United States: Export Controls Reduced On Libya And Iraq – Amendments To Regulations Expand Opportunities For Exports

On August 31, 2006, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to implement the decisions by the U.S. Government to remove Libya and Iraq from the list of state sponsors of terrorism. These EAR amendments expand opportunities for companies to export or reexport goods and technology to Libya and Iraq.

On May 15, 2006, President Bush submitted a report to Congress certifying that Libya had not provided support for international terrorism during the preceding six months and that Libya had provided assurances that it would not support future acts of international terrorism. In conjunction with the submission of this report, the U.S. Department of State announced that it intended to remove Libya from the list of state sponsors of terrorism. Subsequently, on June 30, 2006, the State Department officially rescinded Libya’s designation as a state sponsor of terrorism.

In order to implement the State Department’s rescission, BIS has amended the EAR to remove Libya from the list of terrorist supporting countries in Country Group E:1. BIS also has made the following conforming amendments and related revisions to the EAR.

• Libya has been added to Country Group D:1 but remains in Country Groups D:2, D:3, and D:4.

• Items subject to the EAR but not listed on the Commerce Control List (CCL) (i.e., EAR99 items) will generally not be subject to license requirements for export or reexport to Libya except for the end user and end use controls set forth in EAR Part 744.

• Items controlled only for anti-terrorism (AT) reasons on the CCL will no longer be subject to license requirements for export or reexport to Libya except for the end user and end use controls set forth in EAR Part 744. This amendment, for example, effectively opens the commercial aircraft and aircraft parts market in Libya.

• The de minimis rules applicable to Libya have been amended so that reexports of items to Libya from abroad are subject to the EAR only when U.S.-origin controlled content in such items exceeds 25% instead of the 10% that formerly applied when Libya was listed in Country Group E:1.

These EAR amendments significantly reduce the level of controls on exports and reexports to Libya. BIS, however, will retain license requirements for the export or reexport to Libya of items on the multilateral export control regime lists (i.e., Wassenaar Arrangement, Nuclear Suppliers Group, Australia Group and Missile Technology Control Regime) and items controlled for Crime Control (CC) or Regional Stability (RS) reasons. In addition, certain categories of items controlled for Encryption (EI), Short Supply (SS), and Chemical Weapons (CW) reasons also will require licenses for export or reexport to Libya.

BIS has also revised its licensing policies for Libya. Under the revised policies, license applications for exports and reexports to civil end users and end uses will generally be approved for items that are controlled for Nuclear Nonproliferation (NP) and National Security (NS) reasons. Similarly, license applications for exports and reexports of items subject to CC controls will be reviewed favorably on a case-by-case basis consistent with the licensing policy described in EAR § 742.7. License applications for exports and reexports of items subject to Missile Technology (MT) controls and RS controls will be reviewed on a case-by-case basis consistent with the licensing policies set forth in EAR §§ 742.5 and 742.6.

As a result of Libya's inclusion in Country Groups D:1 through D:4, the following License Exceptions may now be available, in whole or in part: CIV, APP, TMP, RPL, GOV, GFT, TSU, BAG, AVS, ENC and KMI. Of course, a specific transaction will be eligible for a license exception only if it satisfies all of the terms and conditions of the relevant license exception and is not excluded by any of the restrictions that apply to all license exceptions as set forth in EAR § 740.2 and elsewhere in the EAR. It should also be noted that BIS has eliminated License Exception USPL since it is no longer necessary as a result of the lifting of AT controls on Libya.

BIS also has amended certain EAR provisions relating to Iraq to reflect the State Department’s October 2004 decision to rescind Iraq’s designation as a state sponsor of terrorism.

To begin with, BIS has amended the EAR to delete all references to Iraq’s former status as a designated state sponsor of terrorism. In addition, BIS has amended the EAR so that exports and reexports to Iraq, and transfers within Iraq, on items covered by eight export control classification numbers (ECCNs) are no longer controlled for AT reasons. The applicable ECCNs are:

• 0B999 (Specific processing equipment such as hot cells and glove boxes suitable for use with radioactive materials);

• 0D999 (Specific software for neutronic calculations, radiation transport calculations and hydrodynamic calculations/modeling);

• 1B999 (Specific processing equipment such as electrolytic cells for fluorine production and particle accelerators);

• 1C992 (Commercial charges containing energetic materials, n.e.s.);

• 1C995 (Certain mixtures and testing kits);

• 1C997 (Ammonium Nitrate);

• 1C999 (Specific Materials, n.e.s.); and

• 6A992 (Optical Sensors, not controlled by 6A002).

Although items covered by these ECCNs are no longer controlled for AT reasons, BIS has retained a licensing requirement for these items for RS reasons because they could contribute to military capabilities within Iraq and in the region that would be destabilizing and contrary to the foreign policy interests of the United States.

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