In a final rule issued April 28, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) announced new export control requirements relating to China, Russia, and Venezuela.
Effective June 29, 2020, BIS will impose an export license requirement on a broad range of items destined for “military end-users” in China, supplementing existing restrictions on exports for “military end-use” in that country. The rule also expands the definition of “military end-use” and the category of items for which a license may be required for exports to China, Russia, and Venezuela. These changes expand and harmonize controls for “military end-users” and “military end-uses” in an attempt to counter the contribution of commercial U.S.-origin items to the military capabilities of these countries. The rule, at 15 C.F.R. § 744.21, applies not only to exports from the United States, but also to reexports from abroad of covered items, including certain U.S.-origin items and certain foreign-produced items containing U.S.-origin content or technology.
The specific items subject to this new license requirement include many that are regarded as civilian in nature and otherwise only modestly controlled for export, including in the categories of materials, materials processing, electronics, computers, telecommunications, information security, sensors and lasers, navigation and avionics, vessels, aircraft, and propulsion systems. Covered items are identified by their Export Control Classification Number, or ECCN, in Supplement No. 2 to Part 744 of the Export Administration Regulations, which is accessible via the above link. Of potentially broad interest, even low-level encryption items (ECCNs 5A992 and 5D992, which includes “mass market” encryption items with limited encryption functionality) and electronic test equipment and related software (ECCNs 3A992 and 3D991) will be subject to the new rule.
When exporting or reexporting covered items directly or indirectly to China, Russia, Venezuela, this rule will require careful diligence to understand the nature of the ultimate consignees in these countries as well as the item’s intended end use. This will prove difficult in many cases. “Military end-user” includes the army, navy, air force, marines, coast guard, national guard/police, government intelligence and reconnaissance organizations, as well as a vague category of persons or entities whose actions or functions are intended to support “military end uses.” The rule’s markedly expanded definition of “military end use” will refer not only to items destined for the use, development, or production of a military item (e.g., parts, components, or subsystems of weapons), but also to items that support the operation, installation, maintenance, repair, overhaul, refurbishing of military items in these countries.
License applications for covered items will be processed under a presumption of denial.
To increase the transparency of U.S. exports to China, Russia, and Venezuela, the rule also expands Electronic Export Information (EEI) filing requirements in the Automated Export System (AES) for these countries. As of June 29, and subject to certain exceptions, all shipments to these countries — regardless of value — will be subject to EEI filing (eliminating the exemption that applied to shipments valued at less than $2,500), while an item’s ECCN must be stated in the EEI filing even when it is controlled only for anti-terrorism (AT) reasons.
Also effective June 29, 2020, BIS will eliminate License Exception CIV, which authorizes unlicensed exports to certain countries of certain national security-controlled items to most civil end users for civil end uses in Country Group D:1. This will further restrict exports to China, Russia, Venezuela, and a host of other countries of concern.