The document discusses how Export Control Reform (ECR) has impacted Canadian companies. Some key points: 1) ECR has moved many military items from the US Munitions List (ITAR) to the Commerce Control List (EAR), making them easier to export to Canada and transfer within Canada. 2) The existing ITAR exemptions for exporting defense items to Canada remain unchanged. 3) Canadian purchasers may avoid being subject to the ITAR "see-through rule" for reexporting items containing US content that were moved to the EAR under ECR. 4) Items moved from ITAR to the EAR 600 series can now generally be exported from the US to

1. U.S. Export Control & Compliance:
What Canadian Entities Should Know
The Knowledge Group
April 6, 2016, Webinar
Export Control Reform – Implementation
Challenges and Impacts on Canadian Companies
Chuck Barry, Special Counsel, Eckland & Blando LLP
cbarry@ecklandblando.com
Cell: 763-807-9724
1

2. Agenda
• Export Control Reform (ECR) Context –
Changes and Challenges
• Determining Changes in Jurisdiction &
Classification
• 5 Key Results of ECR Affecting Canadian
Companies
• ITAR – Canadian Exemptions (Sec. 126.5)
• Reexporting – Steps for Success & Surprises
• Transition Challenges
• Summary
2

3. Export Control Reform (ECR) Context –
Changes and Challenges
• “Export controls are about risk mitigation.”
• Main goal of export controls – keep select states
or non-state actors (e.g., Al Qaeda, Taliban,
Hezbollah, Hamas, ISIS) from obtaining military
capabilities that could threaten important U.S.
national security interests.
• Aug 2009 – U.S. agencies directed by President
Obama to build U.S export control system with:
– “Higher walls…around fewer, more critical items.”
(Former Secretary of Defense Robert M. Gates, April 10, 2010)
3

4. Export Control Reform (ECR)-Cont’d
Goals
• Goals of ECR to enhance US national security:
– Overhaul Cold War-era system of regs by focusing
on threats that matter most
– Increase interoperability with and streamline
defense transfers to NATO (includes Canada) and
other close allies
– Strengthen US national security while increasing
competitiveness of US industry by reducing
incentives for non-US manufacturers to design out
or avoid US origin content .
4

5. Export Control Reform (ECR)-Cont’d
“Four Singles” Objectives - Elusive
• Single export-control list
• Single licensing entity (regulating agency)
• Single enforcement agency
• Single IT infrastructure
• Results: Progress moving toward these
– Phase 1 “USXPORTS” selected as single licensing
database (secure DoD database)
– Consolidated screening list (3 agencies) to self-
screen (100,000 screens per day as Feb-11-16)
5

6. Export Control Reform (ECR)-Cont’d
Key Accomplishments
– Major changes: moved less sensitive items from U.S. Munitions List (USML) to
new section of Commerce Control List (CCL) called the “600 Series” and for
spacecraft “9X515” items. Created “Positive Lists” of ITAR-controlled items .
• E.G., military aircraft instrument flight trainers not specially designed to simulate combat
were moved from USML to CCL.
• Prior to ECR, most parts specifically designed or modified for military aircraft fell under
USML Category VIII (h), and corresponding tech data for the parts was under USML
Category VIII (i). After ECR, most of parts moved to new 600 Series under ECCN 9A610,
and corresponding technology required for development, production, etc. of the parts
falls under ECCN 9E610.
– Most 600 series items require license to all countries except Canada.
• However many of those will be eligible for an EAR license exception, e.g., STA.
– Revision of 18 of 21 categories of USML, 15 of which have final regulations
implemented, remaining 3 been published for public comment (02-10-16).
DDTC of State Department aims to finalize initial review of all USML in 2016.
– More flexible licensing process under CCL to export less sensitive defense
products/services to allies and partners, benefitting US (and NATO, including
Canadian, and allied or partner countries’ manufacturers.
6

