The Directorate of Defense Trade Controls of the U.S. State Department (DDTC) and the U.S. Commerce Department's Bureau of Industry and Security (BIS) concurrently published highly anticipated revisions to their July 15, 2011, proposed definition of "specially designed" in the Federal Register today, June 19, 2012.

The DDTC proposed rule is available by clicking here the BIS proposed rule is available by clicking here. Comments on the proposed rules are due by August 3, 2012.

The term ''specially designed'' (not to be confused with the undefined term "specifically designed" as used in the International Traffic in Arms Regulations (ITAR)) is used widely throughout the Commerce Control List (CCL), as well as in the control lists of multilateral regimes to which the U.S. is a signatory. The agencies hope to obtain several goals by creating clear, well-defined terms for use in the Export Administration Regulations (EAR) and the ITAR.

First, the agencies seek to avoid inadvertently de-controlling items that are now ITAR-controlled as a result of being "specifically designed, modified or configured" for a military application, with the exception of items such as fasteners, wire and solder. As many, if not most, items controlled under the ITAR are currently not enumerated on the USML, and are controlled purely as a result of being specifically designed, modified or configured for military application, attempting to transition such items to the CCL without a catch-all would be virtually impossible. Also for this reason, the agencies have attempted to create definitions that are as similar as reasonably possible, to avoid an item "falling between the cracks" for control purposes.

Second, the agencies wish to move away from a highly subjective and moveable target – the current "specifically designed" rule and its reliance on design intent – to create a more "positive" control list based on objective, performance based factors. The intent is to maintain controls over items that are not enumerated on either control list, but which have properties that uniquely create or support performance levels that warrant control. At the same time, the agencies seek to avoid capturing items that clearly do not warrant strong controls simply because they are modified for use with a military item or end-item. In fact, a central goal of Export Control Reform is to remove restrictions to the export of items where such controls place U.S. businesses at a substantial competitive disadvantage with no substantial national security benefit, and these definitions seek to further that goal.

Finally, because the term "specially designed" is used in multilateral regime lists, the U.S. cannot unilaterally remove that term from its control lists. However, the U.S. does have the authority to define the term in any way that is not inconsistent with those control regimes.

Both BIS and DDTC's proposed definitions seek to fulfill the nine objectives for that term as set forth in the July 15, 2011, Federal Register publication. The agencies sought to define the term in such as way as to:

  • Prevent overlapping controls of similar items in the two control lists;
  • Be easily understood by exporters and the Government;
  • Be consistent with definitions already in use by multilateral export control regimes;
  • Not include any item specifically enumerated on the two control lists, and do not use "specially designed" as a control criterion;
  • Allow exclusions for commonly used, simple parts like springs, bolts, and other similar types of items;
  • Apply both to descriptions of end items that are "specially designed" and to parts of items "specially designed;"
  • Apply to software that is "specially designed" for particular end item or characteristic;
  • Refrain from moving items currently subject to lower control status to a higher control status; and
  • Refrain from designating historically EAR-controlled items as ITAR-controlled.

To achieve these goals, BIS and DDTC coordinated their definitions to create a "catch and release" format. That is, the definitions attempt to initially capture a fairly broad scope of items, then exempt or "release" certain items if they are enumerated elsewhere, are substantially similar to items in civil application, or which are, or are likely to be, used in substantial civil application (i.e., a carryover of the carve out in the ITAR for items that are in predominant civil application. See 22 C.F.R. §§ 120.3(a)(i) and (ii)).

Both definitions begin by capturing articles that are designed to meet or exceed performance criteria that relate to the reasons why an item or end-item is controlled, or which are required for a defense item to perform as designed. If an article does not meet the criteria in this first part of the definition, it is not considered "specially designed." If an article is captured in this first portion of the definition, it may still be removed by the application of the second portion of the definition. This portion of the definition removes various items from the "specially designed" basket, including items that are specifically enumerated elsewhere and should be controlled on that basis; items such as fasteners, wire and solder; and, items that are, or are substantially similar to items that are, used in civil application.

Exporters are strongly encouraged to review the proposed rules carefully and to attempt to apply them to "real world" examples. To the extent that the proposed definitions are unclear, unworkable, or result in apparently unintended consequences – either over controlling, or under controlling items - the agencies welcome comments and examples.

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