On May 8, 2024, BIS published a correction to the interim final rule, further removing license requirements for certain items under ECCN 0x5zz.

Previously, the interim final rule stated that all 0x5zz ECCNs referenced in footnote 9 to the Commerce Country Chart in supplement no. 1 to part 738 that were previously controlled for NS1 or RS1 reasons for control would continue to require a license for export to Australia and the UK based on the license requirements specified in that footnote.  However, the correction clarifies that only portions of the referenced 0x5zz ECCNs will continue to require a license.

On April 19, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued an interim final rule under the U.S. Export Administration Regulations (“EAR”) that significantly streamlines export controls on certain defense-related technology products to Australia and the United Kingdom (“UK”). Aimed at enhancing technological innovation among the three countries in furtherance of the Australia, United Kingdom, United States (“AUKUS”) Trilateral Security Partnership, the interim final rule removes license requirements, expands the availability of license exceptions, and reduces the scope of end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) to or within Australia and the UK.

In a statement, BIS said that it “anticipates these changes will reduce licensing burdens for trade with Australia and the UK by over 1,800 total licenses valued at over $7.5 billion per year.” BIS also states that the cumulative effect of these export control revisions under the EAR will be to treat Australia and the UK as destinations equivalent to Canada. BIS is soliciting public comments on the impacts of these changes to ensure that the export control revisions implemented advance AUKUS objectives, as well as potential additional revisions to the EAR that would further enhance defense industrial base cooperation and technology innovation with Australia and the UK. Interested parties should consider submitting comments to BIS by the June 3, 2024, deadline.

Notwithstanding this important regulatory development, export control revisions under AUKUS related to the U.S. International Traffic in Arms Regulations (“ITAR”) administered by the U.S. Department of State, Directorate of Defense Trade Controls (“DDTC”), have not yet been promulgated. Until that action occurs, industry will not be able to assess the full extent of U.S. export control revisions and continued licensing requirements that will be implemented under AUKUS.Continue Reading BIS Removes Significant Export Control License Requirements for Australia and the UK under the Strategic AUKUS Partnership

May 1, 2024, saw two major developments under the Australia, United Kingdom, and United States (“AUKUS”) Trilateral Security Partnership.

First, the U.S. Department of State (the “Department”) issued a notice of proposed rulemaking (“NPRM”) that would amend the International Traffic in Arms Regulations (“ITAR”) to create an exemption for certain exports, reexports, retransfers, or temporary imports of defense articles or defense services, or certain brokering activities between or among authorized users within Australia, the United Kingdom, and the United States.

Second, the UK Department for Business and Trade (“DBT”) issued Notice to Exporters 2024/09: update on AUKUS, which was accompanied by publication of a draft Open General Licence to permit the export, transfer, and supply or delivery, of dual-use goods, military goods or technology to, between, and among the AUKUS partners (“Draft AUKUS OGL”).

These developments signal clearly to industry that the AUKUS partners are committed to fostering greater cooperation across defense and critical technologies through reforms of their export controls and licensing regimes. Interested parties may wish to consider submitting comments on one or both proposals. The deadline for comments on the proposed United States ITAR rule is May 31, 2024. The deadline for comments on the UK Draft AUKUS OGL is July 1, 2024. Importantly, the NPRM for the ITAR does not yet have the force and effect of law until a final or interim final rule is promulgated. Similarly, the Draft AUKUS OGL cannot currently be relied upon and will not come into effect until a final version is issued.

United States: ITAR Exemptions

The Department’s proposed exemption would be available for all defense articles or defense services, except for those contained within a limited excluded list. The proposed rule would also introduce a provision to allow for certain transfers of classified defense articles to certain dual nationals (subject to certain requirements described below) and would codify an expedited license review process for Australia, the UK, and Canada.Continue Reading Trilateral AUKUS Partnership Further Strengthened with Proposed New U.S. ITAR Exemptions and UK Open General Licenses

On April 24, 2024, President Biden signed HR 815, “Making emergency supplemental appropriations for the fiscal year ending September 30, 2024, and for other purposes,” into law (the “National Security Supplemental” or the “NSS”). The National Security Supplemental appropriates funds to provide security assistance to Ukraine, Israel, and US partners in the Indo-Pacific and humanitarian aid for Gaza. Alongside the appropriations measures, the National Security Supplemental includes the “21st Century Peace through Strength Act”, a collection of fourteen sanctions, export controls, and related regulatory measures targeting Iran, Russia, and China, in addition to areas of concern including narcotics trafficking, terrorist financing, and misuse of information and communications technology and services (“ICTS”).