7. Export Control Reform (ECR)-Cont’d
Fewer Burdens for 600 Series Items*
• no defense services
• no brokering
• no registration
• no registration or licensing
fees
• availability of a de minimis rule
(U.S. content 25% or less of
total value of item for most
countries) for non-embargoed
countries (No US export juris.)
• vastly less burdensome direct
product rule
• one page licensing forms
rather than complex MLA’s
and TAA’s
• More flexible dual/third
country national rules
• No need for authorizations
just to market or to
manufacture abroad
• No import requirements
• No purchase order
requirements (thus allowing
for better business planning)
• Multiple license exceptions for
trade with allied countries,
such as STA, GOV for exports
to the US and allied
governments, and
• RPL for replacement parts
*Kevin Wolf, Assistant Secretary of Commerce for
Export Admin, BIS Annual Update 2015 – Nov 2, 20157

8. Determining Changes in Jurisdiction
(agency) and Classification (item)
• All items controlled by either ITAR or EAR:
– ITAR controls exports on USML
– EAR controls dual use and certain “military items”
– If get jurisdiction wrong, every export decision in future will be
wrong, too
– This determination sets direction toward the correct:
• Controlling agency - Dept. of State (DOS) or Dept. of Commerce (DOC)
• License Requirements (or exemptions exceptions),
Also, similar serious compliance risk of export violation, if product
classification is incorrect.
8

9. Determining Jurisdiction and Classification
• Two Basic Questions:
1. Is product, service, or data item controlled under ITAR?
(Jurisdiction)
- If yes, which USML Category and Classification (C)
- All J & C reviews must start with ITAR review & only
State Dept has legal authority to decide whether item is
ITAR-controlled
- Self-determine and may seek CJ per ITAR 22 CFR 120.4
2. If not under ITAR, where is it controlled within the EAR?
(Classification)
- Which ECCN (Export Control Classification Number)?
• Resolved Questions by required “Order of Review” and
document the results. Start analysis with 22 CFR ITAR
121.1(b) to determine jurisdiction and classification.
9

10. Order of Review – Determine
Jurisdiction & Classification (J&C)
• J&C process governed by “Order of Review”
• Order of Review defines steps for reviewing ITAR,
then EAR to assess jurisdiction and classification
• Only analyze “specially designed” if such words
are in control paragraph in ITAR or EAR, as case
may be
• DDTC and BIS “Decision Tools”:
– ITAR 121.1(b)(1)
• Online Decision Tool:
http://pmddtc.state.gov/licensing/dt_OrderofReview.htm
– EAR 774 Supplement No. 4
• Online Decision Tool:
• http://www.bis.doc/index/php/export-control-classification
10

11. “Specially Designed”
ITAR §120.41
• Definition of “specially designed” uses a
“catch and release” structure. Two “catches”
• Is specially designed ITAR item if it is:
– As result of development can achieve or exceed
the controlled performance levels, characteristics,
or functions described in relevant USML
paragraph; OR
– A part, component, accessory, attachment, or
software for use in or with a defense article.
• These are two VERY BROAD “CATCHES.”
11

12. Specially Designed – 5 Possible
“Releases” – Not subject to ITAR
• Item is subject to EAR under DDTC C J
• Is, regardless of form or fit, a fastener, washer, spacer,
grommet, bushing, wire, etc.
• Has same function, performance capabilities as item or
sofware in production and not on USML
• Was or is being developed knowing use in or with
BOTH defense items and items Not on USML
• Was or is being developed as general purpose item
with no knowledge for use in or with particular
commodity, e.g, an aircraft or machine tool - Must
have contemporaneous documents that establish this
fact, e.g., concept design, marketing plans, declarations
in patent apps or contracts. 12

13. ITAR Examples – Order of Review
• ITAR: Aircraft tail boom component – Review
USML Category VIII(a)(1) & ITAR 120.41 “specially
designed” words are expressly stated in (h)(3)
• ITAR: Static line anchor cable for CH-47 Chinook –
Review USML Category VIII – not listed in VIII
(h)(1) or in paragraph using “specially designed.”
So, move your export review to EAR 600 Series
– Source: DDTC at Society for International Affairs (SIA) Conference – Mar 9 2015
13

