I recently dealt with a producer of parts used in the HVAC (heating-ventilation-air conditioning) system on submarines and aircraft carriers. The parts were specifically designed for this purpose and are classified in Category VI(f) of the U.S. Munitions List (USML) and subject to controls under the International Traffic in Arms Regulations (ITAR). Category VI(f) includes “all specifically designed or modified components, parts, accessories, attachments, and associated equipment for the articles in paragraphs (a) through (e) of this category” (military vessels and systems).
In a Federal Register notice dated Dec. 23, 2011, the Department of State proposed a rewrite of USML Category VI. The proposal would modify that category substantially and move many items from the USML to the Commerce Control List (CCL). Under the proposed rule, only certain components, parts and accessories for military vessels would continue to be controlled in Category VI. These include parts of the hull or superstructure, propulsion systems, chemical-biological-radiological-nuclear systems, active protective systems, and other specialized systems and components of such vessels. Other components, parts and accessories would be transferred to the CCL and controlled under the Export Administration Regulations (EAR).
The comment period for the proposed rule closed on Feb. 6 of 2012, and the final regulations governing USML Category VI are currently under review. Let’s assume that the rule goes through as proposed. What would things be like for the producer who manufactures and exports parts used in the HVAC system of military vessels?
The first thing the producer would need to do is to carefully read the provisions of the revised Category VI dealing with components, parts and accessories to determine whether any of those provisions describe parts of HVAC systems. They probably don’t, but it is important to check to make sure. If any doubt existed, the producer should apply for a Commodity Jurisdiction Determination for its parts.Assuming that parts of HVAC systems are no longer controlled under the ITAR, the producer would next need to check the CCL to determine how the parts may be controlled under those regulations. The Bureau of Industry & Security of the Department of Commerce is creating a new 600-series of CCL provisions to capture items transferred from the USML. Therefore, the producer will need to look for two different things in the CCL: (1) whether any of the current provisions in the CCL describe its parts, and (2) whether any of the 600-series provisions cover the parts. If the answer is yes, the producer will now need to examine the EAR licensing rules.
This last step involves the same processes that now apply to items described in the CCL. The producer would need to note the reasons for control under the specific Export Commodity Control Number (ECCN), and then refer to the country chart to find out whether a license is required for the country in which the end user is located. If that process indicated the need for a license, the producer would then need to review the available license exceptions. These may include GBS for exports to Country Group B or STA for the Strategic Trade Authorization. There are prerequisites for using license exceptions, so the producer would need to review the prerequisites to confirm that its products, in fact, qualify for the exception.
If no exceptions applied, the producer would need to log into SNAP-R or its replacement to apply for a license to export the parts of HVAC systems. Under the proposed Export Control Reform plan, that license would be valid for four years instead of the current two.
Export Control Reform promises to ease export controls and make exports of many products easier. However, exporters will still have plenty of regulations to check and procedures to follow. Easier controls doesn’t mean “no controls” – there is still plenty of work to be done.