May 2, 2008
The U.S. Department of State Directorate of Defense Trade Controls has published a proposed rule amending the International Traffic in Arms Regulations (“ITAR”). See Amendment to the International Traffic in Arms Regulations: The United States Munitions List, 73 Fed. Reg. 19,778 (Apr. 11, 2008). The amendment is intended to address “recurring questions” concerning the State Department’s interpretation and implementation of section 17(c) of the Export Administration Act (“EAA”). That provision describes the civil aircraft equipment that is controlled by the Export Administration Regulations (“EAR”) instead of the ITAR. Section 17(c) states that standard civil aircraft equipment that is (1) certified by the Federal Aviation Administration, (2) is an integral part of an aircraft, and (3) is to be exported to a non-controlled country, is controlled under the EAA.
The objective of the proposed amendment is to clarify that certain basic parts and components that have a long history of use on civil and military aircraft are not subject to State Department control under the ITAR and reiterate the Department of State’s policy of using the commodity jurisdiction process when there is uncertainty. The amendment states that a component that is not Significant Military Equipment (“SME”) and that does not specifically appear elsewhere in the USML is not subject to the ITAR, provided that it
- is standard equipment;
- is covered by a civil aircraft-type certificate (including amended-type certificates and supplemental-type certificates) issued by the Federal Aviation Administration for a civil, non-military aircraft (this expressly excludes military aircraft certified as restricted and any type certification of Military Commercial Derivative Aircraft); and
- is an integral part of such civil aircraft.
Under these circumstances, no commodity jurisdiction determination is needed. However, unless some terms such as “standard equipment” and “integral” are defined in the final rule, companies may find that resorting to a commodity jurisdiction determination may still be necessary because there may be doubt as to whether the criteria have been met.
These factors will also be applied in determining whether an item that is an SME or appears on the USML may be excluded from ITAR coverage. Self-determinations for parts and components that are SME are not, however, permitted under the proposed rule unless the SME part or component was “integral” to the aircraft prior to the effective date of the rule. The determination for SME parts and components that are not exempted must be made in the context of a commodity jurisdiction request filed with the Department of State. Notably, the new rule will add certain sensitive parts and components to Category VIII(b) so as to designate them as SME. These include certain “hot section” components and digital engine controls. Such parts were previously controlled under Category VIII(h), which is not SME. This will impact licensing for these items independent of the implications arising under Section 17(c).
It is important to note that the amendment does not remove items from the USML, nor does it remove all items that are FAA certified. In addition, existing commodity jurisdiction determinations remain unchanged, and perceived inconsistencies with the new rule must be addressed through a reconsideration request.
The State Department has invited public comment by May 12, 2008.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or the following members of the firm’s International Trade Regulation and Compliance Practice Group in the Washington, D.C. office:
Judith A. Lee (202-887-3591, firstname.lastname@example.org)
Daniel J. Plaine (202-955-8286, email@example.com)
Jim Slear (202-955-8578, firstname.lastname@example.org)
Andrea Farr (202-955-8680, email@example.com)
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