United States: ECR Episode IX – Serving Up The Third Round: The Next Wave Of Export Control Reform Takes Effect On July 1, 2014

In the country pubs of Ireland, it has long been the practice of the barkeep to "stand the third round" for good customers, meaning to offer the third drink for free. The practice makes sense both as customer appreciation and as an inducement for those fine customers to continue their revelries right where they are. The third round represents a tipping point for the patron from an after-work drink to a full night out: the transition from a quiet pint or two, to a full investment in the proceedings. When the bartender stands the third round, the now-happy, soon-to-be-elated customer is encouraged to see matters through to the evening's finish.

The Third Round

This month, we find ourselves at that same tipping point of the Export Control Reform initiative: the storied Third Round. On July 1, 2014, the third round of revisions to the United States Munitions List will take effect. This round includes revisions to the following five USML categories:

  • Category IV: Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines
  • Category V: Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents
  • Category IX: Military Training Equipment
  • Category X: Personal Protective Equipment
  • Category XVI: Nuclear Weapons and Related Articles

The addition of these five categories brings to 13 the number of USML categories now revised out of a total of 21 USML categories. It is not clear how many rounds of revisions there will be in the final count, but it is clear that this third one gets us past the halfway mark, our tipping point. A full schedule of the ECR implementation status from DDTC can be found here.

The Changes

As with the first and second rounds of ECR revisions, which we reported extensively in this blog, the revisions will move commodities and related technical data from USML catch-all provisions, onto the Export Administration Regulations' Commerce Control List. That transition should generally benefit manufacturers and exporters of commodities and technical data covered in the five categories by reducing export restrictions on their products.

However, manufacturers and exporters may not sit back and wait for the ECR changes to make things easier. In fact, if they do not get out ahead of the changes, they may face lengthy delays, administrative hurdles, and even potential export violations. Affected manufacturers and exporters may not simply proceed with export compliance using the old USML classifications. Any license applications submitted under the old classifications will be returned without action. Therefore, those manufacturers and exporters should analyze their products under the revised regulations to determine whether their products fall under new jurisdictions and classifications. A basic step-by-step approach to taking on a jurisdiction / classification project with your entire catalogue can be found here, and an online Decision Tree Tool from DDTC can be found here.

Existing licenses and agreements under the old USML categories remain effective for two years or until they expire by their terms (whichever occurs first). Existing ITAR licenses that cover both transitioned products and non-transitioned products may be used until they expire or until all exports authorized have been made. Alternatively, an exporter may obtain a license from the Bureau of Industry and Security for the transitioned products or export them under an exception, and continue using the ITAR license for the non-transitioned products. For all other activity, the effective date of USML Categories IV, V, IX, X, and XVI is July 1, 2014. Any exports occurring after that date that are not the subject of an existing license must comply fully with the revised categories.

Conclusion

So, BIS and DDTC have stood us the third round. It is now the responsibility of manufacturers and exporters, in consultation with counsel, as appropriate, to give the proffered glass a hard look, fully understand the potential benefit and risk, and engage with it as they see fit. Perhaps we'll think better of it and head for home, or perhaps we'll respond with a deep sigh of satisfaction as we tuck in to this third round.

Here's to your success under the latest ECR changes.

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