1. Implementation of U.S. Export Control Reform Update - 2014
Date of Last Revision: Jan 20, 2014

2. USA Export Control Reform
The Administration determined that the U.S. export control system needed to be reformed to:
Increase interoperability with NATO and other close allies;
Reduce the current incentives for companies in non-embargoed countries to design out or avoid US-origin content; and
Allow the Administration to focus its resources on the transactions of greater concern.

3. ECR Background
To implement the objectives, the Administration needed to:
Identify the specific items on a more positive USML that warrant individual license reviews even for ultimate end use by NATO and other allies; and
Amend the EAR to continue controls as military items on former USML items, but in a more flexible way regarding transfers to allies.

4. ECR Background
The Departments of Commerce and State have published proposed or final rules on the following aspects of ECR:
All changes in the jurisdictional status of items will need to comply with the congressional notification requirements of § 38(f) of the AECA.
Final rules will have a six-month delay in implementation after publication (in addition to a two-year optional grandfathering period for existing USML authorizations.)
Framework: more “positive” USML and establishment of “600 series” structure
Revised USML categories: Proposed and final revisions to USML categories and corresponding “600 series” ECCNs
“Specially Designed”: definition of the term for both the ITAR and EAR
Transition/Implementation: grandfathering, changes to license exceptions and license structure

5. Summary
Former defense articles no longer listed on the revised USML categories shift to control by the EAR’s “600 series” ECCNs.
EAR licenses will still be required to export and reexport most 600 series items (minus Canada), unless an EAR license exception is available.

6. Summary
New license exception STA will be available to authorize exports and reexports to 36 countries if (a) for ultimate end use by a government of such countries, (b) return to the US, or (c) in connection with an existing authorization.
STA eligible countries are all NATO countries plus Australia, New Zealand, Japan, South Korea, and Switzerland.
Non-U.S. parties must have been previously approved on a license issued by BIS or DDTC.
The consignee statement must agree to permit a U.S. government end-use check with respect to the items.

7. ECR Actions for 2014 Completed to date…
In Phase II of ECR implementation
More than half-way through control list revisions
Finalized definition of “specially designed”
Provided transition guidance to industry
In 2014…
Finish the remaining control list revisions
Harmonize definitions – technical data/technology, defense services, public domain/publicly available
Continue developing inter-agency relationships
Fine-tuning processes

8. Status USML Description ECCNs Status I Firearms 0y601 II Artillery
TBD II
Artillery
0y602
III
Ammunition
0y603 IV
Launch Vehicles, Missiles, Rockets, Torpedoes, Bombs, Mines
9y604
Effective 1 Jul 2014 (IV, V, IX, X, XVI)
Rule: 79 FR 34 (2 Jan 14) V
Explosives/Propellants/Incendiary
1y608
Effective 1 Jul 14 (IV, V, IX, X, XVI) VI
Surface Vessels of War
8y609
Effective 6 Jan (VI, VII, XIII, XX)
78 FR (8 Jul 2013)
& 79 FR 26 (2 Jan 2014)
VII
Military Tanks, Ground Vehicles
0y606
Effective 6 Jan 14 (VI, VII, XIII, XX)
VIII
Military Aircraft and Related Articles
9y610
Effective 15 Oct 2013 (VIII, XVII, XIX, XXI)
78 FR (16 Apr 2013) &
78 FR (3 Oct 2013) IX
Military Training Equipment
0y614

9. Status USML ECCNs Status X XI XII XIII XIV XV XVI XVII XVIII XIX XX
Description
ECCNs
Status X
Personal Protective Equipment
1y613
Effective 1 Jul 14 (IV, V, IX, X, XVI) XI
Electronics
3y611, 9y620
TBD (Proposed 28 Nov 12)
XII
Fire Control/Sensors/Night Vision
TBD
XIII
Miscellaneous
0y617
Effective 6 Jan (VI, VII, XIII, XX)
XIV
Toxicological Agents
1y607 XV
Spacecraft/Satellites
9y515
TBD (Proposed 24 May 13)
XVI
XVII
Nuclear
Classified Articles, Technical Data, and Defense Services
N/A
Effective 1 July 2014 (IV, V, IX, X, XVI)
Effective 15 Oct 2013 (VIII, XVII, XIX, XXI)
XVIII
Directed Energy Weapons
XIX
Gas Turbine Engines
9y619 XX
XXI
Submersible Vessels
Articles, Technical Data, and Defense Services Otherwise Not Enumerated
8y620

