Expiration Of “Grandfather” Period For Category VIII/XIX

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

Not sure what your licensing obligations are for ITAR licenses and agreements that contain items that transitioned as a result of Export Control Reform? USML Category VIII (Aircraft and Related Articles) was the first USML Category revised under President Obama’s Export Control Reform (“ECR”). The goal of ECR is to strengthen national security while fostering the competitiveness of key U.S. manufacturing and technology sectors through revision of the International Traffic in Arms Regulations (“ITAR”) and Export Administration Regulations (“EAR”). The ITAR and EAR continue to undergo revisions. The revisions to date has resulted in the movement, or “transition,” of a majority of parts and components “specifically designed” for defense articles off of the ITAR and onto the EAR. Today, if an item is regulated by the ITAR, it will be enumerated in the specific US munitions list category or be caught by terminology of “specially designed parts and components therefor”. If not on the USML, the item will fall to the jurisdiction of the Commerce Department and be enumerated on the Commerce Control List (“CCL”), unless released from control under the “Specially Designed” definition/provisions for release.

Under ECR, the transition rules provide a two year “Grandfather” period for which existing DDTC licenses or agreements may continue to be used. The revised category VIII and new category XIX (and corresponding 600-series ECCNs 9X610 and 9X619) went into effect October 15, 2013. Thus, the Grandfather period for USML Category VIII/XIX expires October 14, 2015. The Department of State then published an extension to this date on October 9, 2015. The Department of State has now authorized all DSPs to remain in effect until expiration. Exporters should refer to the Department of State notice at http://www.pmddtc.state.gov/index.html.

Any agreements which only have transitioned items must also be replaced with an EAR authorization (license or license exception) after three years instead of the original two years as stated on October 3, 2013.

If, however, the items in questions are integrated into a defense article, the defense services now remain authorized but the agreement must be amended prior to October 14, 2016, to reflect the transitioned items using USML VIII(.x) or XIX(.x). Agreements with both transitioned and non-transitioned items must also be updated by October 14, 2016 to reflect USML changes.

For agreements with other USML categories in addition to USML VIII/XIX, the last USML category with items to transition to the EAR controls the grandfathering requirement. For example, if an exporter has items listed on a TAA that has USML category VIII items and also USML category XI items, the TAA grandfather period is extended until December 29, 2017, i.e., the end of the grandfather period for USML category XI.

DSP-61s and DSP-73s are not affected by the Grandfather period as these authorizations are valid to expiration whether containing only transitioning items or containing both transitioning and non-transitioning items.

For exporters now evaluating their obligations, you must first do the analysis of export jurisdiction and once you have verified EAR, then verify the Export Control Classification Number (“ECCN”) under the EAR. Not all items transitioned for USML category VIII were captured by the new ECCN 9X610 or 9X619. The “Specially Designed” rules released some items to EAR99 or another ECCN such as 9A991. As the exporter, once you have verified your ECCN, you must evaluate what export authority you will need to facilitate the export; a license, a license exception or “NLR” designation for export of the transitioned commodities. To accomplish this, exporters must determine the applicable ECCN down to the specific subparagraph for the item(s) and review the controls (NS, RS, etc.) associated with the item. Then a review of the country chart is necessary to determine if a license is required. Because of the existence of the prior DDTC license, depending on the country, license exception “STA” may be applicable. Other license exceptions may also be available.

For questions or support in navigating these time sensitive requirements, contact your FD Associates consultant.

Are you ready?

If your items are in other USML categories, here are some key dates