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Export Controls and

Export Control Reform

April 23, 2015

Impact of US Export Control Reform

Correct jurisdiction and classification are fundamental to compliance with US export laws and regulations.

US Export Control Reform (ECR) changes jurisdiction and classification.

ECR has many good intentions, including having a leveler playing field for all members of industry with respect to export compliance.

ECR, at least in part, has resulted from industry asking for greater flexibility in US export controls (i.e., more autonomy).

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Impact of ECR

Another good intention of ECR is to create a path for migration for articles born in the defense or intelligence worlds to be able to become dual-use (i.e., true commercial) items.

However, ECR is occurring incrementally, meaning that legacy ITAR controls continue, today, to exist (e.g., “DDCAM” or, in other words specifically Designed, Developed, Configured, Adapted, or Modified for a military application).

And legacy ITAR control will continue to exist into the foreseeable future for USML Categories I, II, and III.

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Impact of ECR

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Impact of ECR

And legacy-type ITAR controls, in some cases, have been continuing despite ECR, for example:– Cameras in revised USML Category XIII;– All of revised USML Category XX;– Developmental Controls in revised USML Categories V, VI, VIII, X, XI, XIII, XV and XX;– USML Category XXI; and– Defense Services, generally and throughout.

Also, ECR formalized the See-Through Rule in the ITAR (see Note to USML Category VIII regarding inertial navigation systems, etc.), which means that ITAR taint/infection/creep still exists as an issue.

Nevertheless, ECR has greatly reduced DDTC licensing (or “DTCL”) involvement in industry trade activities, and, on the balance, this is probably also true, generally, with respect to USG involvement in industry trade activities.

ECR provides industry greater flexibility, but, according to the USG, with greater flexibility comes greater complexity – industry can’t have it both ways.

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Impact of ECR

The DNA of ECR self-classification:

https://www.pmddtc.state.gov/licensing/decision_tools.html

http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/2013-02-15-13-50-21

ECR DNA

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Impact of ECR

ECR has altered the nature of self-classification in many ways, including:– Prescribed Order of Review (really not too different, except

“Specially Designed”).– 22 CFR 121.1(d) – ITAR– 15 CFR Part 774, Supplement No. 4 – EAR

– Shifting the focus to whether the article/item is a part, component, accessory or attachment.

– 22 CFR 120.45 – ITAR– 15 CFR Part 772 – EAR– Must know this for the “Specially Designed” analysis.

ECR does not always mean lower controls (e.g., military aircraft tires).

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Impact of ECR

ITAR - An end-item is a system, equipment, or an assembled article ready for its intended use. Only ammunition or fuel or other energy source is required to place it in an operating state. - 22 CFR 120.45(a)

EAR - End item. This is a system, equipment or assembled commodity ready for its intended use. Only ammunition, fuel or other energy source is required to place it in an operating state. Examples of end items include ships, aircraft, computers, firearms, and milling machines.

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Impact of ECR

ITAR - A component is an item that is useful only when used in conjunction with an end-item. A major component includes any assembled element that forms a portion of an end-item without which the end-item is inoperable. A minor component includes any assembled element of a major component. - 22 CFR 120.45(b)

EAR - Component. This is an item that is useful only when used in conjunction with an “end item.”

“Components” are also commonly referred to as assemblies. For purposes of this definition an assembly and a “component” are the same. There are two types of “components”: “major components” and “minor components.” A “major component” includes any assembled element which forms a portion of an “end item” without which the “end item” is inoperable. For example, for an automobile, “components” will include the engine, transmission, and battery. If you do not have all those items, the automobile will not function, or function as effectively. A “minor component” includes any assembled element of a “major component.” “Components” consist of “parts.” References in the CCL to “components” include both “major components” and “minor components.”

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Impact of ECR

ITAR - Accessories and attachments are associated articles for any component, equipment, system, or end-item, and which are not necessary for its operation, but which enhance its usefulness or effectiveness. - 22 CFR 120.45(c)

EAR - Accessories. These are associated items for any “component,” “end item,” or “system,” and which are not necessary for their operation, but which enhance their usefulness or effectiveness. For example, for a riding lawnmower, “accessories” and “attachments” will include the bag to capture the cut grass, and a canopy to protect the operator from the sun and rain. For purposes of this definition, “accessories” and “attachments” are the same.

