This week the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”) and the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) published a number of final rules that significantly revise the controls that apply to companies exporting certain defense articles from the United States or re-exporting any such U.S. origin items located abroad.
Certain Commercial Satellites and Related Items Transfer to the Commerce Department Control
First, DDTC and BIS finalized (at 79 Fed. Reg. 66608 and 79 Fed. Reg. 67055, respectively) the transfer of certain commercial communications and remote sensing satellites and related items from the jurisdiction of the International Traffic in Arms Regulations (“ITAR”) to the jurisdiction of the Export Administration Regulations (“EAR”).
These changes are part of the Obama Administration’s broader export control reform initiative, and are designed to enhance the competitiveness of U.S. industry in the global commercial satellite marketplace while maintaining tight controls over sensitive satellites and related items vital to U.S. national security interests.
The new rules transfer certain commercial satellites, remote sensing satellites, and related items from Category XV of the U.S. Munitions List (“USML”) to a new “500 series” on the EAR’s Commerce Control List (“CCL”). Because some commercial satellites and other commercial spacecraft will remain subject to USML controls, companies will need to review the new rules carefully to determine the proper jurisdiction for their products.
A license or license exception still will be required to export or reexport almost all of the transitioned items to any country except Canada. However, several license exceptions, including the EAR’s Strategic Trade Authorization (“STA”) license exception, could authorize transfers of these items to allied countries without a license, provided that certain requirements are met.
U.S. persons should bear in mind that the furnishing of assistance (including training) by a U.S. person in the integration of a satellite or spacecraft to a launch vehicle, or in launch failure analysis of a satellite or spacecraft, regardless of whether the satellite or spacecraft is subject to ITAR control, or whether ITAR-controlled technical data is used, is still considered a defense service. Any U.S. persons engaging in such activities on behalf of foreign persons will continue to require a license or other approval from DDTC.
New Restrictions on Exports, Reexports, and Transfers of Certain Items to Venezuela When Intended for a Military End Use or Military End User
In response to the Venezuelan military’s role in the crackdown on anti-government protests in Venezuela, BIS has imposed new license restrictions on the export, re-export, or transfer (in-country) of certain specified items to or within Venezuela when intended for a military end use or military end user. See 79 Fed. Reg. 66288. These military end use/end user controls track the controls that BIS implemented against Russia in September.
As a result of these licensing restrictions, items that previously did not require a license for export to Venezuela may be subject to licensing requirements. (Items subject to these new licensing restrictions are enumerated in Supplement No. 2 to § 744 of the EAR.) Companies should consider revising internal policies and procedures and amending standard terms and conditions in agreements with third parties to ensure that they comply with these new licensing restrictions.
Controls Relaxed on Exports of Defense Articles to Vietnam
On November 10, 2014, DDTC determined that it “is in the best interests of U.S. foreign policy, national security, and human rights concerns” to authorize exports of lethal defense articles and defense services to Vietnam on a case-by-case basis when such exports are “in support of maritime security and domain awareness.” See 79 Fed. Reg. 66615. This change marks one of the first significant expansions of opportunities for defense sector exports to Vietnam in approximately 30 years.