Acme Electronics (Acme) is a medium-sized company that produces populated printed circuit board assemblies and wiring harnesses as a subcontractor to aerospace and electronics companies.  Currently, Acme’s process for classifying its products for export control purposes has been a simple one: If the products are used in a military application they go in Category XI of the U.S. Munitions List and are ITAR controlled. If the products are used in a commercial application, they are Commerce controlled, and Acme normally has its freight forwarder classify them. Acme is registered with the Directorate of Defense Trade Controls and applies for ITAR licenses when required.

Acme’s life – and export control classification process – are about to become more complicated.

Currently, Cat. XI of the U.S. Munitions List (USML) reads like a “catch-all” for military electronic components. The current category includes electronic equipment “specifically designed, modified or configured for military application.” It also includes “components, parts, accessories, attachments and associated equipment specifically designed or modified” for equipment in Cat. XI.

As part of the Export Control Reform Initiative, the Department of State published a proposed rule in the Federal Register of Nov. 28, 2012 to rewrite Cat. XI of the USML. The Department of State collected comments and decided to revise and republish the proposed rule. The second proposed rule containing a revision to Cat. XI was published in the Federal Register of July 25. It has a closing date for comments of Sept. 9.

The proposed Cat. XI will change things significantly. The intent behind Export Control Reform is to control those articles that truly warrant controlling under the ITAR and transfer all else to Department of Commerce controls under the Export Administration Regulations (EAR). The Commerce Control List (CCL) in the EAR will be modified to create new 600-series provisions for articles transferred from the USML. This includes articles transferred from Cat. XI, (especially parts and components).

If Cat. XI is finalized in substantially the same form as proposed in the July 25 Federal Register; it will no longer be a “catch-all” for military electronics.

We won’t go into full detail of the proposed language to Cat. XI, but I can give you some highlights.

As proposed, Cat. XI would cover some very specifically described articles. These include:

• Underwater electronic hardware, including acoustic arrays and acoustic countermeasures
• Radar equipment, including airborne radar, synthetic aperture radar, ocean and air surveillance radars, electronic protection and countermeasures, radar and laser radars specially designed for defense articles
• Electronic combat systems and equipment
• Command, control and communications equipment
• Electronic sensor systems for anti-submarine warfare
• Direction-finding equipment specially designed for defense articles
• Electronic systems or equipment specially designed for intelligence purposes
• Printed Circuit Boards (PCBs) and populated circuit card assemblies for which the layout is specially designed for defense articles

These are a few truncated descriptions of the articles proposed for control in Cat. XI. Each provision in the proposed Cat. XI contains very specific language describing exactly what is controlled, making it imperative that one reads those descriptions carefully before classifying in this category. For example, one group of articles in the proposed Cat. XI reads as follows: “Transmit/receive modules or transmit modules that have any two perpendicular sides, with either length d (in cm) equal to or less than 15 divided by the lowest operating frequency in GHz [d≤15cm*GHz/fGHz], that incorporate a Monolithic Microwave Integrated Circuit (MMIC) or discrete RF power transistor and a phase shifter or phasers.”

The proposed Cat. XI also includes parts provisions. These include “parts, components, accessories, attachments, and associated equipment” such as:

• Application-specific integrated circuits and programmable logic devices for defense articles
• Multi-chip modules specially designed for defense articles
• Electronic assemblies specially designed for rockets, missiles, and UAVs
• Specifically described radio frequency circulators, polar meters, vacuum electronic devices, antennas, radomes, and underwater sensors
• Classified parts and components

Note the use of “specially designed” as an adjective in several provisions. This term has a very specific meaning in both the USML and CCL, and one must apply the definition in classifying an article.

There is no subcategory for “parts and components used in military electronics.” Instead, one has to carefully read the provisions to determine if a part or component falls in Cat. XI. Parts, components, etc. not classified in Cat. XI would be transferred to the CCL and be classified there – possibly under one of the new 600-series provisions.

What will Acme’s classification process look like if the rewrite of Cat. XI goes through as proposed? It would be something like this:

Determine whether the circuit board assembly or wiring harness is described in Cat. XI. If not, determine whether they are described anywhere else in the USML. If not, determine whether the circuit board assembly or wiring harness is described in any of the 600-series provisions of the CCL. If not, determine whether they are described elsewhere on the CCL.

If the circuit board assembly or wiring harness is described on the CCL, determine whether a license is required. If so, determine whether it qualifies for a license exception.

If the circuit board assembly or wiring harness is not described anywhere on the USML or CCL, classify under EAR99.

Automatically classifying all circuit board assemblies and wiring harnesses used in military applications in Cat. XI will no longer be a choice. The printed circuit board provision in Cat. XI may capture some of Acme’s products, but the board must be specially designed for defense articles on the USML and Acme will need to do that analysis.

Allowing the freight forwarder to classify Acme’s products on the CCL based on a packing sheet description is a bad idea, and possibly constitutes gross negligence.

Instead, Acme will need to learn about its products and carefully analyze how they are classified. So will you.

By Bruce Leeds, Attorney