Regulatory intelligence for US exporters

DDTC Issues Licensing, CJ Guidance on Gun Export Controls Transitioning to Commerce

The Directorate of Defense Trade Controls issued a Jan. 23 guidance on the final rules for the transfer of gun export controls from the State Department to the Commerce Department, including a clarification on license submissions during the transition period. The guidance also clarifies how the rules and transition period affect technical assistance agreements, manufacturing license agreements, reporting requirements, commodity jurisdiction determinations and regulatory oversight responsibilities. The rules -- which were published Jan. 23 and transfer export control authority from the State Department to Commerce for a range of firearms, ammunition and other defense items -- will take effect March 9 (see 2001170030).

During the nearly seven-week transition period, both DDTC and the Bureau of Industry and Security will accept license applications for items moving from the U.S. Munitions List to the Commerce Control List, the guidance said. However, BIS will not issue approved licenses until the effective date. Licenses for goods transitioning to the CCL that were issued before the effective date and that do not contain items remaining on the USML will remain valid until they either expire, are returned by the license holder or three years pass from the effective date -- whichever occurs first. Licenses containing both transitioning and non-transitioning items -- known as “mixed authorizations” -- will also remain valid until expired or returned.

In addition, any “limitation, proviso, or other requirement” imposed by DDTC on the license authorization will remain in effect if the authorization is still “relied upon for export,” the guidance said. The DDTC also said “license amendment requests (DSP-6)” received during the transition period that amend licenses affected by the transition will be “adjudicated on a case-by-case basis” up until the rule’s effective date. The same conditions apply to temporary licenses, DDTC said. All license applications received after the effective date for transitioned items will be returned without action with instructions to contact Commerce.

Any “agreements or amendments” -- such as technical assistance agreements, manufacturing licenses agreements and warehouse and distribution agreements -- containing both USML and CCL items will be “adjudicated up to the effective date of the relevant final rule,” DDTC said. Agreements with transitioning and non-transitioning items issued before the effective date will remain valid until expired or until three years from the effective date of the rule -- whichever comes first. Users must submit an amendment in order for an agreement to remain valid beyond three years, DDTC said.

Agreements that contain only transitioning items issued before the effective date of the final rule will also remain valid for three years from the effective date. After the three-year period ends, any “on-going activity” must be conducted with Commerce authorization, the guidance said. In addition, all reporting requirements under the International Traffic in Arms Regulations relating to manufacturing license agreements and warehouse and distribution agreements “must be complied with” and submitted to the State Department “while the agreement is relied upon as an export authorization by the exporter.”

Previously issued commodity jurisdiction (CJ) determinations for items subject to the Export Administration Regulations will remain valid, DDTC said. Previously issued CJ determinations for USML items transitioning to the CCL will be “superseded by the newly revised lists.” The agency said exporters should review each revised USML category and its “companion” CCL category to determine whether their items subject to a CJ are now under Commerce’s jurisdiction. Licensees and foreign persons subject to the licenses must still keep records relating to the items.

License holders who are unable to “ascertain the proper jurisdiction of their items” can request a CJ determination from DDTC, the agency said. License holders can also submit a Commodity Classification Automated Tracking System request to Commerce if they’re unsure of the proper Export Control Classification Number designation.

After the effective date, foreign people who receive an item that has transitioned to the CCL through a State Department authorization should submit a request to Commerce for post-transition re-exports or transfers, DDTC said. If a re-export or retransfer was previously authorized by DDTC, that authority remains valid, the guidance said. Foreign or U.S. people abroad should be aware that any USML items in their inventory must comply with EAR requirements after the effective date, the agency said. “If doubt exists on jurisdiction of the items, the foreign person should contact the original exporter or manufacturer.”

License holders can apply for and use Commerce authorizations for exports of “newly transitioned” CCL items instead of continuing to use previously issued State Department authorizations, the guidance said. Is those cases, license holders must return the State Department license.

DDTC registered manufacturers, exporters, temporary importers, defense service providers and brokers who determine that all of their activities will now be subject to Commerce jurisdiction “must nevertheless maintain registration” with the State Department until the effective date of the rules, the agency said. Registrants who are no longer required to register with the State Department due to the transition but who have registration renewal dates scheduled after the rule takes effect may request to “have their registration expiration date extended to the effective date of transition and not be charged a registration fee,” the guidance said. Registrants that continue to use previously issued State Department authorizations for items that transitioned to the CCL “must maintain” their current State Department registration and pay registration fees.

The DDTC’s guidance also warned traders to “closely monitor” ITAR and EAR compliance for items transitioning from the USML to the CCL. The agency “strongly” encouraged traders to self-disclose violations to either DDTC or BIS.