International Law Advisory - New Export Control Rule for Exports to India

On October 2, 2007, the Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule amending the Export Administration Regulations (EAR) to add India as an eligible destination for exports, reexports, and transfers under the Authorization Validated End-User program.  See 72 Fed Reg. 56010-56011.  This rule creates a new opportunity for companies to eliminate export licensing requirements for eligible items sent to authorized Indian end-users.

Earlier this year, BIS issued a revised final rule that incorporated a new Validated End-User (VEU) authorization to facilitate legitimate exports to civilian end-users.  The authorization allows the export, reexport, and transfer of eligible items to specified end-users in an eligible destination without a license.  Validated end-users are those entities that meet a number of criteria, including a demonstrated record of engaging only in civil end-use activities.

Yesterday’s rule adds India to the list of VEU-eligible destinations, which initially only included the People’s Republic of China (PRC).  This development is the latest step toward easing US controls on exports to India – a trend spurred by bilateral cooperation over the past several years.

As previously reported in our PRC-focused advisory of June 22, 2007, under the VEU program, either a foreign company, a US exporter, or a non-US re-exporter on behalf of its foreign customer may file an advisory opinion request, identifying the items that will be exported or transferred to the VEU candidate.  The specific procedures and timelines for requesting and maintaining VEU status were described in detail in the above-referenced advisory; the key elements are summarized here:

• An advisory opinion request that includes all relevant details must be filed.
• Advisory opinion requests will be submitted to the End-User Review Committee (ERC), which will complete an evaluation of the application within 30 days after a complete application is circulated to the relevant agencies.
• Prior to an initial export of eligible items to a VEU, exporters/reexporters must obtain certifications from the VEU regarding end-use and compliance with the VEU requirements, and exporters must submit annual reports to BIS identifying each VEU to whom the exporter transferred eligible items and the quantity and value of those items.

In considering an application, the ERC will take into account a variety of factors, including: the VEU candidate’s record of exclusive civil end-use activities; the candidate’s compliance with US export controls; the need for an on-site review by US Government officials prior to approval; the VEU candidate’s ability to comply with the VEU requirements; the candidate’s agreement to continuing on-site reviews; the candidate’s relationship with US and foreign companies; and the export controls and adherence to multilateral export control regimes demonstrated by the VEU candidate’s government.

It should be noted that items controlled for missile technology or crime control reasons do not qualify for consideration under the VEU program.  However, for eligible items, exporters, reexporters, and eligible Indian end-users should take advantage of the new opportunity to eliminate licensing requirements by adopting US-compliant export control procedures.

If you have any questions regarding the VEU or any related export control issues, please contact Ed Krauland at 202.429.8083 or Petra Vorwig at 202.429.6417 in our Washington office, or contact David Lorello at +44 (0)20 7367 8007 in London.