The US Department of Commerce’s Bureau of Industry and Security (“BIS”) has issued two proposed rules amending the Export Administration Regulations (“EAR”) to impose expansive new controls on US persons’ activities in connection with non-US military, security, and intelligence end users and end uses, as well as new end user-, end use-, and list-based controls applicable to items subject to the EAR. These new controls would apply to more categories of activities and end users/end uses in more countries than the existing controls.
The two new proposed rules (here and here) would implement new authorities under the Export Control Reform Act to impose controls on “the activities of United States persons, wherever located, relating to specific foreign military, security, and intelligence services” and amend the EAR to introduce or expand controls on:
- US persons’ activities in “support” of “military end users,” “military-production activities,” “intelligence end users,” and “foreign-security end users” which can apply regardless of whether the activities involve items subject to the EAR;
- exports, reexports, and in-country transfers of any item subject to the EAR (including EAR99 items) where the transferring party has “knowledge” that the item is intended, entirely or in part, for the following end uses or end users:
- a military end use or military end user from or in Macau or a country specified in Country Group D:5 in Supplement No. 1 to Part 740 of the EAR, including mercenary, paramilitary, or irregular forces (EAR § 744.21);
- an “intelligence end user” from a country or destination specified in Country Groups D or E but not also listed in Country Groups A:5 or A:6 (i.e., Israeli and Taiwanese intelligence end users are not caught by this control), which now includes civilian intelligence end users in addition to “military-intelligence” end users (the current controls on “military-intelligence” end uses and end users would be subsumed into the controls on “intelligence” end uses and end users (EAR § 744.24); and
- exports, reexports, and in-country transfers of any item subject to the EAR and listed on the Commerce Control List (“CCL”) where there is “knowledge” that the item is intended, entirely or in part, for the following end uses or end users:
- a “military-support end user” from or in Macau or a Country Group D:5 country (EAR § 744.22); and
- a “foreign-security end user” of a country listed in Country Groups D:5 or E (EAR § 744.25);
- certain items that may potentially be used to commit human rights abuses.
Each of these new controls is discussed in more detail below. In addition, the US Department of State’s Directorate of Defense Trade Controls (“DDTC”) has issued a complementary rule revising the definition of “defense services” in the International Traffic in Arms Regulations (“ITAR”) as well as the US Munitions List to clarify the scope of which services are controlled under the ITAR versus the EAR and to classify new types of services related to intelligence and military (including paramilitary) assistance as defense services. The proposed controls on intelligence and military defense services would not necessarily require that the services involve defense articles.
BIS and DDTC are soliciting public comments on the three proposed rules until September 27, 2024.
1. US Persons’ Activities under the EAR (EAR § 744.6)
The EAR prohibit certain activities of US persons without a license from BIS. For purposes of the EAR, the term “US person” includes US citizens and permanent resident aliens, entities organized under US laws and their non-US branches, and any person physically present in the United States, regardless of their nationality.
The prohibitions apply to US persons’ “support” for various activities, such as development of WMDs in certain countries. Importantly, these controls apply to US persons wherever located and can apply regardless of whether their support involves goods, software, or technology (“items“) subject to the EAR.
The two BIS proposed rules would add or amend certain activities to the list of activities that US persons are prohibited from supporting and clarify the definition of “support.”
1.1 New or Amended Activities That US Persons Would Be Prohibited from Supporting Without a BIS License
The two proposed rules would add three new subparagraphs to EAR § 744.6(b) prohibiting US persons’ unlicensed support for certain non-US “military end users,” “military-production activities,” and “foreign-security end users” and would replace the existing controls related to “military-intelligence” end uses and end users with a broader control applicable to “intelligence end users,” which would include both civilian and military intelligence end users of certain non-US governments. The definitions for each of these types of end user are discussed in the next section.
For each of the new categories, BIS is proposing to add different footnote numbers to entries on the Entity List (Supplement No. 4 to Part 744 of the EAR) denoting which entries BIS considers “military end users” (footnote 3 or 5); “military-support end users” (footnote 6); “intelligence end users” (footnote 7); and “foreign-security end users” (footnote 8). For the purposes of the controls on US persons’ support activities, with the exception of “military-support end users,” the entities on the Entity List with these footnotes are to be considered a non-exhaustive list of “military end users,” “intelligence end users,” and “foreign-security end users.”
1.2 Clarifying Exclusions to the Definition of “Support”
These amendments would make certain exclusions from the definition of “support” more explicit, including by excluding:
- activities related to items that are not subject to the EAR (e.g., published items, released by instruction in a course or laboratory, or software or technology arising during or resulting from fundamental research);
- activities subject to control by DDTC under the ITAR or subject to another federal agency’s control;
- administrative services (e.g., providing or arranging office space and equipment, hospitality, advertising, or clerical, visa, or translation services, collecting product and pricing information to prepare a response to a request for proposal, generally promoting company goodwill at trade shows, or activities by an attorney that are limited to the provision of legal advice);
- commercial activities related to movement of goods by common carriers (but only with respect to the US-person controls related to military end users, military-support end users, and intelligence end users and only if undertaken without knowledge that the goods will support such military- and intelligence-related end users and end uses); and
- certain activities for, on behalf of, or in connection with the US government.
