Impact on FRENCH COMPANIES: Export Controls Reform (stagg - norman)
Update on Export Control Reform and
Implications on FRANCE-U.S. Trade
On October 15th, the United States will implement initial revisions to its export control laws as part of President Obama’s Export Control
Reform initiative. These are the most significant revisions to U.S. export control laws in more than thirty years. Initially, the impact will
primarily affect the aerospace industry. Specifically, the revised export controls will concern aircraft and gas turbine engines, including
related articles such as systems and equipment.
In 2014, additional revisions to the U.S. export control laws will take place that affect other critical categories such as vehicles, electronics,
and space related articles. Those articles previously controlled by the U.S. Munitions List will shift to the Commerce Control List, which is
administered by the Bureau of Industry and Security at the U.S. Department of Commerce. Although the control lists will continue to be
updated over the next year, the general framework for the new export control process and transition policy will be in place on October 15th.
The intent behind Export Control Reform is primarily based on jurisdiction: to remove less sensitive items from the U.S. Munitions List
to the Commerce Control List. By controlling less sensitive items on the Commerce Control List, they are subject to less restrictive legal
authorities than are items on the U.S. Munitions List. This will enable the United States to better promote exports of U.S. goods and
technology. Previously, the complex export control system and unclear jurisdiction issues encouraged foreign companies to design out or
otherwise avoid U.S.-origin content.
One key benefit of items moving to the Commerce Control List is the available license exceptions, such as the Strategic Trade Authorization.
By contrast, items on the U.S. Munitions List are subject to greater restrictions with limited export and re-export exceptions. French and
U.S. parties will have to increase their familiarity with the available options that the U.S. Department of Commerce provides for exemptions
or exceptions rather than the requirement to obtain a license.
Another key benefit for items moving to the Commerce Control List is the de minimis rule. The de minimis rule allows for French made
items to incorporate below de minimis thresholds (generally 25%) of U.S. origin items on the Commerce Control List without subjecting
the French goods to the U.S. Department of Commerce for export and re-export authorizations. By contrast, if any item on the U.S.
Munitions List is incorporated into a French made item, then the French item is subject to the U.S. Department of State for export and
re-export authorizations (i.e., zero de minimus).
While U.S. parties must prepare for the regulatory changes, French parties must also now understand how the changes will affect their
activities and take the appropriate action. French parties will need to follow the same steps as U.S. parties in reviewing the appropriate
jurisdiction of the articles, services, and technical data. French parties should review current inventory and agreements to see if these
items have transitioned to the Department of Commerce.
Given the benefits of the Commerce Control List, French parties should take an active approach in reviewing the appropriate jurisdiction of
the items they are importing from the United States. The revisions to the control lists are intended to make them more clear by moving
from subjective control criteria to objective control criteria. This will enable French parties to make informed self-classifications.
In addition, French parties will need to understand the revised destination control statements that requires flow down by both U.S. and
French parties of certain information, how to handle re-export and retransfers, how to notify suppliers and customers of any changes including their responsibilities as recipients of U.S. export controlled items, the de minimis and Foreign Direct Product under the Department of
Commerce’s regulations, the impact on dual and third country nationals, and the use of the new paragraph (x) entry on the U.S. Munitions
List. Also, French companies will need to understand the available license exceptions provided by the Department of Commerce.
The benefits of these changes to U.S. export control laws are significant to French companies. It will allow greater business opportunities
to take place with U.S. companies and reduce concerns or uncertainties that incorporating certain U.S. items will subject the French made
goods to the jurisdiction of the Department of State (i.e., the so-called ITAR taint) or the Department of Commerce.
To benefit from these changes, it will be necessary for French parties to understand the new regulations and how they impact their current or future activities. Although the Export Control Reform efforts will result in a number of new regulations, these new regulations are
manageable and will provide greater clarity over which regulatory authorities apply.
Co n t ac t Inf o r m at io n
Christopher B. Stagg
NC | VA | DC | WILLIAMSMULLEN.COM
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