New US Export Control Rules Provide Businesses With Greater Flexibility For International Operations

Article by

Simeon M. Kriesberg ,

Carol J. Bilzi and

Kristy L. Balsanek

Previously published October 8, 2008

Keywords: BIS, export control, Export

Administration Regulations, intra-company transfers, US-origin,

license exception, compliance, de minimis calculation, Bureau of

Industry and Security, US Department of Commerce, License Exception

ICT, controlled items

The Bureau of Industry and Security (BIS) of the US Department

of Commerce issued in recent days three new proposed or interim

final rules that substantially revise US export control laws. Any

company exporting or reexporting US-origin commodities, software,

or technology may benefit from these important changes in areas of

the law that have long frustrated international businesses. The

rules aim to simplify the Export Administration Regulations (EAR)

pertaining to intra-company transfers of controlled US-origin

items, exports and reexports of encryption items, and de minimis

calculations for exports and reexports of foreign-produced items

containing US-origin content.

Proposed Intra-Company Transfer License Exception

On October 3, 2008, BIS published a proposed rule to establish

License Exception Intra-Company Transfer (ICT). This new license

exception would authorize approved parent companies and their

approved wholly owned or controlled-in-fact entities to export,

reexport, or transfer (in-country) a wide range of controlled items

among themselves for internal company use, without obtaining

individual export licenses. Previously, companies had to apply to

BIS on a transaction-by-transaction basis and obtain multiple

export licenses from BIS to transfer items among their foreign

branches, subsidiaries, and parent companies. Such applications

delayed internal product development, reduced sales, and hindered

competitiveness.

The main features of the proposed new rule are the

following:

Pre-approved parent companies and their wholly owned or

controlled-in-fact entities would be able to utilize License

Exception ICT. Parent companies would not need to be incorporated

in, or have their principal place of business in, the United

States. If located outside the United States, however, the parent

company would have to be incorporated in, or have its principal

place of business in, Europe, Australia, New Zealand, Argentina,

Turkey, Japan, or South Korea. Colleges and universities generally

would not be eligible.

License Exception ICT could be used to ship a wide range of

authorized commodities, software, and technology. It could not be

used for certain items, however, including items controlled for

missile technology reasons, Encryption Items (EI) reasons, and

Significant Items (SI) reasons. License Exception Encryption

Commodities and Software (ENC) would remain the primary

authorization for intra-company transfers of encryption items.

License Exception ICT also could not be used for shipments to Cuba,

Iran, North Korea, Sudan, or Syria.

Unlike most other license exceptions...

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