14. EAR Examples – Order of Review
• Items previously controlled under USML Category VIII –
Aircraft and Related Articles
– For end item: if not listed in ITAR USML VIII(a), (e), or (f), then
it is moving to CCL’s new 9A610 (aircraft). Part of new “600
Series” (EAR as former USML item.)
– For Software or technology (unclassified):
• If an item stays on USML, then these 2 items directly related to the
USML item also stay - on USML VIII (i) or XIX(g).
• If not on USML, item is moving to CCL’s new 9D610/9E610 (aircraft
software/tech) or 9D619/9E619 (engine software/technology)
– Source: Bureau of Industry and Security (BIS) at SIA Conference Mar 9 2015
14

15. USML Framework
• Control text for:
– End platforms and major systems
– Parts, components, accessories, and attachments
– Classified articles
• Technical data (including software) and
defense services
• Items subject to the EAR – new “(x)”
paragraph

16. CCL 600 Series Framework (Source: BIS)
Former USML items (and -018 items)
listed in the “Items” paragraph.
Order of review:
• .a - .w: specifically enumerated
end items, materials, parts,
components, accessories, and
attachments
– Some items may be “specially
designed”
• .y: specifically described
commodities (primarily parts,
components, accessories, and
attachments) that are “specially
designed”
• .x: “specially designed” parts,
components, accessories, and
attachments that are not
specifically enumerated
9A610
CCL
Category
0-9
Product
Group
A-E
“600 series” derives its
name from the 3rd
character of the ECCN
Last two
characters will
generally track
the WAML

17. CCL 600 Series Framework
STA eligibility requests for “600 series” end items). (2) Paragraph (c)(2) of License Exception
STA (§740.20(c)(2) of the EAR) may not be used for any item in 9A610.
9A610 Military aircraft and related commodities, other than those enumerated in 9A991.a
(see List of Items Controlled)
License Requirements
Reason for Control: NS, RS, MT, AT, UN
List Based License Exceptions (See Part 740 for a description of all license exceptions)
LVS: $1500
GBS: N/A
CIV: N/A
Special Conditions for STA
STA: (1) Paragraph (c)(1) of License Exception STA (§740.20(c)(1) of the EAR) may
not be used for any item in 9A610.a (i.e., “end item” military aircraft), unless determined by
BIS to be eligible for License Exception STA in accordance with §740.20(g) (License Exception
.a - .x items
controlled to all
countries except
Canada
.y items
controlled to
Country Group
E:1, China,
Russia, and
Venezuela
Control(s) Country Chart (See Supp. No. 1 to part 738)
NS applies to entire entry except 9A610.u, .v,
.w, and .y
NS Column 1
RS applies to entire entry except 9A610.y RS Column 1
MT applies to 9A610.u, .v, and .w MT Column 1
AT applies to entire entry AT Column 1
UN applies to entire entry except 9A610.y See §746.1(b) for UN controls

18. Examples: USML to 600 Series (Source: BIS)
Revised USML
End-Items
“A More Positive List”
(“.a-.w” items)
Specially enumerated end-items,
“parts”, “components”, “accessories”
& “attachments”.
Commerce Control List
600 Series
• F-15, F-16
• Assembled engines
• Weapons pylons
• Mission systems
• Bomb racks
• Missile launchers
• Fire control computer
• Fire control Radar
(“.x” items)
“Specially Designed” “parts”,
“components”, “accessories”, and
“attachments”.
(“.y” items)
Specifically enumerated “parts”
“components”, “accessories”,
“specially designed”…
• Aircrew life support and
safety equipment
• Parachutes/paragliders
• Controlled opening
equipment of automatic
piloting systems, designed for
parachuted loads
• T-1 Aircraft
• Wings, Rudder, Fin, Panels
• Fuselage – forward, center, aft
• Cockpit structure
• Forward equipment bay
• Control surfaces, activation
and control systems
• Aircraft tires
• Hydraulic system filters
• Hydraulic and fuel hoses,
fittings, clips, couplings,
brackets
• Cockpit panel knobs,
switches, buttons, dials

