BIS Final Rule Revises Export/Reexport Controls/Policy for China, Etc. (Part II - Military End Use Controls)

This is Part II of a multi-part series of summaries of this final rule, and includes details on the new military end-use controls for China established by the final rule. See future issues of ITT for additional summaries.

New Military End-Use Controls Imposed on China

BIS' final rule implements new military end-use¹ controls (i.e., license requirements) by adding a new 15 CFR 744.21 which states that in addition to the license requirements for items specified on the Commerce Control List (CCL), any item listed in new Supplement No. 2 to 15 CFR Part 744 (i.e., items subject to the new military end-use control for exports to China) may not be exported, reexported, or transferred to China without a license if, at the time of the export, reexport, or transfer, either:

1. the exporter has knowledge², that the item is intended, entirely or in part, for a military end-use in China; or
2. the exporter has been informed by BIS that the item is or may be intended, entirely or in part, for a military end-use in China.

(BIS may inform an exporter either individually by specific notice, through amendment to the EAR published in the Federal Register, or through a separate notice published in the Federal Register, that a license is required for specific exports, reexports, or transfers of any item because there is an unacceptable risk of use in or diversion to military end-use activities in China.)

BIS cautions that the absence of BIS notification does not excuse the exporter from compliance with the license requirements of 15 CFR 744.21(a).

License Exception GOV still available. Despite these new controls, BIS states that items may be exported subject to the EAR under the provisions of License Exception GOV set forth in 15 CFR 740.11(b)(2)(i) and (ii).

(License Exception GOV authorizes exports and reexports for international nuclear safeguards; U.S. government agencies or personnel, and agencies of cooperating governments; and international inspections under the Chemical Weapons Convention (CWC).)

New export license application procedures. BIS' final rule also imposes new procedures for submitting export license applications for products subject to the new military end-use controls for China. These procedures state that:

When submitting a license application pursuant to 15 CFR 744.21, the applicant must state in the "additional information" section of the BIS-748P (Multipurpose Application) or its electronic equivalent that "this application is submitted because of the license requirement in 15 CFR 744.21 (Restrictions on Certain Military End-uses in the People's Republic of China)."

Either in the additional information section of the application or in an attachment to the application, the applicant must also include all known information concerning the military end-use of the item(s). If the applicant submits an attachment with the license application, the attachment must be referenced in the "additional information" section of the application.

License review standards. New 15 CFR 744.21 outlines the following related license review standards:

Applications to export, reexport, or transfer items subject to the new military end-use license requirements for exports to China will be reviewed on a case-by-case basis to determine whether the export, reexport, or transfer would make a material contribution to the military capabilities of China and would result in advancing the country's military activities contrary to the national security interests of the U.S. When it is determined that an export, reexport, or transfer would make such a contribution, the license will be denied.

(Applications for items requiring a license for other reasons that are destined to China for a military end-use also will be subject to the review policy stated above.)

Applications may be reviewed under chemical and biological weapons, nuclear nonproliferation, or missile technology review policies, as set forth in 15 CFR 742.2(b)(4), 742.3(b)(4) and 742.5(b)(4), if the end-use may involve certain proliferation activities.

List of products subject to the new military end-use license requirements for exports to China. According to a BIS fact sheet and this final rule, the following products and associated technologies are subject to the new military end-use license requirements for exports to China. These products are listed in more detail in new Supplement 2 to 15 CFR Part 744.

Savings Clause

Shipments of items removed from eligibility for a License Exception or for export or reexport without a license (NLR) as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting or reexporting carrier, or en route aboard a carrier to a port of export or reexport on June 19, 2007, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license so long as they are exported or reexported before July 19, 2007. Any such items not actually exported or reexported before midnight on July 19, 2007 require a license in accordance with this final rule.

¹New 15 CFR 744.21(f) defines "military end-use" as: incorporation into a military item described on the U.S. Munitions List (USML) at 22 CFR Part 121; incorporation into a military item described on the International Munitions List (IML) as set out in the Wassenaar Arrangement; incorporation into items listed under ECCNs ending in "A018" on the CCL; or for the "use," "development," or "production" of military items described on the USML or the IML, or items listed under ECCNs ending in "A018" on the CCL. "Military end-use" also means "deployment" of items classified under ECCN 9A991 as set forth in Supplement No. 2 to 15 CFR Part 744.

²15 CFR 772.1 defines "knowledge" as knowledge of a circumstance (the term may be a variant, such as "know," "reason to know," or "reason to believe") as including not only positive knowledge that the circumstance exists or is substantially certain to occur, but also an awareness of a high probability of its existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person and is also inferred from a person's willful avoidance of facts. This definition does not apply to 15 CFR Part 760 (Restrictive Trade Practices or Boycotts).

(See ITT's Online Archives or 06/19/07 news, 07061925, for Part I of BP's summary of BIS' final rule.)

(See ITT's Online Archives or 07/18/06 news, 06071820, for the final part of BP summary of the July 6, 2006 proposed rule, with links to the other parts. See ITT's Online Archives or 11/08/06 news, 06110805, for BP summary of BIS' supplemental guidance on the proposed rule.)

BIS contact - Bernard Kritzer (202) 482-0092

BIS final rule (D/N 061205125-7125-01, FR Pub 06/19/07) available at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-11588.pdf

BIS fact sheet available at http://www.bis.doc.gov/News/2007/06-15-07%20Export%20Rule%20Fact%20Sheet%20-%20FINAL.pdf