The Bureau of Industry and Security adopted two final rules and proposed a third at the end of April. We’ve already covered the military end use/end user license requirement. With apologies for the delay, it’s time to address the other two as well.
License Exception CIV to Be Eliminated
First, License Exception CIV (Civil End-Users) will be eliminated in its entirety, effective on June 29, 2020. This license exception permits unlicensed exports and reexports to Country Group D:1 countries of certain national security-controlled articles, software and technology for use in “civil” (i.e., non-military) applications by “civil” end-users. Transactions where the supplier has knowledge that an “item will be or is intended to be exported, reexported, or transferred (in-country) to military uses or military end-users” are ineligible, and require a license.
BIS explained its action is “due to the increasing integration of civilian and military technology development in these countries of concern.” Such integration makes it difficult for exporters and reexporters to determine whether the end user is eligible for the license exception. BIS also stated it had identified instances of improper diversion to ineligible end users or end uses. To address those concerns, BIS “determined that transactions involving the national security-controlled items currently permitted under CIV should be reviewed by the U.S. Government prior to export, reexport or transfer (in-country).”
This change will apply to the 28 (by my count) Export Control Classification Numbers in the Commerce Control List having the reference “CIV: Yes”. The items affected include high-end microcircuits, field programmable logic devices, digital integrated circuits, semiconductor production equipment and materials, telecommunications items, radar systems and optical equipment. The Country Group D:1 countries include China, Russia and Venezuela.
Changes Planned to License Exception APR
BIS has proposed excluding national security-controlled items destined to Country Group D:1 countries from coverage by license exception APR (Additional Permissive Reexports). Under APR, a U.S. license is not required for reexports of controlled articles if the country of export is a member of the Wassenaar Arrangement identified in Country Group A:1 or Hong Kong, and such country’s own export control authorities have authorized the transaction.
The stated rationale for the proposed change is that “BIS has evidence of differences in licensing review standards for national-security controlled items destined to Country Group D:1, so that countries in Country Group A:1 or Hong Kong may approve a license for the reexport of a U.S.-origin item that would have been denied if exported directly from the United States.” To prevent such transactions from occurring, BIS proposes requiring reexport licenses to “allow the U.S. government prior review of these reexports to ensure that the reexports are authorized consistent with U.S. policy.”
Comments on the proposed rule must be submitted to BIS by June 29, 2020.