Overview of New ECCN
The Department of Commerce, Bureau of Industry and Security ("BIS") published a final rule on April 13, 2012 amending the Export Administration Regulations ("EAR") by adding a new Export Control Classification Number ("ECCN") series. See 77 Fed. Reg. 22,191. The new ECCN series, 0Y521,1 will be used as a temporary classification for items that are deemed by BIS (in conjunction with the Departments of Defense and State) to warrant control, but are not yet identified in an existing ECCN. This new temporary holding classification is in some ways similar to the U.S. Munitions List ("USML") Category XXI (Miscellaneous Articles). It will be used for items that are preliminarily deemed to warrant control for foreign policy reasons, or because they provide a significant military or intelligence advantage to the United States. It is expected to include items such as emerging technologies. Classifications of ECCN 0Y521 will not be based on the technical characteristics of the items.
The new ECCN series is one of several reforms to U.S. export controls proposed by BIS on July 15, 2011, and its creation is part of a process of revising the Commerce Control List ("CCL") and the USML in an effort to rationalize the USML and incorporate a "holding" ECCN for new items that require control pending a more specific ECCN designation. The final rule is substantially similar to the proposed rule.
Items classified under the new ECCN will be controlled for regional stability reasons (RS Column 1) and will require a license to all countries except Canada. Licensing decisions will be conducted on a case-by-case basis. No license exceptions are available for ECCN 0Y521 items other than License Exception GOV, although, in a change from the proposed rule, BIS has the authority to apply additional license exceptions to specific items if the Defense and State Departments concur with the application of the license exception.
While an item is temporarily classified under the ECCN 0Y521 series, BIS and other relevant authorities will work to determine an appropriate long-term classification for the item or determine that the item does not warrant CCL control. Items classified under ECCN 0Y521 will retain that classification for one year from the date a final rule identifying the item is published in the Federal Register, unless the item is re-classified or the 0Y521 classification is extended.
Clarification in Response to Public Comments
In issuing the final rule regarding new ECCN 0Y521, BIS provided some useful clarification in response to public comments on the proposed rule. For example, one commenter had expressed concern that that the new ECCN category would capture technologies that are the product of university fundamental research activity, particularly given the ECCN's focus on emerging technologies. In response, BIS clarified that items not subject to the EAR, including technology that arises during, or results from, fundamental research (as in § 734.8 of the EAR), would continue to be not subject to the EAR and would not, therefore, be captured by a 0Y521 ECCN classification.
Another commenter argued that BIS should seek industry input and expertise regarding new technologies prior to classifying them under ECCN 0Y521 and that such classifications should be appealable. BIS declined to allow for industry comments on the temporary classification of an item as ECCN 0Y521, stating that allowing this process would be unfair and inconsistent with the Administrative Procedure Act, 5 U.S.C. 551-559. BIS also declined to allow statutory appeals of ECCN 0Y521 classifications. However, BIS did state that the public could request the amendment, revocation, or appeal of a regulation at any time under § 756.1(a)(1) of the EAR, and as a result, could provide input to BIS after the classification of an ECCN 0Y521 item.
In response to comments about the timing and number of ECCN 0Y521 classifications, BIS stated that it did not anticipate that a large number of items currently classified as EAR99 would be moved to ECCN 0Y521 control, and reiterated that the classification would expire one year from the initial classification unless specifically extended (with extensions generally limited to two one-year periods). Further extensions are possible only when the Under Secretary for Industry and Security determines that such extensions are in the U.S. national security or foreign policy interests.
Future Export Control Reforms
Regarding future export control reform measures, in an interesting note to one of the comments on the proposed rule, BIS stated that it "is conducting a comprehensive evaluation of the ITAR exemptions to determine if the EAR should be revised to add any exceptions available in the ITAR for defense articles." BIS noted that this evaluation is ongoing and that it expects to release additional Federal Register notices regarding rulemaking in this area as part of the overall export control reform initiative.
Footnotes
1. The "Y" designation is a generic reference, where the actual ECCNs will be 0A521 (for Equipment, Assemblies and Components), 0B521 (for Test, Inspection and Production Equipment), 0C521 (for Materials), 0D521 (for Software), and 0E521 (for Technology).
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