19. 5 Key Results of ECR Affecting
Canadian Companies
• No change to ITAR Canadian Exemptions (126.5)
• ECR simplifies export of 600 Series items from
U.S. to Canada
• ECR makes easier retransfer of 600 Series items
within Canada
• Canadian Purchasers may avoid being subject to
ITAR “see-through rule” for reexports of
Canadian-made items with US origin 600 Series
content
• Canadian Purchasers may require US suppliers to
give ECCN for 600 Series items.
19

20. ECR Affecting Canadian Companies
1st – No Change to ITAR Canadian Exemptions (126.5)
• Many items changed from USML to CCL
– E.G., ground vehicles, surface vessels; not
explosives, energetic materials, missiles.
• For those remaining subject to ITAR – existing
Canadian exemptions in Sec. 126.5 remain
• Certain ITAR items for export to Canada or
retransfer within Canada – may be eligible
• Only minor rev to reflect realigning USML
• See List of ITAR Exemptions & EAR Exceptions
20

21. ITAR Exemptions & EAR Exceptions
ITAR Exemptions EAR License Exceptions
§ 123.4 RPL § 740.10; TMP § 740.9(b)(2) and (b)(4)
§ 123.16(b)(2) LVS § 740.3
§ 123.16(b)(5) TMP § 740.9(a)(5)
§ 123.16(b)(9) TMP § 740.9(b)(10)
§ 123.17(f)-(i) TMP § 740.9(a)(11); BAG § 740.14(h)(2)
§ 123.19 TMP § 740.9(b)(1)
§ 125.4(b)(1) GOV § 740.11(b)(2)
§ 125.4(b)(3) GOV § 740.11(b)(2)
§ 125.4(b)(4) TSU § 740.13(g)
§ 125.4(b)(5) TSU § 740.13(a)
§ 125.4(b)(10) TSU § 740.13(f)
§ 126.4 GOV § 740.11(b)(2)
§ 126.6(a) GOV § 740.11(b)(2)

22. ECR Affecting Canadian Companies
2nd - simplifies export of 600 Series items from U.S. to Canada
• Prior to ECR, most EAR-controlled items could be
exported from US to Canada – no license required
(NLR)
• After ECR, this expanded to include new 600
Series ECCN from USML – to be exported for
ultimate end-use in Canada NLR. Much easier to
export former USML items to Canada without
having to resort to ITAR exemption.
• Canada is the only country to which 600 Series
items – in general, may be exported NLR.
22

23. ECR Affecting Canadian Companies
3rd - Makes easier retransfer of 600 Series items within Canada
• What if you want to sell ITAR-controlled items from
Ottawa to Toronto, or send same to Vancouver for heat
treatment or to Winnipeg for testing? US State-DDTC
likely view such actions as “retransfers” requiring their
approval.
• Yet, possible to retransfer in Canada, most EAR-
controlled items (including 600 Series) with no US
export authorization – if not transfer for prohibited
end –use or end-user, and know the Canadian
customer will not export in violation of EAR (Cuba or
Europe without license or exception.
23

24. ECR Affecting Canadian Companies
4th - Canadian Purchasers may avoid being subject to ITAR “see-
through rule” for reexports of Canadian-made items
• Canadian Purchasers may avoid being subject
to ITAR “see-through rule” for reexports of
Canadian-made items with US origin 600
Series content.
24

25. Export Control Basics: What are export
controls & how affect me?
• U.S. laws/regs that govern electronic transfer or
shipment overseas (or to foreign nationals within
U.S.) of certain controlled information,
technologies and commodities.
• Protect economy, promote trade goals, restrict
export of tech and goods that could militarily aid
U.S. adversaries. Is good business. Failure is
costly & impacts ability to deliver or on time.
• Protect your company’s reputation/ability export.
• Other countries have similar laws.
25

26. Export Control Basics: What are export
controls & how affect me?
• Export: actual shipment or transmission of
items out of U.S. (EAR 734.2(b)) Examples:
– Physical shipment, hand carried items or laptops,
email, posting or pulling from FTP site, accessing a
server overseas, file sharing with foreign person or
colleague overseas, telephone, fax, visual
inspection by foreign person in U.S. or abroad of
controlled tech, actual use or application of
controlled tech for the benefit of a foreign entity
or person anywhere.
26

