Commerce Department's Press Release on New License Exception STA

Below is the press release issued today by the U.S. Department of Commerce announcing the issuance of the final rule on License Exception Strategic Trade Authorization (STA) that is the subject of the previous post. I will leave it to readers to determine whether License Exception STA is actually a "major" or "significant" step forward in the export control reform process.

Commerce Department Implements New Export Control Rule to Enhance National Security, Facilitate Trade

Major step forward in President's reform initiative to modernize export control system

Washington, DC (MMD Newswire) June 16, 2011 - - U.S. Commerce Secretary Gary Locke today announced the next step in President Obama's export control reform (ECR) initiative aimed at strengthening U.S. national security and ensuring the competitiveness of American companies abroad. The Department will implement today a new license exception, Strategic Trade Authorization (STA), that will facilitate exports between the United States and partner countries while enhancing the competitiveness of key industrial base sectors.

The Export Control Reform Initiative aims to build higher fences around a core set of items whose misuse can pose a national security threat to the United States. By facilitating trade to close partners and allies, the Commerce Department can better focus its resources ensuring the most sensitive items do no end up where they should not.

"This is an important first step towards creating a system that addresses the serious threats we face in today's changing economic and technological landscape. This new license exception will eliminate the need for U.S. exporters to seek licenses in nearly 3,000 types of transactions annually, affecting an estimated $1.4 billion in goods and technology," Commerce Secretary Gary Locke said. "The new license exception will allow us to focus our resources on items that pose a significant national security risk and help facilitate U.S. exports."

"This is a significant step in President Obama's Export Control Reform Initiative which enhances our national security and makes U.S. exporters more competitive by easing their licensing burden for exports to partners and allies," said Under Secretary of Commerce for Industry and Security Eric L. Hirschhorn.

Items such as electronic components for use on the International Space Station, cameras for search and rescue efforts for fire departments, components for civil aviation navigation systems for commercial aircraft, airport scanners, and toxins for vaccine research will be eligible for the new license exception.

At the same time, the license exception establishes new safeguards designed to ensure Department of Commerce approval is obtained before controlled items exported under the exception are re-exported outside of authorized destinations.

To see a copy of the regulation published in the Federal Register Notice, go to http://www.gpo.gov/fdsys/pkg/FR-2011-06-16/pdf/2011-14705.pdf.

Background

The President has directed a broad-based interagency reform of the U.S. export control system with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats and adapting to the changing economic and technological landscape.

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Bureau of Industry and Security Unveils New License Exception Strategic Trade Authorization (STA)

As part of the ongoing export control reform process, the Bureau of Industry and Security today published in the Federal Register (PDF version of notice) the anticipated new license exception Strategic Trade Authorization (STA).

Under the U.S. Export Administration Regulations, a license exception authorizes the export or reexport of eligible products, software and technology without having to submit a license application and obtain a license from BIS as long as the specific conditions of the license exception are followed.

While License Exception STA will take effect immediately for eligible products, software and technology, as discussed below, it will take some time before the Automated Export System (AES) is modified by the Census Bureau to add the appropriate code in AES.

The scope of the final version of License Exception STA was significantly changed from the version included in the proposed rule published in December 2010. For example, the list of countries eligible to export controlled items that are considered to be less sensitive items was narrowed from 125 countries to eight. Although the final rule does not mention the reason, Ukraine was removed from the list of STA eligible countries.

In addition, based on input received during the public comment period BIS has clearly indicated that License Exception STA can be used for "deemed exports."

According to the final rule, License Exception STA can only be used to export products, software and technology in specific Export Control Classification Numbers (ECCNs) on the Commerce Control List without a license to the following 36 countries (known as 740.20(c)(1) destinations):

Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

ECCNs eligible to be exported to these 36 countries are indicated by the designation "STA" in the License Exception section of the particular ECCN.

For certain ECCNs involving less sensitive items, software and technology, the following eight additional countries (known as 740.20(c)(2) destinations) are eligible for license exception STA shipments:

Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan.

However, items controlled for national security reasons are not eligible to be exported under STA to these eight countries and are indicated by "exclusion paragraphs" in the specific ECCN text. 

In addition, items on the Commerce Control List that are subject to control for encryption (EI), short supply (SS), surreptitious listening (SL), missile technology (MT), chemical weapons (CW), and human rights reasons are not eligible for License Exception STA because of various requirements imposed by statutes, treaties or U.S. implementation of international commitments.

The final rule made some favorable changes to the notification requirement contained in the proposed rule. However, the following three conditions will apply to exports, reexports and transfers made under STA:

Condition 1. The consignee must be furnished with the ECCN that applies to each item transferred under License Exception STA. The ECCN notification needs to be made only once for each item to be shipped. As long as the ECCN remains accurate, it does not need to be refurnished for subsequent shipments.

Condition 2. Consignees must provide, prior to the shipment, the following written statement identifying the items to be shipped and restating the ECCN(s) to be shipped.

[CONSIGNEE NAME]:
(i) Is aware that [INSERT DESCRIPTION AND APPLICABLE ECCNS OF ITEMS TO BE SHIPPED] will be shipped pursuant to License Exception Strategic Trade Authorization (STA) in § 740.20 of the United States Export Administration Regulations (15 CFR 740.20); (ii) Has been informed of the ECCNs noted above by [INSERT NAME OF EXPORTER, REEXPORTER OR TRANSFEROR];
(iii) Understands that items shipped pursuant to License Exception STA may not subsequently be reexported pursuant to paragraphs (a) or (b) of License Exception APR (15 CFR 740.16(a) or (b));
(iv) Agrees not to export, reexport or transfer these items to any destination, use or user prohibited by the United States Export Administration Regulations; and
(v) Agrees to provide copies of this document and all other export, reexport or transfer records (i.e., the documents described in 15 CFR part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7.

The consignee’s written statement must be maintained as well as a log or other written record that identifies each shipment associated with a particular statement.

Condition 3. The consignee must be notified in writing that the shipment is made pursuant to License Exception STA. The notice must either specify which items are subject to License Exception STA or state that the entire shipment is made pursuant to License Exception STA. The notice must clearly identify the shipment to which it refers. The written notice may be conveyed by paper documents or by electronic methods such as facsimile or email.

For "deemed exports," the ECCN notification, consignee statement, and destination control statement requirements are replaced with a requirement that the releaser of the technology or source code notify the recipient in writing of the restrictions on further release and other requirements.

As with all BIS license exceptions, the applicable license exception symbol and code will have to be reported in Electronic Export Information (EEI) filings, regardless of the value of the shipment. The U.S. Census Bureau will soon modify the Automated Export System (AES) by adding a new License Type Code for License Exception STA.

BIS has previously indicated that License Exception STA has the potential to eliminate approximately 3,000 individual licenses that BIS issued last year. Given the narrowed scope of the final version of STA, this number is likely to be reduced. Nevertheless, even if a smaller number of individual licenses do not have to be obtained by U.S. exporters, License Exception STA is a positive development.

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