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State/BIS Proposed Rules Would Remove Most Aircraft and Aircraft Parts and Components from Defense Export Licensing Requirements

Friday, November 04, 2011

Separate proposed rules from the State and Commerce departments would result in sweeping changes to U.S. export controls on most aircraft and associated parts, components, attachments and accessories. Certain items covered by Category VIII of the U.S. Munitions List would be transferred to the Commerce Control List, providing greater flexibility to U.S. companies exporting or reexporting to NATO countries and other countries that the president determines no longer warrant USML control. The transfer would also allow the application of de minimis threshold principles under the Export Administration Regulations and make available certain license exceptions. Finally, the number of companies who must register with State as manufacturers or exporters of these items would be reduced, and licenses, manufacturing license agreements and technical assistance agreements under the International Traffic in Arms Regulations in connection with the transfers of technical data would be eliminated as well.

The proposed rules were issued as part of President Obama’s Export Control Reform Initiative in which both State and Commerce are working to revise the USML and CCL to establish a brighter line between each agency’s jurisdiction, convert the USML and CCL into more positive lists, and harmonize key definitions, such as “specially designed,” in the ITAR and EAR. On July 15, 2010, State and Commerce issued their proposed rules on the revision of USML Category VII (tanks and military vehicles) and the treatment of Category VII items that would be transferred to the CCL. The agencies are also reportedly working on proposed rules for the revision of USML Categories VI (vessels of war and special naval equipment) and XV (spacecraft systems and associated equipment).

State proposes to amend USML Category VIII by narrowing the types of aircraft and related items that would be controlled under the ITAR. For example:

• Aircraft inertial navigation systems would be transferred from USML Category VIII(e) to Category XII or possibly to the CCL category.

• Gas turbine engines would be transferred from USML Category VIII(b) to Category XIX.

State also proposes to more clearly define aircraft in Section 121.3 of the ITAR. Most importantly, the ITAR would not control generic aircraft parts, components, accessories or attachments (with the exception of those specially designed for certain U.S.-origin aircraft, such as the B-1B, B-2, F-155E, F/A-18E/F/G, F-22, F-35, F-117 or U.S. government technology demonstrators). All other parts and components would be transferred to the proposed 600-series in Category 9 of the CCL.

Commerce’s proposed rule focuses on how items transferred from USML Category VIII to the CCL would be controlled. The review conducted by State and Commerce identified types of articles that are inherently military and warrant control on the USML as well as items that are common to civil aircraft applications but possess parameters or characteristics that provide a critical military or intelligence advantage to the United States and are almost exclusively available from the United States. If an article satisfied one or both of those criteria, it was to remain on the USML. If an article did not satisfy either standard but was “specially designed” for military applications, it was identified for transfer to the CCL.

USML Category VIII items that would be transferred to the CCL would be included in the proposed new 600-series of ECCNs in Category 9 (9A610, 9D610, 9E610).

• end items would be identified in new ECCN 9A610.a - .k
• unmanned aerial vehicles (UAVs) would fall into 9A610.l - .n
• parts, components, accessories and attachments specially designed for end items in 9A610.a - .k would be identified in 9A610.x
• 25 specific types of commodities that warrant less strict controls would fall into 9A610.y

In addition, Wassenaar Arrangement Munitions List items currently controlled in ECCNs 9x018 on the CCL would also be transferred to the new 600-series in Category 9. Aircraft turbine gas engines, however, are excluded from both proposed rules because these items will be included in a new USML Category XIX that will be the subject of a separate notice. The CCL, in turn, will likely add new ECCN 9A619 for gas turbine engines that do not warrant control under the ITAR.

Commerce would also prohibit the use of License Exceptions STA or GOV except for certain exports, reexports or transfers of software and technology (other than “build-to-print technology”) for the development or production of certain ECCN 9A610.x items to U.S. government personnel and agencies. There would be a general denial policy for license applications to export or reexport 600-series items to destinations that are subject to a United States arms embargo, as well as to export items specially designed or required for F-14 aircraft to any destination. However, items identified in new ECCN 9A610.y—items determined to warrant less stringent controls—would be subject to anti-terrorism (AT) controls only.

Comments on both proposed rules must be received no later than Dec. 22, 2011.

Sandler, Travis & Rosenberg is closely tracking and monitoring the president’s Export Control Reform Initiative and will continue to provide client updates as new developments unfold. For more information about these proposed rules and their potential impact on companies located in the U.S. and overseas, or for advice on any export control matter, please contact Melissa Proctor at (480) 305-2110, Donna Bade at (312) 641-0000 or Anu Gavini at (248) 474-7200.

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