1. International Traffic in Arms Regulations (ITAR)
Export Control Reform Initiative Update
May 11, 2016
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
Copyright Holland & Hart LLP All Rights Reserved.

2. Disclaimer
This presentation, related materials and subsequent discussion are provided for educational purposes only. They do not constitute legal advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the speaker. This presentation is not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

3. AGENDA Introductions EAR / ITAR Overview
Licensing and Commodity Jurisdiction
OFAC Compliance
Lunch Keynotes
Economic Espionage and Theft of Trade Secrets
Export Regulations Enforcement
Export Control Reform Initiative Update
ITAR Registration Requirements (Including ITAR Part 129 Brokering)
Export Controls Compliance Programs (Including Key Lists to Check) and Voluntary Disclosures

4. Export Control Reform Initiative
Regulatory and Policy Reform
Obama Administration is pushing for completion of Export Control Reform Initiative (ECRI) by end of term.
Goal: “higher fences around fewer items.”
Risk-based approach – enhancement of national security controls while making U.S. exporters more competitive.

5. Export Control Reform Initiative
ECRI
4 Areas of Reform:
Single controlled items list (defense articles and dual-use items).
Single licensing agency.
Single IT licensing system.
Single enforcement organization.

6. Export Control Reform Initiative
ECRI Control List Strategy
The 2 separate control lists that currently exist will be combined into a single, tiered, risk-based list.
Present
Future
Commerce Control List & United States Munitions List

7. Export Control Reform Initiative
Single Controlled Items List
Movement of USML items to the CCL
Not “decontrol”, just different control
Creates “Commerce Munitions List”
Final rules for 15 USML Categories – effective now
Categories IV, V, VI, VII, VIII, IX, X, XI, XIII, XV, XVI, XVII, XIX, XX, XXI
Final rules for remaining USML Categories expected this year
Categories I, II, III, XII, XIV, XVIII
Some movement of items from the USML to the CCL required Congressional notification or approval (e.g., Category XV – Spacecraft, including commercial satellites)
New BIS licensing division created for CCL munitions items
Bureau of Industry and Security
Public comments on revisions to USML Category XII closed in April. Category XII includes night vision goggles, and is being amended to to describe more precisely the articles warranting control on the USML.

8. Export Control Reform Initiative
Single Controlled Items List (cont.)
New CCL “600” & “515” series ECCNs
Allows for use of some EAR License Exceptions (LE) for items formerly on the USML
New LE STA eligible for:
36 countries - NS, CB, NP, RS, CC, SI controls
8 countries – NS control
Interactive Compliance Tool:
Items to be controlled, no “design intent”
Export Control Classification Numbers = ECCNs
Items that are now defense articles but that are no longer listed on the revised USML categories will become subject to the EAR’s “600 series” ECCNs.
STA = Strategic Trade Alliance

9. Export Control Reform Initiative
USML vs. “600 Series”
USML “defense article”
CCL “600 series” items
End-items
Worldwide license
Worldwide license – except Canada
Identified parts & components
License Exception STA
Specifically/Specially designed parts & components
(“.x”) License Exception STA
Insignificant parts & components
(“.y”) NLR except T-5 + China
De minimis
None
25% except, 0% for ITAR countries
Registration
Yes No
Prohibitions
ITAR 126.1
Exemptions/Exceptions
Limited
GOV, STA (ultimate government use), TSU, TMP, RPL
Temporary Import Controls
All USML items
Source: Defense Technology Security Administration.

10. Export Control Reform Initiative
Single Controlled Items List (cont.)
New “catch all” ECCNs– 0A521, 0B521, 0C521, 0D521, 0E521
Temporary categories for control of “sensitive emerging technologies” not yet on CCL or USML (up to 3 years + extensions possible)
Items so classified will be in a new Supplement No. 5 to the CCL (i.e., EAR Part 774) - currently only 1 item on the list: epoxy system used on x-ray and microscopy imaging.
Factors for classification under these ECCNs:
“significant military or intelligence advantage to the United States” or
“foreign policy reasons.”
License required for all countries except Canada
Licensing policy – case-by-case
No appeal process

11. Export Control Reform Initiative
USML Category
CCL “600 series” Entries
Rule Status
I-Firearms
Proposed Rule in Process
II-Guns
III-Ammunition
IV-Missiles
604
Final Rule Published 1/2/14 / Effective 7/1/14
V-Explosives
608
VI-Vessels
609
Final Rule Published 7/8/13 / Effective 1/6/14
VII-Vehicles
606
VIII-Aircraft
610
Final Rule Published 4/16/13 / Effective 10/15/13
IX-Training Equipment
614
X-Protective Equipment
613
XI-Electronics
611
Final Rule Published 1/2/14 / Effective 12/30/14
XII-Sensors
611/615
Proposed Rule Published 2/19/16
XIII-Aus. Military Equip.
617
XIV-Chem/Bio
607
Proposed Rule Published 6/17/15
XV-Satellites
515
Final Rule Published 5/13/14 / Effective 6/27/14 & 11/10/14
XVI-Nuclear
None
XVIII-Directed Energy
619
XIX-Gas Turbine Engines
XX-Submersibles
620
“Specially Designed” Rule
N/A
Transition Rule
Note: only minor revisions were made to Categories XVII and XXI; the final State and Commerce rules for these categories were included with the final rules for Categories XIII and XIX.

12. Export Control Reform Initiative
Single Licensing Organization
Intended to provide a “one stop shopping” approach to licensing
Requires increased licensing staff at BIS – so far, no strategy or money for this
Applications will still be “staffed” to other agencies for review and approval
No proposals released to date

13. Export Control Reform Initiative
Single IT Licensing System
Internal government migration to a common licensing system – USXports
DDTC is in final phase of migration to USXports
BIS migration to USXports is in process
No announced strategy for submission of license applications

14. Export Control Reform Initiative
Single Enforcement Organization
Export Enforcement Coordination Center (E2C2) established by the President – Nov. 2010
Responsible for coordination of DDTC, BIS, OFAC, DoJ, DoE, Homeland Security & National Intelligence
Full-time director from DHS
Serves as primary focal point between licensing and enforcement authorities
Responsible for “de-confliction” and coordination of enforcement activities
52% de-confliction rate to date

15. Export Control Reform Initiative
New ECRI Tool
Order of Review Tool
Provides assistance with how to apply the ITAR and EAR under Export Control Reform Initiative
Available at:
NOTE: Helpful tool, but not a “safe harbor” – always refer back to the regulatory provisions

16. Questions?