Publications

Overview

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

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

Venezuela

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.”

Endnotes

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.

Disclosure

This advisory may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions. Some of the design images and photographs in this document may be of actors depicting fictional scenes.