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THE PERFECT MATCH
LICENSE EXCEPTION
STRATEGIC TRADE AUTHORIZATION
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License Exception STA §740.20
The Concept
• Facilitates exports, re-exports, and transfers (in-country) of
numerous eligible products, software, and technology to
partners and allies posing low risk of unauthorized use or
diversion.
– Includes deemed exports.
• Replaces license requirement with a paper trail –notifications
and statements exchanged between the parties to the
transaction to provide assurance against diversion.
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License Exception STA
The Good
• Implements part of the Administration’s Export Control
Reform Initiative announced in 2009.
• Broad — negative list — governed by what it excludes.
• Items brought across from USML may be eligible for STA
after join agency review.
• Allows BIS resources to be focused on transactions involving
core items with greater risk of misuse and diversion.
• BIS — may eliminate 3,000 of the 22,000 licenses issued in
2010.
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License Exception STA
The Bad
• Administrative burden.
•
Complicated?
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License Exception STA
Background
• Proposed Rule — December 9, 2010.
• Comments closed — February 7, 2011 (41 comments
received).
• Final Rule — June 16, 2011.
– http://www.bis.doc.gov/news/2011/fr_06162011.pdf
• First export using STA Exception — August 2011.
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License Exception STA
Road Map
• Eligibility requirements.
• Limitations on the use of License Exception STA.
• Authorizing paragraphs.
• Conditions of use.
• Some examples (courtesy of BIS Update 2011).
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License Exception STA
Eligibility
• §740.20(b)(1)(i) — Only applies to transactions involving CCL
based license requirements described in §742.
• §740.20(b)(1)(ii) — Must comply with administrative
requirements (notice, consignee statements) described in
§740.20(d).
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License Exception STA
Limitations
 §740.20(b)(2) — Limitations on use of License Exception
STA.
o (i) May not be used in lieu of license requirements
imposed by §744 (end-use, end-user) or §746
(embargoes and special destinations).
o (ii) Some crime control items in Category 0.
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License Exception STA
Limitations
•
(iii) Any item controlled for:
o
o
o
o
o
Encryption (EI);
Short Supply (SS);
Surreptitious Listening (SL);
Missile Technology (MT); and/or
Chemical Weapons (CW).
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License Exception STA
Limitations
• (iv) Any item that is subject to the exclusive export control
jurisdiction of another agency.
• (v) All pathogens and certain toxins in Category 1.
• (vi) Except certain toxins (1C351d (1) through (10)) if:
o Max 100 mg of any one toxin per shipment; and
o Max of 6 shipments per end user per calendar year.
• (vii) Some gas turbine software and technology in Category 9.
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License Exception STA
Authorizations
• §740.20(c) — Authorizing paragraphs.
o All reasons for control that apply to the transaction must
be authorized by STA.
o Two authorizing paragraphs listing reason(s) for control
and destination(s).
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License Exception STA
Authorizations
• §740.20(c)(1) — Multiple reasons for control:
o NS, CB, NP, RS, CC, and SI.
• 36 eligible destinations:
o Argentina, Australia, Austria, Belgium, Bulgaria, Canada,
Croatia, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland,
Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands,
New Zealand, Norway, Poland, Portugal, Romania,
Slovakia, Slovenia, South Korea, Spain, Sweden,
Switzerland, Turkey, and United Kingdom.
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License Exception STA
Authorizations
• §740.20(c)(2) — Controls of lesser sensitivity:
o NS.
• 8 additional eligible destinations:
o Albania, Hong Kong, India, Israel, Malta, Singapore, South
Africa, Taiwan.
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License Exception STA
Authorizations
• STA Paragraphs — 49 ECCN’s.
o designate ECCN’s or portions that are ineligible for STA if
destination is listed in §740.20(c)(2).
o See §738.2 – explaining that STA paragraphs in ECCN
limit eligibility (opposite to most ECCN paragraphs).
o Tracks Wassenaar Arrangement Sensitive List.
o See Final Notice FR 35289-35294 for list.
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License Exception STA
Conditions
• §740.20(d)(1) — Furnish ECCN to consignee.
o (i) Exporter must furnish ECCN(s) of item(s) to be shipped.
o (ii) Reexporters and transferors must furnish ECCN(s) to
all subsequent consignees.
o Good for subsequent shipments of same item(s) to
consignee, if ECCN(s) remain(s) accurate at time of new
shipment.
o (iii) Consignee can rely on ECCN furnished to it for
purposes of determining STA eligibility unless they “know”
that ECCN has changed or is incorrect. Knowledge
defined in §772.1.
