Use Of EAR License Exception STA – Are You Ready??

Leave a Comment / By /

By: Jenny Hahn, Vice President , FD Associates, Inc.

Prior to the implementation of Export Control Reform (“ECR”), the Bureau of Industry and Security (“BIS”), in June 2011, amended the Export Administration Regulations (“EAR”) to add a new License Exception for the export of certain highly controlled commodities and technology to a potential total number of 44 countries under specified conditions. 

License Exception Strategic Trade Authorization (“STA”), afforded exporters and reexporters, the ability to make exports under STA, so long as the export meets all of the provisions of use specified in the EAR at Part 740.20, and the Export Control Classification Number (“ECCN”) for the commodity or technology cited License Exception STA in the entry.

Use of STA provides exporters and reexporters the ability to make exports/reexports to countries specified in paragraphs c.1 and c.2 of Part 740.20 of the EAR. No longer is a license required to make an export to one of the STA countries, however, the rigorous requirements imposed for the use of License Exception STA could cause a novice exporter or foreign reexporter, not fully conversant in the EAR or requirements of using license exception STA, to not be fully compliant with all the requirements of the EAR. 

Perhaps due to the complexity of License Exception STA, the BIS has been following up with US industry on its use and compliance with License Exception STA. Since 2012, BIS has sent formal requests for documents to exporters that have utilized License Exception STA to verify their compliance to EAR for these export transactions.

 How does BIS know what License Exceptions exporters have used? Simply by pulling the information the exporter or its agent has filed in the Automated Export System (AES) record filed at the time of export. 

On October 15, 2013, the initial wave of ECR commenced with ECCN 9A610 and related ECCNs established for certain military aerospace platforms, systems, subsystems, parts, components, production, test and inspection equipment, software and technology, and ECCN 9A619 and related ECCNs established for certain military gas turbine engines, parts and components, production, test and inspection equipment, software and technology transferred off the ITAR’s US Munitions List to the Commerce Control List under the EAR. As part of the ECR Initiative, exporters were able to take advantage of a “license free zone” to 36 of the 44 countries provided by License Exception STA in Part 740.20.c.1 

ITAR exporters that had never exported EAR highly controlled goods were now treading in unfamiliar territory, as generally, most ITAR exemptions are not as complicated as those required for use of License Exception STA. Thus the potential for mistakes are greater. BIS has continued its practice of sending inquiries to exporters that use License Exception STA as the export authority and now has a larger field of exporters to verify the export has been made correctly. 

The question is: ARE YOU STA READY? Do you understand your obligations and has your company set up the required procedures necessary to ensure compliance with this complicated License Exception? Let’s review them now, so that when BIS sends you the request for verification of compliance, you won’t panic but will confidently be able to respond in 30 days or less.

In this article, I will focus on exports of 600 series ECCNs hardware, that are eligible to use License Exception STA to 36 countries listed in Part 740.20 (c)(1).

Prior to undertaking the export of a 600 series part, component or system, software or technology, you must undertake the following actions. 

  1. Classify your hardware to the subparagraph level in the CCL;
  2. Read the ECCN carefully at “License Exceptions” and confirm the License Exception STA exclusions DO not apply to your export;
  3. Confirm your transaction involves export/reexport to only the 36 countries listed under License Exception STA (740.20 (c)(1);
  4. Confirm your end user is a government (armed forces, police, paramilitary, law enforcement, customs, correctional, fire, or a search and rescue agency) of one of the 36 countries or the hardware is being returned to the United States; 
  5. Confirm the end use is for one of the following: “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of the hardware;
  6. Confirm all the parties in your transaction have been previously approved by either a Department of State license or Department of Commerce license (this means the USG has had an opportunity to vet these parties previously);
  7. Confirm all the parties in your transaction have been previously approved by either a Department of State license or Department of Commerce license (this means the USG has had an opportunity to vet these parties previously); 
  8. Advise the foreign consignee in writing of the specific ECCN applicable to the parts, subsystem or system they will receive via license exception STA; 

Obtain a written statement from the foreign consignee prior to any export confirming their understanding of the requirements for use/reexports under STA pursuant to EAR Part  740.20 (“Prior Foreign Consignee Statement”):      

  • The consignee is aware of the ECCN and that the parts will be exported via License Exception STA;
  • Has been informed of the ECCN by the US exporter; 
  • Understands the items being exported are exported pursuant to License Exception STA may not be reexported pursuant to License Exception APR;
  • Agrees not to export, reexport or transfer to any destination, use or user prohibited by the EAR;
  • Agrees to provide copies of the Prior Foreign Consignee Statement and all relevant export and reexport documents to the USG, if requested;
  • Agrees and understands that 600 series parts may only be transferred to persons or governments who are nationals of the 36 countries: 
  • Confirms that the  ultimate end user is a government of one of the 36 countries or return to the USG; or
  • Confirms that The end-use use is for “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of the hardware for ultimate end use by a government of the 36 countries or the United States or return to a US person;
  • Confirms that the foreign consignee has been provided a copy of the DOS or BIS authorization for the end use and the parties (if the US exporter does not have such authorization).
  • Agrees to permit a USG end user check, if requested.

  Be sure to note that if your transaction involves the export of hardware designated Major Defense Equipment and the contract value is $25M or more, License exception STA is not eligible for use. BIS will still request a copy of the contract in their request for documents to substantiate compliance. This element of BIS’ request seems out of place since the License exception cannot be used.

In addition to the Prior Foreign Consignee Statement, your customer must be aware that the receipt of the hardware via License Exception STA, will impose on them the same obligations to notify any/all eligible recipients of the commodities pursuant to STA, of the ECCN and obtain a Prior Foreign Consignee Statement before any retransfer of the equipment in its original form. 

As you can see there are many steps for use of STA, applicable not only to US exporters but also to your customers who may also wish to take advantage of this License Exception. 

As always, the devil is in the details. Are you ready to respond to the BIS, in the event of an inquiry? Do your records demonstrate your compliance? As you know, exporters are required to maintain export records for a period of 5 years from the date of export or known reexport, so it is important that you have in place the correct procedures for use before starting to use STA.

Need help with understanding the requirements of the STA? Or any aspect of the EAR or the new 600 series rules? Contact FD Associates for assistance, 703-847-5801 or info@fdassociates.net

[1] 740.20 (C)(1) 36 Eligible Destinations
Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, & United Kingdom.