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On January 12, 2021, the US Department of Commerce issued a final rule (the “Final Rule”) amending the Export Administration Regulations (“EAR”) to implement recent licensing review policy changes for exports of US-origin unmanned aerial systems (“UAS”), also known as “drones.”  Our prior blog posts on UAS export policy developments are available here and here.  The Final Rule implements the more flexible export license review policy applicable to a specific subset of UAS with maximum airspeeds of less than 800 km per hour, as first announced in July 2020 (“the July 2020 Revised UAS Export Policy”).  The Final Rule does not change UAS export licensing requirements under the EAR or the International Traffic in Arms Regulations.

July 2020 Revised UAS Export Policy

The July 2020 Revised UAS Export Policy announced that a subset of UAS covered by Category I of the Missile Technology Control Regime (“MTCR”) would be treated as though such UAS were covered by MTCR Category II.  Export license applications for MTCR Category I items are subject to a strong presumption of denial, whereas MTCR Category II items are subject to a more flexible case-by-case review policy for export licensing purposes.

Amendments to the EAR

The Final Rule implements the licensing review policy changes announced in the July 2020 Revised UAS Export Policy by amending the missile technology (“MT”) controls in § 742.5 of the EAR.  In particular, section 742.5(b)(1) of the EAR establishes, in relevant part, a case-by-case review policy for applications for the export or reexport of MT-controlled items to determine whether the export or reexport would make a material contribution to the proliferation of missiles.

The Final Rule adds a new note to § 742.5(b)(1) that specifies that UAS with a range and payload capability equal to or greater than 300 km/500kg, but a maximum true airspeed of less than 800 km/hr, will be subject to case-by-case review policy.  Additionally, “parts,” “components,” and other MT-controlled items for the design, “development,” “production,” or “use” of such UAS systems will also be subject to the case-by-case licensing review policy.  Applications for exports/reexports of UAS falling within this subset will continue to be subject to a presumption of denial if they are intended to be used for WMD purposes, military activities contrary to US national security, or if there is a high risk that they will be diverted to such end uses.

Implications

The licensing review policy changes implemented by the Final Rule are motivated by the rapid evolution of UAS technology in recent years.  The recent UAS export policy reforms are intended to adjust the United States’ UAS export policy in recognition of the growing commercial uses of UAS, to increase US manufacturers’ share of the global UAS export market (which is increasingly open to competitors from non-MTCR countries), and to enhance security relationships with US partners.

The Final Rule also coincides with other significant changes in the UAS regulatory climate.  The Federal Aviation Administration published two final rules on January 15, 2021 that require UAS to have remote identification and authorize UAS operations at night and over people.  More information about these developments is available on our UAS blog here and here.

Author

Jennifer Trock is chair of Baker McKenzie's International Commercial Practice Group and a member of its Global Aviation Group in Washington, DC. She co-leads the Firm's unmanned aircraft systems (UAS) focus team and is the Chair of the ABA's Forum Air & Space Law. Jennifer has been recognized by Chambers USA, Aviation Regulatory – National (2007-2019) and has also received honors from Euromoney’s Guide to the World’s Leading Aviation Lawyers, Infrastructure Journal and The Washingtonian.

Author

Alison Stafford Powell has considerable experience counseling US and non-US companies on cross-border outbound trade compliance in the areas of export controls, trade and financial sanctions, anti-terrorism controls, anti-corruption and anti-money laundering rules, US anti-boycott laws, and US foreign investment restrictions under the Exon-Florio Provision. With a background also in EU and UK trade restrictions, she routinely advises non-US companies on reconciling US and EU trade regulations and on the extra-territorial impact of US trade restrictions. She is a dual US/English qualified lawyer and has worked in the Firm’s London, Washington, DC and Palo Alto offices since 1996.

Author

Inessa Owens is an associate in the Washington, D.C. office and member of the Firm’s International Trade practice group. She focuses on outbound trade compliance issues, including compliance with the Export Administration Regulations, anti-boycott rules, and economic sanctions administered by the US Treasury Department’s Office of Foreign Assets Control, including those targeting Cuba, Iran, North Korea, Syria, and Russia. She has worked with clients in diverse industries that include finance, pharmaceuticals, and energy.

Author

Ryan Poitras is a member of the Firm's International Trade Practice Group in our Washington, DC office. He joined the Firm as a summer associate in 2018 and became a full-time associate in 2019. Ryan’s experience also includes working as an intern with the Office of the US Trade Representative.