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License Exception STA
Conditions
Consignee
Statement Back
• §740.20(d)(2) — prior consignee statement.
o Prior to first STA eligible shipment, the exporter,
reexporter, and/or transferor must obtain written
statement from consignee — (5 year retention).
• One statement is good for multiple shipments of same
item(s) between same parties if names, description(s)
of the item(s), and ECCN(s) remain correct.
• Exporter, reexporter, and transferor must maintain log
or other records identifying each STA shipment and to
which consignee statement it relates to.
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License Exception STA
Conditions
• Consignee statement:
o Aware that item(s) will be shipped under STA.
o Informed of ECCN by [Exporter, reexporter, transferor].
o Understands that STA item(s) are not eligible for
subsequent reexport pursuant to License Exception
APR(a) or (b).
o Agrees not to export, reexport, or transfer in violation of
EAR.
o Agrees to provide copies of documents to U.S. Govt. upon
request.
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License Exception STA
Conditions
Notification
Out
 §740.20(d)(3) — Notification to Consignee.
o Exporter, reexporter, or transferor must notify consignee in
writing that shipment is made under STA.
o Must identify which item(s) is (are) subject to STA or that
entire shipment is STA. Must identify to which shipment it
applies.
o May be paper or electronic and need not accompany
Shipment.
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License Exception STA
Conditions
• §740.20(d)(4) — deemed exports.
o The party releasing the software or technology to a
national of a country listed in (c)(1) or (c)(2) must notify
recipient of the restrictions upon further release.
o Must either expressly inform the recipient that the EAR
imposes restrictions or be in the form of an agreement that
is at least as restrictive as the EAR.
• In writing and copy retained by releasor and recipient.
• May be separate or in contract or NDA. Restriction
does not expire.
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License Exception STA
Conditions
• §740.20(e) — License Exception APR (additional Permissive
Reexports) §§740.16(a) and (b) do not apply.
o Once shipped under STA a commodity may not be
subsequently exported, reexported, or transferred
pursuant to APR(a) or (b).
o §§740.16(a) and (b) do not apply to software or
technology.
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License Exception STA
Conditions
• §740.20(e) — §743.1 Wassenaar reporting requirements
apply to some exports.
o Rare.
• If you have an export from 1 of the 49 ECCN’s (which
track Wassenaar Arrangement Sensitive List) and
export is to Iceland (only non-Wassenaar member
state to which STA authorizes).
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License Exception STA
Step-by-Step
• Is a license required?
• Does § 740.2 preclude use of license exceptions generally?
• Does § 740.20(b) preclude use of STA?
• Does § 740.20(c)(1) authorize use of STA?
o Are all reasons for control that apply to the transaction
in paragraph (c)(1)?
o Is the destination in paragraph (c)(1)?
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License Exception STA
Step-by-Step
• Does §740.20 (c)(2) authorize use of STA?
o Is the only reason for control that applies to the
transaction NS?
o Is the destination in paragraph (c)(2)?
o Is the item for export excluded in an STA paragraph in the
license exception section of the applicable ECCN?
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License Exception STA
Step-by-Step
• Provide consignee with ECCN.
• Obtain consignee statement.
• Notify consignee that shipment (or specific items within a
shipment) is (are) under STA.
• Keep record showing which shipments belong to each
consignee statement.
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License Exception STA
Example 1
• Virus to a research laboratory in Australia for human vaccine
development.
• ECCN 1C351.a.11.
• No parties on Entity List, Denied Persons List or List of
Specially Designated Nationals and Blocked Persons.
• No prohibited end uses under part 744.
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1C351 Human and zoonotic pathogens and “toxins”, as follows
(see List of Items Controlled).
License Requirements
Reason for Control: CB, CW, AT
Control(s)
Country Chart
CB applies to entire entry
CB Column 1
CW applies to 1C351.d.5 and d.6 and a license is required for CW
reasons for all destinations . . .
.a. Viruses, as follows:
...
.a.11.
