International Trade and Customs

Commerce Tightens Restrictions on Exports to China, Russia and Venezuela

Author: Thomas B. McVey

The Commerce Department adopted a number of new amendments to the Export Administration Regulations (EAR) which increase export restrictions for China, Russia and Venezuela. These are part of the Administration’s accelerating efforts to clamp down on transfers of sensitive products and technologies to China and other foreign adversaries under the White House’s 2017 National Security Strategy. The amendments create increased compliance burdens and risks for commercial and military exporters.

Expansion of Military End Use and End User Controls. The Commerce Department’s Bureau of Industry and Security (BIS) issued a final rule on April 28, 2020 which expands the export licensing requirements for exports, reexports and transfers (in-country) of items intended for military end use or military end users in China, Russia and Venezuela. The amendment consists of a number of parts which, when taken together, significantly broaden the current Military End Use and End User controls set forth in EAR §744.21. Despite the term “military,” these controls will now apply to many purely commercial transactions. The new amendment becomes effective on June 29, 2020.

Under the newly revised EAR §744.21, in addition to license requirements for items on the Commerce Control List, parties may not export, reexport or transfer (in-country) items listed in Supplement No. 2 to EAR Part 744 to China, Russia or Venezuela if at the time of such transfer the party had “knowledge” that the item is intended entirely or in part for a “military end use” or “military end user” in China, Russia or Venezuela. The term “knowledge” is defined to include “reason to know,” “reason to believe” and can be inferred from an awareness of a high probability of the occurrence of future events.[1]

In the first part of the amendment, BIS expanded the licensing requirement for China to cover exports for “military end users” as well as “military end use.” (Previously under EAR §744.21 exports to China required a license for exports for “military end use” but not for “military end users.”) By adding “military end users” for China, BIS expanded the scope of the controls on China by adding a new category of transactions that will require a license.

In addition, BIS expanded the definition of the term “military end use.” By way of background, the definitions of “military end user” and “military end use” are extremely broad and incorporate many items that a reader might not initially consider in a general definition of these terms. For example, the definition of “military end user” under EAR §744.21(g) is as follows:

In this section, the term ‘military end user’ means the national armed services (army, navy, marine, air force or coast guard), as well as the national guard and national police, government intelligence or reconnaissance organizations, or any person or entity whose actions or functions are intended to support ‘military end uses’ as defined in paragraph (f) of this section. (Emphasis added.)

Thus any party in China, Russia or Venezuela whose actions or functions are intended to support “military end uses” are covered under this definition. As such, private commercial companies, universities and research institutions can be “military end users” under certain circumstances.

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