Blowing up planets is contrary to U.S. foreign policy. This is one of the reasons why, despite over 34,000,000 signatures on a petition to “Secure resources and funding, and begin construction of a Death Star by 2016,” the Administration recently announced it will not pursue construction of a Death Star. [F/N 1] Other reasons include the cost (which the Administration estimates at $850,000,000,000,000,000), an enemy’s ability to destroy a Death Star with a single X-wing Starfighter, and, of course, reality.
While a Death Star is far-fetched, the petition brings to mind how, more than ever, we live in an era of constantly emerging technologies. There are already many technologies that seem Star Wars-like. There are helmets with neural interfaces like the technology used in Luke Skywalker’s bionic arm, all-terrain hovercrafts similar to Imperial speeder bikes, laser cannons, and modern day androids and robots similar to those found on Imperial Star Destroyers.
Some of these and other emerging technologies implicate U.S. government military, intelligence or foreign policy concerns. Because of this, many of them are described in existing U.S. export control lists. For those not already described in the lists, the U.S. Government gets a second bite at the apple through the recently revised U.S. Munitions List (“USML”) Category XXI and the new 0Y521 Commerce Control List Export Control Classification Number (“ECCN”) series.
U.S. Export Controls on Emerging Technologies
Category XXI (formerly titled, “Miscellaneous Articles”) was recently revised as part of ECR and controls articles, technical data, and defense services not enumerated on the USML until such time as the appropriate USML category is amended. [F/N 2]
Prior to the ECR revision, the scope of Category XXI was much narrower, focusing on articles, technical data, and services which had substantial military applicability and which had been specifically designed, developed, configured, adapted, or modified for military purposes. [F/N 3] These qualifiers are now removed and, following other ECR changes to the Department of State’s policy on designating defense articles and services on the USML at ITAR Section 120.3, the government can apply Category XXI to many emerging technologies regardless of design intent if it determines the technology provides a critical military or intelligence advantage such that it warrants control under the Arms Export Control Act. [F/N 4]
Although ITAR Section 120.3(c) provides that an article is not subject to control when it “[m]eets one of the criteria of §120.41(b) of this subchapter [i.e., the definition of “specially designed”] when the article is used in or with a defense article and specially designed is used as a control criteria (see §120.41 of this subchapter), “specially designed” is not included in the revised Category XXI. [F/N 5] Even if it was, Section 120.41(b) does not release end items and systems from control, and end items and systems are very often the form taken by emerging technologies. [F/N 6]
Manufacturers can submit written requests for a determination of whether an article is classified under Category XXI through use of the Department of State’s commodity jurisdiction procedure. However, the Department of State does not generally provide notice to the public of what specific articles are classified under Category XXI. Notice of Category XXI classifications are not reported in the Federal Register and, of the over 2,500 commodity jurisdiction determination results posted on the DDTC website since 2010, none report a Category XXI classification.
The ECR Task Force created ECCN 0Y521 to serve as a holding place in the Commerce Control List similar to Category XXI that can catch items warranting Department of Commerce control, but that are not yet identified in an existing ECCN. [F/N 7] Another intent of ECR in implementing 0Y521 was to stop “hostage taking” of commodity jurisdiction requests, a practice in which ITAR control is imposed on otherwise commercial items solely because the Commerce Control List does not sufficiently catch the item. [F/N 8]
Pursuant to the ECR final rule implementing the control, ECCN 0Y521 classification determinations focus on whether an item provides a significant military or intelligence advantage to the U.S. or is justified for foreign policy reasons. [F/N 9] Upon such a determination, the classifications are made through Department of Commerce Federal Register notices, which are followed by descriptions of classified items at Supplement No. 5 to the Commerce Control List. [F/N 10]
The Department of Commerce Bureau of Industry and Security Office of Technology Evaluation, which performs focused assessments of emerging technologies to determine the appropriateness of export controls, may propose candidates for classification under ECCN 0Y521. Information leading to a 0Y521 classification can also come from Department of Commerce technical advisory committees, licensing officers and other agency personnel, or any member of industry. [F/N 11]
If you are involved in the development of emerging technology, you can of course decide to do nothing and hope the technology at issue stays off the government’s radar. This approach is appealing in some regards, because classification requests to agencies require that you disclose military and intelligence applications of technology that the government may not have otherwise considered. However, the approach also poses significant compliance risks commensurate with the significance of the technology to U.S. military, intelligence, and foreign policy interests.
Alternatively, you can proactively seek written agency guidance in the form of a commodity jurisdiction request to the Department of State or commodity classification request to the Department of Commerce, whichever is implicated by the nature of the item.
Unfortunately, the new standards for control under Category XXI and ECCN 0Y521 are quite similar. The difference between what constitutes a “critical military or intelligence advantage” (Category XXI) versus a “significant military or intelligence advantage” (ECCN 0Y521) can be a fine line subject to differing opinions. [F/N 12] Given this ambiguity and subjective nature of these two standards, industry is left to wonder whether they are even distinguishable from one another or control the same thing. Thus, your safest approach to determining the control status of emerging technologies with military or intelligence applications is to make a request using the Department of State’s commodity jurisdiction procedure.
