On October 6, 2020, the US Department of Commerce, Bureau of Industry and Security (BIS) released a final rule (Final Rule), taking effect the same day, revising its licensing policy for crime control and detection (CC) items, “which is designed to promote respect for human rights throughout the world.”
But if you read it quickly and thought it only dealt with crime control items, look again! BIS also revised the Export Administration Regulations EAR so that a review of human rights is part of every license application review, with the sole exception of short supply (SS) items.
If you think this might have something to do with the Administration’s disagreements China, you may be right. The preamble indicates abuse of human rights could involve censorship, surveillance, detention, or the excessive use of force, and BIS also states that “the revision is necessary to prevent items currently controlled for reasons other than CC, including reasons related to certain telecommunications and information security and sensors, from being used to engage in or enable the violation or abuse of human rights.”
Also on October 6, 2020, BIS made another CC-related move, issuing a final rule regarding new controls on water cannon systems and related parts and components, with the preamble specifically describing riot and crowd control in Hong Kong. (Export Control Classification Numbers (ECCNs) 0A977, 0D977 and 0E977.)
Revised Licensing Policy
A) BIS’s Changes in a Nutshell
The licensing policy amends 15 CFR § 742.7 to address two issues:
- License applications for items controlled for CC revisions will be considered favorably on a case-by-case basis unless there is civil disorder in the country or region of destination or if BIS assesses there is a risk that the items will be used in a violation or abuse of human rights;
- Other than items controlled for SS applications for all export-controlled items on the Commerce Control List (CCL) will be considered under this human rights framework.
B) BIS’s Change To the CC Licensing Policy
As side-by-side comparison shows how the licensing policy has been broadened under the Final Rule:
Licensing policy in effect as of October 6, 2020
Licensing policy in effect before October 6, 2020
Applications for items controlled under this section will generally be considered favorably on a case-by-case basis, unless there is civil disorder in the country or region or unless there is a risk that the items will be used to violate or abuse human rights. The judicious use of export controls is intended to deter human rights violations and abuses, distance the United States from such violations and abuses, and avoid contributing to civil disorder in a country or region.
Applications for items controlled under this section will generally be considered favorably on a case-by-case basis unless there is civil disorder in the country or region or unless there is evidence that the government of the importing country may have violated internationally recognized human rights. The judicious use of export controls is intended to deter the development of a consistent pattern of human rights abuses, distance the United States from such abuses and avoid contributing to civil disorder in a country or region.
BIS notes that the “revision is necessary to clarify to the exporting community that licensing decisions are based in part upon US Government assessments about whether CC-controlled items may be used to engage in or enable violations or abuses of human rights including through violations and abuses involving censorship, surveillance, detention, or excessive use of force.”
Notably, the change also removes the requirement that there be actual evidence of past human rights violations, leaving BIS in charge of assessing whether there is merely a risk that the items will be used to violate or abuse human rights.
C) Addition of a New Licensing Policy
Far more significant from the perspective of most exporters, however, is the addition of “a new subparagraph (b)(2) to make clear that BIS will consider the [human rights] licensing policy set forth in new subparagraph (b)(1) when reviewing items controlled for reasons other than CC with the exception of items controlled for short supply.” 15 CFR §742.7. The new licensing policy is in the EAR provision dealing with CC controls. We note there have been no changes in any other reason-based controls, such as the national security (NS) licensing policy, to indicate license application reviews will consider human rights concerns, and as such, we wonder if exporters of non-CC items will completely miss this new license review policy.
According to BIS, the new licensing policy will now allow BIS and other reviewing agencies to consider two factors:
- violations or abuses of human rights by individuals or entities other than the government of the importing country, and
- abuses of human rights by the government in addition to violations of internationally recognized human rights.
What Does This Mean for Exporters?
This Final Rule is in line with the current Administration’s efforts to combat human rights violations, particularly in China, which has been off limits for CC items since the 1989 Tiananmen Square protests.
If you do export CC-controlled items, this Final Rule makes it easier for BIS to deny your license applications. That said, it was not particularly hard for BIS to do this in the past, so it is unclear whether this will have much of an impact on the number of licenses denied.
For the rest of the items on the CCL (except SS-controlled items) the change is more significant and far-reaching. BIS can now deny license applications for non-CC items based on human rights concerns, including those involving censorship, surveillance, detention, or excessive use of force. If you export items – particularly telecommunications and information security and sensors – that require a license and could be used for censorship, surveillance, detention, or use of force (such as arrest), you should anticipate licensing denials for certain countries and regions of the world.
As a practical matter, exporters who export to such countries or regions would be well-advised to conduct additional due diligence on end users and end uses prior to filing an export license application, and should address any potential human rights risks in their license applications.