Commerce Considering Removing Authorized Countries Under License Exception APR

The Commerce Department is considering restricting the number of destination countries that are authorized to receive certain U.S. re-exports that are controlled for national security reasons, the agency said in a notice. The proposed rule would amend the license exception for Additional Permissive Reexports (APR) by removing nations in Country Group D:1, including China, from being eligible to receive those re-exports, Commerce said. The rule would remove APR license eligibility from more than 20 countries. Comments are due June 29.

The proposed change stems from U.S. concerns that countries in Country Group A:1 -- which are authorized to re-export these controlled goods under license exception APR -- do not hold their exports to the same license-review standards as the U.S. Group A:1 countries, such as Hong Kong, “may approve a license for the reexport of a U.S.-origin item that would have been denied if exported directly from the United States,” Commerce said. The agency also said some “partners” in Group A:1 do not share U.S. concerns of the “threat caused by the increasing integration of civilian and military technology development.” China’s civil-military fusion has been a major concern of the administration (see 1904260018).

Commerce's Bureau of Industry and Security said the license exception should be amended because “there may be variations of national security or foreign policy concerns” between the U.S. and its partners, including Wassenaar Arrangement member countries. Those countries “may have export authorization policies that do not align with the national security or foreign policy interests of the U.S. government,” BIS said. Requiring a re-export license for controlled items to Country Group D:1 will “ensure that the reexports are authorized consistent with U.S. policy.”

BIS acknowledged that license exceptions, including exception APR, “can be of significant benefit” to exporters, adding that it “has historically encouraged” the use of license exceptions, which reduce administrative burdens on both industry and BIS staff. The agency also said licensing requirements can have “a significant impact on the timing and predictability” of order fulfillments due to longer processing times.

Because of these concerns, BIS said it is seeking comments on how the change in license exception APR would impact users, how it would change the amount of time needed to complete these transactions and how it would “otherwise affect current business.” The agency also encouraged industry to provide information on the number of transactions this change would impact, given that “BIS does not have a way to readily account for how many items are being authorized” by license exception APR.

(Federal Register 04/28/20)