July 24 the Bureau of Industy and Security published a Final Rule formalizing the changes to the Export Administration Regulations imposed by Congress in the emergency supplemental appropriation [HR 815] signed into law April 24th.
Division N of Public Law No. 118-50, the No Technology for Terror Act establishes that certain foreign-produced items are subject to the Export Administration Regulations if they are to be exported, reexported, or in-country transferred to Iran.
As a result of this new FDP Rule, exporters require a U.S. Government authorization for transfer of these items when produced outside the United States with certain U.S. technology, software, or production equipment when exports are destined to Iran or for use in connection with certain equipment destined to Iran, even when such items were never exported from the United States.
As reported last month [12381], the language enacting the rule change was drafted by congressional staff with no consultation with Commerce. Customarily, changes to the EAR are managed by the Department of Commerce, with notices, comment periods, etc.
"They totally bypassed BIS on this," an official said at the time, noting that there are no corrections or clarifications to align, adding "whether we do or not, it's going to be effective July 23rd."
One week earlier (April 18) BIS had imposed additional controls to further restrict Iran’s access to low-level technologies, such as basic commercial grade microelectronics. That action cut off a wider range of items from reaching Iran’s arsenal – including items manufactured outside the U.S. that are produced using U.S. technology. [12072 4/19/24]
BIS had already in place a Foreign Direct Product (FDP) Rule specific to Iran for items in certain categories of the Commerce Control List (CCL) covering electronics, computers, communications and information security, and navigation and avionics, as well as the EAR99 items identified in Supplement No. 7 to Part 746.
Under the Iran FDP rule, prior to July 23, 2024, foreign-produced items were subject to the EAR when they were:
Such items may have required a license from Commerce for export, reexport, or transfer (in-country) to Iran
Effective July 23, 2024, the Act expanded the scope of the EAR’s existing Iran FDP rule to require a license for additional foreign-produced items, while also providing certain exclusions from license requirements that would otherwise apply.
This rule revises §§ 734.9 and 746.7 of the EAR to implement the Act’s requirements in four respects.
First, BIS revises the introduction to paragraph (j) to identify the two circumstances in which foreign-produced items that meet the product scope of paragraph (j)(1) are subject to the EAR: if they fall within either the destination and end-use scope paragraphs of paragraph (j)(2) or the end-user scope set forth in new paragraph (j)(3).
Second, this rule expands the range of items in the product scope of the Iran FDP rule.
Specifically, this rule revises the product scope in § 734.9(j)(1) by expanding the CCL category range of items in paragraphs (j)(1)(i) and (j)(1)(ii) from “any ECCN in product group D or E in Categories 3 through 5 or 7” of the CCL to include Categories 3 through 9 of the CCL.
The expanded product scope now includes “technology” and “software” for Category 6 - Lasers and Sensors, Category 8 – Marine, and Category 9 - Aerospace and Propulsion.
Third, BIS has revised paragraph (j)(2) and has made structural changes, including by breaking the revised paragraph into separate paragraphs (j)(2)(i) and (j)(2)(ii) to assist the reader in applying the scope of this paragraph correctly.
As revised, the scope of paragraph (j)(2) is satisfied if there is “knowledge” that the foreign-produced item meets the destination scope in paragraph (j)(2)(i) or meets the combined end-use and destination scope in paragraph (j)(2)(ii).
The paragraph title is accordingly expanded by adding “and end-use” so that it will refer to both destination and end-use scope.
Finally, BIS has added a new end-user scope in new paragraph (j)(3). This new end-user scope applies if there is “knowledge” that the Government of Iran is a party to any transaction involving the foreign-produced item, e.g., as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user.”
This “knowledge” standard and reference to transaction parties is consistent with language used in the Entity List FDP rule set forth in § 734.9(e) of the EAR.
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Filed on: 07/24/2024 at 11:15 am |
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