The Bureau of Industry and Security and the State Department have issued final rules that, effective Nov. 16, will harmonize the destination control statements required under the Export Administration Regulations and the International Traffic in Arms Regulations. Both rules reflect the agreement of BIS and State with public commenters that the proposed rules did not go far enough and additional harmonization was needed. The rules also incorporate certain clarifications and refinements to clarify and alleviate perceived concerns, in particular for exporters of non-600 series and non-9x515 items under the EAR.
Destination Control Statements. The EAR require exporters to include a DCS on certain export control documents that accompany a shipment for most exports. The ITAR include the same type of requirement but specific to the ITAR context and with slightly different text. In both cases the purpose of the DCS is to alert parties outside the United States that receive the item that the item is subject to the EAR/ITAR, that the item was exported in accordance with the EAR/ITAR and that diversion contrary to U.S. law is prohibited.
Because the transfer of formerly ITAR-controlled defense article parts and components to the EAR under the Export Control Reform Initiative has increased the incidence of exporters shipping articles subject to both the ITAR and the EAR in the same shipment, there has been confusion among exporters as to which DCS to include on such mixed shipments or whether to include both. BIS states that adopting a new harmonized DCS will simplify export clearance requirements for exporters because they will not have to decide which DCS to include, especially for mixed shipments containing both ITAR and EAR items. Harmonization is also “one important step” to prepare both regulators and the regulated public for the eventual creation of a single export control list and single licensing agency.
The harmonized DCS will adopt language equally applicable under the ITAR and the EAR. The first sentence specifies that “these items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified.” The term “authorized” includes exports, reexports and transfers (in country) designated as “no license required.” The phrase “country of ultimate destination” means the country specified on the commercial invoice where the ultimate consignee or end user will receive the items as an export.
The second sentence focuses on alerting the persons receiving the items that the items may not be resold or transferred or otherwise be disposed of to any other country or any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations. BIS states that the application of this second sentence is different under the ITAR and the EAR due to the different types of authorizations and other approvals in the respective regulations as well as other differences, such as the de minimis requirements in the EAR.
Under these rules the DCS will only be required with the commercial invoice and will no longer have to be included on the air waybill, bill of lading or other export control documents. In addition, the DCS is only required for items exported in tangible form. However, when a commercial invoice does exist for intangible exports, BIS recommends as a good compliance practice to include a DCS or other export control-related information that may be relevant.
Other Changes. Other changes these rules make to existing regulations include the following.
- removing from the EAR a provision that requires a special DCS for items controlled under ECCNs for crime control columns 1 and 3 reasons or regional stability column 2 reasons when those items are destined to India
- adding clarifying language to various provisions of the ITAR pertaining to the use of license requirement exemptions and the export of items subject to the EAR when the EAR items are shipped with items subject to the ITAR (including guidance on the use of licensing exemptions as well as clarification that items subject to the EAR are not defense articles even when exported under a license or other approval (to include exemptions) issued by State)
- clarifying that items subject to the EAR may be exported pursuant to an ITAR exemption if exported with defense articles
- clarifying how parties may obtain authorization from State to export or retransfer items subject to the EAR
- removing from the ITAR the requirement to provide seven paper copies for various export license requests, which has not been necessary for many years due to the use of electronic license submissions
- removing the pilot filing requirement in the ITAR because it does not take into account the practices of modern airport operations and is no longer necessary
- adding to the ITAR a provision for requests to interpret ITAR requirements (State notes that it is undertaking a review of the advisory opinion process, which will be addressed in a future rule)