27. Export Control Basics: What are export
control laws/regs that affect me?
• U.S. Dept. of Commerce (DOC) – Export
Administration Regs (EAR) – focus on dual-use
• U.S. Dept. of State (DOS) – International Traffic in
Arms Regulations (ITAR) – focus primarily on
military items and technologies.
• Two main lists: EAR Commerce Control List (CCL)
and ITAR Regs – U.S. Munitions List (USML)
• Plus – Office of Foreign Assets Control (OFAC)
• Varying levels – trade embargoes (17 countries)
– Cuba still subject, Iran, Iraq, North Korea, Sudan, etc.
27

28. Export Control Basics: Question 2: What
are export control items-technologies?
• Examples in export control lists - seek expert legal
advice to see if license or license exception fits before
export:
• advanced computing; microelectronics; telecomm;
information security and encryption; certain life
sciences (biotech, biomed engineering) and chemicals,
e.g., health sciences research, e.g. anthrax or botulism
to protect military; nanotechnology and materials tech
– e.g., composites, ceramics; advanced
avionics/navigation (DOC); space-related and
prototypes (ITAR); robotics; and items or technology
specially developed for military (ITAR).
28

29. Export Control Basics: Quest 3: Are there
any export exemptions/exclusions?
• Yes, in both EAR and ITAR – However, be careful.
• EAR – No License Required (NLR) OK if ECCN has
no “X” on EAR Country Chart under “Reasons for
Control” or “EAR 99” items if no license required
based on any other licensing requirement (e.g.,
end-use/user requirement; restricted
destinations - countries).
• ITAR – Part 125 Exemptions, e.g., tech data
previously authorized for export to same
recipient; or for use by US Person abroad.
• Should obtain export legal advice prior to use of
any exemption (ITAR) or exception (EAR).
29

30. Export Control Basics: Quest 4: What are the
“Foreign Person” export licensing rules?
• “Deemed Export” – transfer of tech or tech data to foreign person is deemed to be
export to home country of the Foreign Person. Foreign national or person refers to
everyone other than a U.S. citizen, a permanent resident alien (has “Green Card”),
or certain protected individuals like refugees and persons with asylum via USG.
(ITAR 22 CFR 120.16)
• Even a discussion with a Foreign Person in U.S. is considered a “deemed export.”
Avoid doing unless obtain in advance an export license or obtain license exception
approved by proper U.S. Govt. agency and qualified export legal advice.
• Tech Data definition (EAR and ITAR) is very broad and inclusive: design,
development, production, maintenance, repair, testing, manufacture, assembly.
Includes blueprints, drawings, photos, plans, instructions, diagrams, models, specs,
etc.
– Tech Data definition does not include: basic marketing info on function,
purpose or general descriptions of defense items. If so, no EAR or ITAR export
license required. 30

31. Export Control Basics: Question 5: How
long does it take to get export license?
• Export licenses can take 60 days to 3 months to
obtain after applications are sent to Govt.
• Consider these factors in your export planning:
– Physical shipments could be delayed.
– International collaborations and exchange of
controlled information could be delayed.
– Restricted equipment at your business may trigger
technology control plan requirements, e.g. physical
and IT security & foreign national review
requirements.
– Training on military restricted (ITAR) equipment could
trigger licenses for certain foreign nationals at your
business or elsewhere.
31

32. Export Control Basics: Quest 6 - What
are penalties for violating such laws?
• Important to take steps to prevent violations of export regs
and become personally liable for substantial civil and
criminal penalties.
• Consequences of violating EAR or ITAR can be severe – for
both the company and individual.
• State Department (ITAR):
- Criminal: up to $1M per violation, up to 10 years imprisonment
- Civil: seizure & forfeiture of items and any vessel, aircraft or
vehicle involved in attempted violation, revocation of export
privileges, fines up to $500,000 per violation
32

33. Export Control Basics: Quest 6 - What
are penalties for violating such laws?
• Commerce Department (EAR):
– Criminal: $50K to $1M or up to 5 times the value
of export, whichever is greater per violation (range
depends on applicable law); up to 20 years prison.
– Civil: loss of export privileges, fines up to $250K
per violation or up to twice the value of the
export.
33

