Export Control Reform

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In a little-noticed provision of the annual US military authorization law, which took effect on January 1, 2021, the US Congress issued yet another push for the US Commerce Department to grant eligibility to Israel for a key authorization under US export controls.  Israeli companies in the tech, aerospace/defense, and other sectors that are regulated under military and “dual-use” (i.e., military/commercial) export controls should watch these developments closely and consider engaging with the US government and/or the Israeli government regarding the implementation of this regulatory change.  The same is true for US and other global companies in these sectors that trade with Israel, maintain facilities in Israel, cooperate with Israeli partners on R&D, or employ or contract with Israelis who are not US citizens or green card holders.  The export controls authorization in question applies to a broad array of dual-use products/technologies, and even certain military products/technologies, and allows companies to operate without the need to obtain specific licenses from the US Commerce Department in certain instances and thereby may help avoid the added costs, delays and uncertainties that can result from the licensing process.  In short, if the Commerce Department granted this regulatory authorization to Israel, trade and technology cooperation in these sectors with Israel and Israelis would be much simpler.

Looking at the details, Section 1276 of the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”) requires the State Department to brief Congress during the first few months of the Biden administration “by describing the steps taken to include Israel in the list of countries eligible for” a key authorization under US export controls, License Exception Strategic Trade Authorization (“STA”), which is administered by the US Commerce Department under the Export Administration Regulations (“EAR”).   Specifically, this congressional mandate relates to so-called “STA-37,” or paragraph (c)(1) of STA, which is by far the broadest and most relevant part of STA that currently applies to 37 countries (as listed in “Country Group A:5” of the EAR).  That includes many European countries, the UK, Canada, Japan, S. Korea, Australia, and New Zealand, along with India (which was recently added), Argentina and Turkey.  Israel is already eligible for a much narrower STA provision (applicable to “Country Group A:6” of the EAR), along with Albania, Cyprus, Malta, Mexico, Singapore, South Africa, and Taiwan.  Congress is pushing Commerce to include Israel in the former group that benefits from the much broader regulatory authorization.

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Continue Reading Congress Continues to Push for Key US Export Controls Authorization for Israel

On August 27, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) published an advance notice of proposed rulemaking (“ANPRM”) to solicit comments from industry and other stakeholders about how BIS should approach the establishment of new export controls on “foundational technologies” under the U.S. Export Administration Regulations (“EAR”).   Comments must be received by October 26, 2020.   This is an important opportunity for both U.S. and non-U.S. companies, industry groups, academic institutions and others to have a role in shaping this new U.S. regulatory process at an early stage.

The U.S. government is required under Section 1758 of the Export Control Reform Act of 2018 (“ECRA”) to “identify emerging and foundational technologies” that are “essential to the national security of the United States” and that are not yet subject to export controls for most countries, and then to “establish appropriate controls” on such technologies, which “at a minimum” are to include restrictions on providing such technologies to China and other U.S. arms-embargoed countries.  Therefore, the end result of this process may be new U.S. export controls on China and other countries that are viewed as more sensitive from the perspective of U.S. national security.  Any controls ultimately established for foundational technologies will be relevant not just for export controls, but also other regulatory areas.  Notably, “emerging and foundational technologies” controlled pursuant to Section 1758 of ECRA will be treated as “critical technologies” for the purpose of foreign investment national security reviews led by the Committee on Foreign Investment in the United States (“CFIUS”), as we previously advised.

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Continue Reading Export Controls on “Foundational Technologies” – Opportunity for Public Comment

The US Department of Commerce’s Bureau of Industry and Security (“BIS”) has issued new FAQs on its website addressing the new military end use / military end user rule (“MEU Rule”) and the expansion of the MEU controls for China, Russia, and Venezuela. For a summary of the MEU rule changes, please see our prior blog post detailing the changes to Section 744.21 and other related provisions in the Export Administration Regulations (“EAR”).

There are 32 FAQs, which provide a summary of the new MEU Rule, guidance on specific scenarios, and interpretations of the key terms, including, “military end use” and “military end user.” Below we discuss a few of the key points from the BIS FAQs regarding military end users, military end uses, and due diligence.

