1. U.S. Dual-Use Export Controls for the Aerospace Industry
Gene Christiansen
Kelly Gardner
U.S. Department of Commerce
Bureau of Industry and Security
Toulouse
June 22, 2009

2. Dual-Use Export Controls Framework
What are you exporting?
Where are you exporting?
Who will receive your item?
For what will your item be used?

3. Three Main Regulatory Agencies
U.S. Department of Commerce controls “dual-use” items
Items that may have both commercial and military applications
Not primarily for weapons or military related use
U.S. Department of State controls “defense articles” and “defense services”
Items specifically designed, developed, configured, modified or adapted for a military application
U.S. Department of the Treasury
Embargoes and assets controls

4. Department of Commerce vs. Department of State Regulations
U.S. Department of Commerce
Administers the Export Administration Regulations (EAR)
Control “dual-use” items described on the Commerce Control List (CCL)
U.S. Department of State
Administers the International Traffic in Arms Regulations (ITAR)
Control “defense articles” and “defense services” described on the United States Munitions List (USML)

5. Main Agencies Administering Export Controls
Commerce ↓
State
Treasury
BIS
(Bureau of Industry and Security)
DDTC
(Directorate of Defense Trade Controls)
OFAC
(Office of Foreign Assets Control)
EAR
(Export Administration Regulations)
ITAR
(International Traffic in Arms Regulations)
Trade Embargoes
Assets Blocking
CCL
(Commerce Control List)
USML
(United States Munitions List)
“Dual-Use” Items
“Defense Articles” and
“Defense Services”
Transactions Prohibited by Trade Embargoes (Iran, Cuba) and Assets Blocking

6. The Control Lists
The items on the CCL and the USML are largely determined by the multilateral export control regimes:
Australia Group (AG)
Chemical and biological weapons
Missile Technology Control Regime (MTCR)
Unmanned delivery systems capable of delivering weapons of mass destruction
Nuclear Suppliers Group (NSG)
Nuclear weapons
Wassenaar Arrangement (WA)
Conventional arms and dual-use goods and technologies

7. Establishing Licensing Jurisdiction: Why is This Important?
Establishing licensing jurisdiction is the first step in determining the licensing requirements associated with your item
Jurisdictional uncertainty occurs frequently in the aerospace industry, primarily due to the military heritage of aircraft
The Department of Commerce (EAR) and the Department of State (ITAR) have differing licensing requirements
The exporter is responsible for obtaining licenses, when required, from the appropriate agency

8. Commodity Jurisdiction Request
Used to obtain an official government determination when there is uncertainty as to whether an item is subject to the licensing jurisdiction of the Department of Commerce or the Department of State
Commodity Jurisdiction (CJ) Requests are submitted directly to the Department of State
CJ Requests are evaluated by the Departments of Commerce, Defense and State
The Department of State makes the final determination
Information on submitting a CJ request may be found at:

9. The CJ Request Submission
What was the original intent of the design?
Who funded the development?
Does the item have any unique characteristics?
What is the current market for the item?
Are there any performance equivalents?
If the item was originally under Department of State jurisdiction:
How has the item been modified and for what specific end-use?
How has the market for the item changes?
Provide any relevant jurisdiction history, as applicable

10. CJ Requests Things to Consider
There is comfort in having an official government document
The expense of a challenge to jurisdiction or a violation can be significant
The item is under Department of State jurisdiction during CJ review period
Must register as a manufacturer/exporter of defense articles
Must obtain Department of State export licenses
Determinations can take significant amounts of time

11. What Are You Exporting?
EAR Principles
Toulouse
June 22, 2009

12. Some Important Terms
The EAR controls “exports”, “transfers”, and “reexports” of dual-use “items”
An “export” is an actual shipment or transmission of items outside the United States, or a release of technology or source code to a foreign national in the U.S. or abroad
A “transfer” is a shipment, transmission, or release of items subject to the EAR from one party to another party within a single foreign country
A “reexport” is an actual shipment or transmission of items subject to the EAR from one foreign country to another foreign country
“Items” are commodities, software, and technology