EAR - Attachments. These are associated items for any “component,” “end item,” or “system,” and which are not necessary for their operation, but which enhance their usefulness or effectiveness. For example, for a riding lawnmower, “accessories” and “attachments” will include the bag to capture the cut grass, and a canopy to protect the operator from the sun and rain. For purposes of this definition, “attachments” and “accessories” are the same.

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Impact of ECR

ITAR - A part is any single unassembled element of a major or a minor component, accessory, or attachment which is not normally subject to disassembly without the destruction or the impairment of designed use. - 22 CFR 120.45(d)

EAR - Part. This is any single unassembled element of a “component,” “accessory,” or “attachment” which is not normally subject to disassembly without the destruction or the impairment of design use. Examples include 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.

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Impact of ECR

ITAR - Firmware and any related unique support tools (such as computers, linkers, editors, test case generators, diagnostic checkers, library of functions, and system test diagnostics) directly related to equipment or systems covered under any category of the U.S. Munitions List are considered as part of the end-item or component. Firmware includes but is not limited to circuits into which software has been programmed. - 22 CFR 120.45(e)

EAR – Firmware undefined.

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Impact of ECR

ITAR - Software includes but is not limited to the system functional design, logic flow, algorithms, application programs, operating systems, and support software for design, implementation, test, operation, diagnosis and repair. A person who intends to export only software should, unless it is specifically enumerated in §121.1 of this subchapter (e.g., USML Category XIII(b)), apply for a technical data license pursuant to part 125 of this subchapter. - 22 CFR 120.45(f)

EAR – “Software”. (Cat: all)--A collection of one or more “programs” or “microprograms” fixed in any tangible medium of expression.

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Impact of ECR

ITAR - A system is a combination of parts, components, accessories, attachments, firmware, software, equipment, or end-items that operate together to perform a function. - 22 CFR 120.45(g)

Note to paragraph (g): The industrial standards established by INCOSE and NASA provide examples for when commodities and software operate together to perform a function as a system. References to these standards are included in this note to provide examples for when commodities or software operate together to perform a function as a system. See the INCOSE standards for what constitutes a system at: http://g2sebok.incose.org/app/mss/asset.cfm?ID=INCOSE%20G2SEBOK%202.00&ST=F, and in INCOSE SE Handbook v3.1 2007; ISO/IEC 15288:2008. See the NASA standards for examples of what constitutes a system in NASA SE Handbook SP-2007-6105 Rev 1.

EAR - System. This is any combination of “end items,” “equipment,” “parts,” “components,” “accessories,” “attachments,” firmware, or “software” that operate together to perform a function.

NOTE: The industrial standards established by INCOSE and NASA provide examples for when commodities and software operate together to perform a function as a system. References to these standards are included in this note to provide additional examples for when commodities or software operate together to perform a function as a system. See the INCOSE standards for what constitutes a system at (http://g2sebok.incose.org/app/mss/asset.cfm?ID=INCOSE%20G2SEBOK%202.00&ST=F), and in the (INCOSE SE Handbook v3.1 2007; ISO/IEC 15288:2008). Also see the NASA standards for examples of what constitutes a system in the (NASA SE Handbook SP-2007-6105 Rev 1).

NASA SE Handbook SP-2007-6105 Rev 1

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Impact of ECR

ITAR - Equipment is a combination of parts, components, accessories, attachments, firmware, or software that operate together to perform a function of, as, or for an end-item or system. Equipment may be a subset of an end-item based on the characteristics of the equipment. Equipment that meets the definition of an end-item is an end-item. Equipment that does not meet the definition of an end-item is a component, accessory, attachment, firmware, or software. - 22 CFR 120.45(h)

EAR - Equipment. This is a combination of parts, components, accessories, attachments, firmware, or software that operate together to perform a function of, as, or for an end item or system. Equipment may be a subset of “end items” based on the characteristics of the equipment. Equipment that meets the definition of an end-item is an end-item. Equipment that does not meet the definition of an end-item is a part, component, accessory, attachment, firmware, or software.

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Impact of ECR

Under the ITAR, everything except a part is equipment; under the EAR, everything, including a part, is equipment.

Under the ITAR and EAR, every combination may be a system.

What is a computer?