The New Era of Export and US Person Controls for Military, Military Support, Intelligence, and Foreign Security End-Users
On July 29, 2024, the U.S. Department of Commerce’s Bureau for Industry and Security issued two sets of proposed rules to expand the scope of the military end-use/end-user and U.S. person controls aspects of the Export Administration Regulations.
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n July 29, 2024, the U.S. Department of Commerce’s Bureau for Industry and Security (“BIS”) issued two sets of proposed rules to expand the scope of the military end-use/end-user and U.S. person controls aspects of the Export Administration Regulations (“EAR”).1
The proposed rules are likely to have the following consequences for government and industry:
The BIS uses item-based controls, end-user controls, and other specific license policies to address proliferation and prevent items subject to the EAR from being diverted or misused contrary to U.S. national security and foreign policy interests. See our prior blog posts introducing various aspects of the EAR regime here, here, and here. The proposed rules implement expanded authority granted to the BIS pursuant to the Export Control Reform Act of 2018 (“ECRA”).
Bearing in mind the proposed rules are highly technical and nuanced, they most notably would expand:
Items Subject to the New End-Use/User Controls. Under the current EAR, military controls are circumscribed to cover items associated with 47 distinct Export Control Classification Numbers (“ECCNs”). The proposed rules expand coverage to all items covered by the EAR or all items described in the Commerce Control List (“CCL”), depending on the relevant end-user (discussed below).
Types of End-Users and Target Countries. Under the current EAR, there are military end-users (“MEUs”) and military intelligence end-users. The proposed rules will add Military Support End-Users and Foreign Security End-Users, broaden military intelligence end-users to Intelligence End-Users, and revise and conform the MEU classification. They will also expand the number of target countries covered for each end-user, all the way up to 48 countries and territories in some cases.
Restrictions on U.S. Persons Providing Support. Under the current EAR, U.S. Persons are prohibited from providing support services overseas in respect of various weapons of mass destruction (“WMD”) programs2. The proposed rules will cover those support services provided overseas to any of the above four end-users as well as in respect of certain military production activities.
Understanding the Items Subject to the New End-Use/User Controls
The following table represents the totality of items subject to the current rules.
Under the proposed rules, the covered items landscape will change dramatically in that it will essentially cover all conceivable items as summarized in the following table:
Understanding the New Types of End-Users
The general BIS prohibition is to require a license to export, re-export, or transfer any of the items above if there is knowledge that it is intended, entirely or in part for any of the following end-users/end use:
It must be noted that any entity meeting the definitions above (based on functions/activities) are subject to the relevant controls regardless of whether they are listed by the BIS. We refer to these as unlisted end-users.
Learn more about the expanding scope of military end use regulations in “Military Civil Confusion - Strategies for Identifying Military End Users” available to watch on-demand here.
According to the BIS, the expansion of the MEU definition is intended to capture private companies, non-state actors, or parastatal entities.
In regard to the newly created FSEU, according to the BIS:
state actors exploit advancements in technologies to reinforce existing repression; target civil society actors, human rights defenders, journalists, activists, and dissidents; surveil and profile women in all their diversity, ethnic, religious, and racial minorities, and other members of marginalized populations; censor speech; spread misinformation and disinformation; engage in mass surveillance; control the flow of information; infringe privacy; and suppress freedom through a variety of end users, including traditional law enforcement bodies, public security agencies, private prisons, and private contractors.
BIS notes that while these practices are not new, “advances in technology have supercharged the ability of such state actors to leverage new mechanisms to deploy their repressive agendas.”
The licensing standard for each of the above tabularized user/uses is set to either a presumption of denial, policy of denial, or case by case, depending on the type of user/use and the specific country.
Understanding the Target Countries
In addition to the above revisions, BIS proposes to greatly expand the target countries for all of the end-users as summarized in the table below. Under current rules, the target countries for MEU are limited to Belarus, Burma, Cambodia, China, Nicaragua, Russia, and Venezuela while the target countries for military intelligence end-users are the same plus Cuba, DPRK, and Syria.
Understanding U.S. Person Controls
Unlike the term “support” used in the definition of Military Support End-Users which remains undefined, the term “support” is defined for U.S. Persons control purposes as summarized in the following table.
Similar to the end-user/use controls, the general BIS prohibition is to require a license for a U.S. Person to provide support (as tabulated above) to the following end-users:
In addition, the proposed rules create a general prohibition that requires a license for a U.S. Person to provide support (as tabulated above) for “military production activity” when such activity occurs in or the product of such activity is destined to an MEU country. A military production activity refers to incorporation into or any other activity that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, development, or production of defense articles and any other item subject to the EAR where there is knowledge it is ultimately destined to or for use by an MEU.
Examples of such activities would include:
The licensing standard for the U.S. Person support activities is set based on those standards for the corresponding end-users and specified countries.
1 See End-Use and End-User Based Export Controls, Including U.S. Persons Activities Controls: Military and Intelligence End Uses and End Users, 89 Fed. Reg. 60985 (mostly relevant to 15 C.F.R. Part 744) and Export Administration Regulations: Crime Controls and Expansion/Update of U.S. Person Controls, 89 Fed. Reg. 60998 (also relevant to 15 C.F.R. Part 774). In addition, the former document follows up on the BIS’ Notice of Inquiry on Advanced Surveillance Systems and Other Items of Human Rights Concern, 85 Fed. Reg. 43532 (July 17, 2020) regarding amendments to ECCN 3A981 for facial recognition systems. Also on July 29, 2024, the State Department issued its proposed International Traffic in Arms Regulations: Revisions to Definition and Controls Related to Defense Services, 89 FR 60980, which coordinates with the EAR from an ITAR perspective.
2 This was recently expanded to cover military intelligence end users in certain countries in the BIS' Expansion of Certain End-Use and End-User Controls and Controls on Specific Activities of U.S. Persons, 86 F.R. 4865 (January 15, 2021) and certain semiconductor related support in China in the BIS' Implementation of Additional Export Controls: Certain Advanced Computing and Semiconductor Manufacturing Items; Supercomputer and Semiconductor End Use; Entity List Modification, 87 F.R. 62186 (October 13, 2022).
3 In 2018, ECRA empowered the BIS to regulate exports and U.S. person controls in connection with "foreign military intelligence services". BIS exercised this authority in its Expansion of Certain End-Use and End-User Controls and Controls on Specific Activities of U.S. Persons, 86 F.R. 4865 (January 15, 2021) to start covering military intelligence. See our prior blog post for more on this.
4 ECRA Section 4812(a)(2)(F) was amended to insert the word “security", effective December 23, 2022. This seemingly minor change gave BIS statutory authority to regulate non-military intelligence as well as security services. The creation of IEUs and FSEUs is an exercise of this new authority.
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