US, EU Should Better Harmonize Export License Exceptions, Semiconductor Industry Says
The U.S. and the European Union should better align their export license exceptions, export controls and policies to avoid “unnecessary friction on trade” between the two sides, particularly surrounding chip equipment, the Semiconductor Industry Association said. The group said American semiconductor companies depend on overseas markets in Europe, and regulatory harmonization could help to “level playing fields with respect to export controls, particularly their scope, application, and enforcement.”
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SIA -- which submitted the comments to the Bureau of Industry and Security this month to outline priorities for cooperation under the U.S.-EU Trade and Technology Council (see 2111290014 and 2201180062) -- stressed that better coordination on license exceptions is critical. The association specifically pointed to the EU’s EU001 export authorization and the U.S.’s License Exception STA (Strategic Trade Authorization), both of which are intended to reduce licensing obligations on certain dual-use trade with close allies.
But in practice, the two exceptions have “significantly different scopes” for covered and excluded items, eligible countries and conditions for use, SIA said. “It would be a significant and massively complex exercise to list out and chart the dozens of variations between EU001 and STA.”
SIA suggested that the TTC’s export control working group start with a “clean slate” by assuming all trade in dual-use goods between the two countries is permitted, and then single out which items may need to be subject to more strict licensing policies. This strategy could solve many of the current differences between the two authorizations, which could be “the result of legacy ad hoc and uncoordinated decisions,” SIA said. “It makes more sense then to decide which specific items and destinations among the U.S. and the EU member states warrant additional controls and then work together to identify those items as carve-outs from a broad and largely harmonized EU001/STA authorization.”
Similarly, the U.S. and the EU should harmonize their other license exceptions or work to create authorizations in the EU where there isn’t a “direct counterpart” to a U.S. exception, SIA said. The group specifically pointed to License Exception LVS (limited value shipments), TSR (technology and software under restriction), RPL (replacement parts), TSU (technology and software unrestricted), AVS (aircraft, vessels, and spacecraft) and ENC (encryption software and technology).
SIA also listed several recommendations specifically for the EU, including one urging the European Commission or member states to define “public security” in their dual use export regulations. Under the regulations, member states can impose controls on certain “unlisted items” for reasons of public security, but that term isn’t defined, SIA said.
The EU should also consider adopting its own extraterritorial controls similar to the U.S.’s de minimis or foreign-produced direct product rules, SIA said. By themselves, extraterritorial controls “have significant detrimental impact on supply chains,” the association said, but “working together to coordinate controls to achieve common objectives would greatly reduce such negative impacts on U.S. and EU companies and also would be far more effective for governments’ objectives.”
The EU and the U.S. should both do a better job of consistently applying their control parameters to the dual-use goods they want to control, SIA added. Both sides seem to employ different definitions for a range of phrases included in control parameters, the group said, including “specially designed,” “capable for use with,” “designed or modified,” and “required.” A more consistent application of those definitions would create a more even playing field for U.S. and European exporters, SIA said. “The ultimate goal would be that exporters could be confident that an item controlled based on such a parameter in the U.S. would be equally controlled or not in an EU member state, and vice versa.”
The TTC should also work to address uncertainty created from U.S. deemed export controls, which require companies to secure license authorizations before sharing certain technologies with certain foreign employees, even if they are on U.S. soil. Even though the U.S. has “resolved” most deemed export barriers for EU nationals, SIA said “discrepancies and unnecessary compliance burdens” still exist. The association said BIS should expand the scope of License Exception STA to “further reduce the compliance burden and complexity involved when deciding whether the release of dual-use technology” to an EU national requires a license. A BIS spokesperson declined to comment.