Proposed ITAR Rule To Relax ITAR Licensing For Components Incorporated Into Commercial Products

On March 15, the State Department Directorate of Defense Trade Controls published a proposed new rule that marks a significant change in the approach to ITAR regulation. Historically, ITAR controls have always applied to commercial end products incorporating any ITAR controlled components. This was the basis of the highly publicized QRS chip case, in which the State Department asserted continuing ITAR control over avionics chips that had originated on a military program but had come to be widely used in civilian jet aircraft. That case resulted eventually in a special exception to allow jet aircraft to remain in production and passenger service with the QRS chip and without ITAR licensing.

The new rule, ยง126.19, sets out conditions under which an ITAR license will not be required for the export or reexport of a defense article incorporated into an end-item that is subject to the EAR. The conditions are that:

1. The defense article would be destroyed (i.e., rendered useless beyond the possibility of restoration) by its removal from the end-item, or the end-item would be rendered inoperable by the removal of the defense article and the value of the defense article is less than 1% of the value of the end-item;

2. No technical data for development or production are transferred with the defense article; and

3. The incorporation of the defense article does not provide and is not related to a military application.

The rule provides expressly that export of the ITAR controlled components as replacement parts would remain subject to ITAR licensing.

Please see full article below for more information.

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Published In: Antitrust & Trade Regulation Updates, General Business Updates, Government Contracting Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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