1. Export Control Reform December 10, 2013 Ian H. Moss

2. Export Control Reform If we guard our toothbrushes and diamonds with equal zeal, we will lose fewer toothbrushes and more diamonds. • McGeorge Bundy, National Security Advisor to John F. Kennedy and Lyndon B. Johnson, 1961-1966. America’s decades-old, bureaucratically labyrinthine system does not serve our 21st-century security needs or our economic interests. Our security interests would be far better served by a more agile, transparent, predictable, and efficient regime. • Secretary of Defense, Robert Gates, April 20, 2010 [T]he current export control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishes our ability to focus our efforts on the most critical national security priorities. • Whitehouse Press Release, August 10, 2010.

3. Realigned Control Lists – Revised USML • Revision of USML categories. From overly broad subjective controls to positive objective controls. • October 15, 2013: • USML Category VIII (Aircraft) • USML Category XIX (New) (Gas turbine engines) • January 6, 2014: • USML Category VI (Vessels) • USML Category VII (Vehicles) • USML Category XIII (Auxiliary Military Equipment) • USML Category XX (Submersibles)

4. Realigned Control Lists – CCL 600 Series • Creation of 600 Series ECCN. For items transitioning from ITAR to the Export Administration Regulations (EAR) Commerce Control List (CCL). • October 15, 2013: • 9A610 (Military aircraft and related commodities) • 9A619 (Military gas turbine engines and related commodities) • January 6, 2014: • 8A609 (Military vessels and related commodities) • 0A606 (Military vehicles and related commodities) • 0A617 (Miscellaneous equipment, materials, and related commodities) • 8A620 (Military submersibles and related technology)

5. Specially Designed – Catch

6. Specially Designed - Release

7. Specially Designed – Release Need contemporaneous documents to support design intent in (b)(4)-(6)

8. 600 Series • Items enumerated in a 600 series ECCN or items caught and not released from 600 series catch all paragraph (i.e. using the term specially designed): • Still controlled for at least NS1, RS1, AT, and UN reasons; • License required to export or reexport to all countries unless: • EAR license exception applies; or • Enumerated in .y subparagraph (AT only) • ITAR 126.1 country embargoes remain (including China) and countries listed in Country Group D:5

9. De Minimus • Under ITAR – “see through rule” resulted in ITAR taint • Causing foreign markets to design out U.S. ITAR controlled items • Under EAR - de minimis rules apply • A foreign made item located outside the U.S that incorporates controlled U.S. origin content that does not exceed the applicable de minimis percentage is not subject to the EAR. • 25% for most countries except D:5 • 0% for country group D:5 (Afghanistan; Belarus; Burma; China; Congo; Cote D’Ivoire; Cuba, Cyprus; Eritrea; Fiji; Haiti; Iran; Iraq; N. Korea; Lebanon; Liberia; Libya; Somalia; Sri Lanka, Sudan; Syria; Venezuela; Vietnam; Zimbabwe)

10. License Exceptions • Strategic Trade Authorization (STA) • STA-36 countries listed in Country Group A:5 • Items of lesser national security concern to 8 additional countries listed in Country Group A:6 • Instead of licensing, STA requires the exporter to undertake certain administrative requirements • Notification • Consignee Statements

11. License Exceptions • Strategic Trade Authorization (STA) (cont) • Can be used for most 600-series to Country Group A:5 subject to: • Not available if relevant ECCN excludes STA; • Must be ultimate end use by or for the development or production of items for government agency of an A:5 country; agrees to end use checks by U.S. Government; and • Purchaser, intermediate consignee, ultimate consignee, and end user must all have been previously approved on a license issued by BIS or DDTC

12. License Exceptions • Other available license exceptions listed in §740.2(a)(13): • LVS (§740.3) • TMP (§740.9) • RPL (§740.10) • GOV (§740.11) • TSU (§740.13) • Certain restrictions apply

13. Next Steps • Review your product matrix and determine which items may have transitioned • Revise your jurisdiction and classification procedures to follow the order of review: • Is it enumerated in a USML? • Is it described in a USML catch-all paragraph using “specially designed?” • For USML categories that are not yet revised, is it caught in a paragraph that uses specifically designed or modified? • Is it enumerated in a 600 series ECCN in the CCL? • Is it described in a 600 series ECCN catch-all paragraph using “specially designed?” • Is it described elsewhere in the CCL? • Export as EAR99. Consider General Prohibitions 4-6.

14. Next Steps • Understand the license requirements for your product and related technical data / technology • Consider whether any of the license exemptions / exceptions apply • Consider overseas business opportunities that may now open up • For dual use products in development ensure you are creating contemporaneous documents to support future jurisdiction and classification issues (i.e. CJ, release under (b)(3) of specially designed, etc)

15. Contact Details Ian H. Moss Goulston & Storrs PC T 617.574.3515 imoss@goulstonstorrs.com