Where Have All the Licenses Gone?

When the first of three (3) final rules to change the International Traffic in Arms Regulations (ITAR) U.S. Munitions List (USML) categories and establish the new “600 series” on the Export Administration Regulations (EAR) Commerce Control List (CCL) was published on April of 2013, it seemed like everyone was scrambling to meet the 180-day transition period. October 15, 2013 is now in the rear-view mirror and (from where I sit) there has yet to be a significant spike in the number of export licenses we are reviewing, let alone getting ANY licenses with a new “600 series” commodity staffed from Department of Commerce (DoC). 

So I am wondering - Why all this hype, excitement, and preparation?  I have a few theories.

Maybe exporters have just decided to take the “mea culpa” route. The three (3) final rules are quite detailed and admittedly a perplexing read. For larger exporters / big industry, determination of new classifications, for the over 30K parts, is a daunting task and for smaller exporters / small businesses, the specially-trained staff and time to analyze the new rules does not exist (to determine what license might be required). The difficulty with this approach is the risk of the exporter receiving an ITAR violation. 

Another reason could be that exporters are filing Commodity Jurisdiction requests (with either Department of State (DoS) or DoC (or both) to obtain an authoritative ruling on the appropriate placement of their commodity before moving forward with any license request. Please refer to my previous post regarding Commodity Jurisdictions at: http://www.thetsateam.com/export-control-blog/

Or, perhaps exporters who HAVE read / understood the new rules have decided to actually use them and have chosen to execute ITAR 120.5(b) and EAR 734.3(e) which “authorizes the export, reexport, or in-country transfer of items subject to the EAR when the items subject to the EAR will be used in or with items subject to the ITAR and are included on the same DDTC license, agreement, or other approval.” This provision removes the requirement to obtain licenses from both agencies in certain circumstances and even allows for both USML and CCL items to be included on a DSP-5 (permanent export license) or Technical Assistance Agreement / Manufacturing License Agreement (TAA / MLA). Of course exceptions exist; therefore I recommend a thorough analysis of the rules for a comprehensive understanding. 

Another possibility for the delay in DoC licenses is the ‘transition plan’ presented by both DoC and DoS allowing for some additional delays in obtaining new licenses. Part of the transition plan allows for existing licenses or agreements to stay in effect for up to two (2) years, from the effective date of the revised USML category (only if ALL of the items within the license or authorization have transitioned from the USML to the CCL). Another part allows for licenses or agreements to remain valid until its expiration (only if SOME of the items on the license or authorization have transitioned from the USML to the CCL). Simply stated, some cases will enable exporters to wait and apply for a new license, specifically exporters can obtain authorization two years after the effective date of the revised USML category or when their existing license / authorization expires (in the case of USML Category VIII, exporters potentially have until October 14, 2015 to obtain a new license). The transition is clearly going to take time and perhaps five months is premature to expect the changes to come into effect given that export control reform has taken more than five (5) years to implement.

I am curious to see how export control reform is going to change…and am anxiously awaiting!

More information on the transition plan can be found at:  https://www.pmddtc.state.gov/FR/2013/78FR22740.pdf

http://www.bis.doc.gov/index.php/regulations/federal-register-notices/17-regulations/496-federal-register-notices-2013#78fr22660

Link to the ITAR 120.5(b):http://www.ecfr.gov/cgi-bin/text-idx?SID=86008bdffd1fb2e79cc5df41a180750a&node=22:1.0.1.13.57&rgn=div5#22:1.0.1.13.57.0.31.5

Link to the EAR 734.3(e): http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=a8460dee9a3ce9050bf04fa7591c1a2a&ty=HTML&h=L&n=15y2.1.3.4.22&r=PART#15:2.1.3.4.22.0.1.3

Need help with export controls?  TSA Inc. can help!

Heidi France is a Lead International Trade Specialist, Technology Security Associates, Inc.

Email: heidi_france@theTSAteam.com

Contributor: Jackie Sudore-Flood, Director of International Programs, Technology Security Associates, Inc., Email: jackie_sudore-flood@theTSAteam.com