2. End-Use and End-User Controls
In addition to the controls on US persons’ “support” activities, the two BIS proposed rules would also expand existing controls on exports, reexports, and in-country transfers involving military end users and end uses, “military-support end users,” “intelligence end users,” and “foreign-security end users.”
Only License Exception GOV, which authorizes specific exports to certain governmental and international organizations, would be available under these expanded end-use and end-user controls.
2.1 Military End Users and End Uses (EAR § 744.21)
BIS is proposing to expand both the product scope and the end-user scope of the existing controls related to military end users and end uses found at EAR § 744.21.
Rather than applying to a specific subset of items subject to the EAR currently found at Supplement No. 2 to Part 744 of the EAR, the new rule would impose a licensing requirement on all items subject to the EAR (including EAR99 items) when bound to military end users or end uses in certain countries. The existing rule only applies such a broad prohibition on military end users in Russia and Belarus.
The end-user scope has also expanded from military end users in Belarus, Burma (Myanmar), Cambodia, China (incl. Hong Kong), Nicaragua, Russia, and Venezuela to military end users in Macau or any country specified in Country Group D:5 (US arms-embargoed countries).
While the definition of “military end use” remains largely the same, the definition of “military end user” has been expanded to make specific reference to mercenaries, paramilitary or irregular forces and to entities designated with a footnote 3 or 5 on the Entity List. BIS will merge the existing non-exhaustive Military End User List into the Entity List using these footnote designations and eliminate the standalone Military End User List.
2.2 Military-Support End Users (EAR § 744.22)
BIS is also proposing a new control on exports to “military-support end users,” which it would define as “any person or entity whose actions or functions support ‘military end uses’” as defined in EAR § 744.21(f) and any entities designated with a footnote 6 on the Entity List.
The product scope for this rule is more limited than for the rule on military end users; the license requirement would not apply to all items subject to the EAR but rather only items subject to the EAR that are specified in an export control classification number (“ECCN”) on the CCL (i.e., EAR99 items would not require a license to military-support end users under this rule).
2.3 Intelligence End Users (EAR §744.24)
BIS would also replace the current EAR § 744.22, which relates to military-intelligence end uses and end users, with EAR § 744.24, which would control exports to “intelligence” end users.
Both the product scope and the end-user scope of the new rule on “intelligence” end users would be expanded beyond the current controls on “military-intelligence” end users.
As with the controls on military end users, the product scope would be any item subject to the EAR, including EAR99 items.
The end-user scope would expanded from the present controls on military-intelligence end users in two ways. First, it would expand the definition from only military-intelligence end users to “any foreign government intelligence, surveillance, or reconnaissance organizations or other entities performing functions on behalf of such organizations,” meaning civilian intelligence end users would also be covered. Second, the country scope for the end users would expand from Belarus, Burma (Myanmar), Cambodia, China (incl. Hong Kong), Cuba, North Korea, Russia, Syria, and Venezuela to “intelligence end users,” wherever located, from any country listed in Country Groups D or E (except for Israel and Taiwan), which includes over 45 countries.
BIS intends to identify intelligence end users (non-exhaustively) using a footnote 7 designation on the Entity List.
2.4 Foreign-Security End Users (EAR § 744.25)
The second BIS proposed rule would introduce new controls on exports to “foreign-security end users,” which would be defined to include any of the following:
- Governmental and other entities with the authority to arrest, detain, monitor, search, or use force in furtherance of their official duties, including persons or entities at all levels
- of the government police and security services from the national headquarters or the Ministry level, down to all subordinate agencies/bureaus (e.g., municipal, provincial, regional);
- Other persons or entities performing functions of a “foreign-security end user,” such as arrest, detention, monitoring, or search, and may include analytic and data centers (e.g., genomic data centers) forensic laboratories, jails, prisons, other detention facilities, labor camps, and reeducation facilities; or
- Entities designated with a footnote 8 on the Entity List.
The product scope for this proposed rule would be the same as the one for “military-support end users,” i.e., items subject to the EAR specified on the CCL.
The purpose of the “foreign-security end user” controls is to protect against US persons or US-origin items being used to support human rights abuses.
3. List-Based Controls
Finally, BIS has proposed amending the CCL to capture certain items that can potentially be used to commit human rights violations or abuses, including certain:
- polygraphs,
- fingerprint analyzers,
- cameras and equipment,
- automated fingerprint identification retrieval systems,
- psychological stress analysis equipment,
- electronic monitoring restraint devices,
- facial recognition systems, and
- components, accessories, and software specially designed therefor).
These items would be added as ECCNs 3A981 and 3D980 and be subject to Crime Control (CC) Column 1 controls and, in the case of 3D980 software only, Anti-Terrorism (AT) Column 1 controls.
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If you have questions related to these developments, please contact the authors of this post or your Baker McKenzie trade compliance contact.