13. Items Subject to the EAR
All items in the U.S., unless subject to the exclusive jurisdiction of another agency
Foreign-origin items in the U.S. are subject to the EAR for export from the U.S. only
All U.S.-origin items, wherever located, unless subject to the exclusive jurisdiction of another agency or publicly available
U.S.-origin items remain subject to the EAR throughout the life of the item, until it is incorporated into a higher order assembly
Certain foreign-made items incorporating greater than the de minimis amount of controlled U.S. content
Certain foreign-made direct products of U.S.-origin technology
Certain activities of U.S. persons

14. Exports vs. Reexports
The same rules apply to exports, transfers, and reexports, of U.S.-origin items
Same licensing requirements (except for certain sanctioned/embargoed countries)
Same License Exceptions, plus Additional Permissive Reexports (APR)
Same license application
For foreign-produced items, these rules extend to
Items having more than the de minimis amount of controlled U.S. content
Certain items that are the direct products of U.S.-origin technology
BIS published guidance on reexports:
More on this later

15. Classifying Your Item on the CCL
What Are You Exporting?
Classifying Your Item on the CCL
Toulouse
June 22, 2009

16. Classifying Your Item on the CCL
The U.S. has adopted the EU Control List
Therefore, in most cases, multilaterally-controlled items are classified in the same way
Entries differ only in format: E3 becomes 9E003
The U.S. also maintains some unilateral controls, which are incorporated into the CCL

17. Classifying Your Item on the CCL
The proper classification is essential to determining any licensing requirements associated with your item
Classification options:
Classify the item on your own:
Check with the item’s manufacturer or exporter
Submit a classification request to have BIS determine the classification for you:

18. Classifying Your Item on the CCL
Entries on the CCL are alpha-numeric codes called Export Control Classification Numbers (ECCNs)
Each ECCN on the CCL provides:
A description of the technical parameters of a particular item or type of item
The control(s) associated with the item
Any License Exceptions for which the item is eligible

19. Classifying Your Item on the CCL
If your item does not fit within the technical parameters of any ECCN on the CCL, it is designated as “EAR99”
EAR99 items generally consist of low-technology consumer goods and do not require a license in most situations
You must still consider the destination, the end-user, and the end-use in order to rule out a license requirement

20. Commodity Classification Request
Used to obtain official government confirmation of a dual-use item’s ECCN or EAR99 status
Commodity Classification Requests are submitted directly to the Department of Commerce
The Department of Commerce makes the final determination

21. The Commodity Classification Request Application EAR Section 748.3
A Commodity Classification Request should include:
The model number(s) of item(s) to be reviewed
A description of the item(s)
Technical specifications for each of the item(s) in terms of the potential ECCN(s)
Brochures, drawings, pictures, etc., as appropriate
Any precedent cases, if known
A recommended classification

22. Where Are You Exporting?
Determining License Requirements Based on Item and Destination
Toulouse
June 22, 2009

23. Commerce License Requirements Based on Reason(s) for Control
All items on the CCL are controlled for specific reasons (e.g., NS, MT, CB, NP)
Each ECCN indicates the reason(s) the item is controlled
With the control reason(s) and the country of the consignee, the Commerce Country Chart fixes the licensing requirement
If there is no license requirement based on the Commerce Country Chart, you must still consider the destination, the end-user, and the end-use in order to rule out a license requirement
This is true for items classified on the CCL (i.e., items having an ECCN), and for items designated as EAR99

24. Reasons for Control Unilateral Regime/Convention-based
CB = Chemical & Biological Weapons
CW = Chemical Weapons Convention
EI = Encryption Item
FC = Firearms Convention
NP = Nuclear Nonproliferation
NS = National Security
MT = Missile Technology
UN = United Nations
Unilateral
AT = Anti-Terrorism
CC = Crime Control
RS = Regional Stability

25. Commerce Country Chart Supplement No. 1 to EAR Part 738

26. License Exceptions EAR Part 740
Authorization to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license
Two types of License Exceptions:
List driven
Transaction driven

27. License Exceptions with Aerospace Applications
Transaction Driven
TMP - Temporary imports, exports and reexports
RPL - Servicing and replacement of parts and equipment
AVS - Aircraft and vessels
APR - Additional permissive reexports
List Driven
GBS - Shipments to Country Group B countries
TSR - Technology and software under restriction