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Continue Reading BIS Issues New FAQs Regarding the Expansion of the Military End Use / Military End User Rule

Today, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) is publishing a new set of regulations tightening export controls on China, Russia and Venezuela (the new “Rule”).  The new Rule will take effect on June 29, 2020, and will apply to goods, software and technology subject to U.S. export controls jurisdiction – it will not be limited to U.S. persons.

The most significant parts of this new Rule will increase the licensing requirements and due diligence expectations that apply to trade with China, Russia and Venezuela under the U.S. Export Administration Regulations (“EAR”) when “military end users” or “military end uses” are involved.  However, in light of the way these terms are defined, industry should note that the impact of this new Rule will extend into many areas of commercial technology and trade with these countries, beyond the defense sector.

In two additional rulemakings published today, BIS is removing one license exception under the EAR (CIV) and proposing to modify another EAR license exception (APR).

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Continue Reading Commerce Issues Long-Awaited Export Control Rules for China, Russia and Venezuela

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On February 24, 2020, the US Commerce Department’s Bureau of Industry and Security (BIS) issued a rule that significantly expands the scope of US export controls on Russia and Yemen. The new trade restrictions on Russia have been imposed due to “proliferations…

On February 20, 2020, the US Office of Foreign Assets Control (OFAC) issued two new FAQs on the Reporting Procedures and Penalties Regulations (RPPR), 31 CFR part 501. The FAQs follow OFAC’s June 2019 amendments to the RPPR, which significantly expanded the requirement for US persons (and in some circumstances non-US persons subject to OFAC’s regulatory jurisdiction) to report blocked property, unblocked property, or rejected transactions to OFAC.
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Continue Reading New OFAC FAQs Clarify Rules for Reporting of Rejected Transactions

The Council of the European Union recently adopted a Decision amending Council Common Position 2008/944/CFSP of December 8, 2008 defining common rules governing control of exports of military technology and equipment. The new Council Decision takes account of the developments at EU and international level since the adoption of the original 2008 Common Position. The Council Decision is accompanied by Conclusions and an updated version of the User’s Guide to Council Common Position 2008/944/CFSP defining common rules governing the control of exports of military technology and equipment.…
Continue Reading EU Common Rules on the Control of Exports of Military Technology and Equipment: Council Adopts new Decision, Conclusions and a Revised User’s Guide

Steptoe’s Brian Egan and Peter Jeydel authored a Feature Comment in The Government Contractor, a Thomson Reuters publication, discussing the provisions of the Export Control Reform Act of 2018 that are most likely to have a lasting impact on industry. US and international companies should take careful note of the enduring changes to export …

Yesterday the US Department of Commerce’s Bureau of Industry and Security (BIS) took its first step towards a potentially significant expansion of US export controls by publishing a Federal Register notice soliciting public comments on how the US government should regulate the export of “emerging technologies.” Under the Export Controls Reform Act of 2018 (ECRA), “emerging and foundational technologies” will be subject to additional export controls and will trigger heightened foreign investment reviews for US companies that produce or develop these technologies.  Commerce has requested public comments on the “criteria for defining and identifying emerging technologies” by December 19, 2018.  Commerce will begin a separate comment process regarding “foundational technologies” at a later date.

Export Controls

BIS regulates the export of “dual-use” and less sensitive military items through the Commerce Control List (CCL) and the Export Administration Regulations (EAR). Section 1758 of the ECRA, enacted in August 2018 as a part of the National Defense Authorization Act for Fiscal Year 2019, requires BIS to establish “appropriate controls” for the export, re-export, or in-country transfer of “emerging and foundational technologies” that “are essential to the national security of the United States” but are not yet subject to US export controls.  While Commerce will have the discretion to set the level of export controls for any identified emerging and foundational technologies, at a minimum it must require a license for the export of these technologies to countries subject to a US arms embargo. (Section 126.1 of the International Traffic in Arms Regulations (ITAR) identifies several countries, including China, currently subject to an arms embargo by the United States.)…
Continue Reading Administration Moves Toward Strengthening Export Controls and Investment Restrictions on “Emerging Technologies”