The Australia Group, consisting of 40 countries that work to maintain export controls on a list of chemicals, biological agents and related equipment and technology used in chemical or biological weapons programs. In April 2008 the Australia Group met and agreed upon revisions to the above mentioned documents. The changes are as follows:

• CCL: ECCN 1C352 paragraph (a) is amended by replacing the following descriptions with the new HPAI language currently used by the World Organization for Animal Health (OIE);
  • a.2.a will now state, AI viruses that have an intravenous pathogenicity index (IVPI) in 6- week-old chickens greater than 1.2; or
  • a.2.b. will be added and state, AI viruses that cause at least 75% mortality in 4- to 8- week-old chickens infected intravenously.
• EAR:Part 745.1 paragraph (a) is amended to update the fax number and address for submitting advance notification and annual report requirements for exports of Chemical Weapons Convention (CWC);
  • (2) will now read: Send the notification either by fax to (202) 482-1731 or by mail or courier delivery to the following address: Information Technology Team, Treaty Compliance Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 4515, 14th Street and Pennsylvania Avenue, NW., Washington, DC 20230. Attn: “Advance Notification of Schedule 1 Chemical Export”.
  • (3) will now state: Submit a copy of the end-Use Certificate, no later than 7 days after the date of export, either by fax to (202) 482-1731 or by mail or courier delivery to the following address: Information Technology Team, Treaty Compliance Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 4515, 14th Street and Pennsylvania Avenue, NW., Washington, DC 20230. Attn: “CWC End-Use Certificate Report”.
• EAR: Supplement No. 2 to Part 745 is amended to now read “List of States Parties as of July 1, 2008”; and by adding in alphabetical order, the countries “Congo (Republic of the)” and “Guinea-Bissau”.

More information:

• Federal Register Notice

More information:

Federal Register Notice

Bottom Line:

This new export licensing requirement that the United States is implementing consistent with a United Nations decision is good for a laugh. Now that North Korean Government officials can’t get I-Pods and stereos, they most certainly will end their nuclear weapons program. (OK, I am not so naïve as to think this new requirement will keep Kim Il Jung from getting an I-Pod.) Seems like the United Nations is developing a taste for useless symbolic export controls so long favored by the United States just because it’s better to do something that doesn’t help than to do nothing.

Due to the flagrant and defiant actions of North Korea over the past year relating to missile testing and the detonation of a nuclear device, the United States is imposing new export and reexport controls on North Korea. This new rule is in accordance with UN Security Council Resolution 1718 which prohibits the direct or indirect sale of arms and other specified items to North Korea by UN Member States.

Under the new rule, the Bureau of Industry and Security (BIS) will require a license for all items subject to the Export Administration Regulations (EAR) with the exceptions of food and medicines not on the Commerce Control List (CCL).

Luxury items to North Korea will generally be denied. Examples are yachts, gems, art, designer clothing and collectible items.

Non-food and non-medical humanitarian items intended for the benefit of the North Korean people will generally be approved by BIS

BIS will continue to generally deny applications for the export or reexport of arms and related materials controlled on the CCL and items controlled under the Missile Technology Control Regime, the Nuclear Suppliers Group, the Australia Group, and the Wassenaar Arrangement.

All other items subject to the EAR will be reviewed by BIS on a case-by-case basis.

The effective date of this rule is January 26, 2007. Items that did not require a license prior to the publication of this rule which are on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export on January 26th may be exported or reexported without being subject to the new rule as long as they are exported or reexported before midnight on February 9, 2007.

• Sukoy (also spelled Sukoi) in Russia, and any successor, sub-unit or subsidiary; and
• Great Wall Airlines Company Limited (a.k.a Great Wall Airlines; a.k.a. Changcheng Hangkong), 1600 Century Road, Shanghai 200122, China; C.R. No. 001144 (China) Issued 20 Oct 2005 expires 19 Oct 2035

What does all of this actually mean? For starters, there is a big different between the minor sanctions imposed on Sukoy and the significant sanctions imposed on Great Wall Airlines Company.

Sukoy:

Specifically, the thrust of the sanctions on Sukoy do not prohibit all exports and reexports to Sukoy and are not an across the board ban on US persons doing business with Sukoy. The most significant sanction is that the US Government may not issue any new export/reexport licenses for Sukoy and any existing ITAR approvals for Sukoy are terminated. The remainder of the US sanctions applies to US Government procurement from Sukoy and US Government assistance to Sukoy.