28. Country Considerations
The EAR maintains strict licensing requirements for the following sanctioned/embargoed countries:
Cuba
Iran
North Korea
Sudan
Syria

29. U.S. Department of the Treasury Office of Foreign Assets Control
The U.S. Department of the Treasury’s Office of Foreign Asset Controls (OFAC) administers and enforces economic and trade sanctions against targeted:
Foreign governments
Individuals (e.g., terrorists, narcotics traffickers)
Entities (e.g., charities linked to terrorist groups, drug front companies)
Practices (e.g., WMD proliferation, trade in non-certified rough diamonds)
In certain instances, BIS and OFAC controls overlap

30. Licensing Authorities for Reexports to Certain Countries
Reexports of CCL items to Iran: OFAC
Reexports of EAR99 items to Iran:
by a non-U.S. persons BIS
by a U.S. Person OFAC
Reexports of all items to Sudan: OFAC
Reexports of CCL items to Sudan: BIS & OFAC
Reexports of all items to Cuba: BIS
Reexports of all items to Syria: BIS
Reexports of all items to North Korea: BIS

31. Who Will Receive Your Item?
End-User Based License Requirements
Toulouse
June 22, 2009

32. Who Will Receive Your Item? End-User Controls
Certain individuals and organizations are prohibited from receiving U.S. exports, and others may only receive goods if they have been licensed
This includes items that would not normally require a license based on the ECCN and Commerce Country Chart or based on an EAR99 designation

33. Who Will Receive Your Item? End-User Controls
The U.S. Government publishes various end-user lists, which identify certain individuals and organizations that
Are prohibited from receiving U.S. exports;
May only receive goods if they have been licensed; or
Constitute a “Red Flag” that should be resolved prior to carrying out a transaction

34. End-User Lists Denied Persons List
Entity List
Unverified List
Specially Designated Nationals List
Nonproliferation Sanctions
Debarred List

35. For What Will Your Item be Used?
End-Use Based License Requirements
Toulouse
June 22, 2009

36. For What Will Your Item be Used? End-Use Controls
In addition to the “list based” and “end-user” controls, BIS implements a series of end-use controls
Some end-uses are prohibited, while others may require a license

37. End-Use Controls EAR Part 744
Restrictions on certain nuclear end-uses
Restrictions on certain rocket systems and unmanned air vehicles end-uses
Restrictions on certain chemical and biological weapons end-uses
Restrictions on certain maritime nuclear propulsion end-uses
Restrictions on certain exports to and for the use of certain foreign vessels or aircraft
Restrictions on certain exports and reexports of general purpose microprocessors for “military end-uses” and to “military end-users”
Restrictions on certain “military end-uses” in the People's Republic of China (PRC)

38. Restrictions on Certain Rocket Systems and UAV End-Uses
A license is required to export, reexport, or transfer all items subject to the EAR if, at the time of export, you know that the item:
Will be used in the design, development, production, or use of rocket systems or UAVs capable of a range of at least 300 km in or by a country listed in Country Group D:4 (see Supplement No. 1 to EAR Part 740)
Will be used in the design, development, production or use of any rocket systems or unmanned air vehicles in or by a country listed in Country Group D:4, but you are unable to determine:
The characteristics (i.e., range capabilities) of the rocket systems or UAVs, or
Whether the rocket systems or UAVs, regardless of range capabilities, will be used in a manner prohibited above
Will be used, anywhere in the world (except by governmental programs for nuclear weapons delivery of NPT Nuclear Weapons States that are also members of NATO) in the design, development, production or use of rocket systems or UAVs, regardless of range capabilities, for the delivery of chemical, biological, or nuclear weapons
D:4 Countries – Subject to MT controls

39. Restrictions on Certain Exports To and For the Use of Certain Foreign Vessels or Aircraft
A license is required to export or reexport any item subject to the EAR to, or for the use of, a foreign vessel or aircraft, whether an operating vessel or aircraft or one under construction, unless a License Exception or the designator “NLR” permits the shipment to be made:
To the country in which the vessel or aircraft is located
To the country in which the vessel or aircraft is registered, or will be registered in the case of a vessel or aircraft under construction
To the country, including a national thereof, which is currently controlling, leasing, or chartering the vessel or aircraft

