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Revised EAR and ITAR Definitions Go Into Effect
Practical Law Legal Update w-003-3458 (Approx. 8 pages)
Revised EAR and ITAR Definitions Go Into Effect
by Practical Law Commercial Transactions
| Law stated as of 01 Sep 2016 • USA (National/Federal) |
The US Department of Commerce's Bureau of Industry and Security (BIS) and the US Department of State's Directorate of Defense Trade Controls (DDTC) published final rules on June 3, 2016, revising key terms in the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR). The new definitions include export, re-export, and transfer, and went into effect on September 1, 2016.
In order to better harmonize the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR), the Bureau of Industry and Security (BIS) and the Directorate of Defense Trade Controls (DDTC) have revised the definitions for important cross-regulatory terms. The new definitions were published in the Federal Register on June 3, 2016:
- BIS revisions to the EAR. (81 Fed. Reg. 35586)
- DDTC revisions to the ITAR. (81 Fed. Reg. 35611)
The revisions and additions went into effect on September 1, 2016.
The new definitions are meant to further the President's Export Control Reform Initiative, a plan announced in 2013. One of the stated goals of the Initiative is to reduce the ambiguity and confusion for US companies that result from overlapping jurisdictions in the area of export control.
New Definitions
BIS made important changes to its definitions under the EAR for:
- Export.
- Re-export.
- Transfer.
- Release.
- Activities not considered exports, re-exports, or transfers.
Export
BIS defines the term export as:
- An actual shipment or transmission out of the US, including sending or taking an item out of the US in any manner.
- Releasing or transferring technology or source code (but not object code) to a foreign person in the US (considered a "deemed export"). This rule does not apply to:
- technology or software that arises during, or results from, fundamental research intended to be purchased;
- information in a patent or an open patent application available from any patent office;
- information in a published patent or patent application prepared wholly from foreign-origin technology where the application is being sent to the foreign inventor to be executed and returned to the US for subsequent filing;
- information in a patent application, or an amendment, modification, supplement, or division of an application, and authorized for filing in a foreign country under 37 C.F.R. Part 5; or
- information in a patent application when sent to a foreign country before or within six months after the filing of a US patent application for the purpose of obtaining the signature of an inventor who was in the US when the invention was made or who is a co-inventor with a person residing in the US.
- Transferring by a person in the US of registration, control, or ownership of:
- a spacecraft subject to the EAR that is not eligible for export under License Exception STA to a person in or a national of any other country; or
- any other spacecraft subject to the EAR to a person in or a national of a Country Group D:5 country (Supplement No. 1 to 15 C.F.R. § 740.11).
BIS has also revised the definition of an export of encryption source code and object code software (15 C.F.R. § 734.17).
Re-export
BIS defines re-export as:
- An actual shipment or transmission of an item subject to the EAR from one foreign country to another, including sending or taking an item to or from such countries in any manner.
- Releasing or transferring technology or source code subject to the EAR to a foreign person of a country other than the foreign country where the release or transfer takes place (considered a "deemed re-export").
- Transferring by a person outside the US of registration, control, or ownership of:
- a spacecraft subject to the EAR that is not eligible for export under License Exception STA to a person in or a national of any other country; or
- any other spacecraft subject to the EAR to a person in or a national of a Country Group D:5 country. (Supplement No. 1 to 15 C.F.R. § 740.11.)
BIS lists activities that are not deemed re-exports, including:
- Authorized releases of technology or source code.
- Releases to Country Group A:5 nationals (Supplement No. 1 to 15 C.F.R. § 740.11), provided that:
- the entity is authorized to receive the item by license, license exception, or through situations where no license is required under the EAR;
- the recipient is a bona fide permanent and regular employee of the receiving entity, and not a proscribed person as defined in 15 C.F.R. Section 772.1;
- the recipient is a national exclusively of a country in Country Group A:5; and
- the release takes place entirely within the physical territory of a country in Country Group A:5, or within the US.
- Releases to other than Country Group A:5 nationals, provided that:
- all requirements for Country Group A:5 nationals are met;
- the entity has effective procedures to prevent diversions to destinations, entities, end users, and end uses contrary to the EAR; and
- one of the detailed situations outlined in 15 C.F.R. Section 734.20(c)(5) applies.
Transfer
BIS defines transfer (in-country) as a change in end use or end user of an item within the same foreign country (15 C.F.R. § 734.16). This term is synonymous with in-country transfer.
Release
BIS defines a release of technology or software as either:
- Visual or other inspection by a foreign person of items that reveals technology or source code subject to the EAR to a foreign person.
- Oral or written exchanges with a foreign person of technology or source code in the US or abroad.
Activities That are not Exports, Re-exports, or Transfers
BIS excludes the following activities from the definitions of exports, re-exports, and transfers:
- Launching a spacecraft, launch vehicle, payload, or other item into space.
- Transmitting or transferring technology or software to a person in the US who is not a foreign person from another person in the US.
- Transmitting or making a transfer (in-country) within the same foreign country of technology or software between persons who are not foreign persons as defined in 15 C.F.R. Part 772, provided that the transmission or transfer does not result in a release to:
- a foreign person; or
- a person otherwise prohibited from receiving the technology or software.
- Shipping, moving, or transferring items between or among the US, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of Northern Mariana Islands, or any US territory, dependency, or possession.
- Sending, taking, or storing technology or software that is:
- unclassified;
- secured using end-to-end encryption;
- secured using cryptographic modules or its successors; and
- not intentionally stored in a country listed in Country Group D:5 or in the Russian Federation (Supplement No. 1 to 15 C.F.R. § 740.11).
New DDTC Definitions
DDTC has also revised its definitions of export, re-export, and transfer as they apply under the ITAR.
Export
DDTC defines export as:
- An actual shipment or transmission out of the US, including the sending or taking of a defense article out of the US in any manner.
- Releasing or transferring technical data to a foreign person in the US (considered a "deemed export").
- Transferring registration, control, or ownership of any aircraft, vessel, or satellite subject to the ITAR by a US person to a foreign person.
- Releasing or transferring a defense article to an embassy or to any of its agencies or subdivisions, such as a diplomatic mission or consulate, in the US.
- Performing a defense service on behalf of, or for the benefit of, a foreign person, whether in the US or abroad.
A launch vehicle or payload is not considered an export under the ITAR.
Re-export
DDTC defines re-export as:
- An actual shipment or transmission of a defense article from one foreign country to another foreign country, including the sending or taking of a defense article to or from such countries in any manner.
- Releasing or transferring technical data to a foreign person who is a citizen or permanent resident of a country other than the foreign country where the release or transfer takes place (considered a "deemed re-export").
- Transferring registration, control, or ownership of any aircraft, vessel, or satellite subject to the ITAR between foreign persons.
Retransfer
DDTC has added 22 C.F.R. Section 120.51 to define a retransfer as a change in end use or end user of a defense article within the same foreign country.
Practical Implications
The new definitions should clarify requirements for US companies engaged in export activity by better aligning the definitions of:
- Deemed exports and re-exports under both the EAR and ITAR.
- Transfer (in-country) under the EAR and retransfer under the ITAR.
- Release under both the EAR and the ITAR.
The EAR definitions have gone further to outline situations excepted from the definitions of exports, re-exports, and transfers. The EAR definitions also provide greater detail on when a transfer of technology or code should be considered an export or re-export for purposes of the EAR. The ITAR definitions do not delve into these details, leaving some distance between the EAR and ITAR parameters.
For more information on complying with US export control under both the EAR and ITAR, see: