President Obama's Export Control Reform Initiative Continues with Final Revisions to Four U.S. Munitions List Categories and Proposed Changes to an Additional One

by BakerHostetler

On July 8, 2013, the U.S. Departments of State and Commerce published final rules (78 Fed. Reg. 40892 and 40922), effective in 180 days (January 6, 2014), transferring export control jurisdiction over certain items previously classified in four categories of the U.S. Munitions List (USML) from the Department of State to the Department of Commerce, and making certain clarifications to the rules regarding exports of these items. Eight out of 21 USML Categories have now been finally revised under the President's ongoing Export Control Reform Initiative, with additional categories likely to be finally revised in August/September. Moreover, on July 25, 2013, the two departments issued proposed rules (78 Fed. Reg. 45018 and 45026) that would move certain military electronics items from USML Category XI to Commerce Department export jurisdiction.

The approach taken in these new final and proposed rules generally follows that set forth in the April 16, 2013, Federal Register notices issued by those departments transferring certain items in USML Category VIII (Aircraft and Related Articles) from State to Commerce Department export control jurisdiction, amending USML Categories XVII (Classified Articles) and XXI (Articles, Technical Data and Defense Services Not Otherwise Enumerated), establishing a new USML Category XIX (Gas Turbine Engines and Associated Equipment), setting forth a definition of the key term "specially designed," and establishing transition rules. For a full description of the changes made by those notices, see our May 15, 2013 Executive Alert.

A summary of some of the key changes in the July 8 final rules, along with an evaluation of their impact, as well as a description of the proposed changes in the July 25 Federal Register notices, follow.


The revisions to this category include removal from USML control of harbor entrance detection devices, developmental vessels (and "specially designed" parts and components therefore) identified in the relevant Defense Department contract as being developed for both military and civilian applications, demilitarized (but not decommissioned) vessels of war manufactured prior to 1950 and unmodified since 1949, and generic parts, components, accessories and attachments specifically designed or modified for a defense article in this category, regardless of their significance to maintaining a military advantage for the United States. Those vessels of war and related parts and components that continue to merit control under the USML, including, among others, certain hulls or superstructures, energy and active protection systems, shipborne auxiliary systems for chemical/biological warfare, radiological and nuclear applications, control and monitoring systems, nuclear propulsion plant machinery and tooling, catapults for launching aircraft or arresting gear for recovering aircraft, and mine sweeping and mine hunting equipment are specifically identified in revised Category VI and in new Section 121.15 of the International Traffic in Arms Regulations (ITAR).

Other parts and components "specially designed" for items in this category and for related end items transferred to Commerce Department export jurisdiction, as well as related test, inspection and production equipment, materials, software and technology, will become subject to the new "600" series under the Commerce Department's Commerce Control List (CCL) Category 8. Transitioning parts and components related to items in this USML Category (as well as to items in the other categories below) that are not "specially designed" (see the definition of this term below) would be classifiable under their own pre-existing non-"600" series ECCN, or under EAR99.

Transitioning parts, components, accessories and attachments "specially designed" for surface vessels of war, classified under new ECCN 8A609 and USML Category VI, are divided into two sections. The "y" series section (ECCN 8A609.y) sets forth a specific listing of certain such items, including, inter alia, certain filters, hoses, fittings, couplings and brackets, emergency lighting and gauges and indicators. These specifically identified items will require licenses for export to only a very limited number of countries subject to anti-terrorism export controls (the U.S.-embargoed countries of Cuba, Iran, North Korea, Sudan and Syria).

The "x" series section (ECCN 8A609.x) covers other unspecified transitioning parts, components, accessories and attachments "specially designed" for surface vessels of war and related items controlled under USML Category VI or ECCN 8A609. These other parts, as well as finished items transferred to the new ECCN will require a license for export to all destinations, other than Canada, but will be eligible, in certain cases, for export, without a license, under License Exception STA, to 36 countries, including NATO members and certain other countries friendly to the United States.

The "x" subcategory sets forth a more detailed version of a similar existing ITAR rule regarding forgings, castings and other unfinished products. It provides that where those items, such as extrusions and machined bodies, have reached a stage in manufacturing such that they are clearly identifiable by mechanical properties, material composition, geometry or function to items controlled under subcategory "x," they are also classifiable in that subcategory.


The new rules also move from USML to CCL jurisdiction most unarmored and unarmed military vehicles, trucks, trailers and trains (unless "specially designed" as firing platforms for weapons above .50 caliber) and armored vehicles (either unarmed or with inoperable weapons) manufactured before 1956 and unmodified since 1955. Armored vehicles subject to USML control will not include those that are merely capable of being equipped with add-on armor.

As with the changes to USML Category VI, USML Category VII will no longer cover generic parts, components, accessories and attachments for military ground vehicles regardless of their significance. However, certain specifically enumerated parts, components, accessories and attachments, including, among others, armored hulls, armored turrets and turret rings, active protection systems, "specially designed" composite armor parts and components, spaced armor components and parts, reactive armor parts and components, electromagnetic armor parts and components, automatic elevating systems, and certain fire control and other computers, would remain classified on the USML.

