Details of BIS Wassenaar Rule Changes (Final Part)

This is Part VI, the final part of a multi-part series of summaries on this final rule, and includes changes for used goods, License Exceptions GOV and ENC, encryption items, definitions, etc. A number of the changes are needed as a consequence of other changes contained in the final rule.

Used Goods

The final rule amends 15 CFR 744, Supplement 3, by adding a Statement of Understanding related to Used Goods which states, ‘‘The specifications in the Commerce Control List apply equally to new or used goods. In the case of used goods, an evaluation by BIS may be carried out in order to assess whether the goods are capable of meeting the relevant specifications.’’

This statement was added because the regulated public often asks the question as to whether the controls apply to used or older equipment. The statement clearly states that the controls apply to new and used equipment equally, but that if you believe the equipment cannot perform to the stated control parameters because of its current age and condition that you may submit a classification request to BIS and BIS will evaluate the current state of the equipment against the control parameters and make a classification determination.

License Exception GOV

As a matter of policy BIS does not allow the use of License Exception GOV for the export of items listed on the WA Very Sensitive List. As a result of WA agreements adding ECCN 5A001.h (and corresponding technology and software) to its Very Sensitive List, this rule makes corresponding changes to Supplement No. 1 to 15 CFR 740.11.

License Exception ENC

15 CFR 740.17 is amended by replacing the phrase ‘‘5A002.a.1, .a.2, .a.5, .a.6, or .a.9’’ with ‘5A002.a.1, .a.2, .a.5, .a.6, .a.9, or .b’’ in the introductory paragraph and paragraphs (a)(1)(i), (a)(2), and (b)(1).

BIS states that this is a consequential change because of the newly added paragraph 5A002.b, which is EI controlled. (The newly added paragraph 5D002.d, which is EI controlled, is already covered by the existing reference to ECCN 5D002 in 15 CFR 740.17. So, while 5D002.d is a new CCL entry, its addition does not require any conforming edits in these particular paragraphs.)

Hot Section Technology for Commercial Aircraft Engines, Etc.

This rule harmonizes the list of paragraphs under ECCN 9E003 that are controlled for SI reasons with the list in 15 CFR 742.14. The paragraphs of ECCN 9E003 that are controlled for SI reasons are 9E003.a.1 through a.8, .h, .i, and .j.

Encryption Items

15 CFR 742.15 is amended by replacing the phrase ‘‘5A002.a.1, a.2, a.5, a.6 and a.9; 5D002.a or c.1 for equipment controlled for EI reasons in ECCN 5A002;’’ with ‘‘5A002.a.1, .a.2, .a.5, .a.6, .a.9, and .b; 5D002.a, .c.1 or .d for equipment and ‘‘software’’ controlled for EI reasons in ECCNs 5A002 or 5D002;’’ in paragraph (a)(1).

BIS states that this is a consequential change because of the newly added paragraphs 5A002.b and 5D002.d, which are EI controlled. This change also clarifies that ‘‘EI’’ controls apply to ‘‘software’’ items as specified by the designated ECCN 5D002 paragraphs, regardless of whether the ‘‘software’’ is bundled, commingled or otherwise used with ECCN 5A002 equipment.

De Minimis U.S. Content

15 CFR 734.4 is amended by replacing:

• the phrase ‘‘9E003.a.1 through a.8, a.10, h and i.’’ with ‘‘9E003.a.1 through a.8, .h,.i and .j.’’ in paragraph (a)(4) ‘‘Items for which there is no de minimis level.’’ This change is made to harmonize with revisions to paragraphs ECCN 9E003.i and .j made by the final rule.
• the phrase ‘‘5A002.a.1, .a.2, .a.5, or .a.6, .a.9, or 5D002,’’ with ‘‘5A002.a.1, .a.2, .a.5, .a.6, .a.9, .b, or 5D002,’’ in the introductory text of paragraph (b)(1), because 5A002.b is a newly added EI controlled paragraph.

Wassenaar Arrangement Reporting Requirements

As a matter of policy, BIS makes certain items on the WA Basic List (BL) and Sensitive List (SL) eligible for license exceptions.

