As part of the overall export control reform initiative announced by the White House in 2008, regulatory agencies have issued the latest proposals to revamp the export regulations. The public has enthusiastically embraced the goal of revising the Export Administration Regulations (EAR) administered by the Bureau of Industry and Security (BIS), and the International Traffic in Arms Regulations (ITAR) overseen by the Directorate of Defense Trade Controls (DDTC). Much of the revision involves moving items from DDTC jurisdiction to BIS, which has less stringent controls, making the regulations easier to understand, and subsequently reducing the exporters’ burden in complying.
Recently, both the DDTC and BIS published revisions to their July 15, 2011 proposed definition of “specially designed.” These new proposed definitions, released in the Federal Register on June 19, 2012,1 seek to differentiate between articles that are ITAR controlled as they are “enumerated” on the United States Munitions List (USML), and articles not enumerated, but captured in “catch-all” paragraphs.
The phrase “specially designed” is a core term in both the EAR and multilateral regimes to which the U.S. is signatory (the equivalent term under the ITAR is “specifically designed”). Both BIS and DDTC are working on creating a clear, well-defined term as part of their efforts to capture those items which are subject to control under the regulations, but not otherwise specifically designated in other categories of the regulations. Under the ITAR, many items are controlled because they were “specifically designed, modified, or configured” for a military application. Moving these items from the USML to the CCL without a “catch-all” would, in effect, de-control these items.
As such, with the newly published definition, the agencies are attempting to create a “catch and release” format by first capturing a broad scope of items and then releasing controls through exclusions (e.g., if they are enumerated elsewhere, substantially similar to civil application, or are likely to be used in a civil application).
In addition to these recently proposed definitions for “specially designed,” BIS has published an advanced notice of public rule making in the Federal Register and seeks comments on the feasibility of enumerating “specially designed” components. Through this proposed rulemaking notice, BIS is seeking comments on whether it is feasible to create an exhaustive list of stated components which are considered specially designed. The idea would be to create a list of components that fall under the catch-all category and minimize the use of the term “specially designed”. This would, of course, limit analytical guesswork in using the CCL and EAR regulations. Currently, BIS does not envision that an exhaustive list is also needed for parts, although it also seeks comments on the usefulness of an exhaustive list for parts in this rule making notice. Unlike the USML in the ITAR, the CCL does not contain a general catch-all paragraph for all components specially designed for items identified on the CCL. BIS encourages comments about this proposed rule, especially from technical experts in classification. Comments are due by September 17, 2012. The notice can be viewed here.
As noted above, the proposed revamping of the phrase “specially designed” is tied to the initiative to move items from the USML to the CCL of the EAR. The goal of moving these items is not about de-control, but rather about making it easier for exporters to use and export items, while still maintaining national security. The export agencies feel they are achieving these aims with the new proposed definitions of key phrases. These new definitions will purportedly be adaptable to the changing technological landscape, and permit U.S. businesses to remain competitive by decreasing controls on items as the technology involved becomes less sensitive due to changes in the marketplace.
We encourage you to review the proposed rules carefully and if you have questions please do not hesitate to contact us. You can also submit comments to BIS on the feasibility of enumerating “specially designed” components. The deadline for submission is Sept. 17.