affects multiple USML categories);
  3. Expands “the scope of the exemption for intra-company, intra-organization, and intra-governmental transfers to allow for the transfer of classified defense articles to certain dual nationals who are authorized users or regular employees of an authorized user within the United Kingdom and Australia” (new § 126.18(e)); and

  4. Revises “the section on expediting license review applications by referencing new processes for Australia, the United Kingdom, and Canada” (126.15).

The exemption is limited to authorized users and with an excluded list of articles and defense services, which is a similar approach to the existing Canadian Exemption (§ 126.6) as well as the Australia and UK Defense Trade Cooperation Treaty exemptions (§ 126.16 and § 126.17).  The proposed exemption does not amend the treaty exemptions, but is intended to be broader in scope and easier to use.

Unlike the Department of Commerce, Bureau of Industry and Security (BIS) which issued an interim final rule implementing changes to the to the Export Administration Regulations (EAR), this is only a proposed rule and will require a subsequently published rule to make any new exemption effective.  That rule is expected sometime after review of comments is complete.

Comments will be accepted through May 31, 2024.  The Federal Register Notice contains additional details on how to submit comments.  Industry organizations are also collecting input for group comments.

BIS Announces AUKUS Exemption, DDTC Proposes Fee Increase

BIS Announces AUKUS Exemption

On April 19, 2024, the Department of Commerce, Bureau of Industry and Security (BIS) issued an interim final (89 FR 28594) making to the Export Administration Regulations (EAR) to support the AUKUS (Australia, the United Kingdom, and the United States) Trilateral Security Partnership. 

In order to streamline defense trade among the three countries, license requirements were removed for exports, reexports, and transfers (in-country) of items controlled by:

  • National Security Column 1 (NS1)
  • Regional Stability Column 1 (RS1)
  • Missile Technology Column 1 (MT1)

As a result, the following items no longer require a license for Australia or the UK:

  • “600 series” items;
  • Items controlled under the EAR for missile technology reasons (MTCR Annex);
  • 9×515 satellite-related items, except for those items requiring a license to all destinations worldwide pursuant to § 742.6(a)(9);
  • 0A919 items to Australia and the UK;
  • Certain cameras, systems, or related components for military end-use and end-users; and
  • Significant Items (SI) ( i.e., hot section technology for the development, production or overhaul of commercial aircraft engines, components, and systems) controlled under ECCN 9E003.a.1 through a.6, a.8, .h, .i, and .l.

Of note:

Under the EAR, firearms-related items and other CC controlled items in ECCNs 0A501 (except 0A501.y), 0A502, 0A503, 0A504, 0A505. a, .b, and .x, 0A981, 0A982, 0A983, 0D501, 0D505, 0E501, 0E502, 0E504, 0E505, and 0E982 will continue to require a license when destined to and among the UK and Australia.

This is implemented through a note in the Commerce Country Chart.  Items controlled for Chemical and biological weapons purposes (CB Column 1) also remain controlled for Australia or the UK.  Canada’s treatment is similar, with controls only for CB Column 1 and firearms convention (FC1).

Other minor revisions are made throughout the EAR to implement the policy changes.

The changes were effective on the date of publication, April 19th.  The Commerce Department also published a press release on the changes.  Comments will be accepted through June 3, 2024.  The Federal Register Notice contains additional details on how to submit comments.  In particular, comments are requested on the impacts of these changes, additional changes to enhance defense industrial base cooperation and technology innovation, and the potential impact of removing encryption items (EI) licensing requirements for Australia and the UK.

These changes to the EAR also acknowledge that Australia and the UK are included in the National Technology and Industrial Base (NTIB).  Canada and New Zealand are also included in the NTIB.  EAR treatment of Australia and the UK now aligns with previous treatment of Canada.

The Department of State, Directorate of Defense Trade Controls (DDTC) has not yet made any changes to the International Traffic in Arms Regulations (ITAR), but Australia and the UK do have existing Defense Trade Cooperation Treaty exemptions under § 126.16 and § 126.17 respectively.  DDTC is expected to expand on these exemptions, but not as broadly as the new BIS rule.

DDTC Proposes Fee Increase

On April 24, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a proposed rule (89 FR 31119) to amend the International Traffic in Arms Regulations (ITAR) to increase and specify registration fees.

As proposed the new fee structure would be as follows:

  • Tier 1: $3000
    • New registrants and registrants with no authorization approvals
    • Increase from $2250
  • Tier 2: $4000
    • Registrants with five or fewer approvals
    • Increase from $2750
    • Previous threshold was ten approvals
  • Tier 3: $4000 + $1100 for each approval after the first five
    • Registrants with more than five approvals
    • Increase from $2750 + $250 for each approval after the first ten

Brokering registration fees remain tied to Tier 1, regardless of the number of brokering authorizations submitted or approved.  No additional fee is required for brokers already registered as manufacturers or exporters.  An existing discount for non-profit organizations will also remain available.

According to DDTC, the proposed fee increases are intended to reflect inflation since the last fee increase, increased technological improvements, and improved services, as well as support continued and modernized DDTC operations.

The proposed rule also includes minor changes regarding registration requirements in ITAR § 122.1 through § 122.3.                                 

Comments will be accepted through June 10, 2024.  The Federal Register Notice contains additional details on how to submit comments.

USML Capacitor Controls Revised

On March 25, 2024, DDTC published a new rule (89 FR 20546) to amend the ITAR to remove U.S. Munitions List (USML) Category XI(c)(5) controls on certain high-energy storage capacitors.  The rule changes the technical thresholds for USML control and adds an explanatory note defining the relevant terms (e.g., “rated voltage).  The rule took effect April 24, 2024.

New Export Restrictions for Nicaragua: § 126.1 Prohibited Destination and EAR Military End User Rule Now Apply!

Nicaragua Added to ITAR §126.1 Prohibited Destinations

On March 15, 2024, the Department of State, Directorate of Defense Trade Controls (DDTC) issued a new rule (89 FR 18796) that adds Nicaragua to the International Traffic in Arms Regulations (ITAR) § 126.1 list of prohibited destinations.

The primary rationales of the new listing are based on human rights concerns and security cooperation with Russia.  Nicaragua is now listed in § 126.1(p) with case-by-case exceptions related to “non-lethal military equipment intended solely for humanitarian assistance, to include natural disaster relief.”

While the main effect of this change will be that defense articles may no longer be exported or reexported to or imported from Nicaragua, 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 to individuals and companies as well as for actual sales and exports. For example, information on the equipment’s performance characteristics, price, and probable availability for delivery would be a proposal or presentation requiring a license or other approval.
  • 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.” Failure to provide a full disclosure within a reasonable time may result in a decision by State/DTCC to not consider the notification as a mitigating factor in determining the appropriate disposition of the violation.
  • 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 Nicaragua.
  • Brokering: Note Part 129 for additional restrictions.

The listing was effective on the date of publication, March 15th.  The State Department also published a press release on the new restrictions.

Nicaragua Faces New EAR Restrictions

Also on March 15, the Department of Commerce, Bureau of Industry and Security (BIS) issued a new rule (89 FR 18780) 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. Country Group D:1 (National Security concern) (removal from Country Group B makes certain license exceptions unavailable and foreign direct product rules now apply);
  2. 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);
  3. Countries subject to military end use and end user controls in § 744.21; and
  4. Countries subject to a U.S. arms embargo under Country Group D:5.

Seven Countries Now Subject to MEU Rule

Nicaragua joins Belarus, Burma, Cambodia, China, Russia, and Venezuela as subject to the military end use and end user controls.  Although no entity in Nicaragua 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 seven 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.’”