In this post, we assess these new developments and the areas where they will likely have the greatest impact.Continue Reading President Signs Expansive Sanctions Bill Into Law; Doubling of Limitations Period for IEEPA Violations Likely to Have Major Impact

On March 21, 2024, the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a final rule under the U.S. Export Administration Regulations (“EAR”) that imposes new export controls on certain individuals and entities identified on the U.S. Department of the Treasury’s Office of Foreign Assets Control’s (“OFAC’s”) List of Specially Designated Nationals and Blocked Persons (“SDN List”).  More specifically, the final rule imposes a BIS licensing requirement on exports, reexports, or transfers (in-country) of all items “subject to the EAR” when certain categories of SDNs are parties to the transaction.  The covered types of SDNs are designated under 11 OFAC-administered sanctions programs (as noted by BIS), including those relating to Russia, Belarus, transnational criminal organizations, and narcotics traffickers (as well as making slight changes to similar preexisting controls on SDNs designated for activities related to terrorism or proliferation of weapons of mass destruction).

The U.S. government has described these broader EAR restrictions as a “force multiplier” to complement OFAC’s jurisdiction, by allowing these controls in Part 744 of the EAR to “act as a backstop for activities over which OFAC does not exercise jurisdiction.”  OFAC’s sanctions regulations generally prohibit U.S. persons from engaging in any transactions or dealings involving SDNs and blocked parties (i.e., entities owned 50 percent or more by one or more SDNs or blocked parties), and the property or interest in property of such parties in the United States or within the possession or control of a U.S. person must be blocked (i.e., frozen) and reported to OFAC.  Non-U.S. persons can violate U.S. sanctions programs by, among other things, “causing” a U.S. person to violate U.S. sanctions.  With limited exceptions such as under the Cuban Assets Control Regulations and the Iranian Transactions and Sanctions Regulations, OFAC’s sanctions regulations generally do not specify whether they apply to transactions taking place entirely outside the United States that do not involve U.S. persons simply because the transactions involve items subject to the EAR.  This new rule aims to close this gap by providing BIS with clear authority to take export controls enforcement action in such cases where U.S. products or technologies, but not U.S. persons, are involved.   

As a result of BIS’s rule, non-U.S. persons outside the United States, who may not clearly be prohibited (absent the involvement of U.S. persons) by U.S. sanctions regulations from dealing in the property or interests in property of an SDN or blocked party, will now generally be subject to licensing requirements under the EAR if reexporting or transferring (in-country) any item “subject to the EAR” when an SDN designated under at least one of these sanctions programs is a “party to the transaction,” including as purchaser, intermediate consignee, ultimate consignee, or end user.  This underscores the guidance in the Tri-Seal Compliance Note of March 6, 2024 that non-U.S. persons have export controls (and sanctions) licensing obligations under U.S. law, even if operating wholly offshore, and therefore, they should consider enhancing compliance screening protocols and controls to prevent violations of U.S. export controls and sanctions.Continue Reading Export Controls and Sanctions Converge: New BIS Restrictions on SDNs

On January 16, 2024, the Assistant Secretary for Export Enforcement at the Department of Commerce’s Bureau of Industry and Security (BIS) issued a memorandum, announcing that:

  1. parties disclosing minor or technical violations that occurred close in time can submit a single Voluntary Self-Disclosure (VSD) on a quarterly basis, which may include an abbreviated narrative account of the suspected violations; and
  2. parties sending formal requests to BIS’s Office of Exporter Services to engage in otherwise prohibited activities with respect to items involved in violations of the Export Administration Regulations (EAR) should also send courtesy copies to the Office of Export Enforcement (OEE), which will help expedite BIS’s processing of such requests.