Specifically, the sanctions announced in the August 4 Federal Register on Sukoy are:

1. No department or agency of the United States Government may procure, or enter into any contract for the procurement of, any goods, technology, or services from these foreign persons;
2. No department or agency of the United States Government may provide any assistance to the foreign persons, and these persons shall not be eligible to participate in any assistance program of the United States Government;
3. No United States Government sales to the foreign persons of any item on the United States Munitions List (as in effect on August 8, 1995) are permitted, and all sales to these persons of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and
4. No new individual licenses shall be granted for the transfer to these foreign persons of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.

So, if you want to export 9A991 civil aircraft parts to Sukoy, you may go full speed ahead. If you want to export to Sukoy something that requires a license for Russia, your license will not be approved.

The official basis for US sanctions on Sukoy are “…for the transfer to Iran since January 1, 1999, of equipment and technology controlled under multilateral export control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar Arrangement) or otherwise having the potential to make a material contribution to the development of weapons of mass destruction (WMD) or cruise or ballistic missile systems.” Sukoy claims it has not recently sold weapons to Iran, but it has been reported that the sanctions may be in response to a deal to repair and upgrade 30 Su-24 ‘Fencer’ long-range strike aircraft. The SU-24 strongly resembles the earlier American F-111, whose FB-111 variant the US Strategic Air Command used as a nuclear strike platform.

Great Wall Airlines Company:

On August 15, 2006, the Office of Foreign Assets Control (OFAC) announced that it added Great Wall Airlines Company to its list for “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters.” These sanctions block all property and interests in property that come into the United States or into the possession/control of US persons. What does that mean? It means that if a US company exports to Great Wall and then payment comes from Great Wall to the United States, US regulations block the payment, which means the US company may not have the money. So, for starters, these sanctions effectively prevent US companies from dealing with Great Wall.

On the other hand, the sanctions do not apply if a non-US company, for example, a South Korean company, reexports US origin 9A991 civil aircraft parts from South Korea to Great Wall—as long as no US person receives Property/money from Great Wall. If, however, a US company has foreign customers or partners dealing with Great Wall, it should make sure that there is an impenetrable wall (perhaps even a Great Wall) between the foreign parties’ activities and the US company.

Great Wall Airlines Company operates a small number of Boeing 747-400 freighters for cargo purposes. The US acted against Great Wall Airlines because claims that its parent company, Great Wall Industry Corp. (which is already subject to US Sanctions), provided assistance to Iran’s missile program. Apparently Great Wall Airlines suspended operations on August 18, three days after the US announced its sanctions. I guess these sanctions worked.

It is 20 years since Australia convened the first meeting of 15 like-minded countries in 1985 in Brussels.

That meeting was a response to the findings of a UN investigation, led by an Australian – Dr Peter Dunn, that Iraq had used chemical weapons in the Iran-Iraq war. It posed the question of how to prevent Iraq from acquiring materials for the production of chemical weapons through otherwise legitimate commercial trade.

The response – a proposal to harmonize national export controls – was endorsed by all present at that meeting, and the Australia Group was born.

But the plenary wasn’t all talk with the AG participants agreeing on three control list changes to refine limits on illegitimate trade in items with chemical or biological weapons end uses:

1. Simplification of the types of pumps subject to controls due to their usefulness in manufacturing chemical weapons (the US controls such equipment under ECCN 2B350.i).
2. New controls on spraying or fogging systems designed for use with aircraft or unmanned aerial vehicles (UAVs) and capable of delivering droplets of less than 50 m in diameter at a rate of greater than 2 liters per minute (ECCN 2B352).
3. A revision to the technical note clarifying that the controls applicable to genetic elements and genetically-modified organisms also cover nucleic acid sequences that represent a significant hazard to human, animal or plant health or enhance the ability of AG-controlled or other microorganisms to cause harm. (This change in particular has potentially significant implications for firms and universities involved in biotechnology research. The revised technical note can be found under ECCN 1C353).

It may have taken nearly four months, but the US Bureau of Industry and Security did finally turn up with a gift in honor of the AG’s first twenty years on August 5 – a regulation implementing the group’s new rules. In addition to the control list and technical note revisions explained above, the BIS rule updates the Export Administration Regulations to reflect a new AG participant (Ukraine), the fact that the tiny Pacific island nation of Niue has acceded to the Chemical Weapons Convention, and a new name for the largest part of the former Yugoslavia (Serbia and Montenegro).

