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Commodity jurisdiction was discussed in the first article in a 5-part series on US Export Control Compliance. In this second article we focus on export licensing.

If jurisdiction is determined to be under the International Traffic in Arms Regulations’ (ITAR) US Munitions List (USML), export approval must be sought from the US Department of State’s Directorate of Trade Controls (DDTC). Permanent export of unclassified defense articles (including technical data) and services requires a DSP-5; temporary export (for example to support a trade show) requires a DSP-73 and temporary import (generally to return an item for repair) is via a DSP-61. Permanent/Temporary export and temporary import of classified defense articles and services requires a DSP-85. A Non-transfer and Use Certificate (DSP-83) is also required for export of Significant Military Equipment (denoted by* in the USML) and classified equipment or data to assure commitment to its original end-use and control. Another commonly used export control form is a DS-6004 Re-Export/Retransfer Request which is used to authorise retransfer (to another end-user in the same country) or re-export (a different end-user in another country) for previously licensed exports.

Given the relatively limited range of items covered by the USML, particularly since Export Control Reform (ECR) which transferred jurisdiction for many items to the Export Administration Regulations (EAR)’s Commerce Control List (CCL), DDTC’s expectation is that licenses for defense articles and services should be specific and comprehensive. Despite the rationalisation of the USML, the ‘ITAR taint’ or ‘see-through rule’ means that the incorporation of ITAR content into Australian-produced defense articles will in most cases render them subject to DDTC licensing and re-transfer approval. Another peculiarity of the ITAR is that it considers exports of controlled technology to a dual national (i.e. a citizen of one country but born in another) and third country nationals (resident of one country but born in another) to be an export to that individual’s country of residence, citizenship and birth. While some relief exists in ITAR exemptions, issues of nationality should be considered in license applications, particularly for employees with links to ‘proscribed countries’ (as identified in ITAR 126.1) where trade restrictions exist.

While the Department of Commerce regulates the export of items on the CCL, for administrative ease, these items can be included in DDTC licenses when they are intended to be integrated into or used with a defense article. For CCL items, it is critical to know the Export Control Classification Number (ECCN) as this provides the types and reasons for control. Fortunately, most items on the CCL can be exported license-free due to either a License Exception or in cases where ‘No License Required’ (NLR).  NLR can be used when there are no General Prohibitions and is generally applicable to EAR99 items (i.e. those controlled under the EAR but do not have an ECCN). General Prohibitions include specified countries and end-users who are prohibited from acquiring certain technologies as well as restrictions on the sale of ‘emerging and foundational technologies’ which have been identified as critical to US national security (although the US generally seeks multilateral controls on these technologies under international agreements such the Wassenaar Agreement). The EAR differs from ITAR in setting a minimum (or ‘de minimis’) threshold for US controlled content as a General Prohibition. An exception to the de minimis rule is the 600 series in the ECCN, including those items which are ‘specially designed’ (i.e. exceed performance requirements in the relevant ECCN), which have generally transitioned under ECR and are therefore subject to closer control.

While licensing can be complex, real world cases of heavy fines and imprisonment for failure to understand licensing fundamentals provide convincing arguments for getting it right.

Note: Debbie Richardson is a Senior Consultant with Goal Group.

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