40. Restrictions on Certain Military End-Uses in the PRC
A license is required to export, reexport, or transfer items controlled under 31 ECCNS when the items are intended for a “military end-use” in the PRC
“Military end-use” means:
Incorporation into a military item described on the USML, the Wassenaar Munitions List, or items listed under ECCNs ending in “A018" on the CCL of the EAR
For the “use”, "development", or “production” of military items described on the USML or the Wassenaar Munitions List, or items listed under ECCNs ending in “A018" on the CCL
“Deployment” of items classified under ECCN 9A991 (certain aircraft)

41. Reexport Controls and Technology and Software Transfers
Toulouse
June 22, 2009

42. What is Subject to Commerce Reexport Controls?
U.S.-origin items, wherever located
Foreign-produced items, if
The items have more than the de minimis amount of controlled U.S. content
The items are the direct products of certain U.S.-origin technology or software

43. Reexports of U.S.-Origin Items
Confirm classification
Identify the reason(s) for control
Consult the Commerce Country Chart
If “X” in the box, then
Check for possible License Exception, or
Submit a license application
Review end-user controls
Review end-use controls

44. Reexports of Foreign-Made Items: De Minimis
A license is required to reexport foreign-made items incorporating, commingled with, or drawn from controlled U.S.-origin items
Exceeding 10% for Cuba, Iran, North Korea, Sudan, and Syria
Exceeding 25% for all other destinations
The same percentages are applied for commodities, technology, and software (i.e., no “mixing”)
There is a one-time reporting requirement for technology

45. De Minimis One Time Report Supplement No. 2 to EAR Part 734
Unique to foreign-made technology incorporating controlled U.S. technology
Submitted prior to reexport relying on calculations
Includes:
Description of the foreign technology
Description of the fair market value of the foreign technology
Rational and basis for the valuation of the controlled U.S. content
Contact info: name, title, address, phone, fax
If you do not receive any feed back from BIS in 30 days, you may rely on your calculations

46. De Minimis Exclusions
There is no de minimis level for foreign-made commercial primary or standby instrument systems and automatic flight control systems integrating QRS11-based Micromachined Angular Rate Sensors
U.S.-origin technology required for the development or production of certain gas turbine engine components or systems (controlled by ECCN 9E003.a.1-10 and .h) does not lose its U.S.-origin when redrawn, used, consulted, or otherwise commingled abroad in any respect with other software or technology of any other origin

47. EAR99 and De Minimis
EAR99 items are calculated as controlled for U.S. content when exporting to an embargoed destination
Most EAR99 items are also calculated as controlled for U.S. content when exporting to Syria

48. Direct Products of U.S.-Origin Technical Data
If your product is the direct product of U.S. controlled technology, it will be subject to U.S. export law if:
The foreign-made item is controlled for National Security (NS) reasons and
The foreign-made item is the direct product of U.S. technology or software that requires a written assurance as a supporting document for a license or as a precondition for the use of License Exception TSR (Technology and Software Under Restriction)
Foreign produced direct products require a license for reexport to destinations in Country Groups D:1 and E:2 (See Supplement No. 1 to EAR Part 740)
D:1 – NS controlled countries; E:2 – unilateral embargo (i.e., Cuba)

49. Technology and Software Transfers
Subject to U.S. law if:
U.S.-origin
Exceeds the de minimis level
Follow the same procedures as for hardware (i.e., classification, reason(s) for control, Commerce Country Chart, License Exceptions)
If a license is required (regular reexport)
Use a letter of explanation - See Supplement No. 2 to EAR Part 748 (o)(2)
Letter of assurance
If a license is required (deemed reexport)
Follow the guidance in Supplement No. 2 to EAR Part 748 (s) and (t)
Validity periods

50. The BIS Licensing Process
Toulouse
June 22, 2009

51. Applying for a License
Electronic application via the BIS website: Simplified Network Application Process Redesign (SNAP-R)
SNAP-R gives you the ability to:
Submit export and reexport applications, and commodity classification requests, via the Internet in a secure environment
Receive same day acknowledgment of your submission
Obtain online validations (e.g., electronic facsimile of export license)

