BIS, State Release Proposed USML-CCL Changes to Spacecraft in Latest Move for Export Control Reform

The proposed rule covers USML Category XV: spacecraft and related items. BIS is proposing to create four new “500 series” Export Control Classification Numbers, to describe Export Administration Regulations controls over items that no longer warrant control in Category XV of the USML. The rule also proposes amending the related controls paragraph of 18 other ECCNs, revise cross references to the USML for the Category XV items moving to the CCL, and add a new “500 series” definition to section 777.2 of the EAR.

BIS said it would be inappropriate to use the “600 series” to classify these items, since that series is by definition composed of munitions items. Many items proposed to be moved in the rule have zero military or intelligence applications, making it “unnecessarily complicated and confusing” to move certain spacecraft to the new 600 series ECCNs, BIS said. “The creation of a new series would provide a place for ‘spacecraft’ systems and associated equipment transferred from the USML, and would allow BIS to apply the appropriate controls to these items.”

The order of review for the new “500 series” is, however, the same as “600 series” ECCNs, the rule said. To determine whether an item now controlled under Category XV would be EAR controlled, first look to the new 500 ECCNs. If the item is not controlled there, then look to the remaining ECCNs in the CCL to determine whether the item is on the CCL, or an EAR99 item, the rule said.

All the new ECCNs would be subject to national security, regional stability and antiterrorism controls. In specific cases, some of the items would be subject to missile technology controls. The new ECCNs are:

• 9A515: different paragraphs would control “spacecraft,” including satellites, manned or unmanned space vehicles not enumerated in USML Category XV; specific ground control systems and training simulators; certain radiation hardened microelectronic circuits that are specially designed for USML defense article, “600 series” items, or certain items controlled by this ECCN. Space qualified parts, components, accessories and attachments would also be controlled.
• 9B515: controls test, inspection, and production equipment specially designed for production or development of commodities listed in the previous ECCN or USML Category XV; equipment, cells, and stands specially designed for testing, analysis and fault isolation of the same commodities; environmental test chambers capable of specific pressures and their specially designed components.
• 9D515: controls software specially designed for the development, production, operation, installation, maintenance, repair, overhaul, or refurbishing of commodities controlled by ECCNs 9A515 and 9B515.
• 9E515: technology required for the development, production, operation, installation, maintenance, repair, overhaul or refurbishing of items controlled by ECCNs 9A515, 9B515, or 9D515.

State’s proposed rule also makes revisions to ITAR section 124.1(a), which describes approval requirements of manufacturing license agreements and technical assistance agreements. The rule proposes to remove the requirement of State approval for the provision of a defense service using public domain data, or data otherwise exempt from ITAR licensing requirements. The rule also proposes to remove the requirement for approval for training of foreign military forces. Sections 124.2(a) and (b) are deleted in the proposed rule, because the provisions described in them are no longer defense services.

State’s proposed rule revises specific articles within USML Category XV to accommodate the proposed change, limiting the scope of USML-controlled items. The rule also proposes a new “defense services” definition, using comments from a 2011 proposed rule (see 11041323). The definition is split into what is a defense service and what is not a defense service. According to the rule, a defense service is:

• furnishings of assistance (including training) using other than public domain data
• integrating items into defense articles
• furnishing of assistance (including training) to a foreign person, regardless of whether technical data is transferred, in the tactical employment of a defense article
• conducting direct combat operations for a foreign person
• furnishing of assistance (including training) in the integration of a satellite or spacecraft to a launch vehicle
• furnishing of assistance (including training) in the launch failure analysis of a satellite, spacecraft or launch vehicle

The proposed rule includes a new clarification on the definition of “integration” in response to comments: it is not the same as “stowage.” The proposed rule also clarifies the difference between “integration” and “installation.” The latter means the act of putting something in its place, and does not require changes or modifications to the item where it is being installed.

State also responded to comments about whether companies will have to amend approval agreements for activities that may no longer be considered defense services: such companies will not have to submit amendment requests, but they should still contact State or Commerce “for any necessary clarification of their circumstances and which authorizations are required,” the rule said.

In the proposed exclusions section of the defense services definition, the proposed rule includes a change in wording to “natural U.S. person,” instead of the previous “U.S. citizen” phrasing, to ensure that categories of U.S. employees are not ruled out. The proposed rule also said that two U.S. persons do not constitute a defense service. The proposed rule also clarifies that servicing of EAR items is not a defense service, and that the items listed in the proposed exclusions section are not an exhaustive list. “Rather, the paragraph is meant to highlight those services about which the Department has received, or anticipates receiving, inquiries regarding their classification.” State said it will address the answers to some comments in future proposed rules, including whether individual persons may be required to register with State, and circumstances when USML articles are incorporated or installed into CCL items.

Comments on both proposed rules are due July 8 and can be submitted to www.regulations.gov. Read State’s proposed rule (here) and the BIS proposed rule (here).