The finished goods and related test, inspection, and production equipment, materials, software and technology, as well as generic parts, components, accessories and attachments and other items in this category moved to Commerce Department jurisdiction are set forth in the "600" series of CCL Category 0. ECCN 0A606.y identifies certain specific parts "specially designed" for ground vehicles under USML Category VII or those moved to Commerce Department jurisdiction, including, among others, brake discs, drums, and rotors, alternators and generators, axles, batteries, bearings, cables, connectors, cooling system hoses, various filters, gaskets and o-rings, certain hydraulic and pneumatic system parts, lighting systems, tires and certain windows. As with other "y" series parts and components, these items will require export licenses to only a very limited number of destinations subject to anti-terrorism export controls.

Other non-specifically enumerated ground vehicle "specially designed" parts and components transitioning from State to Commerce Department controls will be classified in ECCN 0A606.x, and will be subject to export licensing to all destinations, except Canada, although export under License Exception STA will be available in many cases.


As with the changes to the other USML Categories, the new rule moves certain items from State to Commerce Department export jurisdiction, including certain structural materials, self-contained diving and underwater breathing apparatus, metal embrittlement agents and developmental armor identified in the relevant Defense Department contract as being developed for both civil and military applications. One Commerce Department ECCN for transitioning items (0A617) does not contain any "x" subcategory for unspecified transitioning parts and components, but does contain a listing of "y" subcategory items, including, inter alia, certain "specially designed" construction equipment and related parts and components, and "specially designed" containers, field generators, and power controlled searchlights and related control units.


The new rules move submarines and nuclear propulsion power plants for submersible vessels from USML Category VI to Category XX. They also move to Commerce Department export jurisdiction submarine rescue vehicles, Deep Submersible Vehicles, submersible and semi-submersible vessels "specially designed" for cargo transport, harbor maintenance detection devices, certain diesel engines, submarine and torpedo nets, and certain rebreathing apparatus.

The extent of movement of parts and components for items in this category from State to Commerce Department control is more limited than for such items in other categories. Parts, components, accessories, attachments and associated equipment, including production, testing, and inspection equipment and tooling "specially designed" for the items identified in this USML Category remain subject to State Department export controls. No specific listing of such parts, components, parts and attachments is set forth on the USML.

ECCN 8A620.y identifies certain specific submersible vessel parts, components, accessories and attachments "specially designed" for submersible vessel end items to be placed under Commerce Department control. These include, inter alia, such items as filters, hoses, lines, fittings, couplings, and brackets for pneumatic, hydraulic, oil and fuel systems, lavatories, potable water tanks, filters, valves, hoses, lines, fittings, couplings and brackets, emergency lighting, and gauges and indicators which, as with other "y" series items, will become subject to export licensing for shipment to only a limited number of destinations subject to anti-terrorism controls.

New ECCN 8A620.x covers non-specifically enumerated transitioning parts, components, accessories, and attachments and related forgings castings, and other unfinished items (as described above) that are "specially designed" for submersible vessel items transferred to Commerce Department jurisdiction (other than submersible and semi-submersible vessels "specially designed" for cargo transport and related parts and components, and other "specially designed" parts, components, accessories and attachments covered under ECCN 8A620.y) and will also be eligible, under certain conditions, for export under License Exception STA.


The July 25, 2013 proposed regulations (which represent a second issuance of proposed regulations in this area) would, among other things, move to a new Commerce Department ECCN (3A611) a large group of electronic items and (in companion ECCNs) related test, inspection and production equipment, software and technology) previously controlled under USML Category XI and believed to be inherently military or otherwise exclusively designed and manufactured for military use, including, inter alia, any radar, telecommunications, acoustic or computer equipment, end items or systems "specially designed" for military use that are not enumerated in any USML Category or controlled by a "600" series ECCN, certain "microwave monolithic integrated circuits" (MMICs), power amplifiers, discrete microwave transistors, high frequency surface wave radar, application specific integrated circuits and programmable logic devices for "600" series items, PCBs and populated circuit card assemblies for which layout is "specially designed" for "600" series items, and multichip modules for which pattern or layout is "specially designed" for "600" series items.

In addition, a large number of specific parts, components, accessories and attachments "specially designed" for 3A611 products, including, among others, CRTs, electrical connectors, electrical fuses (other than those "specially designed" for explosive detonation), heat sinks, potentiometers, rheostats, solenoids, trackballs, electric transformers and wave guides would be included in ECCN 3A611.y and would be eligible for export without a license to all destinations, except the anti-terrorism destinations. Other non-enumerated parts, components, accessories and attachments, like the end items in this ECCN, "specially designed" for items in USML Category XI would be covered by subcategory "x" and would continue to require export licenses for shipments to all destinations, except Canada; although in many cases, they would be eligible for shipment under License Exception STA.

License Exception STA would not be available for shipments of ECCN 3A611.x software and technology (other than build to print software and technology) for (i) helix traveling wave tubes, (ii) transmit/receive or transmit modules, (iii) MMICs and (iv) discrete microwave transistors. Electronic parts, components, accessories and attachments "specially designed" for military use that are not enumerated in a USML Category, but are within the scope of a "600" series ECCN would be controlled by that "600" Series ECCN.