52. The License Application
On the license application
Define the item(s) in terms of the technical parameter(s) of the ECCN(s)
Identify the specific end-use(s)
Provide any know information about the ultimate consignee/end-user(s)
Provide information on any internal controls in place to mitigate the risk of diversion or unauthorized end-use
All information provided in support of a license application is restricted to U.S. Government reviewers only

53. Interagency Review
Ensures that the U.S. Government decision on a license application draws on the breadth and scope of the government’s expertise
Reviewing agencies have common national security and foreign policy interests, but unique perspectives
Reviewing Agencies:
Department of Commerce
Technical issues
Economic issues
Department of Defense
National defense issues – Brings the technical expertise of the Services focused on an individual export/reexport
Department of Energy
Nuclear issues
Department of State
Foreign policy issues

54. Understand the Interests of the Reviewing Agencies
Target the known agency concerns in your license application
Anticipate questions and concerns and be ready to respond
Get to know agency representatives
Be responsive to agency questions
Be thorough
Be timely

55. Common Reviewing Agency Concerns
Parties to the transaction:
What are their roles?
What do you know about the parties?
What is your source for information?
End-use concerns:
Is there a balance between the product’s capability and the proposed end-use?
Is there excess capability? Why?
What is the risk of diversion?
Controls:
What controls are in place to prevent diversion?
Are the controls realistic?
Do the parties understand the controls?
Are the controls documented?
Who will conduct monitoring?

56. License Review Period
Department of Commerce must review the application and refer it to the reviewing agencies within 9 days of receipt
Reviewing agencies have 30 days to respond with recommendations
If the reviewing agencies concur on the disposition of the license application, it will be:
Approved
Approved with conditions
Denied

57. Dispute Resolution
If there is disagreement among the agencies, the Department of Commerce will attempt to resolve the issue at the working level
If consensus is not possible, the application will enter into the dispute resolution process:
Operating Committee
Career government employees from the reviewing agencies
Advisory Committee on Export Policy
Presidentially-appointed officials (Assistant Secretary level)
Export Administration Review Board
Cabinet level
President

58. License Denials Notice of intent to deny letter sent to the applicant
Applicant has 20 days to respond to the denial notice with additional information or arguments
If the applicant responds, the application will be reconsidered with the new information received from the applicant
If no response is received from the applicant within 20 days, the license denial is issued

59. Your Responsibilities as a License Holder
Understand and comply with any license conditions
You will be given a chance to review and agree to all proposed license conditions before the license is approved/issued
Some license conditions should be shared with/agreed to by the consignee/end-user(s)
Be mindful of the license validity period
Usually two years, or for the quantity of the items approved, whichever comes first
Decrement the license as exports are made, and maintain the records for five years from the last shipment

60. U.S. Dual-Use Export Controls for the Aerospace Industry
Wrap-Up
Toulouse
June 22, 2009

61. Dual-Use Export Controls: A Summary
What are you exporting?
Establish licensing jurisdiction for your item
Determine the proper classification for your item
Where are you exporting?
The Commerce Country Chart fixes licensing requirements
Who will receive your item?
Prohibited/restricted end-user lists
What will your item be used for?
End-use controls
Applying for a license
SNAP-R

62. BIS Export Control Initiatives
BIS has developed a regularized process for review of the items controlled on the CCL
BIS has developed and published the basis of CCL controls and applicable EAR references
To ensure that export controls are constantly reassessed so that the most sensitive items are controlled…
To provide a greater understanding of the multilaterally-based and unilaterally-based Reasons for Control…

63. BIS Export Control Initiatives
BIS has developed a webpage where sources of publicly available information on Commodity Classifications can be found
BIS has developed an “Online Training Room” that includes both instructional videos narrated by BIS staff and transcripts
To enhance procedural transparency in the licensing process and to help exporters comply with U.S. export and reexport control laws…

64. How to Obtain More Information
BIS Website:
State DDTC Website:
Treasury OFAC Website:

65. How to Obtain More Information
Gene Christiansen
Phone:
Fax:
Kelly Gardner
Phone: