Export Control Reform and Military Aircraft/Parts: Time to Re-Classify

on Tuesday, 27 August 2013. Posted in Export Control Reform

F16-Engine

So you’re a supplier of parts and accessories for military aircraft. Are you aware of the sweeping changes that Export Control Reform initiative has on Category VIII of the United States Munitions List? Do you know that your agency jurisdiction and product classification are likely to change with an October deadline fast approaching? Perhaps you haven’t begun reviewing the ECR and how it will impact the agency that has jurisdiction over your products including either the Directorate of Defense Trade Controls (DDTC) or the Bureau of Industry and Security (BIS). But now is the time to move as the October 15 implementation deadline approaches with a mass migration of aircraft and related parts from the Munitions List to the Commerce Control List.

Currently, USML Category VIII covers all types of military aircraft including but not limited to fighters, bombers, transporters, cargo planes, attack helicopters and more. The new change creates a “positive list” of aircraft primarily limited to fighters and bombers. Specifically, the new USML Category VIII(h) covers:

Parts, components, accessories, attachments, and equipment specially designed for the following U.S.-origin aircraft: the B–1B, B–2, F–15SE, F/A–18 E/F/G, F–22, F–35 and future variants thereof; or the F–117 or U.S. Government technology demonstrators. Parts, components, accessories, attachments, and equipment of the F–15SE and F/A–18 E/F/G that are common to earlier models of these aircraft, unless listed in paragraph (h) of this category, are subject to the EAR.

If your company’s products support military aircraft other than those enumerated above, agency jurisdiction moves to the BIS and you’re now subject to the EAR/CCL, not the ITAR/USML. The ECCN will fall under the new “600” series category, more specifically somewhere in 9A610. For all but 36 countries, an export license from the BIS is required, not the DDTC, or if the destination is one of the 36 on the newly revised A:5 country group (mostly NATO countries) then license exception STA (Strategic Trade Authorization) is available after a one time classification ruling from BIS (CCATS) is obtained. In all, the ECR has greatly pared down Category VIII of the USML and moved jurisdiction and classification from the State Department to the Commerce Department. For licensing purposes, this is a game changer, as export licenses will come from the BIS and depending on the destination, a new license exception may be available.

So what needs to be done to prepare for 10-15-13? The answer is straightforward: Re-classify. It’s essential that companies supplying parts for military aircraft review their product lines, re-determine agency jurisdiction and re-classify accordingly. This will help you avoid costly fines and penalties from potential violations of either the EAR or ITAR. More specifically, the following steps should be taken:

  1. Assemble a full database of your military aircraft parts and specifically identify which military aircraft each part supports,
  2. Sort your database by aircraft type (i.e. B-1B, F/A-18, C-5, V-22 etc),
  3. Using the “positive list” above, indicate the appropriate agency jurisdiction and and USML/CCL classification for each part,
  4. All parts identified as ITAR controlled should be classified under USML Category VIII (most likely, VIII(h)),
  5. All parts identified as EAR controlled should be classified under 9A610(a) – (y) as appropriate.

Here’s a special note for step 5. ECCN 9A610(a) – (w) and (y) covers very specific types of aircraft parts, so it’s essential to perform an additional sort of your database by part type. Then it becomes easier to classify which sub-part of 9A610 is appropriate for your items. The catch all ECCN for parts not specifically enumerated in  9A610(a) – (w) and (y) is 9A610.x.

There’s one last thing. You should match each part to any countries designated in the A:5 group for eligibility under license exception STA. Once you’ve finalized this list, it’s time to submit a CCAT’s ruling request to the BIS for approval to use license exception STA. When you receive the approved one-time classification ruling, you’re good to go with STA to the A:5 countries. Naturally, any new items to your product line should be reviewed and classified in the same manner described above.

Note that over the past few months Commerce and State officials have been encouraging companies to submit Category VIII related license applications where they will be reviewed in the order received with final authorizations issued on October 15.  Need a hand in the application process, in updating your compliance and information technology programs, in the proper classification of your parts inventory under the new guidelines? Give us a call. We’ll be glad to assist.

David G. Ross
Senior Advisor, MKTCG