By Joan Koenig

On Friday, May 24, the State Department and Commerce Department published proposed rules in the Federal Register addressing articles that no longer warrant control under United States Munitions List (USML) Category XV—spacecraft and related items— and would now be controlled on the Commerce Control List (CCL). (Click here to read the State Proposed Rule in the Federal Register, and click here to read the Commerce Proposed Rule in the Federal Register.) Under the proposed rules, these items would be controlled under new Export Control Classification Numbers (ECCNs) 9A515, 9B515, 9D515, and 9E515 proposed by this rule and existing ECCNs. These proposed rules were made possible by a change in the 2013 National Defense Authorization Act (NDAA) which removed a prior requirement that all satellites and related items be subject to the International Traffic in Arms Regulations (ITAR). Comments on these proposed rules are due by July 8, 2013.

The changes in the proposed rules are based on a review of Category XV by the Defense Department. In performing its analysis, Defense reviewed the articles in Category XV to determine which are “either (i) inherently military and otherwise warrant control on the USML or (ii) if, common to non-military space applications, possess parameters or characteristics that provide a critical military or intelligence advantage to the United States, and that are almost exclusively available from the United States.” 78 FR 31432. Items that satisfied one or both of these criteria are slated to remain controlled under the ITAR. The proposed rules would transfer jurisdiction for all other satellites and related items to the export control jurisdiction of the Export Administration Regulations (EAR).

One important aspect of the proposed rules related to controls on radiation hardened microelectronic circuits and the transfer of these items to the EAR. Because these types of items were historically used largely in satellite and space applications, they were considered ITAR items regardless of whether they were specifically designed or developed for such applications. The expanding need for such articles in uses such as medical devices (where the electronics might be exposed to radiation) or downhole drilling (where they would be exposed to extreme conditions, such as extreme heats), as well as commercial communication satellites, combined with a dearth of production facilities in the United States, control under Category XV was becoming increasing difficult for U.S. industry. Under the proposed rules, radiation hardened circuits that are ‘‘specially designed’’ for defense articles on the USML, ‘‘600 series’’ items, or items controlled by new ECCN 9A515 that meet or exceed five specific radiation hardening characteristics will be controlled under the EAR. An exception to this proposed transfer would be Application Specific Integrated Circuits (ASICs) ‘‘specially designed’’ for defense articles. These items would remain under the jurisdiction of the ITAR and would be controlled under Category XI(c) of the USML regardless of their performance characteristics.

Source: Client Alert