ITAR REFORM EXPORT CONTROLS

1. Export Control Reform in
the United States
Presented by Christopher B. Stagg
October 2013

2. Background
> President’s National Export Initiative
– U.S. goal to double exports over five years
> Federal agencies working to streamline U.S. export
controls
– Build higher walls around the most sensitive items
– Allow exports of less critical items under less restrictive
conditions
> Proposals to move many military end-items and their
systems, subsystems, parts, components, and
technologies from the U.S. Munitions List (USML) to
the Commerce Control List (CCL)
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3. Background
> Export Control Reform will improve national security
– Reform will provide a more clear line by using positive criteria to
identify what items are controlled on the USML or the CCL
– Controlling less sensitive items on the CCL will remove the socalled “ITAR taint” and the resulting incentives by non-U.S. firms
to avoid or otherwise design out U.S. origin content
– It will promote interoperability and allow for a greater number of
items going to the CCL to be exported under license exceptions
> Export Control Reform will create business
opportunities
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– By more clearly identifying those items subject to the USML or
CCL, it will enable businesses to have greater clarity over which
regulatory authority applies to their activities and products
– By allowing exports of less critical items under the CCL’s less
restrictive conditions, it will open up new business opportunities
that were unavailable when such items were subject to the
USML

4. Benefits of Export Control Reform
> Most items moved to
CCL will be
> Controlled for national
security reasons
> Require a license for
export to all destinations,
except Canada
> Eligible for broad license
exceptions
> Eligible for de minimis
treatment when
incorporated into a
foreign article
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> Some end-items, as well
as many parts and
components, will be less
strictly controlled for
export and re-export.
> Manufacturers,
exporters and brokers of
moved items would no
longer be required to
register with US State
Department

5. Regulatory Changes
> The entire U.S. Munitions List will be revised and
turned into a positive control list
– The intent of the revised USML is to make it clear through
specific positive control parameters those items controlled on
that list
– Previously undefined terms and the use of broad control
language will be changed
– The revisions will make the USML similar to the CCL’s use of
positive control criteria to establish a bright line for jurisdiction
> The creation of a new “600” series on the Commerce
Control List to capture those items previously on the
USML
– The reform efforts are not intended to “decontrol” items but to
move less sensitive items from the USML to the CCL, where the
CCL’s legal authorities provide greater flexibility for license
exceptions
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6. Regulatory Changes
> Export Control Reform introduces many new
approaches and concepts to export controls
– New approach of a positive control list as the current USML uses
broad and subjective language, which has led to many
conflicting interpretations over the intended meaning
– It will now define important terms such as design intent
(“specially designed”) and provide clarifying notes within the
USML
– The new framework of the Department of State to have the
authority to license items subject to the EAR in certain
circumstances
– There will be a transition period for those items moving from the
USML to the CCL, as well as grandfathering of certain items
> The regulatory changes will require adjustment for
businesses but they will result in new business
opportunities
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7. Impacts for Non-U.S. Parties
> Review the possible changes to jurisdiction from the
USML to the CCL
– Notification to suppliers and customers of any
changes to jurisdiction, including their responsibilities
as recipients of U.S. export controlled items
• Destination Control Statement requires flow-down
by both U.S. and non-U.S. parties
– Understand export rules on the CCL such as:
• The De Minimus Rule
• Foreign Direct Product Rule
• License exceptions and exemptions
> How to handle re-export and retransfers
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8. Status of Export Control Reform
> Revisions to aircraft and gas turbine engines take
effect on October 15, 2013:
– Revises USML Category VIII for aircraft and related articles, and
creates new CCL ECCN 9Y610
– Adds new USML Category XIX for gas turbine engines and
associated equipment, and creates new CCL ECCN 9Y619.
• USML Category XIX will control all such engines previously
controlled in Category VIII for aircraft, as well as Categories
IV (launch vehicles), VI (vessels), and VII (vehicles)
– Also revises language for two broad catch-all concerning
classified items (Category XVII) and other items not otherwise
enumerated on the USML (Category XXI)
– These changes include the transition guidance, grandfathering
provisions, the definition of “specially designed,” “subject to the
EAR,” and other conforming changes.
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9. Status of Export Control Reform
> Revisions to naval vessels, ground vehicles,
miscellaneous items, and submersibles take effect on
January 6, 2014:
– Revises USML Category VI for surface vessels of war
– and special naval equipment, and creates new CCL ECCN
8Y609
– Revises USML Category VII for ground vehicles and creates new
CCL ECCN 0Y606
– Revises USML Category XIII for materials and miscellaneous
articles and creates new CCL ECCN OY617
– Revises USML Category XX for submersible vessels and related
articles, and creates new CCL ECCN 8Y620
> Many key areas of the USML, such as military
electronics, sensors and space-related items, have
yet to go into final rules and may be the subject of
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10. Export Control Reform in a Nutshell
> Intended to promote U.S. exports and enhance national
security
> New rules will clarify jurisdiction (USML or CCL) so
businesses will have greater clarity over which rules
apply
> Many regulatory changes will take effect on October 15,
2013 and businesses need to prepare now
> Additional changes to the USML and CCL will be
implemented in phases throughout 2013 and 2014
> Public comment periods are taking place to determine
what items are covered in certain USML and CCL
categories
> Businesses should monitor the reform efforts and provide
feedback on issues that affect their operations
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11. Questions?
Christopher B. Stagg
Williams Mullen
1666 K St., NW, Suite 1200
Washington, DC 20006
T: (202) 293-8135
E: cstagg@williamsmullen.com
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