New rules synchronize Destination Control Statements for EAR and ITAR.
On August 17, both the US Commerce Department’s Bureau of Industry and Security (BIS) and the US State Department’s Directorate of Defense Trade Controls (DDTC) issued final rules published in the Federal Register, both of which will become effective on November 15, 2016. The rules seek to harmonize the Destination Control Statement (DCS) in 15 CFR § 758.6 of the Export Administration Regulations (EAR) with the DCS in 22 CFR § 123.9 of the International Traffic in Arms Regulations (ITAR).
The rules are an ongoing part of US President Barack Obama’s Export Control Reform Initiative (ECR Initiative). To date, the ECR Initiative has transferred thousands of formerly ITAR-controlled defense article parts and components (along with other items) from ITAR’s United States Munitions List to the Commerce Control List in the EAR. This caused a change in agency jurisdiction for many parts and components of military and defense systems, which in turn resulted in certain export shipments containing articles subject to both the ITAR and EAR in the same shipment (formerly, export shipments were typically only subject to one or the other).
Both the EAR and ITAR have a mandatory DCS that must be stated verbatim on the export control documents for a shipment, such as bills of lading or commercial invoices. Since the pre-existing DCSs were created well before the ECR Initiative was implemented, certain shipments including items subject to both the EAR and ITAR could thus technically be subject to two sets of regulations’ mandatory language that were not consistent with each other. This caused confusion for exporters about which DCS to place on export documents, or whether they were required to include both the EAR and ITAR statements.
BIS and DDTC say that the DCS harmonization in the new rules will ease this regulatory burden on exporters.
We recommend that exporters review the new DCS for the EAR and ITAR and adjust your pro forma export control documentary language accordingly.
Morgan Lewis’s International Trade and Economic Sanctions team can assist you with your export control compliance posture. If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers: