On August 15, 2017, the Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule amending the Export Administration Regulations (EAR) to implement changes agreed to by member states of the Wassenaar Arrangement in their December 2016 Plenary meeting. These changes are designed to prevent destabilizing arms trade, while also ensuring that U.S. companies are competing on a level playing field with their competitors in other Wassenaar countries.
The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies is a group of like-minded countries committed to promoting responsibility and ensuring effective export controls on strategic items to improve regional and international security and stability. BIS’s new rule implements changes from last year’s Plenary meeting by revising 50 Export Control Classification Number (ECCN) entries and expanding license exception eligibility for certain items. In many cases, the amendments are intended to recognize advances in technology, such as by raising the adjusted peak performance (APP) for digital computers controlled by ECCN 4A003 to track improvements in microprocessor technology (i.e., Moore’s Law).
Among other changes, BIS also revised its encryption controls again. The agency formally removed “Note 4,” which excludes from U.S. encryption controls items with ancillary cryptography, such as a vending machine that sends encrypted communications to report that it has run out of soft drinks. Note 4 had been written in the negative, meaning that this exclusion from the encryption controls applied to items where the primary function was not information security, computing, communications, or networking. In an effort to help clear up confusion among exporters, BIS replaced Note 4 with positive text in ECCN 5A002.a that specifies the items subject to control. From a practical standpoint, BIS indicated that the scope of control (and the formerly titled “Note 4” exclusion) remains the same, with one notable exception. In this connection, BIS added language to release from the encryption controls items where the encryption supports a non-primary function of the item (e.g., an automobile with a built-in mobile telephone), but the stand-alone encryption equipment (here, the mobile telephone) is not controlled by ECCN 5A002 (here, the phone is a mass market item controlled by ECCN 5A992.c).
Considering the scope of BIS’s changes and the large number of ECCNs impacted by such changes, exporters are encouraged to review the revisions that could impact their current product and technology classifications.