1. MOMENTUM WEBINAR JULY 8, 2014 Export Control Reform Level Set

2. Agenda 2 1. ECR Background 2. ECR Revisions 3. Doing Business Under the ECR 4. ECR and U.S. Exports

3. Export Control Reform Background

4. ECR Background 4 Aug 2009 President Obama orders a broad- based review of export controls Apr 2010 Defense Secretary Gates announces fundamental reform of export control system Dec 2011 First proposed rules for revising USML and CCL

5. ECR Background 5 Oct 2013 First round of ECR revisions goes into effect. Jan 2014 Second round of ECR revisions goes into effect. Jul 2014 Third round of ECR revisions goes into effect.

6. Export Control Reform Revisions

7. ECR Revisions – Generally 7 “High walls around a smaller yard” Make the USML a positive list Move many items from USML to CCL New definition of “Specially Designed” common to USML and CCL

8. ECR Revisions - Generally 8 ITAR Controls: License required to all destinations Former “catch-all” items EAR Controls: More export opportunities

9. 9 An item is specially designed if: 1. As a result of “development” 2. Has properties peculiarly responsible for 3. Achieving or exceeding performance specifications 4. In the relevant CCL or USML paragraph. A part, accessory, attachment, component or software is specially designed if: 1. It is for use “in or with” 2. Items in the relevant CCL or USML paragraph. Specially Designed – “Catch”

10. 10 1. For any item: if listed in a paragraph not containing “specially designed” 2. For any part: if a fastener (screw, nut, rivet, pin, etc.) Released from “specially designed” Specially Designed – “Release”

11. 11 Specially Designed – “Release” For parts, attachments, accessories, components, or software: 3. If the item has the same capabilities, function, and form as an item in production not enumerated on CCL or USML 4. If the item was developed with knowledge it would be used in or with items not enumerated on CCL or USML 5. If the item was developed as a general purpose commodity or software 6. If the item was developed with knowledge it would be used with EAR99 commodities Released from “specially designed”

12. ECR Revisions – To Date 12 USML CategoryEffective Date VIII - Aircraft and Related Articles 10/15/2013 XVII – Classified Articles, Technical Data and Defense services 10/15/2013 XVIII – Gas Turbine Engines 10/15/2013 XXI – Articles, Technical Data and Defense Services Otherwise Not Enumerated 10/15/2013 VI – Surface Vessels of War and Special Naval Equipment 01/06/2014 VII – Ground Vehicles 01/06/2014 XIII – Materials and Miscellaneous Articles01/06/2014 XX – Submersible Vessels and Related Articles 01/06/2014

13. ECR Revisions – To Date 13 USML CategoryEffective Date IV – Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines 07/01/2014 V – Explosives and Energetic materials, Propellants, Incendiary Agents, and Their Constituents 07/01/2014 IX – Military Training Equipment07/01/2014 X – Personal Protective Equipment07/01/2014 XVI – Nuclear Weapons Related Articles07/01/2014

14. ECR Revisions – To Come 14 USML CategoryEffective Date XV – Spacecraft and Related Articles11/10/2014 XI – Military Electronics12/30/2014

15. ECR: Cat XV Spacecraft Commercial communications satellites move from USML to CCL International Space Station parts move from USML to CCL New “500 Series” controls remain subject to NS, RS, and MT controls 15

16. ECR: Cat XI Military Electronics Cryogenic and superconducting technology and software to CCL Missile Technology Controls on narrowed EAR items Numerous electronic systems specified in the USML 16

17. Doing Business Under The ECR

18. Jurisdiction and Classification 18 1. Review the USML  Review enumerated items  Catch-and-release under “specially designed” definition 2. If not on the USML, review the CCL 3. Determine CCL category and product group 4. Review applicable “600 series” entries  Specifically enumerated items  Categories.x and.y 5. Review applicable non-600 series entries

19. Licensing 19 Existing licenses remain effective for two years or to expiration Exporter may obtain a BIS license for transitioned products All new licenses after effective date must conform with new categories

20. Licensing Revised USML Categories include subcategory (x) EAR commodities, technology, or software used in or with USML items DDTC license may cover both USML and CCL items 20

21. ECR and U.S. Exports

22. Administration’s ECR Goals Publish remaining proposed and final rules in 2014 Publish important definitions, e.g.:  public domain  publicly available  technical data  technology  fundamental research Address new subject matters, e.g.:  Encryption  Cloud computing  Cybersecurity 22

23. Looking to the Future 23 Four consecutive years of increased exports 2013 exports up nearly $700 billion from 2009, a nearly 45% increase TTIP, TTP, bilateral agreements reducing Non-Tariff Barriers

24. QUESTIONS?

25. THANK YOU J. Scott Maberry smaberry@sheppardmullin.com Fatema Merchant fmerchant@sheppardmullin.com 25