34. Export Control Basics: Quest 6 - What
are penalties for violating such laws?
• Treasury Department (OFAC):
– Criminal: up to $1M per violation, up to 10 years
imprisonment
– Civil: $55,000 to $250,000 fines (depending on
applicable law) per violation
For all 3 agencies: penalties apply to each violation,
which means that if a violation relates to more than one
controlled item or material or occurs more than one
occasion, each item or incident may trigger a penalty.
34

35. Export Control Reform (“ECR”) -Context
• ECR overhauled – major “sea lane” changes to 15+ of US
Munitions List Categories (21). Process started 2009 - present.
– Affected wide range of industries.
– Created “Positive Lists” of ITAR-controlled items; many
former ITAR items new 600 Series; spacecraft to 500 Series
& CCL Category.
• ECR impacts jurisdiction and classification or reclassification of
products, data or service(s).
• Key investment-effort to review all items down to component
level; need expertise in EAR and ITAR.
• Is compliance seen as “bonus prevention” by some
international business teams? (Are compliance, business
strategy and incentive compensation properly aligned?)
• Effective export compliance is a “business enabler.”
35

36. Commodity Jurisdiction and Product,
Data, Services Classification
• All items controlled by either ITAR or EAR:
– ITAR controls exports on USML
– EAR controls dual use and certain “military items”
– If get jurisdiction wrong, every export decision in future will be
wrong, too
– This determination sets direction toward the correct:
• Controlling agency - Dept. of State (DOS) or Dept. of Commerce (DOC)
• License Requirements (or exemptions exceptions),
Also, similar serious compliance risk of export violation, if product
classification is incorrect.
36

37. Determining Jurisdiction and Classification
• Two Basic Questions:
1. Is product, service, or data item controlled under ITAR?
(Jurisdiction)
- If yes, which USML Category and Classification (C)
- All J & C reviews must start with ITAR review & only
State Dept has legal authority to decide whether item is
ITAR-controlled
- Self-determine and may seek CJ per ITAR 22 CFR 120.4
2. If not under ITAR, where is it controlled within the EAR?
(Classification)
- Which ECCN (Export Control Classification Number)?
• Resolved Questions by required “Order of Review” and
document the results. Start analysis with 22 CFR ITAR
121.1(b) to determine jurisdiction and classification.
37

38. Before You Begin
• Jurisdiction and classification review should be
an established part of company procedures:
– Product development gate
– Proposal review
– Quote or Proposal release
– Export Approval
 May be required for products, data, services
38

39. Before You Begin
• Certain data or information will be required
before you can review an item’s jurisdiction
and classification (J&C)
• This will likely come from different functional
areas within your company:
– Engineering / Research & Development
– Business Development / Sales
– Contracts
– Legal
 Determining J&C should be a coordinated team effort
39

40. Before You Begin – Product
• You must have a complete understanding of
the product:
– Product description
– Source of product
– Understanding of product capabilities & end-uses
– Product specifications and drawings
– Real and expected customers for the product
– Any past J&C or export history
– Comparable products, including foreign availability
40

41. Before You Begin – Data, Services
• Similar information is required for data or
services to be reviewed
– What is the source of the data or service?
– Who (end-user) receives the service?
– In what context has the service been provided in
the past?
 A checklist or questionnaire is often useful for
gathering this information
41

42. Determining Jurisdiction
• Jurisdiction may be determined in two ways:
– Self-determination based on a review of the ITAR,
or if sourcing item from a supplier – ask them to
identify either ITAR or EAR controlled (ECCN)
– Submitting commodity jurisdiction request (C J) to
the Department of State (ODTC)
• Only a CJ determination is legally binding
42