Pros and Cons of Category XXI and ECCN 0Y521
Despite the ECR goal of reducing catchall controls and moving to a positive control list, the revised Category XXI and new ECCN 0Y521 provide great discretion to the government, essentially allowing it to control things not yet in existence. The ECR Task Force claims these catchall controls are necessary to prevent sensitive items from falling through gaps created by enumerating specific control parameters. [F/N 13] However, the new controls are much broader and open ended than previous catchalls on emerging technologies, presenting unique compliance risks. They also reduce the certainty necessary to cost-benefit analyses of international investment and collaborations in emerging technologies. Just imagine whether the Federation would have built the Death Star if construction involved both Category XXI and ECCN 0Y521 items!
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[F/N 1] See “Secure resources and funding, and begin construction of a Death Star by 2016,” November 14, 2012, Petition available on White House website; Paul Shawcross, “Official White House Response to Secure resources and funding, and begin construction of a Death Star by 2016.”
[F/N 2] “Amendment to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reform,” 73 Fed. Reg. 22,740, 22,758 (April 16, 2013) (changing USML Category XXI(a) to read, in relevant part, “Any article not enumerated on the U.S. Munitions List may be included in this category until such time as the appropriate U.S. Munitions List category is amended.”)
[F/N 3] See Former USML Category XXI(a) (providing, in relevant part, “Any article not specifically enumerated in the other categories of the U.S. Munitions List which has substantial military applicability and which has been specifically designed, developed, configured, adapted, or modified for military purposes.”).
[F/N 4] See 22 C.F.R. § 120.3(b) (“For purposes of this subchapter, a specific article or service shall be determined in the future as a defense article or defense service if it provides a critical military or intelligence advantage such that it warrants control under this subchapter.”).
[F/N 5] See 22 C.F.R. § 120.3(c) (“A specific article or service is not a defense article or defense service for purposes of this subchapter if it…(2) Meets one of the criteria of §120.41(b) of this subchapter when the article is used in or with a defense article and specially designed is used as a control criteria (see §120.41 of this subchapter).”).
[F/N 6] See 120.41(b) (“For purposes of this subchapter, a part, component, accessory, attachment, or software is not specially designed if it…”).
[F/N 7] “Revisions to the Export Administration Regulations (EAR): Export Control Classification Number 0Y521 Series, Items Not Elsewhere Listed on the Commerce Control List (CCL),” 77 Fed. Reg. 22,191 (April 13, 2012).
[F/N 8] “Are We Over-Thinking 0Y521? Come Hear What the Emerging Technologies (0Y521 Series) Rule is All About Plus Export Control Reform Initiative Update with Assistant Secretary of Export Administration Kevin Wolf,” Presentation sponsored by the American Bar Association, May 14, 2012, (“ABA 0Y521 Seminar”) at 9:00 – 11:32 and 24:10 – 25:22.
[F/N 9] “Revisions to the Export Administration Regulations (EAR): Export Control Classification Number 0Y521 Series, Items Not Elsewhere Listed on the Commerce Control List (CCL),” 77 Fed. Reg. 22,191 (April 13, 2012).
[F/N 10] Supplement No. 5 to Part 774 (“Items Classified Under ECCNS 0A521, 0B521, 0C521, 0D521 and 0E521”); N.B. The implementing regulations permit the Department of Commerce to extend 0Y521 classifications on an annual basis.
[F/N 11] ABA 0Y521 Seminar at 25:40 – 26:40.
[F/N 12] See 22 C.F.R. § 120.3(b) (“For purposes of this subchapter, a specific article or service shall be determined in the future as a defense article or defense service if it provides a critical military or intelligence advantage such that it warrants control under this subchapter.”); “Revisions to the Export Administration Regulations (EAR): Export Control Classification Number 0Y521 Series, Items Not Elsewhere Listed on the Commerce Control List (CCL),” 78 Fed. Reg. 22,191, 22,192 (“The U.S. Government’s decision to identify an item as included in ECCN 0Y521 is a classification based on a determination of whether the item has significant military or intelligence advantage to the United States or for foreign policy reasons, not a classification of the item’s technical characteristics.”).
[F/N 13] ABA 0Y521 Seminar at 4:10 – 5:25.
*The above is not intended as an exhaustive list of restrictions that may apply to a particular transaction nor advice for a specific transaction because the specifics of an individual case may implicate application of other U.S. laws as well as foreign laws that carry added or different requirements. In addition, U.S. export control and sanctions laws are frequently subject to change. Such changes can affect the continued validity of the information above, which is based on U.S. law existing as of January 30, 2014. For these reasons, assistance from a qualified attorney competent to advise on such matters is highly recommended.
Matthew A. Goldstein is an International Trade Attorney in Washington D.C. licensed to practice in the District of Columbia. He can be reached at (202) 550-0040 and Matthew@GoldsteinPLLC.com.