Tag Archives: EAR

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.’”