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Export Regulations See Numerous Changes on CCL, Export Control Reform, Shipping Tolerances

Monday, October 07, 2013
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security has issued a final rule implementing numerous changes to the Export Administration Regulations. This rule (a) implements changes in a November 2012 proposed rule aimed at making the Commerce Control List clearer, (b) makes conforming changes and minor clarifications as a result of an April 2013 final rule on initial implementation of export control reform and a July 2013 final rule revising export controls on military vehicles, and (c) reflects comments received in a response to a notice of inquiry on shipping tolerances for BIS export licenses. Most of these changes will be effective as of Oct. 15.

According to the BIS, this rule implements changes that can be made to the CCL without requiring a multilateral export control regime change. For certain changes that would make the CCL clearer but would require a regime change to implement, the U.S. government is developing proposals for consideration by the relevant regimes and the BIS will implement those changes, if approved, in separate rulemakings.

Existing Controls. The rule makes a number of clarifications to existing CCL controls, including by providing clearer definitions of the terms “part” and “component” and adding or revising “related controls” paragraphs. Most of these changes amend the CCL without changing the scope of the controls and serve only to provide additional regulatory guidance to those classifying items subject to the EAR. However, the rule removes Export Control Classification Number 8A918 and adds certain marine boilers to ECCN 8A992, where they will be controlled for AT and UN reasons.

Multilateral Regimes. Several changes will conform the CCL to the multilateral regime control lists and the intent of previous amendments to the EAR (e.g., the intended change was not implemented as intended or was inadvertently not made). These include adopting a standardized list of 36 countries that license exception TSR can be used for with respect to nine specified ECCNs.

Structural Changes. The rule includes various structural changes to improve the clarity of the CCL. For example, the license exceptions section heading is revised to add greater specificity, the license exception STA paragraph in the license exceptions section of 79 ECCNs is removed, and a new section heading called “Reporting Requirements” is added to certain ECCNs .

Removal of ECCNs. Fourteen ECCNs subject to the exclusive export licensing authority of the Nuclear Regulatory Commission are removed.

Shipping Tolerances. The rule specifies that all licenses will be strictly limited by the quantity approved on the license and no shipping tolerance will be available to exceed that quantity. However, a shipping tolerance of 10% will be available on the total approved value for all commodities subject to the EAR to account for price uncertainty and price inflation over the four-year validity period of the license. Because this rule will reduce the applicable shipping tolerance from 25% to 10% of the total authorized value, this change will only apply to licenses granted after Oct. 15. The BIS believes that these changes will be an important step in moving toward decrementing BIS licenses in the Automated Export System, which “is something strongly supported by the public.”

De Minimis. The BIS is clarifying its April 2013 final rule to specify that there is no de minimis level for foreign-made items that incorporate U.S.-origin 600 series items (a) enumerated or otherwise described in paragraphs .a through .x of a 600 series ECCN when destined for a country in Country Group D:5 or (b) enumerated in a .y paragraph when destined for a country in Country Group E:1 or China.

Specially Designed. This rule adds sentences to the end of Note 1 of the “specially designed” definition to (a) list 73 ECCNs that are controlled for AT-only reasons for purposes of this definition and (b) specify that 11 additional ECCNs that are controlled predominantly for AT reasons are treated as ECCNs controlled only for AT reasons for purposes of this definition (with two exceptions).

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