On October 22, 2021, the Commerce Department’s Bureau of Industry and Security (“BIS”) published a Proposed Rule to outline potential changes it is considering making to the Export Administration Regulations (“EAR”) in an effort to clarify and expand the restrictions on the availability of License Exception Strategic Trade Authorization (“STA”) for the export, reexport, and in-country transfer of certain items. BIS is seeking public comments on these proposed changes by December 6, 2021.
In a final rule published June 16, 2011, BIS established STA as part of the Obama Administration’s Export Control Reform efforts to authorize exports, reexports, and in-country transfers of certain, mostly military-related items to STA-eligible destinations. Section 740.20(b) of the EAR sets forth restrictions on the use of License Exception STA, including the exclusion from eligibility for STA of certain Category 9 Export Control Classification Numbers (“ECCNs”), namely ECCNs 9D001, 9D002, 9D004, 9E001, 9E002, and 9E003, regardless of destination.
However, the “Special Conditions for STA” paragraphs of each of these six Category 9 ECCNs are not as comprehensive as Section 740.20(b). These paragraphs state that STA eligibility for certain software and technology controlled under the ECCNs is excluded to destinations in Country Group A:6, while the text of Section 740.20(b) excludes STA eligibility for these items regardless of destination. BIS notes this difference “potentially confuses exporters.”
To reduce confusion, BIS proposes clarifying the “Special Conditions for STA” paragraphs of each of the six Category 9 ECCNs. The clarified text would direct exporters, reexporters, and in-country transferors to the Category 9 limitations on the use of STA set forth in Section 740.20(b). BIS maintains this change would not alter license requirements or restrictions.
BIS also proposes two new restrictions on the use of STA as follows:
- restrictions on the use of STA for coating technologies under ECCN 2E003.f when the technology is used for the application of inorganic overlay coatings on gas turbine engine combustors (as it stands, coating technologies under ECCN 2E003.f are not controlled for Significant Items reasons and are eligible for export to certain countries under STA); and
- the exclusion of ECCN 1E001 technology for the “development” or “production” of “equipment and materials specified by ECCNs 1A002, 1C001, 1C007.c, 1C008.a.1, 1C009.b and 1C010.b, .c or .d.” from eligibility for STA. For consistency purposes, BIS also proposes to exclude these same technologies from eligibility for License Exception Technology and Software under Restriction, (Section 740.6 of the EAR).
If you wish to submit a comment on the Proposed Rule or have any questions, please contact any member of our Outbound Trade Compliance team.