BIS Expands Scope of Iran Foreign Direct Product Rule

The Bureau of Industry and Security is expanding its export controls to make more items subject to license requirements under its Iran foreign direct product rule, increasing its Iran-related restrictions under the Export Administration Regulations. The final rule, which was released July 24 but took effect July 23, implements certain provisions in the wide-ranging national security bill President Joe Biden signed into law in April (see 2404240043).

That bill included the No Technology for Terror Act (see 2312140036), legislation that sought to codify license requirements for Iran under the FDP rule, which places export license restrictions on certain foreign-made items that are made with U.S.-origin software or technology. BIS said its final rule is "designed to further impede Iran’s ability to procure technology and components critical for military systems, including advanced drones that pose threats to U.S. forces and allies."

As part of the changes, the agency said it’s now requiring a license for “additional foreign-produced items” under the FDP rule “while also providing certain exclusions from license requirements that would otherwise apply,” among other changes to the EAR.

One change expands the range of items that fall within the FDP rule’s scope to include certain technology and software used to make lasers and sensors as well as marine-, aerospace- and propulsion-related technologies. The scope had previously applied to any Export Control Classification Number in product group D or E in categories 3 through 5 or 7 of the Commerce Control List, but it now includes categories 3 through 9 of the CCL.

Another change will “identify the two circumstances” in which certain foreign-produced items are subject to the EAR: if the exporter has “knowledge” the foreign item is destined to Iran or will be used or incorporated in certain controlled items located in or destined to Iran; or if the reexporter or transferor has “knowledge” that the Iran government is involved in the transaction. The second circumstance applies a new end-user scope for those transactions when the Iranian government “is a party to any transaction involving the foreign-produced item,” including as a purchaser, intermediate consignee, ultimate consignee or end-user.

“This ‘knowledge’ standard and reference to transaction parties is consistent with language used" in the BIS Entity List FDP rule, the agency said.

Other changes make “structural” revisions to wording in the EAR to “assist the reader in applying the scope” of the new requirements.

Along with expanding the Iran FDP rule, BIS also expanded a license requirement that “applies to items subject to the EAR pursuant to the Iran FDP rule, to apply to in-country transfers of such items within Iran.” Other changes make corrections to EAR language and list certain exclusions from the license requirements, including for certain food, medicine, or medical devices designated as EAR99 and certain items “necessary and ordinarily incident to communications.”

All exports that now require a license as a result of this rule but were aboard a carrier to a port as of July 26, the date the notice is scheduled to be published in the Federal Register, may proceed to their destinations under the previous eligibility as long as the items are exported before Aug. 26, BIS said. Any items not exported before midnight Aug. 26 will require a license.