On June 17, 2015, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) published proposed rules to transfer certain items from U.S. Munitions List (“USML”) Category XIV (toxicological agents) and Category XVIII (directed energy weapons) to the Commerce Control List (“CCL”). These proposed rules represent the next step in the ongoing export control reform process, which is designed to streamline the USML and move less sensitive items to the CCL, where they will be eligible for less restrictive export authorizations. While these two USML categories are limited in scope, these proposals will be relevant for companies that deal in chemical and biological agents, directed energy weapons, and related items. The agencies will accept public comments on the proposed rules until August 17, 2015.
We have summarized below the key changes to the USML and CCL structure and export compliance obligations that would result from implementation of the proposed rules.
The BIS proposed rule would create the following five “600 Series” ECCNs to receive military chemical/biological agent dissemination, detection, and protection equipment items transitioned from the USML:
- ECCN 1A607 would cover military dissemination equipment for riot control agents, military detection and protection equipment for toxicological agents, and related commodities.
- ECCN 1B607 would cover test, inspection, and production equipment and related commodities “specially designed” for the development or development, production, repair, overhaul, or refurbishing of items classified under ECCN 1A607 or 1C607 or USML Category XIV.
- ECCN 1C607 would cover tear gases, riot control agents, and materials designed or processed for the detection and decontamination of chemical warfare agents.
- ECCN 1D607 would cover software “specially designed” for the development, production, operation, or maintenance of items controlled by ECCNs 1A607, 1B607, or 1C607.
- ECCN 1E607 would cover technology required for the development, production, operation, installation, maintenance, repair, overhaul, or refurbishing of items controlled by ECCNs 1A607, 1B607, 1C607, or 1D607.
The proposed rule would also create the following three “600 Series” ECCNs to receive certain directed energy tooling, production, and test equipment transitioned from the USML:
- ECCN 6B619 would cover test, inspection, and production equipment and related commodities “specially designed” for the development, production, repair, overhaul or refurbishing of commodities controlled by USML Category XVIII.
- ECCN 6D619 would cover software “specially designed” for the development, production, operation, or maintenance of commodities controlled by ECCN 6B619.
- ECCN 6E619 would cover technology required for the development, production, operation, installation, maintenance, repair, overhaul or refurbishing of items controlled by ECCNs 6B619 or 6D619.
All of these new ECCNs would be controlled for the following reasons: (1) national security reasons (NS Column 1); (2) regional stability (RS Column 1); (3) antiterrorism (AT Column 1); and (4) United Nations controls (UN). Under the EAR, 600 series items controlled for NS or RS reasons and exported to a destination in Country Group D:5 (countries subject to a U.S. arms embargo) will be reviewed for licensing purposes consistent with U.S. arms embargo policies under the ITAR. However, under the EAR, these transitioned items will be eligible for expanded license exceptions and application of the de minimis rule to foreign-manufactured items incorporating these U.S.-origin items.
The DDTC proposed rule would revise USML Categories XIV and XVIII to more precisely describe the articles still warranting control under the ITAR. Items no longer described on the revised USML would be moved to the CCL. Under USML Category XIV, proposed Paragraph (b) would control “Tier 1” pathogens and toxins defined under U.S. Departments of Agriculture and Health and Human Services regulation that meet specific capabilities. Tier 1 pathogens that do not meet these capabilities would be controlled on the CCL. Also, riot control agents and related equipment would be transitioned to the CCL. The proposed rule makes other revisions and adds notes to create more of a bright line between items controlled under the USML and CCL.
Under USML Category XVIII, the main change would be to define controlled “directed energy weapons” based on the sole or primary purpose of the items and to exclude items to that may perform the same function incidentally. The other changes merely reserve paragraphs for items that will be transitioned to the CCL and make conforming changes.
Consistent with the intent of the export control reform process, the DDTC proposed rule would create a more prescriptive control list. The result would largely be to move certain related equipment to the CCL. In that way, it differs slightly from other export control reform rules, which largely moved generic parts, components, accessories, and attachments that are specifically designed or modified for a defense article. USML Categories XIV and XVIII, by their nature, do not currently control many parts and components.
Comments may be submitted to BIS and DDTC until August 17, 2015. The Administration intends to publish final rules on this topic by June 2016, which will become effective 180 days after publication. If these proposed rules are adopted, they will significantly change exporters’ compliance obligations. Some products may move to a different export control regime altogether, with different licensing vehicles and export control requirements. If you have any questions regarding the proposed rules or would like to file comments with BIS or DDTC, please reach out to the contacts listed below.