New “500 Series” of CCL to be Created to Cover Commercial Satellites Removed from USML

On May 24, 2013, the Department of State issued a proposed rule that would remove certain commercial satellites from control under the International Traffic in Arms Regulations’ (ITAR) United States Munitions List (USML), administered by the Department of State, to the Export Administration Regulations’ (EAR) Commerce Control List (CCL), administered by the Department of Commerce. 78 Fed. Reg. 31444 (May 24, 2013). The proposed rule, the latest issued as part of the Administration’s Export Control Reform effort, is intended to lessen certain restrictions (and the administrative burden) currently associated with exports of commercial satellites and associated technical information and to more clearly articulate those satellites (and associated information) which are captured under the ITAR.

On the same day, the Department of Commerce issued a corresponding proposed rule, which sets forth the restrictions that would apply to commercial satellites and associated technical information formerly controlled under the USML and which would move to the CCL under the proposed rule. 78 Fed. Reg. 31431 (May 24, 2013).

These rules are open for comment until July 8, 2013.

Among other changes, the proposed rules would do the following:

  • Replace the broad list of spacecraft, satellites and associated equipment currently listed on the USML with a more specific, positive list. The Department of State’s proposed rule sets forth the specific types of satellites and associated equipment that would be subject to ITAR jurisdiction if this new rule is adopted as final.
  • Create a new “500 series” classification on the CCL to cover spacecraft and associated equipment removed from the USML. This 500 series classification would only include the spacecraft, associated equipment, and related software and technology which was formerly controlled under the USML. The Department of Commerce’s proposed rule specifies that exporters looking to classify their items which are subject to the EAR would first look to the 500 series to determine whether the item is described by one of the 500 series Export Control Classification Numbers (ECCN) on the CCL (such as 9A515). If the item is not described by a 500 series ECCN, then the exporter would review the rest of the CCL to determine whether the item is within the scope of another ECCN.
  • Add an (x) paragraph to Category XV of the USML to reduce the need for dual licensing for certain items. As with the final rule revising the USML for aircraft and aircraft engines, the proposed rule issued by the Department of State would create a new (x) paragraph to Category XV of the USML. This paragraph would allow for a single license to be obtained under the ITAR for certain types of exports involving items controlled on CCL that are to be used in or with a defense article. The single ITAR license would authorize the export of defense articles and of commodities, software and technical information controlled on the CCL that are to be used in or with a defense article, eliminating the need for the exporter to obtain separate licenses from the Departments of State and Commerce prior to exporting the items.
  • Apply no de minimis exclusion for items destined to countries subject to a U.S. arms embargo. As with the 600 series classification for aircraft and aircraft engines subject to the EAR, a zero percent de minimis threshold for items destined to countries subject to a U.S. arms embargo would apply to items in the 500 series, effectively meaning that the 500 series item (even if it is incorporated into a foreignmade item) would always continue to be controlled under the EAR for export or re-export to a country subject to a U.S. arms embargo. A 25 percent de minimis threshold would apply to 500 series items destined to all other countries.
  • Adopt the definition of “Space-Qualified” as set forth under the Wassenaar Arrangement in December 2012. The proposed rules would adopt the Wassenaar Arrangement’s amended definition of spacequalified. That definition states that an item is space qualified if it is “designed, manufactured or qualified through successful testing, for operation at altitudes greater than 100 km above the surface of the earth.” With respect to testing, only items that meet testing requirements would be considered space qualified. Items on the same production run or model series would not be considered to have been qualified via testing if the testing is not successful.
  • Apply the definition of “specially designed” to the definition of “space qualified.” The proposed rule would extend the new definition of “specially designed” under the EAR to the definition of “space qualified.” Specifically, the rule indicates that any item which is specially designed to operate at altitudes greater than 100 km above the surface of the earth would be considered to be within the definition of “space qualified.” However, because the definition of space qualified covers any item that is designed, manufactured or tested to meet the criteria set forth in the definition of space qualified, an item need not be “specially designed” to be “space qualified.” For example, an item that is space qualified through successful testing would be space qualified, regardless of whether it is specially designed.
  • Create an .x paragraph in ECCN 9A515 that covers “space qualified” parts, components, accessories and attachments. ECCN 9A515.x would be created to capture those parts, components, accessories and attachments that are space qualified and which are not enumerated or controlled on the USML, elsewhere within ECCN 9A515, or within an ECCN containing space qualified in its description of the items controlled by that ECCN. As discussed above, the practical effect of this definition is that any item which is space qualified would be captured under ECCN 9A515, regardless of whether it is specially designed. For example, if a commercial product, such as a diode or semiconductor, not specially designed or modified for a spacecraft and not currently controlled under Category XV, were successfully tested per industry standards, this product would be classified under ECCN9A515 and a license would be required to export the product to any country except Canada.

Interested parties should submit comments about the proposed rules by July 8, 2013. The Department of State has indicated that it is particularly interested in examples of satellites and related items which are currently in normal use and which would remain controlled under the proposed USML Category XV.