Comments on the revised proposed rules are due by September 9, 2013. The State and Commerce Departments issued proposed regulations for items in this area a second time, in part, because they are specifically seeking public comment on a number of changes the proposed regulations would make. This presents an opportunity for exporters of military electronic items to have a real impact on the regulatory process.


The new final rules will continue the significant reduction in license application requirements for exporters begun with the April 16, 2013 Federal Register notices, either by essentially decontrolling, for export to most countries, a substantial number of parts and components (as well as related test, inspection and production equipment, software and technology) for items that have, heretofore, been subject to State Department export licensing for shipment to nearly all destinations, or by making those parts and components and the end items into which they are incorporated eligible for shipment, without an export license, to 36 countries, including NATO members and certain other friendly countries under License Exception STA. The items remaining on the USML in the subject categories are generally those that either are (i) inherently military or (ii) if of a type common to civil applications, possess parameters or characteristics that provide a critical military or intelligence advantage to the United States and are almost exclusively available from the United States.

The new final rules should also ease export control requirements for re-exports of foreign-origin items made with US-origin parts and components. Under existing law, any incorporation of a State Department-controlled item into a foreign-made product, no matter how small a percentage that item represents of the foreign product's total value, will make that foreign product subject to U.S. re-export licensing requirements pursuant to the State Department's "see through" rule. This has resulted in many foreign companies "designing out" U.S. content in the products they manufacture.

However, with most parts and components for military items continuing to be transferred to the jurisdiction of the Commerce Department, foreign-origin products made with such parts and components, in most cases (other than in connection with shipments to U.S. arms-embargoed countries, such as China, to which no de minimis rule will be applied), will become exempt from U.S. export licensing requirements if the U.S.-origin content represents 25 percent, or less, of the value of the foreign-origin finished product.

Finally, instead of the generally subjective evaluation of the classification status of parts, components, accessories and attachments used for military items under the State Department's existing "specifically designed," "predominant civil applications" and "form, fit and function" tests, many such items moved to the Commerce Department's jurisdiction are specifically identified in a positive list format in the applicable ECCN "y" subcategory/series.

That having been said, by relying extensively on a "specially designed" concept (albeit one that is more objective than the State Department's current "specifically designed, developed, configured, adapted, or modified" test) to determine State/Commerce Department licensability for many parts and components, including the ones in the CCL's "x" series, the new rules may continue to pose self-classification challenges for exporters. The new "specially designed" definition, set forth in substantially similar form in the State and Commerce Department Federal Register notices of April 16, 2013 (78 Fed. Reg. 22660 and 22740), is based on a "catch" and "release" approach. Under this approach, an item is broadly "caught" as being "specially designed" if it:

  1. As a result of "development," has properties peculiarly responsible for achieving or exceeding the performance levels, characteristics or functions in the relevant ECCN or USML paragraph; or,
  2. Is a part, component, accessory, attachment or software for use in, or with, a commodity or defense article enumerated or otherwise described on the CCL or USML.

However, parts, components, accessories or attachments are "released" from the scope of the definition, and are thus, not considered "specially designed," if any of the following six situations exist:

  1. They are described in an ECCN paragraph that does not contain a "specially designed" control parameter or they have been found to be classifiable under EAR99 in a Commodity Jurisdiction/CCATS determination.
  2. They are a fastener (e.g., screw, bolt, nut, nut plate, stud, insert, clip, rivet, pin), washer, spacer, insulator, grommet, bushing, spring, wire or solder.
  3. They have the same function, performance capabilities and the same or equivalent form and fit, as a commodity or software used in, or with, an item that is, or was, in production and is either not enumerated on the CCL/USML, or is described in an ECCN controlled only for anti-terrorism reasons.
  4. They were, or are, being developed with knowledge that they would be for use in, or with, both USML and non-USML items/commodities or software described in an ECCN, and also in EAR99 commodities or software, or commodities or software controlled only for anti-terrorism reasons.
  5. They were, or are, being developed as a general purpose commodity or software, without knowledge they would be used in, or with, a particular commodity or type of commodity; or
  6. They were, or are, being developed with knowledge that they would be for use in, or with, commodities or software described in an ECCN controlled for anti-terrorism reasons only, and also EAR99 commodities or software, or exclusively for use in, or with, EAR99 commodities or software.

While some of these "release" criteria, e.g., no. 2, are objective and relatively straightforward and easy to interpret, others, such as no. 3, are more subjective and harken back to some of the prior "form, fit and function" criteria, which have heretofore been used by the State Department to evaluate export control jurisdiction. Moreover, in order to use "release" criteria nos. 4, 5 or 6, documents contemporaneous with the item's development must exist and be maintained, thus potentially re-raising the "design intent" criteria concerns that have proved, in the past, so very difficult to establish, in some cases.

The 180 day period provided before the final rules become effective provide an opportunity for exporters of items covered by the new rules to review their existing export classifications and make whatever compliance adjustments may be necessary. Considering the scope of the changes being made, particularly the extensive use of the "specially designed" term, exporters need to devote their time and attention to these matters promptly.

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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