U.S. Dual-Use Export Controls for the Aerospace Industry

U.S. Dual-Use Export Controls for the Aerospace Industry

Gene ChristiansenKelly Gardner

U.S. Department of CommerceBureau of Industry and Security

Dual-Use Export ControlsFramework

• What are you exporting?

• Where are you exporting?

• Who will receive your item?

• For what will your item be used?

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

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)

Main Agencies AdministeringExport 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 EmbargoesAssets 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

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

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

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:

http://www.pmddtc.state.gov/commodity_jurisdiction/index.html

The CJ RequestSubmission

• 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

CJ RequestsThings 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

What Are You Exporting?

EAR Principles

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

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

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:

http://www.bis.doc.gov/licensing/reexportguidance.htm

What Are You Exporting?

Classifying Your Item on the CCL

Classifying Your Itemon 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:

9E3 becomes 9E003

• The U.S. also maintains some unilateral controls, which are incorporated into the CCL


• The proper classification is essential to determining any licensing requirements associated with your item

• Classification options:– Classify the item on your own:

http://www.bis.doc.gov/licensing/do_i_needaneccn.html– Check with the item’s manufacturer or exporter– Submit a classification request to have BIS

determine the classification for you:http://www.bis.doc.gov/licensing/bis_eccn.pdf


• 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


• 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

Commodity ClassificationRequest

• 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

The Commodity Classification Request ApplicationEAR 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

Where Are You Exporting?

Determining License RequirementsBased on Item and Destination

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

Reasons for Control

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

Commerce Country ChartSupplement No. 1 to EAR Part 738

http://www.access.gpo.gov/bis/ear/pdf/738spir.pdf

License ExceptionsEAR 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

http://www.access.gpo.gov/bis/ear/pdf/740.pdf

License Exceptionswith Aerospace Applications

List Driven

• GBS - Shipments to Country Group B countries

• TSR - Technology and software under restriction

Transaction Driven

• TMP - Temporary imports, exports and reexports

• RPL - Servicing and replacement of

parts and equipment• AVS - Aircraft and

vessels• APR - Additional

permissive reexports

Country Considerations

• The EAR maintains strict licensing requirements for the following sanctioned/embargoed countries:– Cuba– Iran– North Korea– Sudan– Syria

http://www.bis.doc.gov/policiesandregulations/regionalconsiderations.htm

U.S. Department of the TreasuryOffice 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

Licensing Authorities for Reexportsto 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

Who Will Receive Your Item?

End-User BasedLicense Requirements

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

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

End-User Lists

• Denied Persons Listhttp://www.bis.doc.gov/dpl/thedeniallist.asp

• Entity Listhttp://www.access.gpo.gov/bis/ear/pdf/744spir.pdf

• Unverified Listhttp://www.bis.doc.gov/enforcement/unverifiedlist/unverified_parties.html

• Specially Designated Nationals Listhttp://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf

• Nonproliferation Sanctionshttp://www.state.gov/t/isn/c15231.htm

• Debarred Listhttp://www.pmddtc.state.gov/compliance/debar.html

For What Will Your Itembe Used?

End-Use BasedLicense Requirements

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

End-Use ControlsEAR 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)


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

Restrictions on Certain ExportsTo 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

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)

Reexport Controlsand

Technology and Software Transfers

What is Subject toCommerce 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

Reexports ofU.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

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


De MinimisOne 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

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

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

Direct Products ofU.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)


Technology and SoftwareTransfers

• 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

The BIS Licensing Process

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)

http://www.bis.doc.gov/snap/index.htm

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

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

Understand the Interestsof 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

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?

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

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

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

Your Responsibilitiesas 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

U.S. Dual-Use Export Controls for the Aerospace Industry

Wrap-Up

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

BIS Export Control Initiatives

• BIS has developed a regularized process for review of the items controlled on the CCL

http://www.bis.doc.gov/policiesandregulations/cclreviewprocess.html

• BIS has developed and published the basis of CCL controls and applicable EAR references

http://www.bis.doc.gov/policiesandregulations/basis_of_ccl_controls.htm

BIS Export Control Initiatives

• BIS has developed a webpage where sources of publicly available information on Commodity Classifications can be found

http://www.bis.doc.gov/commodityclassificationpage.htm

• BIS has developed an “Online Training Room” that includes both instructional videos narrated by BIS staff and transcripts

http://www.bis.doc.gov/seminarsandtraining/seminar-training.htm

How to ObtainMore Information

• BIS Website: www.bis.doc.gov

• State DDTC Website: www.pmddtc.state.gov

• Treasury OFAC Website: www.treasury.gov/offices/enforcement/ofac

How to ObtainMore Information

Gene ChristiansenEmail: [email protected]

Phone: +1 202 482 2984Fax: +1 202 482 3345

Kelly GardnerEmail: [email protected]

Phone: +1 202 482 0102Fax: +1 202 482 3345

U.S. Dual-Use Export Controls for the Aerospace Industry

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