© Copyright 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. Confidentiality label

© Copyright 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. Confidentiality label goes here

Export ReformsMassachusetts Export CenterCompliance Alliance Network Briefing

Misty Rutter, Manager Export ControlsHewlett-Packard CompanyDate: 10/06/2011


Export Control Reform Initiative

The plan put forward and approved by President Obama in 2010:

•One Licensing Agency to process and adjudicate licenses currently processed by Dept. of State, Commerce and Treasury

•One tiered control list based on sensitivity of the items

•One system for submission, review and adjudication of all licenses– Based on DODs USXPORTS with Capability go lives:o State: August 2011o Commerce: September 2011o Treasury 2012

•One Export Enforcement Agency (Export Enforcement Coordination Center at DHS)

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Three Phased Approach

• Make immediate improvements and create the framework

• Implement the framework within exiting agency structure

• Complete the transition through consolidation

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DOD Review of the USML

Protect the “Crown Jewels”

– Ensure the protection of assets that give our

warfighters a critical edge

• Build partnership capacity

– Secure ties with Allies and partners; increase

cooperation and collaboration

• Enhance and improve enforcement, monitoring,

and intelligence capabilities

– Deny exports to countries and entities of concern


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Final Rule Published June 16, 2011 (Federal Register Vol. 76 No.116)

License Exception STA

• 36 Ally Countries• Plus allows less sensitive items (NS Controls only) to additional 8 countries

• Must be destined for ultimate end use by the armed forces, police, paramilitary, law enforcement, customs and border protection, correctional, fire and search and rescue agencies of a government in one the designated countries.

• Not applicable for Encryption items

• Notification requirements – Exporter must notify consignee of ECCN

• Obtain Prior Consignee Statement

• Shipment Notification to Consignee of each shipment made under STA

• Can be used for Deemed Exports

• Keep a Log referencing applicable Consignee Statement


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Published in Federal Register July 15, 2011 (Volume 76, No. 136)

Proposed Rule – USML to CCLControl of Items the President Determines No Longer Warrant

Control Under the U.S. Munitions List (USML)

Establishes framework to move less sensitive military items from the US Munitions List to the Commerce Control List

4 primary Categories of change– “600 Series” ECCNs

– Creation of ECCN 0Y521 (Equivalent to USML Cat XXI)

– Proposes single definition for “Specially Designed” and additional definitions

– Other Changes to Assist in the Structural Alignment of the USML and CCL

Replaces “Dual Use” with Items of Export to capture all items subject to EAR– Meant to include most dual use items, most commercial items and certain munitions items

listed on the WAML classified under “600 series, ECCN’s ending in “018 and ECCN 0A919

Note: “018” items will eventually consolidate into “600 Series” CML


Establishes the new “600 Series” ECCN

Commerce Munitions List

For end items moved from the USML to the CCL that do not fit in an existing ECCN (controlled for more than just Antiterrorism AT controls only)

• Also Wassenaar Munitions items• Existing xY018 items will be moved into “600 Series” to create to combine Wassenaar

Munitions Items with former USML items to create new CML structure

• These items would retain the existing other provisions such as China Military End Use restrictions

• Parts, components, accessories and attachments not called out on the revised USML

Creates new ECCNs under each Category

•xY6zz format

•x = Category

•Y = Group

•zz = corresponds to Wassenaar Munitions List categories for easier tracking

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“600 Series”

• Restrictions on use of License Exceptions• For xA6zz End Items• LVS, TMP, RPL, GOV and STA only after submission of a License Exception STA eligibility

request

• For Parts, Components, Accessories and Attachments or xB6zz and xC6zz items• LVS, TMP, RPL, GOV and STA (no prior approval required)

• For xD6zz and xE6zz Software and Technology• GOV, TSU, STA

• In all these cases GOV applicable only to the STA – 36 countries

• New Part 743.4 adding semiannual reporting requirements for convention arms exports

• New Red Flags – one referring to STA and one referring to “600 Series” to alert exports of additional due diligence requirements


Commerce Munitions List (CML)

