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Substantial U.S. Export Control Reform Has Finally Arrived

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After several years of developing a new export control system, the U.S. Commerce and State Departments published final rules today that will put substantial reforms into effect. By way of quick review, the purpose of the export control reform effort has generally been to achieve a more efficient allocation of government resources dedicated to restricting the export of sensitive products and technologies and to remove undue burdens on international trade. Practically speaking, the main reform effort has been to revise the regulations so that most items of concern to the U.S. government are controlled under the more permissive Export Administration Regulations ("EAR") and that only items of real military significance are caught under the more restrictive International Traffic in Arms Regulations ("ITAR").

The final rules create a new regulatory framework that is of most immediate benefit to a variety of aerospace suppliers, but the final rules also set the stage for near-term benefits for other industries, including the electronics, satellite, chemical and military vehicle industries. The rules go into effect October 15, 2013.

The rules collectively amount to over 100 pages to be studied, but the main point is that the U.S. government has created a new export control system that could ease compliance for companies exporting products with potential military relevance. Highlights include:

  • Creating a new set of "600 series" Export Control Classification Numbers ("ECCNs") that more objectively and clearly identify whether products and technologies are controlled;
  • Imposing export restrictions on 600 series items that are more proportional to their degree of sensitivity;
  • As of the effective date, implementing new 600 series classifications and controls for aircraft-related parts and technologies;
  • Creating a definition for the term "specially designed," which is also relevant to the determination of whether non-military items are subject to export controls; and
  • Revising the old U.S. Munitions List Category XXI so that it does not provide a virtually open-ended catchall for controlling products and technologies that have some military relevance.

We will have more details on these changes, and other changes due to follow, in the coming weeks.