[author: Janet Longo]

Janet Longo, Regulatory Compliance Manager, at the Volkov Law Group, joins us for a blog posting on the Commerce Department’s changes to export licensing policies and procedures for national security items destined to China, Russia and Venezuela.

The Commerce Department’s Bureau of Industry Security (“BIS”) issued a final rule to restrict even further export licenses for National Security (“NS”) controlled items for China, Venezuela and Russia.

The new rule is effective October 29, 2020.

Section 742.4(b)(7) of the Export Administration Regulations (“EAR”) was amended to include a list of criteria BIS will apply when reviewing license applications for NS items destined to Russia, China and Venezuela.

As a result, license applicants will have to devote additional time and effort to submit required information to justify approval of the license application. Prior to this recent change, BIS applied a presumption of denial for exports that would make a significant contribution to China or Russia’s military capabilities, including for example, major weapons systems described in Supplement 7 to part 742. Under the new formulation, BIS will review export license applications for NS items to these countries to ensure they do not make a material contribution to the production, development, maintenance, repair or operation of weapons systems.

Going forward, under 742.4(b)(7), license applicants will be required to submit information to satisfy BIS review on the following issues:

• The appropriateness of the export, reexport, or transfer for the stated end-use;
• The significance of the item for the weapons systems capabilities of the importing country;
• Whether any party is a ‘military end-user’ as defined in § 744.21(g) of the EAR;
• The reliability of the parties to the transaction, including whether: an export or reexport license application has previously been denied; any parties are or have been engaged in unlawful procurement or diversion activities; the parties are capable of securely handling and storing the items; and end-use checks have been and may be conducted by BIS or another U.S. government agency on parties to the transaction;
• The involvement of any party to the transaction in military activities, including activities involving the ‘‘development,’’ ‘‘production,’’ maintenance, repair, or operation of weapons systems, subsystems, and assemblies;
• Government strategies and policies that support the diversion of exports from their stated civil end-use and redirection towards military end-use; and
• The scope and effectiveness of the export control system in the importing country.

Finally, the review will also include an assessment of the impact of a proposed export of an item on the United States defense industrial base.