10. Two Different Systems State (AECA & ITAR) Commerce (EAA & EAR)
Registration of Manufacturer/Exporter
Yes No
Country Groups
Control Lists
Mostly Subjective
Mostly Objective
De minimis
Exemptions / Exceptions
Narrow
Broad
Retransfer assurances
Often
Seldom
License Fee
Purchase Order Requirement

11. Two Different Systems State (ITAR) Commerce (EAR)
Defense Articles or Hardware
“Dual-Use” or Commercial Items
Technical Data and Defense Services
Technology
License Exemption
License Exception
Empowered Official
No equivalent
“Foreign Person”
“Foreign National” with exceptions
Disclosure to Foreign Person is an export
“Deemed Export”
Commodity Jurisdiction (“CJ”)
Commodity Classification Automated Tracking System (“CCATS”)
All exports need a license unless an exemption is available
If license is not specifically required by ECCN, Country Chart, and Country Groups, No License Required (“NLR”).

12. Common Concepts & Basic Terms
Vocabulary
Common Concepts & Basic Terms

13. Which Export Regulations Apply -- ITAR or the EAR?
The philosophy of State Department’s International Traffic in Arms Regulations (ITAR):
If you manufacture or export defense articles, furnish defense services, or broker their sales, you must register with DTC, and you need a license to export them unless you qualify for an exemption.
The philosophy of the Commerce Department’s Export Administration Regulations (EAR):
You don’t have to register, and only the following items require licenses...

14. Who are “US Persons” “Foreign Persons” and “Foreign Nationals”?
'‘U.S. Person” means (ITAR )
U.S. citizen
Permanent resident with a “green card”
Designated an asylee or refugee
A temporary resident under amnesty provisions
Any entity incorporated to do business in the U.S.
But the company itself may have FP employees
“Foreign Person” means everyone else. (ITAR )
Includes foreign businesses not incorporated in the U.S.
“Foreign National” is the term used in the EAR (734.2(b)(ii)).
But has different meaning in EAR. Always ask if the “Foreign National” is a “US Person” or a “Foreign Person.”

15. Quiz Question:
Q: You will need an export license or exemption before you discuss the design of an EAR or ITAR controlled article with which one or more of the following persons?
(a) U.S. citizen (born in U.S.A.)
(b) Naturalized U.S. citizen (born in Iran)
(c) Iranian or Cuban citizen with a “Green Card”
(d) Asylee or refugee admitted to US residence
(e) Canadian employee of a U.S. corporation

16. Classify Your Export Is it listed on the U.S. Munitions List (USML)?
If so it is a DEFENSE ARTICLE, regulated by International Traffic in Arms Regulations (ITAR), under State Department’s Directorate of Defense Trade Controls (DDTC).
What is its USML Category?
2. Is it listed on the Commerce Control List (CCL)?
If so, it is a “dual-use” item, and will be controlled by the Export Administration Regulations (EAR), under Commerce Department’s Bureau of Industry and Security (BIS).
What is its Export Control Classification Number (ECCN)?
If you aren’t sure where it belongs, or just to be safe, submit a “commodity jurisdiction request” to DDTC (ITAR 120.4), or a “classification request” to BIS (EAR 748.3, 750.2).

17. Step 3 (cont): Classify Your Export
3. What will the “end use” of your export be?
Some end-uses are prohibited (EAR 744) while others may require a license.
For example, you may not export anything to persons making weapons of mass destruction and missiles, without license, no matter what your item is.
Some items must be licensed, no matter what their end use will be. (A bomb to be used only as a doorstop must still be licensed for export.)