43. Order of Review – Determine
Jurisdiction
• J&C process governed by “Order of Review”
• Order of Review defines steps for reviewing ITAR,
then EAR to assess jurisdiction and classification
• Only analyze “specially designed” if such words
are in control paragraph in ITAR or EAR, as case
may be
• DDTC and BIS “Decision Tools”:
– ITAR 121.1(b)(1)
• Online Decision Tool:
http://pmddtc.state.gov/licensing/dt_OrderofReview.htm
– EAR 774 Supplement No. 4
• Online Decision Tool:
• http://www.bis.doc/index/php/export-control-classification
43

44. “Specially Designed”
ITAR §120.41
• Definition of “specially designed” uses a
“catch and release” structure. Two “catches”
• Is specially designed ITAR item if it is:
– As result of development can achieve or exceed
the controlled performance levels, characteristics,
or functions described in relevant USML
paragraph; OR
– A part, component, accessory, attachment, or
software for use in or with a defense article.
• These are two VERY BROAD “CATCHES.”
44

45. Specially Designed – 5 Possible
“Releases” – Not subject to ITAR
• Item is subject to EAR under DDTC C J
• Is, regardless of form or fit, a fastener, washer, spacer,
grommet, bushing, wire, etc.
• Has same function, performance capabilities as item or
sofware in production and not on USML
• Was or is being developed knowing use in or with
BOTH defense items and items Not on USML
• Was or is being developed as general purpose item
with no knowledge for use in or with particular
commodity, e.g, an aircraft or machine tool - Must
have contemporaneous documents that establish this
fact, e.g., concept design, marketing plans, declarations
in patent apps or contracts. 45

46. ITAR Examples – Order of Review
• ITAR: Aircraft tail boom component – Review
USML Category VIII(a)(1) & ITAR 120.41 “specially
designed” words are expressly stated in (h)(3)
• ITAR: Static line anchor cable for CH-47 Chinook –
Review USML Category VIII – not listed in VIII
(h)(1) or in paragraph using “specially designed.”
So, move your export review to EAR 600 Series
– Source: DDTC at Society for International Affairs (SIA) Conference – Mar 9 2015
46

47. EAR Examples – Order of Review
• Items previously controlled under USML Category VIII –
Aircraft and Related Articles
– For end item: if not listed in ITAR USML VIII(a), (e), or (f), then
it is moving to CCL’s new 9A610 (aircraft). Part of new “600
Series” (EAR as former USML item.)
– For Software or technology (unclassified):
• If an item stays on USML, then these 2 items directly related to the
item also stay - on USML VIII (i) or XIX(g).
• If not on USML, item is moving to CCL’s new 9D610/9E610 (aircraft
software/tech) or 9D619/9E619 (engine software/technology)
– Source: Bureau of Industry and Security (BIS) at SIA Conference Mar 9 2015
47

48. Transition Challenges
• Despite all assistance and guidance of agencies,
“export classification remains a dicey proposition.”*
• With all the ECR improvements, there “is an
unwelcome passenger – increased complexity.”**
* “Unintended Consequences of Export Reform: Has DDTC Opened an Alternative to the CJ?” by
Jones Day article in its publications on website, Feb 2014
** “Export Control Reform Expert Analysis,” article by John Black, website of Export Compliance
Training Institute, March 2015
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49. Transition Challenges
• DDTC Amendments to USML Categories VIII (Aircraft), XV
(Satellites/Spacecraft), and XI (Military Electronics-effective 12-
30-2014) (3 of 15 categories revised to date).
• Major impact on manufacturers and their 2nd and 3rd tier
suppliers – especially for Military Electronics (ME).
• While many ME low level items were removed from ITAR
licensing; large number will be subject to EAR, and broad open-
ended “catch-all” provisions being transferred to CCL 600 Series,
e.g, ECCN 3A611 “includes any radar, … “specially designed” for
military application that are not enumerated or otherwise
described…” Result – much analysis reclassifying and BIS
Munitions Licenses in some cases.
Source: “New Export Control Requirements for Electronics Manufacturers in Defense and Aerospace Industries,” Thomas B.
McVey, Williams Mullen law firm website, Nov 6 2014
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50. Practical Tips for Classification
• Use DDTC and Commerce online decision tools;
DDTC’s first, as part of Order of Review (listed
above)
• Define your EAR item in the control parameters
of the potentially applicable ECCN(s)
• End use, specifications, sales literature, etc., may
be helpful to extent relevant and accurate.
• Focus on functions and performance capabilities
as basis for defining if it is subject to ITAR, e.g.,
new Category XI Spacecraft and Related Articles.
50

