Last week, U.S. Secretary of State Condoleeza Rice
announced that the United States was restoring full diplomatic relations with
Libya and would be removing the country from the list of designated state
sponsors of terrorism (the Terrorist Sponsor List)1 and the annual
certification to Congress of countries not cooperating fully with United States
anti-terrorism efforts (the NFC List).2 Secretary Rice
also announced that the United States was adding Venezuela, which has been
developing close ties to Iran and Cuba, countries already on the Terrorist
Sponsor List and the NFC List, to the NFC List and will be imposing an arms
embargo against it as a result.3
Impact on U.S. Exporters and Re-Exporters of U.S.-Origin Items
Libya’s removal from the Terrorist Sponsor List will
lead the Commerce Department’s Bureau of Industry and Security (BIS) to relax
its restrictions on the export and re-export of dual-use items to Libya.
The BIS will update the Export Administration Regulations (EAR) to
remove antiterrorism (AT) controls on Libya. This means, among other things,
that items controlled by the United States for AT reasons only, i.e., most items with an Export Control Classification
Number (ECCN) ending in 990 through 998, will be eligible for export or
re-export to Libya without the need for a license from the BIS.4
BIS updates to
the EAR will permit the use of license exceptions for exports and re-exports to
Libya that are not currently available for terrorist-supporting countries. For
example, low-level encryption items, such as handheld devices or software
classified under 5A992 or 5D992, will be eligible for shipment to Libya without
a BIS license, and higher-level encryption items, such as equipment or software
classified under 5A002 or 5D002, will be eligible for shipment to Libya using
license exception ENC.
BIS updates to the EAR will increase the amount of controlled U.S. content
permitted in foreign-made items exported to Libya under the de minimis
rule, so that foreign-made items will need to exceed a
25 percent U.S. content threshold, rather than the current 10 percent threshold, before they
are subject to BIS export controls.5
Beginning October 1, 2006, new U.S. sales and licenses
for the commercial export of defense articles and defense services to Venezuela
will be prohibited, as will the retransfer to Venezuela of U.S.-origin defense
articles and technology.
Until October 1, already approved export authorizations
will not be rescinded, and exports under International Traffic in Arms
Regulations (ITAR) exemptions will continue to be allowed absent a Federal
Register notice to the contrary. Before that date, however, the U.S. government
intends to carefully scrutinize all proposed arms transfers and sales to
Venezuela on a case-by-case basis. According to the State Department, “[e]xports
that do not support the foreign policy and national security goals of the United
States will not be approved.”
1 In order
to remove a country from this list, under Section 6(j) (4) of the Export
Administration Act (EAA), the President must submit a report to Congress at
least 45 days before the proposed rescission occurs, justifying the rescission
and certifying that the country no longer supports terrorism and will not do so
in the future. With the submission of his report to Congress May 15, the
President intends to rescind Libya’s designation as a state sponsor of terrorism
June 29, 2006.
2 Click for more
information regarding U.S Diplomatic Relations With Libya or Rescission of Libya's Designation as a State Sponser of Terrorism .
3 When a country
is added to the NFC List, the United States, under Section 40A of the Arms
Export Control Act (AECA), will prohibit the sale or license for export under
the AECA of defense articles and defense services to that country during the
next fiscal year. Click for more information concerning Venezuela’s addition to the NFC list
. These changes to the NFC List involving Libya and Venezuela were announced in
a May 18, 2006 Federal Register notice.
4 These items will
still be subject to BIS requirements related to reasons other than the
destination country, such as end-use or end-user restrictions described at 15
CFR Part 744.
5 Please note that
certain foreign-made items containing U.S. products, software or technology are
not eligible for de minimis treatment — and are therefore subject to BIS
restrictions — no matter how little U.S. content they contain.
For More Information
Please contact your Thompson Hine lawyer or any member of our International Trade & Customs practice group for more information.
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