International Trade Alert: Bureau Of Industry and Security Announces Intra-Company Transfer License Exception

After years of requests from the export community, the Bureau of

Industry and Security (BIS) finally proposed creation of the

Intra-Company Transfer (ICT) license exception. It was file://published in the October 3, 2008 Federal

Register and was introduced at BIS Update 2008 by Christopher Wall,

BIS assistant secretary for export administration. The proposed

license exception could eliminate the need for licenses for most

exports of goods and technology between U.S. companies and their

foreign operations.

But (and yes, there is a but), there are strings

attached and qualifying to get BIS approval to use the ICT will not

be as easy as industry had hoped. To use the ICT license exception,

an exporter will be required to obtain advance BIS

approval, part of which will include adoption of an ICT

"control plan" and agreement to allow BIS to conduct

audits of the exporter. In addition, use of the ICT exception will

impose recordkeeping requirements for all trade conducted under the

exception and all foreign persons authorized to have access to

controlled technology under the exception.

The Basics

An application to be eligible to use the ICT will be similar to

the current license applications, and will go through the same

interagency review (BIS, State, Defense) as export license

applications. Applicants must agree to conduct self-evaluations and

BIS will expect ICT holders to file voluntary self-disclosures of

any violations uncovered during these self-audits. Each approved

ICT would be limited to those exporters, users, and recipients,

including foreign nationals identified in the application and to

specific Export Classification Control Numbers (ECCNs). The

proposed ICT would be available for use by approved eligible

applicants, eligible users, and eligible recipients. According to

BIS, "[t]he eligible applicant must be incorporated in or have

its principal place of business in any country listed in Supplement

No. 4 to part 740." "Eligible users" may be eligible

applicants and their wholly owned or "controlled in fact"

entities that are included in the applications submitted by

eligible applicants. "Eligible recipients" must meet the

same criteria.

The Excluded

"No items controlled for Encryption Items (EI) reasons

under ECCNs 5A002, 5D002, or 5E002 may be exported, reexported, or

transferred (in-country) under this license exception," the

proposed rules state. In addition, no items controlled for

Significant Items (SI) reasons may be exported...