By Jim McShane, Export Solutions

The transition of Defense Articles from the ITAR (USML Categories I, II, and III) to the Export Administration Regulations (EAR) is here. The Final Rule published by Department of Commerce and the Final Rule published by Department of State will be effective on March 8, 2020.

Are you ready? The regulatory language has been circulated for comment, revised and re-revised for years, but now it’s final.

Are you prepared? We are!

Export Solutions Inc. has been preparing for these changes all along. We have established guidelines, published blogs and provided assistance to our clients and to anyone who has had questions.

But how exactly can we assist? We are prepared to assist in the below areas and more:

  • Classification – Did the Defense Article you manufacture, export or broker transition to the EAR and if so, what is the new classification? There will be seventeen (17) new Export Control Classification Numbers (ECCNs) within the Commodity Control List (CCL) to accommodate certain items being transitioned from the ITAR. Some of the current ECCNs for commodities on the CCL are being removed because they are included elsewhere under preexisting or new ECCNs. Some of the current ECCNs are being revised to specifically handle the addition of previously classified items on the US Munitions List. Export Solutions can assist you in your classification process and, more importantly, in understanding the requirements related to the ECCNs. We are already assisting clients in reviewing their product lines and will continue to do so.

 

  • Commodity Jurisdictions- If there is a particularly complicated/complex issue with the classification, Export Solutions has the experience and expertise to assist with preparing and submitting Commodity Jurisdictions (CJs) through DECCs and/or Commodity Classification Requests (CCR) through SNAP-R. We are available to answer reviewer questions and to help you understand the determination received.

 

  • Licensing – Whether ITAR or EAR, we can prepare the license, and, in the case of BIS license applications, submit your applications. Companies who have “lived in the ITAR world” are going to need to understand the intricacies of BIS licensing.  While touted as the “less burdensome licensing system”, BIS licenses still need to be correctly filed. With the revisions to the CCL of USML categories, the EAR will require (as the ITAR currently does) that prior to review of an application for export or re-export that an import permit (or copy thereof) be obtained if the importing country requires such permits for import of firearms.

 

  • Transition of Licenses – Under Export Control Reform (ECR), there used to be a “grace period” of two years to continue to use existing licenses even if the item had transitioned. This “grace period” was extended to 3 years by DDTC. However, for USML Categories I-III, DDTC has provided slightly different guidance for existing licenses approved for items that were or that remain classified as USML Category I-III. Remember all applications submitted to DDTC after March 8th, including amendments, which are not identified in a (x) paragraph entry, will be Returned Without Action with instructions to contact the Department of Commerce. Also, BIS will not accept new applications for items that have transitioned to the EAR until after the date of March 8th. One more thing, if you decide to leave your ITAR licenses, which will now contain EAR-controlled commodities, in place, remember any limitation, proviso, or other requirement imposed on the DDTC authorization will remain in effect – so you could end up with provisos on commodities that might not have “conditions” imposed had they been applied for as a new BIS license. Do you understand when and how you must apply for and receive approval for those commodities that are now under the jurisdiction of the EAR? Export Solutions does and we can help.

 

  • Agreements – Technical Assistance, Manufacturing License and Warehouse and Distribution Agreements are unique to the ITAR; there is not an equivalent in the EAR. DDTC has advised that Agreements containing items that remain on the USML and commodities that transitioned to the EAR will remain valid until expired, unless they require an amendment, or for a period of three years from the effective date of the relevant final rule, whichever occurs first, unless otherwise revoked, suspended, or terminated. However just like a license, any limitation, proviso, or other requirement imposed will remain in effect on the “new” EAR commodities and technology. After 3 years, the agreement can remain valid beyond that timeframe with the approval of an amendment. If the agreement was originally approved only for commodities that transitioned to the EAR, it can only remain valid for 3 years and then BIS approvals must be received. Sound confusing? Not for Export Solutions! We have been through this with every USML category that has transitioned and the revisions after those transitions. We are well placed to assist and ease the transitions without disruptions to your business.

 

  • Exemptions and Exceptions – Understanding what items are still allowed to be exported under an exemption and what items will now require exceptions is going to be hardest for many exporters.  It is not a one-for-one change. There are some major differences between what was allowed under an exemption and what will be allowed under an exception.

 

  • Registration – Export Solutions is an expert at providing solid advice as to whether a manufacturer or exporter still needs to Register or if they can let their Registration lapse. This is a situation that needs to be approached cautiously.  DDTC’s policy that one transaction is sufficient to require Registration may result in many manufacturers/exporters who believe they could save $2,250+ a year, being very surprised. All it takes is one item remaining on the ITAR and the Registration must continue. DDTC did take into consideration companies who are currently registered, but after the effective date of the Final Rule will no longer be required to register. DDTC has advised that companies whose registration would need to be renewed between January 23rd and March 8th can have their current registration extended (at no additional charge/registration fee). A simple request to Registration and Analysis will accomplish this. We can help. However, please keep in mind that if you wish to continue using ITAR export approval for items that have transitioned to the EAR after March 8th, you must renew and maintain your registration.

 

  • New Registration Form- Speaking of Registration, what about the new Registration Form that asks if the company has “written ITAR Compliance policies?” Do you have “written ITAR Compliance policies?” For many reasons, it is best that you do have these, so you can answer the question “yes” and avoid possibly being required to develop one. Export Solutions can help with your implementation of our “ITAR Compliance Policy”.

 

  • Compliance Programs – Modifying a Compliance Program is not normally complicated, unless the compliance program was designed for ITAR only.  Modifying an ITAR Compliance Program to include EAR, as well as ITAR, is going to be a necessity for those companies that previously only operated under one jurisdiction and now must operate under two jurisdictions.

 

  • Automated Export System (AES) – Companies will need guidance on filing AES correctly for EAR products and exceptions. The EAR will expand the data elements required as part of an AES filing for these items. We can help you be prepared for this.

 

  • Defense Services – There is no equivalent in the EAR; however, some Defense Services will remain under ITAR control. We are here to assist you to expertly analyze the activity and provide the proper guidance.

The transition of Defense Articles and Technical Data to the EAR has been long awaited and preparations should have begun long ago. As stated, Export Solutions has been preparing for years. Export Solutions has been providing advice and guidance to hundreds of companies who manufactured and/or exported items formerly on the Munitions List that, through the Export Control Reform Initiative, have transitioned to the Commodity Control List.

We are here to help you if you need it. Contact Export Solutions for a free consultation.

Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.