18. Quiz Question on Classification:
Q: For the purpose of an export license, what is the difference between a shotgun with a 17-inch barrel and a shotgun with an 18-inch barrel?

19. Sample ITAR & EAR Classifications
Defense Items:
ITAR Cat I(d): Combat shotguns, barrel length under 18”
ITAR Cat XI(a)(6): “Computers specifically designed or developed for military application, and any computer specifically modified for use with any defense article in any category of the US Munitions List.”
Dual-Use Items:
ECCN 0A984: Shotguns, barrel length 18” or over
ECCN 4A001: Electronic computers and related equipment, and electronic assemblies and specially designed components.

20. Order of Review (Supp. No. 4 to part 774)
Review the USML
Specifically enumerated items
“Catch-all” controls and ITAR definition of “specially designed”
If not on the USML, review the CCL
Review characteristics of item to determine applicable CCL category and product group
Review applicable 600 series ECCNs
“Catch-all” controls and EAR definition of “specially designed”
Review applicable non-600 series ECCNs

21. USML (x) Paragraph
USML (x) paragraph is not a jurisdictional entry; it is a licensing entry:
Meant to alleviate “dual licensing”
Items shipped under USML paragraph (x) are “subject to the EAR”
Change in thought process: DSP license ≠ ITAR control
ITAR §123.9(b)(2) requires U.S. party to provide the appropriate ECCN entry or EAR99 designation
If not received = ask the U.S. party

22. Q: Which of the following would be controlled by the ITAR?
Quiz Question:
Q: Which of the following would be controlled by the ITAR?
(a) Pair of sneakers
(b) Stuff on the U.S. Munitions List
(c) , fax, and a phone call
(d) Conversation in a restaurant

23. Remainder of presentation for advanced discussion.

24. Destination Control Statement
ITAR §123.9(b)(1) revised to require “flow down” of destination control statement by both U.S. and non-U.S. parties
Inform customers and end-users of their responsibilities as recipients of U.S. origin, export controlled items
Needs to be included by non-U.S. party for any re-export or retransfer activity
Including approved transactions
Need to update shipping and purchase documentation

25. ITAR §123.9(b)(1)
(b)(1) “These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end-user] under [license or other approval number or exemption citation]. They may not be resold, diverted, transferred, or otherwise be disposed of, to any other country or to any person other than the authorized end-user or consignee(s), either in their original form or after being incorporated into other end-items, without first obtaining approval from the U.S. Department of State or use of the applicable exemption.”

26. EAR §758.6(b)
(b) Additional requirement for “600 series” items. In addition to the DCS as required in paragraph (a) of this section, the ECCN for each “600 Series” item being exported must be printed on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad.

27. Re-export/Retransfer
Currently approved ITAR re-export/retransfer authorizations remain valid:
ITAR §123.9, program status, MLAs and WDAs
If activity exceeds the above scope, a new re-export/ retransfer authorization must be obtained by appropriate agency (State or Commerce)
Need to determine jurisdiction first
The original authorization is not always indicative of post-ECR jurisdiction
If ITAR request authorization from State
Can include paragraph (x) items
If EAR need to determine licensing requirement
Calculate De Minimis
License or license exception

28. Calculating De Minimis
Non-U.S.-made items incorporating below de minimis levels of controlled U.S. content generally are not subject to the EAR
See EAR §734.4 and Supplement 2 to Part 734
Conversely if non-U.S.-made items incorporating more than de minimis levels of controlled U.S. content is subject to the EAR
General thresholds:
10% content for proscribed or embargoed countries
25% content for all other countries
Thresholds different for 600-series items:
0% de minimis for 600 series items destined for Country Group D:5 (maintains ITAR §126.1 proscriptions)
25% de minimis for 600 series items destined for all other countries

