Tomorrow, the Commerce Department’s Bureau of Industry and Security (BIS) will ease certain U.S. export controls on India, as part of the U.S. commitments under the India–U.S. Joint Statement of June 7, 2016, which recognized the United States and India as Major Defense Partners. BIS is amending the Export Administration Regulations (EAR) to establish a general licensing policy of approval for exports or reexports to or transfers within India of items subject to the EAR and controlled only for National Security (NS) or Regional Stability (RS) reasons. Items subject to the EAR include items shipped from the United States or items reexported from a third country to India with more than 25% U.S.-origin content. The NS and RS controls include some of the most sensitive items on the control list, which underscores the significance of this development from both a national security and a commercial perspective. It is important to note that licensing requirements generally still apply to these exports and reexports to India, but now BIS will be generally inclined towards granting these license requests, which should open up a significant new market for companies operating in these sectors.
The new BIS licensing policies are set out in new paragraph (b)(8) of § 742.4 of the EAR (National Security) and new paragraph (b)(5) in § 742.6 (Regional Stability). The general licensing policy of approval for these items applies whether they are for civil or military end uses in India or for end use by the Government of India, for reexport to a Country Group A:5 country (the “STA-36” countries), or for return to the United States, as long as the items are not for use in nuclear, “missile,” or chemical or biological weapons activities. The policy of approval includes “600 series” military items that were formerly controlled under the International Traffic in Arms Regulations (ITAR).
This move arises more broadly from the November 8, 2010 Joint Statement by President Obama and Indian Prime Minister Singh, in which they committed to work together to strengthen the global nonproliferation and export control framework as part of a renewed global strategic partnership between the United States and India. Easing these sensitive export controls on India is an acknowledgment of the steps India has taken towards adopting the export control requirements of the four multilateral export control regimes (the Nuclear Suppliers Group, Missile Technology Control Regime, Australia Group, and Wassenaar Arrangement), as India works towards full membership in those regimes. As part of these developments, BIS had already, in January 2011, removed nine Indian entities from the Entity List and removed India from Country Groups D:2, D:3 and D:4, and added India to Country Group A:2. Then, in January 2015, after India had taken steps to ensure that U.S.-origin items controlled for Crime Control (CC) and RS reasons would not be reexported from India without a license, BIS removed India from certain CC and RS controls.
In this change, BIS is also amending the end use and end user provisions of the Validated End User (VEU) authorization so that items obtained under authorization VEU in India may be used for either civil or military end uses, provided that they do not involve nuclear, “missile,” or chemical or biological weapons activities.
This development, while maintaining NS and RS controls on trade with India, provides an opportunity to obtain licenses from BIS to allow that trade resume. Given the size and growing sophistication of the Indian commercial and defense-related markets, this is an important development for U.S. companies and their overseas business partners to take note of.