UPDATE: “Grandfather” Period for USML Categories VIII/XIX

By Odyssey E. Gray, III, Associate, FD Associates, Inc. 

USML Categories VIII and XIX of the International Traffic in Arms Regulations (“ITAR”) were the first two Categories revised under President Obama’s Export Control Reform (“ECR”) and were published as a Final Rule with an effective date of October 13, 2013.  As part of ECR, transition rules were published to provide guidance to exporters on how to address existing authorizations (licenses and agreements) which may contain items that transitioned to the jurisdiction of the Export Administration Regulations (“EAR”) under ECR and how to bring those authorizations into compliance with the revised ITAR and EAR.

DDTC’s original plan was to bring existing DSP-5 licenses and agreements related to Category VIII and the new Category XIX into compliance by October 2015, however, the new “compliance due date” is now October 2016, for agreements only, as detailed below.

The transition rules incorporated the use of a “Grandfather” period which provided a “grace period” to allow exporters to meet the new requirements for existing licenses and agreements.  Originally, the “Grandfather” provided exporters a two-year window to ensure that any existing DSP-5 authorizations that contained only items transitioning to the Commerce Control List (“CCL”) (Supplement No. 1 to Part 774 of the EAR) had been replaced with EAR authorizations (license or license exceptions). 

For agreements, those with only transitioned items or transitioned items integrated into end items which also transitioned, had to also be replaced with an EAR authorization unless defense services were still taking place.  Any agreements which contained transitioned items that were integrated into defense articles and any agreements with transitioned and non-transitioned items, needed to be amended to reflect those changes and any USML Category changes. 

Simply stated, exporters originally had until October 2015 to make the above changes to any existing Category VIII licenses and agreements and incorporate changes to reflect the creation of the new Category XIX and the bookend ECCNs 9A610/9A619.

In October 2015, however, DDTC amended the requirements related to the “Grandfather” period by eliminating the two-year requirement to make changes to existing DSP licenses with transitioned items by announcing that all licenses previously issued would retain their original 48-month validity period.  With respect to agreements, DDTC extended the “Grandfather” period by one year.  Thus, any replacement authorizations or amendments that exporters originally had must be updated by October 2016. 

In addition to these changes, DDTC has also updated the Agreement Guidelines.  Applicants must conform their agreements to the latest DDTC guidelines in addition to making the ECR changes.  Refer to the articles published by my colleague, John Herzo.

Time is running out…  Have you made the required changes?

Note: DDTC has stated that as part of ECR, it will now conduct reviews of the revised categories to update them and incorporate new technologies to ensure the ITAR remains a positive list, make corrections and remove language as needed.  DDTC has issued recommendations for revised Category VIII and XIX.  Public comments have been received for input into the final rule.  The revised Categories VIII and XIX are expected to be published in the near term with a potential effective date of December 31, 2016. 

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