29. Foreign Direct Product Rule
Certain foreign-made items that are the direct product of certain U.S.-origin technology or software are subject to the EAR when re-exported to certain destinations – EAR §736.2(b)(3)
Foreign-made 600 series items that are the direct product of U.S.-origin 600 series technology or software require authorizations under the EAR when re-exported to countries in Country Groups D:1, D:3, D:4, D:5, or E:1

30. Foreign Direct Product Rule and the “600 series”
The “600 series” Direct Product Rule
Is the foreign-produced item a direct product of:
U.S.-origin “600 series” technology or software; or
A plant or major component of a plant that is a direct product of U.S.-origin “600 series” technology or software?
Yes
Is the foreign-produced direct product a “600 series” item?
Is the foreign-produced direct product being reexported or exported from abroad to countries listed in Country Groups D:1, D:3, D:4, D:5 or E:1?
If “yes” to all three questions, then the foreign-produced direct product is subject to the EAR.

31. Dual and Third-Country Nationals
No equivalent to ITAR §§ and in the EAR
If an item has transitioned to the EAR or the ITAR agreement is no longer required:
Need to determine whether a transfer or access
May require a “deemed re-export” authorization from Commerce (see EAR §734.2(b)(5))
Per the EAR, Dual and Third Country Nationals determined by country of last allegiance
Country of birth and substantive contacts not applicable
No need for execution of Non-Disclosure Agreement (NDA)
Commerce guidance published October 10

32. USML Framework Control text for:
End platforms and major systems
Parts, components, accessories, and attachments
Classified articles
Technical data (including software) and defense services
Items subject to the EAR – new “(x)” paragraph

33. 600 Series Framework 9A610 CCL Category 0-9 Product Group A-E
Former USML items (and -018 items) listed in the “Items” paragraph.
Order of review:
.a - .w: specifically enumerated end items, materials, parts, components, accessories, and attachments
Some items may be “specially designed”
.y: specifically enumerated parts, components, accessories, and attachments that are “specially designed”
.x: “specially designed” parts, components, accessories, and attachments that are not specifically enumerated
CCL
Category
0-9
Last two characters will generally track the WAML
Product Group
A-E
“600 series” derives its name from the 3rd character of the ECCN

34. 600 Series Framework
.a - .x items controlled to all countries except Canada
.y items controlled to Country Group E:1 countries and China (§ )

35. 600 Series and China Military End Use
Section currently imposes a license requirement for exports or reexports of certain items subject to the EAR when one knows such items are intended for a military end use
Since 600 series items are presumptively for a military end use, all 600 series items (including .y items) will require a license when destined for China – see new § (a)(2)
Maintains ITAR status quo

36. Definition of “Specially Designed”
New definition of “specially designed” is based on a catch-and-release construct
Requires answering a series of yes/no questions that lead to an objective determination whether an item is “specially designed”
Definition is found in Part 772 and is described in an online decision tree tool published by BIS

37. Determining Changes in Jurisdiction
Items previously controlled under USML Category VIII
End item: if not listed in VIII(a), (d), (e), or (f), then moving to the CCL’s new 9A610 (aircraft)
Part, component, accessory, or attachment: if not “specially designed” for stealth aircraft in VIII(h)(1) or listed in VIII(h)(2)-(26), then moving to CCL’s new 9A610 (aircraft); if not listed in XIX(a)-(f), then moving to CCL’s new 9A619 (engines)
Software or technology (unclassified): if commodity stays on USML, then the software and technology directly related to it stay in VIII(i) or XIX(g); otherwise moving to CCL’s new 9D610/9E610 (aircraft software/technology) or 9D619/9E619 (engine software/technology)

38. Determining Changes in Jurisdiction
Prior commodity jurisdiction (CJ) determinations
CJs that determined item was subject to the ITAR
If item is moving from the USML to the CCL, then CJ superseded. No need for additional CJ unless there is doubt.
CJs that determined item was subject to the EAR
If item was not classified in an existing “-018” ECCN at the time of determination, the item will not be controlled under the 600 series
If item was not listed on the CCL at the time of determination (i.e., designated EAR99), the item will remain EAR99, unless later enumerated in an entry on the USML or CCL