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License Exception STA
Example 1
Commerce Country Chart
Reason for Control
CB1 CB2 CB3 NP1 NP2 NS1 NS2 MT1 RS1 RS2 FC1 CC1 CC2 CC3 AT1 AT2
Australia
X
X
X
X
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License Exception STA
Example 1
• License exception restrictions under § 740.2 do not apply.
• Marburg virus is a pathogen in Category 1 that is listed in
ECCN 1C351.a.11.
• STA restrictions under §740.20(b)(2)(v) list ECCN 1C351.a.
Therefore Marburg virus is excluded by an STA restriction
and we need not go to the authorization paragraphs.
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License Exception STA
Example 1
• Remember that STA is not the only license exception.
• E.g., License Exception GOV may apply to this transaction if
the research laboratory is part of the Australian government.
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License Exception STA
Example 2
• Telescopic sight to Argentina and Finland for hunting.
• ECCN 0A987.a.
• No parties on Entity List, Denied Persons List or List of
Specially Designated Nationals and Blocked Persons.
• No prohibited end uses under part 744.
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0A987 Optical sighting devices for firearms (including shotguns controlled
by 0A984); and parts (See list of items controlled).
License Requirements
Reason for Control: FC, CC, UN
Control(s)
FC applies to optical sights for firearms * * *
CC applies to entire entry
UN applies to entire entry
Country Chart
FC Column 1
CC Column 1
Iraq, North Korea,
and Rwanda
*****
List of Items Controlled
*****
Items a. Telescopic sights.
*****
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License Exception STA
Example 2
Commerce Country Chart
Reason for Control
CB1 CB2 CB3 NP1 NP2 NS1 NS2 MT1 RS1 RS2 FC1 CC1 CC2 CC3 AT1 AT2
Argentina X
X
X
X
X
X
X
X
X
X
X
X
X
*****
Finland
X
X
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License Exception STA
Example 2
• License exception restrictions under §740.2 do not apply (e.g.
crime control restrictions do not apply to STA-eligible
transactions per § 740.2(a)(4)(iv)).
• STA restrictions under § 740.20(b) do not apply.
• We go to the authorization paragraphs.
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License Exception STA
Example 2
• Argentina & Finland are both in authorization paragraph
740.20 (c)(1).
• CC reason for control is in 740.20(c)(1) but FC reason for
control is not in that paragraph.
• STA authorizes this shipment to Finland but not to Argentina.
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License Exception STA
Example 3
• Ceramic based materials to Israel.
• ECCN 1C007.a and .c.
• No parties on Entity List, Denied Persons List or List of
Specially Designated Nationals and Blocked Persons.
• No prohibited end uses under part 744.
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1C007 Ceramic base materials, non-“composite” ceramic materials,
ceramic-“matrix” “composite” materials and precursor materials, as
follows (see List of Items Controlled).
License Requirements
Reason for Control: NS, MT, AT
Control(s)
Country Chart
NS applies to entire entry
MT applies to items MT
in 1C007.d and .f . . .
NS Column 2
Column 1
AT applies to entire entry
AT Column 1
License Exceptions
...
STA: License Exception STA may not be used to ship any item in 1C007.c or d
to any of the eight destinations listed in § 740.20(c)(2) of the EAR.
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License Exception STA
Example 3
Commerce Country Chart
Reason for Control
CB1 CB2 CB3 NP1 NP2 NS1 NS2 MT1 RS1 RS2 FC1 CC1 CC2 CC3 AT1 AT2
Israel
X
X
X
X
X
X
X
X
X
X
X
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X
License Exception STA
Example 3
• License exception restrictions under §740.2 do not apply.
• STA restrictions under § 740.20(b) do not apply.
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License Exception STA
Example 3
• Israel is not in § 740.20(c)(1) but is in 740.20(c)(2).
• NS is the only reason for control that applies to this export.
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License Exception STA
Example 3
• ECCN 1C007 License Exception STA paragraph reads STA:
License Exception STA may not be used to ship any item in
1C007.c or .d to any of the eight destinations listed in
740.20(c)(2).
• Therefore the 1C007.a item is eligible for STA to Israel and
the 1C007.c item is not eligible for STA to Israel.
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THANK YOU!
Ian H. Moss
Posternak Blankstein & Lund, LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199-8004
Tel. 617.973.6146
Email: imoss@pbl.com
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