51. Practical Tips for Classification
• If trying to determine release from “specially
designed” (SD) catch all:
– Define item in 5 release parameters of SD (b)(1)
thru (b)(5) in ITAR 120.41 (b) and similar for EAR
version as applicable
– For (b)(2) item must meet the dictionary definition
of the items listed, e.g, fastener, wire.
– For (b)(3), item must meet all 3 criteria. Side by
side comparison (performance, form & fit) helpful
Source: Department of Commerce at SIA Export Conference, March 9-11, 2015
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52. Summary - Discussed
• Export Control Basics
• Export Control Reform (ECR)
• Jurisdiction (Agency) and Classification (Item)
• Impact of Jurisdiction and Classification
• Order of Review – Determine Jurisdiction under ITAR,
including if “specially designed” by express wording in
USML paragraph; if not applicable, then EAR
Classification
• ITAR and EAR Examples – Order of Review
• Transition Challenges
• Practical Tips for Classification
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53. Final Reminders – Due to ECR
• Be extremely careful…
• For some items, realize there are significant
differences of opinion within U.S. Government
• Learn to understand requirements for “600
Series”
• Document your Order of Review and rationale for
either new or reclassification. Securely retain
indefinitely…
• Reach out to U.S. Government regulators for
advice and consult export legal counsel.
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54. Source Notes
ECR – Context
Slide
3 “Hearing on Export Control Reform, Testimony”, Brian Nilsson, Deputy Secretary for Defense Trade Controls, Bureau of Political-
Military Affairs, U.S. Department of State, Statement Before the U.S. House Small Business Committee, Washington, DC, February
11, 2016.
3 “An Imperfect Balance: ITAR Exemptions, National Security, and U.S. Competitiveness”, C.Long, National Security Law Journal, Vol.
2:1, 2013, p. 43. U.S. Department of Commerce, Bureau of Industry and Security (BIS) presentation, ROK and U.S. Defense
Industry, Seoul, Korea, November 1, 2013, slide 40.
4 “Export Control Reform Update, Fact Sheet”, Office of the Spokesperson, Directorate of Defense Trade Controls, U.S. Department of
State, Washington, DC, February 10, 2016. Visit export.gov/ecr/ for more information on President Obama’s Export Control
Reform Initiative . Additional information is available on the Export Control Reform page of the State Department’s Directorate of
Defense Trade Controls website.
5 J. Barker, Arnold & Porter LLP, “Export Controls, Compliance and National Security Concerns – Part II: U.S. Export Controls Under the
ITAR and the EAR: …”, presented at West Government Contracts Year In Review Conference – Covering 2015 - Conference Briefs,
p. Int’l 3-11 to 3-21, at 3-11 and -12, February 16, 2016. Also, “Hearing on Export Control Reform, Testimony,” Brian Nilsson, Deputy
Secretary for Defense Trade Controls, Bureau of Political-Military Affairs, U.S. Department of State, Statement Before the U.S. House
Small Business Committee, Washington, DC, February 11, 2016.
6 A. Lopes, Director, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of
Commerce, “Export Control Reform: Update”, March 2015, slides 2-4 and ECR “Dashboard”, slides 5-6. “Critical Technologies -
Agency Initiatives Address Some Weaknesses, but Additional Interagency Collaboration Is Needed”, GAOE -15-288, ECR portions on
p. 7-13, at 7-8, Feb 2015. “Break Down the Latest Updates to the Export Control Reform”, Interview with B. Bittner, Director of
Global Trade Compliance, Textron, by Marcus Evans, January 222,2016, p. 1. “U.S .Export Control Reform Initiative - Overview”,
Department of Commerce, 2014, p. 1-2.
7 Speech of Assistant Secretary of Commerce for Export Administration, Kevin J. Wolf, BIS Annual Update 2015 Conference,
November 2, 2015, p. 3.
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