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October 05, 2008 

Summary and Overview of the Five Important Final and Proposed Rules Published by BIS

The following are the descriptions of and Federal Register links to the five important final and proposed rules recently published by the Commerce Department's Bureau of Industry and Security:

Final and Interim Final Rules:

1. De Minimis U.S. Content in Foreign Made Items (October 1, 2008) - This interim final rule amends various sections of the Export Administration Regulations (EAR) as follows:

  • Changes the de minimis calculation for foreign produced hardware that is bundled with U.S.-origin software.
  • Clarifies the definition of "incorporate" as it is applied to the de minimis rules and to the medical statement of understanding.
  • Removes the requirement to submit a one time report to BIS for foreign-made software that incorporates U.S.-origin software.
  • Revises the “Steps for Using the EAR” and General Prohibition Two with regard to the de minimis rules in order to reduce redundancies in the EAR and harmonize the provisions with other revisions made by the rule.
2. Encryption Simplification (October 3, 2008) - This interim final rule amends the EAR as follows:
  • Make the treatment of encryption items more consistent with the treatment of other items subject to the EAR, as well as to simplify and clarify regulations pertaining to encryption items.
  • Removes License Exception KMI as it has become obsolete because of developments in uses of encryption.
  • Removes notification requirements for items classified as 5A992, 5D992, and 5E992.
  • Increases certain parameters under License Exception ENC, which is intended to reflect advances in technology.
  • Adds two new review and reporting requirement exclusion paragraphs under License Exception ENC for wireless ‘‘personal area network’’ items and for ‘‘ancillary cryptography’’ items.
  • Adds Bulgaria, Canada, Iceland, Romania, and Turkey to the list of countries that receive favorable treatment under License Exception ENC.
  • Commodities and software pending mass market review may no longer be exported under ECCNs 5A992 and 5D992 using No License Required (NLR). However, once the mass market review has been received by BIS, then such commodities and software may be
    exported using License Exception ENC under ECCNs 5A002 and 5D002.
3. Revisions to EAR Based Upon Systematic Review of CCL (October 6, 2008) - This final rule makes a number of changes to the Commerce Control List (CCL) including:
  • Clarifying existing controls;
  • Eliminating redundant or outdated controls;
  • Establishing more focused and rationalized controls; and
  • Adding additional controls for clarity or for consistency with international regimes.
Note: All exporters of items on the CCL should review this rule to determine whether their ECCNs have been modified byt.

4. Wassenaar Arrangement Plenary Agreements Implementation: December 2007 Categories 1,2,3,5 Parts I and II, 6,7, and 9 of the Commerce Control List, Definitions; December 2006 Solar Cells (will be published later this week) - In order to implement changes made to the Wassenaar Arrangement's List of Dual Use Goods and Technologies, this final rule revises the EAR by:
  • Amending certain entries that are controlled for national security reasons in Categories 1, 2, 3, 5 Part I (telecommunications), 5 Part II (information security), 6, 7, and 9;
  • Adding new entries to the Commerce Control List (CCL), and amending and adding EAR Definitions
Note: All exporters of items on the CCL should review this rule to determine whether their ECCNs have been affected.

Proposed Rule:

5.Establishment of License Exception Intra-Company Transfer (ICT) (published October 3, 2008) - This proposed rule would amend the EAR as follows:
  • Establish new license exception ‘‘Intra-Company Transfer (ICT)’’ that would allow an approved parent company and its approved wholly-owned or controlled in fact entities to export, reexport, or transfer (in-country) certain items on CCL among themselves for internal company use.
  • Prior authorization from BIS is required to use this license exception.
  • This rule describes the criteria pursuant to which entities would be eligible to use License Exception ICT and the procedure by which they must apply for such authorization.
  • Contains a list of the countries in which eligible applicants must be incorporated in or have their principal place of business in to use License Exception ICT.




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