The memorandum builds upon previous changes to BIS’s administrative enforcement program, which were announced in memoranda dated June 30, 2022 and April 18, 2023.  These changes are intended to help OEE fast-track its review of “minor” or “technical” VSDs and to encourage additional disclosures of potentially significant violations of the EAR, but do not apply to VSDs relating to Part 760 of the EAR (antiboycott and restrictive trade practices).  For a detailed analysis of the previous memoranda, see our blog posts from July 6, 2022 and April 26, 2023.  Continue Reading BIS Makes Further Changes to Administrative Enforcement, But Questions Remain

On September 14, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the Department of State, and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced new sanctions designations and export control guidance related to Russia.  These developments are the latest updates in the U.S. government’s ever-evolving response to Russia’s war in Ukraine through economic sanctions and export controls.Continue Reading U.S. Government Issues New Russia-related Sanctions Designations and Export Controls Guidance

Effective August 18, 2023, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued amendments to the Commerce Control List (CCL) (15 CFR Part 774) of the Export Administration Regulations (EAR) to formalize changes based on Nuclear Supplier Group (NSG) commitments to prevent nuclear proliferation and the development of nuclear-related weapons of mass destruction.Continue Reading BIS Promulgates CCL Changes Based on Nuclear Supplier Group Commitments

On August 11, 2023, the U.S. Nuclear Regulatory Commission (“NRC”) and the U.S. Department of Commerce, Bureau of Industry & Security (“BIS”) announced amendments to their existing regulations concerning exports of nuclear materials and related equipment destined for China and Macau. (BIS extends its export controls policies and regulations applicable to China to the territory of Hong Kong.) Although the notice from the NRC provided little explanation, the notice issued by BIS explained that the change in the Export Administration Regulations (15 CFR Parts 730-774 or EAR) is based on an increased concern with China’s military-civil fusion policy and efforts to expand its military nuclear capability. The changes implemented by the NRC are effective as of August 8, 2023, and the changes implemented by BIS are effective as of August 11, 2023. Continue Reading U.S. Government Revises Export Controls Regarding Commercial Nuclear Commerce with China

On July 26, 2023, Assistant Secretary for Export Enforcement Matthew Axelrod of the US Department of Commerce’s Bureau of Industry and Security (“BIS”) spoke at the Society for International Affairs “Back to Basics” conference about BIS’s recent efforts to build partnerships in export controls regulation and enforcement and developments in antiboycott rules.  In his address, Assistant Secretary Axelrod likened the Marvel cinematic universe—the blockbuster superhero films that feature intertwined characters and storylines—with the current export control landscape.  By way of this analogy, Assistant Secretary Axelrod articulated BIS’s view that an ensemble cast of its interagency colleagues, international partners, private industry, and academia is central to a successful export control strategy.Continue Reading Assistant Secretary for Export Enforcement Matthew Axelrod Addresses Recent Developments in Export Controls and Antiboycott Regulations

On June 9, 2023, the US Departments of Commerce, Justice, State, and the Treasury published a joint advisory and guidance (the “Guidance”) related to Iran’s procurement, development, and proliferation of unmanned aerial vehicles (“UAVs”).  Notably, the agencies warned industry participants that key components of Iranian UAVs are US-origin technologies, some of which are “low-technology items” that are designated as EAR99, i.e., not included on the Commerce Control List (“CCL”), Supplement No. 1 to part 774 of the EAR.  The Guidance provides specific Harmonized System (HS) codes that exporters/reexporters may use to identify items that are of diversion/transshipment concern.

Further, the agencies provided clear guidance on the US government’s expectations for private industry compliance programs, identified numerous red flags for industry participants, and highlighted several best practices for how to address a red flag. 

This Guidance is the most recent activity in a series of measures implemented by US government agencies to disrupt Iran’s UAV program.  The Guidance may signal an increased focus on both US and non-US manufacturers and suppliers of commodities that can be used in the production of UAVs.Continue Reading New US Interagency Guidance Targets Iranian UAVs and Compliance Risks