End items will generally be controlled for NS Column 1 (National Security), RS Col 1 (Regional Stability), AT Col 1 (Anti-terrorism and UN Embargo controls

• License required for export or reexport to all countries except Canada (excluding certain items also controlled for MT, CB1 & FC reasons)

• But can apply for STA through license application process• BIS will then publish those end items

• Items controlled for MT reasons not eligible for this procedure

• Items assigned to existing ECCNs retain Reasons for Control of that ECCN

Licensing Review Policy

•General policy of denial for any country under a U.S. Arms Embargo– BIS will publish the list of countries in proposed 740.2(a)(12)

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Ground Vehicles – USML Cat VII

• Proposed revision to the USML Positive List incorporated into this rule • Creates five new ECCN entries: 0A606, 0B606, 0C606, 0D606, and 0E606 along with

consolidation of 9A018.b into 0A606.b.4

• Clarifies which ground vehicles are subject to ITAR and which are EAR


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Specially Designed• Proposed definition (Part 772.1)

(a) A ‘‘specially designed’’ item, other than a ‘‘part’’ or ‘‘component,’’ is an

item that is enumerated on the CCL and, as a result of ‘‘development,’’ has

properties peculiarly responsible for achieving or exceeding the controlled

performance levels, characteristics, or functions of the referenced item

identified in the CCL.

(b) A ‘‘specially designed’’ ‘‘part’’ or ‘‘component’’ is a ‘‘part’’ or

‘‘component’’ of an item ‘enumerated’ in a category of the CCL.

(c) For the purposes of this definition, an item is not considered ‘‘specially

designed’’ if it is separately ‘enumerated’ in an USML subcategory

or an ECCN that does not have ‘‘specially designed’’ as a control criterion.

(d) Items that are not so separately ‘enumerated’ for purposes of this

definition, are also not considered

• Applicable to “600 Series”, Existing ECCNs that use the term and Revised USML Categories that use the term

• Peculiarly responsible to this definition (currently only applies to technology) ‘‘specially designed’’ in any category of the CCL if they are:

(1) A single, unassembled part used in multiple types of civil items, such as threaded fasteners (e.g., screws, bolts, nuts, nut plates, studs, inserts), other

fasteners (e.g., clips, rivets, pins), common hardware (e.g., washers, spacers, insulators, grommets, bushings), springs and wire; or

(2) An item specifically excluded from control on the USML or the CCL; or

(3) A ‘‘part’’ or ‘‘component’’ used as a ‘‘part’’ or ‘‘component’’ of an end item in ‘‘serial production’’ and not ‘enumerated’ on the USML or CCL (i.e.,

the end item is an EAR99 item), and the part’s or component’s form, fit, and function have not been altered for use in another end item enumerated on the USML or CCL after ‘‘serial production’’ of the end-item not enumerated on the USML or CCL has begun; or

(4) A ‘‘part’’ or ‘‘component’’ that can be exchanged with an EAR99 or AT only controlled ‘‘part’’ or ‘‘component’’ on a one-for-one replacement basis

without modification to the form, fit and function of the EAR99 or AT-only ‘‘part’’ or ‘‘component,’’ and the EAR99 or AT-only part’s or component’s

function is identical to the ‘‘part’’ or ‘‘component’’ at issue.


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Specially Designed

• Proposal to have one definition that applies to “600 Series” ECCNs, Existing ECCNs that use the term and revised USML Categories that use the term.

• 3 Notes to Definition

• 3Notes to Exclusions

Other Definitions• 600 Series, accessories and attachments, component, end item, equipment, facilities,

part, serial production, system

• Also clarifying “Materials” as it applies to Product Groups A and C


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Parts and Components

Automatically eligible for STA

AT Controls only (+ China Military End Use)

Specially Designed Components “600 Series” (Subparagraph .x)

Cull out insignificant parts and components (Subparagraph .y)


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De Minimis

Proposed rule establishes a more restrictive 10% de minimis level

• For CML “600 Series” items incorporated into foreign-made items• Applicable to xB6zz, xC6zz, xD6zz and xE6zz items

•As opposed to 25% level


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Placeholder Mechanism for Emerging Technologies OA521

Equivalent to USML Category XXI

• New category in which to place emerging technologies that might otherwise be classified as EAR99

• Gives U.S. Government one year to review and seek multilateral control where appropriate (Maximum 3 one year periods)

• Create a Table for items identified as positively as possible in Supplement 5 to Part 744.

