International Law Advisory - BIS Tightens Export Controls for Chemical-Biological Products

On April 14, 2005, the Department of Commerce, Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to tighten chemical/biological (CB) controls for certain products on the Commerce Control List.1 The new regulations impose license requirements for the export of certain CB-controlled items to all countries except countries that are members of the Australia Group (the Australia Group is a multinational forum consisting of 38 participating countries).  The changes are intended to bring the EAR into compliance with the Australia Group’s “Guidelines for Transfers of Sensitive Chemical or Biological Items.”

CB restrictions are divided into three categories:  CB Column 1, which includes all countries; CB Column 2, which includes all countries except the Australia Group; and CB Column 3, which includes a small subset of highly-restricted countries.  See 15 C.F.R. § 738 Supp. 1 (Country Chart).  The new regulations impose license requirements for CB Column 2 countries for the following export control classification numbers, which previously were controlled only for CB Column 3 countries:

• 1A004 (protective and detection equipment, components)
  
• 2A226 (certain aluminum / nickel valves)
  
• 2A292 (alloy / steel piping, fittings, and valves)
  
• 2B350 (chemical manufacturing facilities / equipment)
  
• 2B351 (toxic gas monitoring systems)
  
• 2B352 (biological materials handling equipment)
  
• 2E001, 2E002, 2E201, 2E290, and 2E301 (controls on technology / software for certain Category 2 items)

Export license requirements now apply for the ECCNs referenced above for all countries except for the Australia Group.  Companies who may be affected by these changes should be sure to update their compliance programs to ensure that exports to CB Column 2 countries are properly licensed, including “deemed exports” to nationals of CB Column 2 countries who are working in the United States or other countries.

The new BIS revisions also include several other changes to the EAR:

• ECCN 1E001 has been revised to control technology for the “development” or “production” of items controlled under ECCN 1A004; the CB Column 2 controls in ECCN 1E001 have also been expanded to include ECCN 1A004.c items that also have the technical characteristics described in ECCN 2B351.a;
  
• ECCN 1E001 has also been amended to include, within its NS Column 1 controls, technology for the development or production of ECCN
  1C011 items;
  
• Paragraphs (a), (b), and (d) of Section 744 of the EAR (end user / end use controls) have been amended to apply to foreign country internal transfers of controlled items / technology, in addition to exports and re-exports;
  
• Sections 744.6(a)(1)(i)(C) and (a)(2)(ii) of the EAR have been amended to expand the scope of restrictions on U.S. persons’ activities in support of the design, development, production, stockpiling, or use of chemical or biological weapons in foreign countries.  The restrictions, which previously applied only to certain countries of concern, now apply to all countries worldwide.

The new regulation includes two savings clause provisions, one relating to actual exports and another to deemed exports:

• Actual exports: any item which could have been shipped without a license or pursuant to a license exception before the new regulation, but for which a license exception is now required, may be exported without a license if the item was “on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on April 29, 2005, pursuant to actual orders for export or reexport to a foreign destination,” so long as it is exported by midnight May 16, 2005.
  
• Deemed exports:  for deemed exports, the new regulation authorizes deemed exports for which a license would be required under the new regulation, but was not required (or was subject to a license exception) previously, until midnight August 12, 2005.

If you have any questions regarding the new regulations, please contact Ed Krauland at 202-429-8083 or David Lorello at 202-429-6757.

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1 The regulation was published in the Federal Register at 70 Fed. Reg. 19,688, and is available for download on the BIS website homepage.