On October 22, 2021, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced its proposal to amend the Export Administration Regulations (EAR) in order to clarify and expand restrictions on the availability of License Exception Strategic Trade Authorization (License Exception STA or STA) for items controlled by the EAR. BIS proposed clarifying the “Special Conditions for STA” paragraphs included under the Category 9 Export Control Classification Numbers (ECCNs) 9D001, 9D002, 9D004, 9E001, 9E002, and 9E003 to reduce confusion for exporters.

BIS established the License Exception STA in Part 740 of the EAR on June 16, 2011 to authorize exports, reexports, and in-country transfers of certain items to STA-eligible destinations. These items include certain software source code and technology, as well as certain “600 series” items. Section 740.20(b) of the EAR sets forth restrictions on the use of License Exception STA – including Section 740.20(b)(2)(viii), which prohibits the use of STA for certain Category 9 ECCNs. These restriction under Section 740.20(b)(2)(viii) apply to ECCNs 9D001, 9D002, 9D004, 9E001, 9E002, and 9E003. Under Section 740.20(b)(2)(viii), STA eligibility for items under these six ECCNs is prohibited regardless of destination.

However, the “Special Conditions for STA” paragraphs of these Category 9 ECCNs are not as comprehensive as Section 740.20(b)(2)(viii), which BIS notes “potentially confuses exporters.” Specifically, these paragraphs state that STA eligibility for certain software and technology controlled under the ECCNs is excluded to destinations in Country Group A:6, while the controlling text of Section 740.20(b)(2)(viii) excludes STA eligibility for these items regardless of destination. The clarified text, which does not change license requirements or restrictions, would direct exporters, reexporters, and in-country transferors to the Category 9 limitation on the use of STA set forth in Section 740.20(b)(2)(viii).

BIS also proposed two new restrictions. The first proposal would expand restrictions on the use of License Exception STA for coating technologies under ECCN 2E003.f when the technology is used for the application of inorganic overlay coatings on gas turbine engine combustors. As it stands, coating technologies under ECCN 2E003.f are not controlled for Significant Items (SI) reasons and are eligible for export to certain countries under License Exception STA. The second rule proposes to exclude License Exception STA eligibility for all destinations for technology described by ECCN 1E001 for the “development” or “production” of “equipment and materials specified by ECCNs 1A002, 1C001, 1C007.c, 1C008.a.1, 1C009.bm and 1C010.b,.c or .d.” BIS will be seeking public comments on these amendments to the EAR, which must be received by December 6, 2021.

The Federal Register notice is available here.

For more information on the EAR and BIS, contact our team and see previous posts below.

Bureau of Industry and Security (BIS) Fines Company $200,000 for Violating the Export Administration Regulations (EAR) – International Trade Law (cmtradelaw.com)

Commerce Adds 23 Companies to Entity List Citing Forced-Labor, Military Technology, and Sanctions Concerns – International Trade Law (cmtradelaw.com)