39. Options for Authorizing Items Moving from the USML to the CCL
Transactions authorized prior to effective date:
Grandfather existing DDTC licenses, agreements, or other approvals beyond effective date of final rule per DDTC transition plan
Maintain DDTC approval until effective date but pre-position BIS license application or utilize license exception or NLR designation upon effective date
Transactions after effective date
Obtain BIS license, use license exception, or use NLR designation when eligible
Obtain DDTC license, agreement, or other approval if eligible under § 120.5(b) of the ITAR

40. Authorization for Items Moving from USML to CCL: Grandfathering DDTC Approvals
Contains only items transitioning to CCL
Contains both transitioning and non-transitioning items
DSP-5
May use for up to 2 years after effective date of transition unless license expires or returned. May amend after effective date on case-by-case basis.
Valid for all items until expiration. May amend after effective date on case-by-case basis.
DSP-61
DSP-73
Valid until expiration. May amend after effective date on case-by-case basis.
TAA
MLA
WDA
May use for up to 2 years after effective date of transition unless agreement expires. May amend after effective date on case-by-case basis.
May use for up to 2 years after effective date of transition unless agreement expires. Agreement may be kept valid beyond the 2-year period by submitting amendment to authorize transitioning items under
§ 120.5(b).
See DDTC’s transition plan for full details.

41. License Exceptions for 600 Series
Restrictions on use of License Exceptions for 600 series
May only use those license exceptions listed in § 740.2(a)(13)
Country Group D:5 (except § (b)(2) of GOV)
9D610.b, 9D619.b, 9E610.b, 9E619.b or .c (except § (b)(2) of GOV)
600 Series Major Defense Equipment sold under a contract exceeding certain values
Other applicable restrictions in § (e.g., MT-controlled items) or specific section of applicable license exception

42. License Exceptions for 600 Series
LVS (§ 740.3): $1500 for most 600 series commodity ECCNs
TMP (§ 740.9): streamlined; expanded scope for exports to U.S. person’s subsidiary, affiliate, or facility abroad
RPL (§ ): allows 600 series parts to repair EAR or ITAR items under certain conditions
GOV (§ ): streamlined; expanded to authorize contractor support personnel and to provide for certain shipments for or on behalf of USG and DoD-directed shipments
TSU (§ ): expanded to allow releases of technology and source code in the U.S. to bona fide, full time regular employees of U.S. universities
STA (§ ): additional requirements for 600 series items

43. License Exception STA (for all items subject to the EAR)
Current requirements for all items subject to the EAR:
ECCN must authorize
All reasons for control that apply to the transaction must be authorized to use STA
NS, CB, NP, RS, CC, SI: Country Group A:5 (§ (c)(1))
Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and United Kingdom
NS only: Country Group A:6 (§ (c)(2)) [NOT available for 600 series items]
Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, & Taiwan

44. License Exception STA (for all items subject to the EAR)
Exporter/Reexporter
Consignee 1
Provide ECCN(s) to Consignee 2
Provide Consignee Statement to 3
Obtain Consignee Statement 4
Notify consignee that shipment (or specific items within a shipment) is (are) under STA 5
Keep records showing which shipments belong to each consignee statement
Maintain Consignee Statement and records pertaining to subsequent reexport or transfer
Consignee Statement – Five Points
Aware that items are to be shipped under STA
Been informed of ECCN by _______.
No subsequent License Exception APR (a) or (b) shipments
Agrees not to ship or transfer in violation of EAR
Agrees to provide documents to USG upon request

45. License Exceptions for 600 Series
License Exception STA: additional requirements for 600 series items only
For ultimate end use by USG or government of country in Country Group A:5 (“STA-36” countries);
For development, production, or servicing of an item in A:5 that is for ultimate end use by USG or government of country in Country Group A:5;
For return to the United States; or
If USG has otherwise authorized its use.

