United States: U.S. Places Further Limits On Export Of Items To China, Russia And Venezuela

The U.S. Department of Commerce's Bureau of Industry and Security (BIS) on April 28, 2020, published two final rules and one proposed rule that amend the Export Administration Regulations (EAR), with the goal of limiting the use of license exceptions for items controlled for national security in exports to countries of particular concern. The motivation behind the three rules is an increasing integration of civilian and military technology development in such countries, particularly the People's Republic of China, Russia and Venezuela.

Military End Use and Military End User

Effective June 29, BIS is expanding the license requirements on exports, reexports and transfers (in-country) of items intended for military end use or military end users in the People's Republic of China, Russia or Venezuela (EAR § 744.21).⁴ Specifically, this rule:

1. expands the licensing requirements for China to include "military end users," in addition to "military end use"
2. broadens the list of items for which the licensing requirements apply, by adding items to the list of items subject to the military end-use and end-user license requirements in Supplement No. 2 to Part 744 (specifically, it adds the following Export Control Classification Numbers (ECCNs) in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers, and propulsion to the supplement: 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996 and 9B990, as well as expands the range of items under ECCNs 3A992, 8A992 and 9A991).
3. adopts a license review policy of presumption of denial
4. expands the definition of "military end use" by identifying each element of the definition of "use" so that any one of the six elements, standing alone, is sufficient; to include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, "development" or "production" of military items controlled on the U.S. Munitions List or classified under ECCNs ending in "A018" or under "600 series" ECCNs
5. creates a new reason for control and the associated review policy for regional stability for certain items exported to China, Russia or Venezuela, moving existing text related to this policy
6. adds Electronic Export Information filing requirements in the Automated Export System for exports to China, Russia and Venezuela, regardless of the value of the shipment, unless the shipment is eligible for license exception GOV

Elimination of License Exception Civil End Users (CIV)

Effective June 29, BIS is eliminating license exception CIV (EAR § 740.5). BIS will now require a license for national security-controlled items on the Commerce Control List (CCL) to countries of national security concern, specifically, those listed in Country Chart D:1. This rule is intended to advance U.S. national security interests by allowing U.S. government review of these transactions to these countries.

BIS is removing License Exception CIV due to the increasing integration of civilian and military technology development in the countries of concern. Reasons for such alignment between civil and defense technology development include achieving greater efficiency, innovation and growth. BIS expressed concern that this can present an economic challenge to nations that export high-tech products, including the U.S., as individual country goals could also directly support military modernization goals contrary to U.S. national security or foreign policy interests. This integration also makes it more difficult for industry to know or determine whether the end use and end users of items proposed for export, reexport or transfer (in-country) will not be or are not intended for military uses or military end users. By removing the CIV license exception, BIS can review each transaction in advance.

Modification of License Exception Additional Permissive Reexports (APR)

BIS proposes to modify license exception APR (EAR § 740.16), which authorizes certain reexports between and among certain countries. Specifically, BIS is proposing to remove provisions that authorize reexports of certain national security-controlled items on the CCL to gain better visibility into transactions of U.S. national security or foreign policy interest. BIS published a proposed rule and will accept comments until June 29.

The amendment is triggered due to variations in how the U.S. and its partners, including partners located in Country Group A:1, perceive the threat caused by the increasing integration of civilian and military technology development in countries of concern. BIS stated that it had evidence of differences in licensing review standards for national-security controlled items destined to Country Group D:1, so that countries in Country Group A:1 or Hong Kong may approve a license for the reexport of a U.S.-origin item that would have been denied if exported directly from the U.S.

Footnotes

1. BIS Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People's Republic of China, Russia, or Venezuela, 85 Fed. Reg. 23459 (Apr. 28, 2020).

2. BIS Elimination of License Exception Civil End Users (CIV), 85 Fed. Reg. 23470 (Apr. 28, 2020).

3. BIS Modification of License Exception Additional Permissive Reexports (APR), 85 Fed. Reg. 23496 (Apr. 28, 2020).

4. On June 19, 2007, BIS published a rule imposing a license requirement on exports, reexports and transfers (in-country) of certain items intended for military end use in China (72 Fed. Reg. 33646), in large part due to a continued lack of transparency regarding products and technologies intended for military end use as China strengthened its military activities and capabilities. On Sept. 17, 2014, BIS expanded these license requirements to include military end uses and end users in Russia (79 Fed. Reg. 55608) to address that country's continuing policy of destabilization in Ukraine and occupation of Crimea. On Nov. 7, 2014, BIS expanded these license requirements to include military end uses and end users in Venezuela (79 Fed. Reg. 66288) as the actions and policies of the Venezuelan military, including its continued and increased repression and complicity in human rights violations, undermined democratic processes and institutions and thereby constituted an unusual and extraordinary threat to the national security and foreign policy of the United States.

Article originally published on 30 April 2020

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