In a long-awaited move, the Bureau of Industry and Security (BIS) of the Department of Commerce announced a proposed rule transferring certain commercial satellite, spacecraft and related items from State Department to Commerce Department control. This proposed rule is the result of extensive efforts by the satellite and spacecraft industries in the U.S. whose exports have been controlled by State Department regulations. It is also the latest step in the overall Export Control Reform Initiative begun in 2007.

Spacecraft and related items are currently controlled under Category XV of the U.S. Munitions List (USML), found in the International Traffic in Arms Regulations (ITAR) overseen by the State Department. The proposed rule would transfer the control of certain items in Category XV to the Commerce Control List (CCL) of the Export Administration Regulations (EAR) overseen by the Commerce Department. The transfer of these items does not result in a “de-control” as the items would still be subject to controls stated in the EAR. Also, it is likely that many, if not all, of the transferred items would still be subject to a license requirement under the EAR. However, an exporter would no longer be responsible for complying with the sometimes more onerous provisions of the ITAR. A new “500” series on the CCL will be created to house these items. The transfer of the items is the result of a joint effort by the State Department and the Commerce Department, together with input from the Department of Defense, to identify items in Category XV of the USML which are eligible for transfer. Items will remain on the USML if they meet the following criteria: 1) are inherently military and otherwise warrant control on the USML or 2) if, common to non-military space applications, possess parameters or characteristics that provide a critical military or intelligence advantage to the U.S. and that are almost exclusively available from the U.S. All other items are proposed to move to the CCL under the proposed rule.

One major change is that all spacecraft, including commercial communications satellites, manned or unmanned space vehicles, even if designated as developmental, experimental, research or scientific, will be controlled under the new EAR category. Spacecraft which is specifically listed in the current Category XV of the USML will remain controlled by ITAR. Space-qualified parts, components, accessories and attachments will also be controlled. Other items that would be controlled under the EAR include software designed for specific commodities controlled in certain listed 500 series, and technology required for services such as development, production, operation and repair related to certain other listed 500 series.

The new 500 series will still be subject to the main controls in the EAR including anti-terrorism, national security and regional stability. Certain items will be subject to missile technology controls. The licensing policy will be on a case-by-case basis to determine whether the transaction is contrary to national security or foreign policy interests of the U.S. However, some EAR license exceptions will be available for the new series. The Strategic Trade Authorization (STA) license exception is also available, which is applicable to exports to certain countries that are NATO members or multi-regime close allies. This exception will be subject to certain requirements, such as requiring the consignee to agree to an end-user check by the U.S. government in addition to the standard consignee statement required for all STA transactions. Other applicable exceptions include limited value shipment (LVS) up to a value of $1,500 or $5,000 for a specific enumerated item, temporary exports (TMP), government exports (GOV) and servicing and replacement of parts (RPL). As with the rest of the EAR and the ITAR, the use of license exceptions is prohibited if the destination is the subject of a U.S. arms embargo, except if it is a U.S. government export under exception GOV.

There are also some specific export clearance requirements included in the proposed rule. Exports of all the items in the new 500 series must be filed in the Automated Export System (AES) regardless of value or destination, which is a departure from the current general rule governing shipments to Canada, or that have a value of less than $2,500. In addition, post-departure filing in the AES is not permitted for the 500 series items. Finally, the Export Control Classification Number in the EAR for a 500 series item must be listed on the same documents on which the destination control statement is provided, and must be listed in the invoice, bill of lading, air waybill or other export control document accompanying the shipment from the point of origin in the U.S. to the ultimate consignee or end user abroad.

Comments will be accepted up to 45 days after the date the notice of proposed rulemaking is published in the Federal Register. A link to the BIS proposed rule is found at: http://www.ofr.gov/(S(at5defqelxjulv40esdg5hhy))/OFRUpload/OFRData/2013-11986_PI.pdf.