• Controlled for RS Col 1 reasons (License required to all countries except Canada)

• Only License Exception GOV applicable (STA countries)


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Rule Making

DOD led review of the USML

Positive List – Start with Categories 6-8

Category 11 (Electronics) early 2012

Requires Congressional Notification and Consent under Section 38(f) of AECA

2010 State Dept. Proposed rule on Military Vehicles (CAT VII) used as an example of the process. (Included in the Proposed Rule)

– Once Congressional approvals in place and both agencies publish final rules, any Military Vehicles, specially designed parts, components, accessories and attachments, and related technology and software, not on the USML positive list will move to CCL

Comment Period Closed September 13, 2011


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Other Reg Changes

• Various updates with End user focus (VEUs – Additions and Revisions)

• India Bilateral Understanding

• Publicly Available Mass Market Encryption

• Wassenaar Arrangement 2010

• High Performance Computers

• Addition of New State of Republic of South Sudan


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Publicly Available Mass Market Encryption Software Published January 7, 2011 (76 FR 1059)

BIS removes two kinds of encryption software from the jurisdiction of the EAR:

(1) Publicly available encryption software in object code with a symmetric key length greater than 64-bits that has been determined to be mass market software under §742.15(b) of the EAR and has been reclassified under ECCN 5D992; and

(2) Publicly available encryption software in object code classified under ECCN 5D002 when the corresponding source code meets the criteria specified in §740.13(e) of the EAR (LE TSU).


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Wassenaar Arrangement 2010

Implementation rule published May 20, 2011 (76 FR 29610)

• This rule revised 53 ECCNs spanning all the Categories of the Commerce Control List, except Category 0.

• The biggest change in Category 3, where there was a total rewrite of the controls for analog to digital converter (ADC) and digital to analog converter (DAC).

• Other notable changes.

Wassenaar Correction:

Published June 14, 2011 (76 FR 34577)

ECCN 2A101 Radial ball bearings – MT:1 and AT:1

In addition to editorial clean-up type fixes.

•


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High Performance Computers

Published: June 24, 2011(76 FR 36986)

• Implements the December 2009 WA Plenary Meeting (the Plenary) agreements that relate to Export Control Classification Number (ECCN) 4A003.

• Raised the Adjusted Peak Performance (APP) for digital computers.

• Moves Albania and Croatia from Computer Tier 3 to Computer Tier 1 in License Exception APP (§ 740.7 of the EAR)


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New HPC NumbersWhat has changed? Old APP New APP EAR Citation

ECCN 4A003 0.75 WT 1.5 WT Supp No. 1 to part 774 (CCL) ECCN 4A003: - AT entry - Notes 1and 2 in the License Requirements section, and - 4A003.b

LE APP: deemed exports of ‘‘development’’ and ‘‘production’’ technology controlled by ECCN 4E001 and source code controlled by ECCN 4D001for foreign nationals

0.5 WT 1.5 WT § 740.7(c)(3)(ii)

LE APP: deemed exports of ‘‘development’’ and ‘‘production’’ technology controlled by ECCN 4E001 and source code controlled by ECCN 4D001 for foreign nationals of Computer Tier 3 countries

0.1 WT 0.5 WT 740.7(d)(3)(i)

De minimis for foreign-made computers when they contain U.S.-origin controlled semiconductors (other than memory circuits) classified under ECCN 3A001 and are destined to a country in Computer Tier 3 of Section 740.7 of the EAR

0.75 WT 1.5 WT § 734.4(a)(1)

Post shipment reporting requirement for high performance computer exports to destinations in Computer Tier 3, as well as exports of commodities used to enhance computers previously exported or reexported to Computer Tier 3 destinations

0.75 WT 1.5 WT § 743.2(b)


Thank you

Documents

© Copyright 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. Confidentiality label