Because of the U.S. obligations under its agreements to the WA, the U.S. must report on SL items exported outside of the WA membership countries. BIS does this by gathering data from its licensing database. To collect data on exports made under license exceptions, BIS requires WA reporting on SL items exported (excluding deemed exports) under License Exceptions GBS, CIV, TSR, LVS, APP and portions of GOV. As a result of WA making changes to its SL, this rule makes corresponding changes to the reporting requirements of 15 CFR 743.1.

This rule:

• revises the Note to paragraph (c)(1)(ii) of 15 CFR 743.1 by adding WA reporting requirements for 2D001 software other than that controlled by 2D002, specially designed for the development or production of deep-hole-drilling machines controlled by 2B001.f, or ‘‘numerically controlled’’ or manual machine tools controlled by 2B003.
• revises the Note to paragraph (c)(1)(ii) of 15 CFR 743.1 by adding WA reporting requirements for 2E001 and 2E002 technology consistent with the General Technology Note for development and production of deep-hole-drilling machines controlled by 2B001.f, or ‘‘numerically controlled’’ or manual machine tools controlled by 2B003.
• changes the formatting of the information in this Note by putting it in outline format for easier readability.
• revises reporting requirements in 15 CFR 743.1(c)(1)(v) to add 5A001.h in three places and to add 5A001.b.5 in two places for consistency. This rule also revises reporting requirements in 15 CFR 743.1(c)(1)(vi) to remove 6A002.a.1.a, a.1.b, a.2.a, a.3, c, and e; 6A003.b.3 and b.4, ; and 6A006.a.1, a.2, and d, because the subparagraphs of these ECCNs are not eligible for list based license exceptions and are therefore not subject to WA reporting requirements under the EAR.
• removes 6D001, 6D003.a, 6E001, and 6E002, because the only list based license exception this software and technology are eligible for is License Exception TSR, and only within countries that are WA member countries.
• revises reporting requirements in 15 CFR 743.1(c)(1)(viii) to add the phrase ‘‘as well as 8A001.b, c, and d’’ to ECCNs 8D001 and 8E001, to indicate that the reporting requirements of 15 CFR 743.1(c)(1) apply to exports of 8D001 software for the development, production or use of commodities controlled by 8A001.b, c, and d and 8E001 technology for the development or production of commodities controlled by 8A001.b, c, and d.

Definitions

As a result of the decisions reached at the 2010 WA Plenary, this rule amends the definitions in 15 CFR 772.1 to:

• add categories 4 and 9 as references in the definition of ‘‘civil aircraft’’ to identify other categories that use this definition.
• add definitions for ‘‘cryptographic activation,’’ ‘‘radiant sensitivity,’’ and ‘‘tip shroud,’’ and amends the existing definition for ‘‘information security’’ to include ‘‘cryptographic activation.’’
• amend the definition of ‘‘frequency switching time’’ to add a more practical and meaningful definition for the term. The change from an absolute frequency to a percentage of the final maximum specified frequency will make actual frequency measurements possible and reasonable, thus removing ambiguity of interpretation.
• correct the structure of the definition of ‘‘frequency switching time’’ by replacing an absolute value with a relative value.
• remove the phrase ‘‘or signal generator’’ from the definition of ‘‘frequency synthesizer,’’ because a signal generator is a subset of a frequency source.
• amend the definition of ‘‘object code’’ by replacing the term ‘‘converted’’ with ‘‘compiled’’ to use a more precise and commonly used word to describe what it is that is done to source code in order to obtain object code.

Savings Clause

Shipments of items removed from license exception eligibility or eligibility for export without a license as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on May 20, 2011, pursuant to actual orders for export to a foreign destination, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported from the U.S. before July 19, 2011. Any such items not actually exported before midnight, on July 19, 2011 require a license in accordance with this regulation.

(See ITT’s Online Archives or 05/20/11 news, 11052022, BP summary announcing the publication of BIS’ final rule.

See ITT’s Online Archives or 05/23/11, 05/24/11, 05/25/11, 05/26/11, and 05/27/11 news, 11052305, 11052403, 11052514, 11052625, and 11052715, for Parts I-V of BP’s multi-part series of summaries.)

(BIS final rule, D/N 110124056-1119-01, FR Pub 05/20/11)