46. License Exceptions for 600 Series
License Exception STA: additional requirements for 600 series items only
Non-U.S. parties must have been previously approved on a State or Commerce license
Consignee statement must also address ultimate end user restrictions for 600 series items and agree to end use check
Eligibility request required for end item aircraft in 9A610.a

47. ITAR Exemptions and EAR Exceptions
EAR License Exception
§ 123.4
RPL §740.10; TMP §740.9(b)(2) and (b)(4)
§ (b)(2)
LVS §740.3
§ (b)(5)
TMP §740.9(a)(5)
§ (b)(9)
TMP §740.9(b)(10) §
TMP §740.9(b)(1)
§ 125.4(b)(1)
GOV §740.11(b)(2)
§ 125.4(b)(3)
§ 125.4(b)(4)
TSU §740.13(g)
§ 125.4(b)(5)
TSU §740.13(a)
§ 125.4(b)(10)
TSU §740.13(f)
§ 126.4
§ 126.6(a)

48. BIS Licenses
Free online submission system (SNAP-R); no cost associated with license application
Default four-year validity period
May export or reexport to and among end users listed on license
No purchase order required
No large agreements to draft or lengthy agreement guidelines to follow
May pre-position applications prior to effective date of applicable final rule

49. DDTC § 120.5(b) Approvals
DDTC may license items subject to the EAR pursuant to Executive Order 13637
§ 734.3(e) of the EAR
§§ 120.5(b), , 123.1(b), and 123.9(b) of the ITAR
Items subject to the EAR must be used in or with items subject to the ITAR
Items subject to the EAR that are licensed under § 120.5(b) remain subject to the EAR
Future transfers not covered by the ITAR approval will require BIS authorization for items subject to the EAR
Potential violations pertaining to the use of § 120.5(b) may result in voluntary disclosures to both DDTC and BIS

50. Export Clearance Furnishing Classification to Consignees
Exports under EAR: must supply 600 series ECCN on export control documents
Exports under DDTC § 120.5(b) Approval: must supply EAR classification (§ 123.9(b)(2))
Automated Export System
BIS Authorizations
All exports of 600 series items (except .y items) require AES filing, regardless of value or destination
Exports of .y items exempt from AES filing when value is $2500 or less or when destined for Canada
All exports authorized under STA require AES filing
DDTC § 120.5(b) Approval
For items subject to the EAR, report the ECCN or EAR99 designation in “ECCN” field
For items subject to the ITAR, report USML category code

51. Reexport Considerations
De minimis: foreign-made items incorporating below de minimis levels of controlled U.S. content are generally not subject to the EAR
0% de minimis amount for 600 series items destined for Country Group D:5 countries (maintains ITAR status quo for countries such as China)
25% de minimis for 600 series items destined for all other countries (ITAR will continue to have a zero de minimis “see-through” rule for all defense articles that remain on USML)
Direct product rule: certain foreign-made items that are the direct product of certain U.S. origin technology or software are subject to the EAR when reexported to certain destinations
Foreign-made 600 series items that are the direct product of U.S.-origin 600 series technology or software require authorization under the EAR when reexported to countries in Country Groups D:1, D:3, D:4, D:5, or E:1

52. Contact Information
600 Series Licensing and Classification Requests: Munitions Control Division
Director: Todd Willis,
Deputy Director: Elena Love,
Deputy Director: Anthony Mitchell,
Technical Product Questions on Aircraft and Gas Turbine Engines
Office of National Security and Technology Transfer Controls: Gene Christiansen,
Munitions Control Division: Jeff Leitz,
Regulatory Interpretation and Transition Guidance
Regulatory Policy Division: ,
Office of the Assistant Secretary for Export Administration:
Outreach Assistance: Outreach and Educational Services Division
Director: Rebecca Joyce,
Western Regional Office Director: Michael Hoffman,
Web: