Re: Regulations and Procedures Technical Advisory Committee Meeting

Transcription

1 Re: Regulations and Procedures Technical Advisory Committee Meeting This memorandum addresses and analyzes matters discussed at the September 12, 2000 meeting of the Regulations and Procedures Technical Advisory Committee Meeting held at the Department of Commerce in Washington, DC. This report is organized in the order the issues were addressed. For your reference, via express mail we have included handouts and other materials distributed at the meeting. I. Hillary Hess, Director, Office of Regulations and Policy A. North Korea Ms. Hess first reviewed the new policy on North Korea. As you may know, the Treasury Department as lifted its embargo on June 19, At the same time, BXA added several ECCNs that, at this point, are only controlled for North Korea. These items are generally those that would otherwise be classified as EAR99 items and can be used in nuclear facilities (e.g., ring magnets). The export of these items will require a license, as will all other items on the Commerce Control List. EAR99 items may be shipped under NLR, no license required. B. Shipper s Export Declaration Rule This regulation was published July 11 in final format in the Federal Register. For routed export transactions (a transaction where a foreign entity is the principal party in interest in the transaction and has control over the shipment) the regulation requires that there be a clear written agreement in which a party located in the United States is named as being primarily responsible for export controls compliance. The regulation also requires that all exporters enter the ECCN of the product being exported if the item is listed on the CCL (except for items controlled for Anti-Terrorism Reasons (AT) only). This is a new requirement, and is expected to be an administrative burden on exporters. Originally, there was a 90-day grace period in which exporters could implement procedures to comply with the new rules. There is discussion now, however, that this grace period may be extended. There are customs related valuation issues that need to be studied to determine if the new regulation conflicts with what has long understood to be Customs policy on the export of mass-market software. C. License Exception AVS for Serbia

2 Page 2 License Exception AVS for Serbia was reinstated for temporary re-exports of foreign registered aircraft subject to the EAR. AVS, however, remains unavailable for U.S. registered aircraft. D. Added Restrictions on Crime Control Items According to Ms. Hess, this rule expands controls on certain restraint devices used to in crime control efforts. Examples of such items include handcuffs and on discharge type arms (stun guns or shock batons) and imposes controls on technology for the development or production of those items. An export license will now be required to ship to all destinations regardless of end-use with the exception of Canada. The regulation also attempts to clarify CCL entries to distinguish between restraint devices and other police. It also changes the Control List grouping for fingerprinting powders, dyes, and inks. Further, the regulation modifies the license review policy to include consideration of whether there is civil disorder in the country or region or whether there is evidence that the government of the importing country may have violated internationally recognized human rights. E. Changes to Indian Entity List Ms. Hess explained that this rule removes two Indian entities from the list. One is the Nuclear Science Centre located in New Delhi, and the second is the Uranium Recovery Plant located in Cochin. The regulation also adds one Indian entity--indian Space Research Organization (ISRO), Telemetry, Tracking and Command Network (ISTRAC) to the Entity List. Formerly, ISTRAC was not on the list but several companies had been informed privately under EPCI that exports to ISTRAC would require a license. This rule is also significant in that it shows that it is possible to be removed from the list once placed on it. F. De Minimis Calculation Standard Ms. Hess reported that other government agencies involved in the export control process had reviewed the current method for calculating de minimis U.S. content. This is done for purposes of determining whether a product is subject to the EAR. A proposal is being circulated that would allow for minimum necessary hardware to be calculated together with the hardware if it is installed. Currently, to calculate de mimimis levels of U.S. content, software and hardware must be calculated separately. This often leads to scenarios where an entire product is caught by the EAR, only because the basic software is entirely of U.S. origin. But for the software, the item would not be subject to U.S. reexport rules. G. Toxic Gas Monitoring Levels

3 Page 3 Ms. Hess reported that this rule will slightly adjust the monitoring levels for controlled toxic gas monitoring equipment. This is a result of an Australia Group ruling. H. Eritrea Arms Embargo A regulation imposing an arms embargo on Eritrea is currently under interagency review. The embargo will be administered in similar fashion to the Rwandan embargo. I. Iraq AT Controls Added This is basically a clean-up rule. Technically, there were no AT controls on Iraq. This is of little consequence because the entire country is under a Treasury embargo. But the Oil for Food Program necessitates imposing EAR AT controls. J. Electronic Licensing Regulation A new regulation is being drafted that would require all export licenses and commodity classifications to be filed electronically through systems such as SNAP (Simplified Network Application Process). For exporters that can show hardship BXA would allow exceptions and they could file with a paper license application. BXA is determining whether or not this type of rule must be first circulated inter-agency before it can be published in the Federal Register. II. William Reinsch, Under Secretary of Commerce Priorities for End of Administration The Wassenaar plenary session in December will raise important issues. These include the most recent encryption initiatives, and continued discussion of the Wassenaar control list. Under Secretary Reinsch also expressed hope that there would be one more round of high performance computer liberalizations before the end of the Clinton administration. He also hoped that the government would move away from the MTOP method/formula of calculating computer performance levels. There seems to be general consensus on that point, the question is developing that better formula. The NDAA law, however, does require use of the work MTOP, so that any new formula will have to be translated into an MTOP format, though it might actually be an entire different formula. Mr. Reinsch also hopes that the government will be able to resolve the ongoing interagency commodity jurisdiction dispute regarding space qualified items. He

4 Page 4 noted that drawing the line between military and civil items is increasingly difficult. He also expressed his displeasure with reports that other agencies (State and Defense) are contacting companies and telling them that their products are controlled by the ITAR, and that they need to apply for licenses through the Department of State. Though he does not expect any conclusions to these jurisdiction issues by the end of the year, he is hoping to leave a solid beginning. III. Susan Daniels, Electronic Licensing/SNAP Ms. Daniels reviewed the on-line structure of SNAP the Simplified Network Application System through which exporters can file license applications and commodity classification applications over the Internet. A copy of her presentation is attached. One issue the RPTAC raised with Ms. Daniels was the need for having a master personal identification number (PIN). If SNAP had such a feature it would enable supervisors to gain access to information relating to applications their employees submitted. Such a feature would be particularly useful for when a person is away on vacation, or is out sick. IV. Amanda DeBusk, Assistant Secretary for Export Enforcement Ms. DeBusk that the Office of Export Enforcement (OEE) had announced four new Agents-in-Charge in field offices in New York, San Jose and Chicago. Some members of the RPTAC and the public were critical of OEE s methods of investigating potential export violations. OEE holds seminars across the country and promotes them as being outreach exercises. In reality, however, companies believe that seminars are also used to gather information on companies that may be used in a prosecution. Ms. DeBusk was in the meeting for only a very brief time and so the conversation was limited. V. Jim Lewis, Director, Office of Strategic Trade According to Mr. Lewis, BXA is in the final stages of cleaning up the encryption rules and hopes to have the regulation published at the end of the month. The changes to the regulation will relate to Reporting and de minimis calculations. Two Changes with Reporting: 1) The Agencies now agree that U.S. subsidiaries should be treated the same as resellers and distributors; 2) certain categories of products on personal computers will be exempt from reporting requirements. Both of these two changes will decrease the reporting burden.

5 Page 5 De minimis: For encryption, BXA is not going to change the way it is calculated. This is ultimately a remnant of when encryption was controlled by the ITAR where there are no de minimis thresholds. Under the ITAR, if an item has even 1% U.S. content it is under the jurisdiction of the State Department. The results of the interagency discussion are currently that for some encryption products it is acceptable to extend de minimis treatment, but for other encryption it is not. BXA will extend de minimis treatment only on a case-by-case basis. Another encryption issue that Commerce is having difficulty with is distinguishing between 5E002 technology and 5E992 technology. There is no bright line between these two ECCNs. * * * * Enclosures End of Memorandum