On October 29, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Federal Register notice announcing further amendments to the Export Administration Regulations (EAR) to revise the license review policy for items controlled for national security reasons destined to the People’s Republic of China (PRC), Venezuela or the Russian Federation (Russia). BIS has increasingly sought to prevent efforts by entities in China, Russia and Venezuela to acquire U.S. technology that could be used in the development of weapons, military aircraft or surveillance technology through civilian supply chains or under civilian-use pretenses. Please see our prior updates of April 28, 2020 and June 26, 2020).
This action amends the license review policy for items that have a national security (NS) reason for export control. Effective October 29, 2020, BIS will determine, “on a case-by-case basis, whether the proposed export, reexport, or in-country transfer of such items will make a material contribution to the weapons systems capability of [China, Russia, and Venezuela].”
In order to do so and to assist exporters in preparing license applications, BIS has prepared an illustrative list of factors that will be considered in reviewing all license applications. This list will include consideration of:
- The appropriateness of the export for the stated end use;
- The significance of the item for the weapons systems capabilities of China, Russia or Venezuela;
- Whether any party is a military end user;
- The reliability of the parties to the transaction, including whether: (i) an export license application has previously been denied; (ii) any parties are or have been engaged in unlawful procurement or diversion activities; (iii) the parties are capable of securely handling and storing the items; and (iv) end-use checks have been and may be conducted by BIS;
- The involvement of any party to the transaction in military activities;
- Government strategies and policies that support the diversion of exports from their stated civil end use and redirection towards military end use; and
- The scope and effectiveness of the export control system in the importing country.
In addition, BIS will also undertake in any review “an assessment of the impact of a proposed export of an item on the United States defense industrial base” and whether “the denial of an application for a license that would have a significant negative impact.”
BIS notes that license applications for exports destined for a civil end user for civil end uses in China, Russia or Venezuela will continue to be reviewed under a “presumption of approval,” and that there will continue to be a license review policy of a “presumption of denial” for applications to export items that would “make a material contribution to the ‘development,’ ‘production,’ maintenance, repair, or operation of weapons systems, subsystems, and assemblies.”