Shutdown or no shutdown, the first round of export control reforms took effect yesterday, October 15. The objective of the Export Control Reform initiative is to apply more stringent controls to items that are significant from a national security perspective while lowering the barriers to exporting items that do not pose such concerns.
This first round of changes rewrites USML Category VIII (aircraft), establishes a new USML Category XIX (gas turbine engines) and creates new “Commerce Munitions List” categories (designated as the “600 series”) under the EAR for military items subject to less stringent controls. The reforms also create a new, unified definition of “specially designed,” which is a linchpin in how commodity jurisdiction and classification determinations will be made in the future.
The changes will affect how items are designated as defense articles subject to the ITAR or as items subject to the EAR. In short, the long-standing sweeping USML categories and “specifically designed for a military application” analysis are out, replaced by what has been called a “positive list” that endeavors to identify with greater specificity which items are subject to which controls.
The changes will result in previously ITAR-controlled items becoming subject to the EAR, and may present opportunities for companies that make or sell items that may be moving from one list to the other. At the same time, the new rules are complex and will doubtless present compliance challenges. Enforcement agencies have already signaled that they will be vigilant in policing whether manufacturers or exporters are misclassifying items or misusing applicable license exceptions and exemptions.
The rules that took effect on October 15 were published April 16, 2013. The Department of State rule can be found here and the Department of Commerce rule can be found here. Further significant changes are afoot as well. The State Department’s Interim Final Rule on brokering takes effect October 25. In addition, the next round of reformed categories will take effect on January 6, 2014 and can be found here (State) and here (Commerce).