In its background preface to the regulation, BIS states that these changes are necessary to bring the Export Administration Regulations into line with the AG Guidelines for Transfers of Sensitive Chemical or Biological Items, which were published in June 2004. The AG guidelines lay out several factors for governments to consider in evaluating potentially sensitive CB exports including the bona fides of the parties to the transaction and the capabilities and intentions of the CB activities of the recipient state. The guidelines do not specify a blacklist of states prohibited from receiving any dual-use CB items nor any sort of hierarchy of scrutiny for different groups of states. The AG guidelines do not even advise governments to distinguish between AG members and non-members in evaluating proposed exports. To their credit, BIS is candid that the new rule “will likely result in an increase in the number of license applications that will have to be submitted to BIS for exports and reexports of equipment and technology”

These are the primary elements to the new regulation:

• It increases the country scope of CB controls on Export Control Classification Numbers (ECCNs) 1A004, 2A226, 2A292, 2B350, 2B351, 2B352, 2E001, 2E002, 2E201, 2E290, and 2E301 by revising each of them to require a license if the country of destination has an “X in CB Column 2. Previously a license was required only for the countries listed in CB Column 3. This is a major increase in the country scope. The old scope, countries in CB Column 3, was limited to countries of particular concern for proliferation of chemical or biological weapons – meaning mostly former Soviet republics, Middle Eastern states, state sponsors of terrorism, plus China, India, Israel, Pakistan, Taiwan, Vietnam and a few others (including the fearsome proliferator and postage-stamp-sized Caribbean federation of St. Kitts & Nevis.)

But with this revision, a license is now required to export any of these items or technologies to every country except those participating in the AG. Excluding the US and the European Commission, the AG has 37 members – consisting of all 25 EU member states plus Argentina, Australia, Bulgaria, Canada, Iceland, Japan, New Zealand, Norway, Romania, South Korea, Switzerland, and Turkey. If your customer is not in one of those countries, a license is required. (Note that CB Column 2 is a superset of CB Column 3 so every country which required a license prior to the new rule still does.)

New to the license required list are five of the top twenty export markets for US merchandise – Brazil (#15), Hong Kong (#13), Malaysia (#16), Mexico (#2), and Singapore (#11). And that does not include the numerous reexports which will now too require a BIS license.

• Changes to the portion of ECCN 1E001 which controls technology related to ECCN 1A004.c chemical protection and detection equipment in order to put it into better alignment with the Wassenaar Arrangement‘s dual-use control list (Word). These alterations increase what 1E001controls, broadening its definition and enlarging the scope of both the CB Column 2 and National Security (NS) Column 1 controls.

• Transfers within a country are now subject to chemical and biological weapons end-use and end-user based controls. A license is required to export, reexport, or transfer (in-country) items subject to the EAR if, at the time of the export, reexport, or transfer, the party responsible for the export, reexport, or transfer knows that the items are intended for chemical or biological weapons activities in or by any country or destination, worldwide. This continues a trend we’ve seen over the past couple years to add in-country transfer controls to various parts of the EAR. This was done previously in the regulation on Iraq and also as part of an amendment to end-use restrictions on rocket systems and unmanned air vehicles.

• Expands the controls on activities by US persons related to the design, development, production, stockpiling, or use of chemical and biological weapons from just those countries suspected of nefarious activities in these dark arts to the entire globe. This brings the US person activity controls into line with the March 30 rule mentioned above, which extended the country scope of end-user/end-use controls catch-all controls on chemical and biological weapons to include all destinations, even AG participants.

Further related to this rule, there is good news and bad news. First, the good news – the regulation includes a savings clause delaying implementation of the new license requirements. Now, the bad news – if your product is not already on dock for loading, on lighter, laden aboard an exporting carrier, or en route to a port of export, it’s too late. The savings clause requires exports or reexports to have been laden by April 29 and to be exported, reexported, or transferred before May 16. Undoubtedly for those of you who now face the prospect of more time wrestling SNAP or snapping up those dwindling supplies of typewriter ribbons to complete 748Ps (and therefore less with your children) this will come as cold comfort. But if savings clause eligibility for deemed exports is a particular concerns, then the situation is a bit cheerier – you have until August 12 to pull together license applications for their foreign national employees involved in the technology at issue.

These CBW prohibitions are one flavor of the catch-all controls encompassed within the EAR.  Even when an item would not ordinarily require an export license to be shipped to a particular destination, the exporter is obliged to seek a license from BIS if he knows that the item will be used in the design, development, production, stockpiling, or use of CBW.

Similar end-use and end-user restrictions are in place on nuclear, rocket, UAV, and maritime nuclear propulsion activities (see EAR Part 744).

The March 30 regulation widens the scope of these controls by eliminating the exemption to them for members of the Australia Group (AG), the informal international arrangement that seeks to limit the proliferation of CBW-related materials and technology.  Now US exporters will need to scrutinize orders from AG countries such as the Belgium, South Korea, and Sweden for CBW end-users and end-use with the same due diligence they have long been required to exercise when it came to the rest of the world.