USML Cat. XI Rewrite – A Major Change to ITAR Controls

Category XI of the U.S. Munitions List (USML) controls a broad range of military electronics, placing them under the export controls enumerated in the International Traffic in Arms Regulations (ITAR). In a Federal Register notice dated Nov. 28, the Department of State announced a proposed rule that would dramatically change Category XI and move many items previously controlled under the ITAR to export controls under the Export Administration Regulations (EAR) of the Department of Commerce. This announcement is one of a series of proposed rules rewriting categories of the USML and moving products to the EAR. It is also one of the most significant. It is all part of the president’s Export Control Reform Initiative.

Currently, Category XI of the USML reads like a “catch-all” for electronic items used in military systems. If not captured elsewhere, an electronic article can wind up being controlled under the ITAR by falling under the broad language of Category XI. The current version of Category XI begins with the following:

“(a) Electronic equipment not included in Category XII* of the U.S. Munitions List which is specifically designed, modified or configured for military application.”

*Category XII includes fire control, range finder, optical and guidance and control equipment.

This is often interpreted as a catch-all category for military electronic parts, components and subsystems.

In describing elements of the Export Control Reform Initiative, the government likes to use phrases such as “bright line” and “positive list.” “Bright line” in this context means a clear separation between what is controlled under the ITAR and what falls under EAR controls. “Positive list” means that controlled items are described specifically instead of falling under broad, generic language.

For example, the rewritten Category XI contains descriptions of controlled articles such as:

“Any ocean surface surveillance radar with either a product of transmit peak power times antenna gain divided by minimum detectable signal of >165 dB, or a capability to distinguish a target of <10 dBsm from sea clutter with a false alarm rate of 10¥6.” The proposed change to Category XI would turn it from a catch-all list to these very specifically described articles. To determine whether a particular article is classified in Category XI, an exporter would need to obtain the specifications of the article to be exported and determine whether it falls within the category's technical descriptions. If it didn’t, the article would not be controlled under the ITAR and the exporter would then start looking in the EAR. This process is similar to that used for many years by persons determining whether a product falls within one of the provisions of the Commerce Control List (CCL) in the EAR. The CCL has long been a positive list and contains some highly technical descriptions. Trade compliance personnel using the CCL have used a methodology of identifying possible CCL Export Commodity Control Numbers (ECCNs) for an article to be exported, then consulting an engineer or technician to assist in determining what provision most accurately describes it. It appears the same methodology may apply to ITAR-controlled articles in the near future. In fact, the process may get more complicated than that. Suppose a company wants to export a radar component. First, they would need to determine whether it is captured by any of the descriptions in Category XI. If it isn’t, their work is not done. The next step would be to read the technical provisions for ECCNs describing radar components in the CCL to see if it is classified under any of them. In effect, export classification will become a two-step process for many articles to be exported. Compliance personnel who have dealt solely with ITAR controls will now have to take a crash course on EAR controls to effectively do their job. Of course, this all assumes that the article to be exported is properly classified in Category XI in the first place. To use reasonable care, an exporter would need to also check the other USML categories to ensure the article is not described elsewhere in the USML. Another part of the Export Control Reform Initiative is the creation of new ECCNs in the CCL for former USML articles transferred to the EAR. Some of these new ECCNs are mentioned in the Federal Register notice on Category XI of the USML. This means that the CCL is destined to become larger. So – the good news is that fewer articles will be subject to ITAR controls. The bad news is that classifying articles for export will be more technical and more complicated. When does all this happen? That is a big TBD. The Federal Register notice says that comments are due by no later than Jan. 28, 2013. After that, the government will review the comments received and consider revisions to the proposed regulation. The revised Category XI will be reviewed internally by the various government agencies involved. They may choose to publish it again in the Federal Register as a proposed rule, or go ahead and publish it as a final rule. The final rule publication will have an implementation date. That could be a year or more from now. Until that date, everyone must work with the current Category XI. Written by Bruce Leeds, Of Counsel