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License Exception STA for Australian Companies

The export control reforms in the U.S. are resulting in a large number or formerly ITAR controlled articles moving to the jurisdiction of the Export Administration Regulations (EAR). With this re-allocation of export controls come some great advantages for Australian industry. The most significant advantage is that where a license is required, an Australian company can apply directly to the U.S. Bureau of Industry and Security (BIS) for the license, without the need for assistance from a U.S. party.

In addition, the EAR allows for the use of several license exceptions. Where a license exception can be used for an export, re-export or retransfer transaction, no license is required to undertake the transaction. The exporter/re-exporter simply needs to self-assess the transaction against the requirements of the license exception to ensure compliance with the EAR. This ability to self-assess and ship without obtaining a license from the BIS will reduce lead times and create efficiencies for Australian industry members seeking to receive and re-export/retransfer EAR controlled items.

License Exception STA
Australian companies may see a sharp increase in the use of license exception STA in the future. The acronym STA stands for Strategic Trade Authorization. Information about license exception STA can be found in Part 740.20 of the EAR, and we outline some key information about STA below.

This particular license exception was specifically designed to facilitate trade of military and dual use goods controlled by the EAR among the U.S. and its allies. STA can be used to export/re-export or retransfer an EAR controlled item that would normally require a license from BIS provided the conditions of using STA can be met for that particular transaction. Though the license exception eliminates the need to obtain a license from BIS for the transaction, the exception itself has many conditions on its use which may make it less attractive than obtaining a license from BIS in some instances.

First, the Export Control Classification Number (ECCN) of the EAR controlled item must authorize the use of license exception STA. Not all ECCNs will be eligible for the use of STA. Part 740.20 of the EAR, which describes the requirements of STA, lists several ECCNs that are ineligible.

Next, all of the reasons for control that apply to the transaction must be authorized to use license exception STA. For example, EAR controlled items that are listed on the EAR’s Commerce Control List (CCL) because they are controlled by the Missile Technology Control Regime (MT) are not eligible to use the STA license exception. Each ECCN will list the reasons for control for that specific ECCN. These reasons for control must be interpreted in conjunction with the EAR’s Commerce Country Chart in Part 738 of the EAR to determine whether a particular transaction will require a license from the BIS.

Further, in order to use STA for a particular transaction, both the exporter/re-exporter and consignee must abide by certain conditions.

As a first step, the exporter/re-exporter must provide the ECCN(s) to the consignee, which can be done on the invoice or in correspondence about the transaction. The ECCN only needs to be provided for the first shipment of that particular item to a particular consignee. Subsequent shipments of the same item do not require advising of the ECCN provided the ECCN remains accurate. Both the provision of the ECCN by the exporter and it’s receipt by the consignee are important records to keep.

Consignee Statements
Next, the consignee must sign a “consignee statement” certifying five points:

  • 1. The consignee is aware that the items are to be shipped to the under EAR license exception STA
  • 2. The consignee has been informed of the ECCN by the exporter/re-exporter
  • 3. The consignee acknowledges that EAR license exception APR cannot be used for subsequent shipment of the item
  • 4. The consignee agrees not to ship or transfer the item in violation of the EAR
  • 5. The consignee agrees to provide documentation related to the export/re-export or retransfer of the item to the U.S. government upon request.

(When STA is used to export/re-export or retransfer 600 series items, the consignee statement contains additional points.)

As the U.S. government is going to spend significant resources monitoring the use of STA in the coming 36 months, it may be likely that Australian companies are tapped on the shoulder by an agent of the Bureau of Industry and Security for such a documentation check.

As a last step, once the consignee statement is obtained by the exporter/re-exporter, they will then notify the consignee in writing that the shipment (or specific items withing a shipment) is (are) being shipped under STA before making the export/re-export/retransfer.

Consignees will only be required to sign the consignee statement the first time they are to receive a particular EAR controlled item under STA. For subsequent back and forth transfers among the same party, additional statements are not required.

The exporter/re-exporter must keep records showing which shipments relate to each consignee statement, which will mean that they must have a record keeping system robust enough to manage these links. The consignee must also maintain the consignee statement they signed and records pertaining to any subsequent re-exports or retransfers.

Australian companies receiving EAR controlled items under STA may need to re-export or retransfer the items in the future to other Australian entities. In this case they may do one of two things. They may either obtain a license from the BIS for the transaction or they may conduct the export/re-export under license exception STA, ensuring that they undertake all re-exporter responsibilities required by this license exception. Any re-exports or re-transfers to other parties in Australia under STA (i.e. subcontractors) will require that the Australian entity making the re-export or retransfer obtain a consignee statement from the recipient, provide them with the ECCN, and keep records related to the re-export/retransfer. For some Australian entities, it may be easier to obtain a license from BIS than to implement a record keeping system that links consignee statements to re-export/retransfer transactions. Australian companies will need to conduct their own analysis to determine which course of action makes the comes sense from a commercial perspective.

Special considerations for “600 Series” items
EAR controlled items which were controlled by the ITAR pre-reform are known as “600 series” items. It is important to note that license exception STA has additional requirements when used for 600 series items. Where a 600 series item is involved, the following requirements must be met:

  • The ultimate end user must be the U.S. government or the government of a Country Group A:5 country (refere to the EAR for a list of these 36 countries); or
  • STA is being used to facilitate the development, production, or servicing of an item in a Country Group A:5 country and the item is for the ultimate end use of the U.S. government or the government of a Country Group A:5 country.
  • The item must be going for return to the U.S.; or
  • The U.S. government has otherwise authorised the use of license exception STA for the transaction. (The Australian entity can obtain this authorisation by making a license application to the BIS in which it requests the use of STA for the transaction.)
  • All non-U.S. parties (i.e. the purchaser, intermediate consignees, ultimate consignee and end user) must have been previously approved on a U.S. government export approval issued by the U.S. State (DDTC) or Commerce (BIS) Department.
  • The consignee statement must also address the ultimate end use restrictions for 600 series items and the consignee must agree to end use checks by U.S. government agents
  • Certain end items with ECCNs (0A606.a, 8A609.a, 8A620.a or b, 9A610.a) must request from BIS specific permission to use STA for a transaction (see EAR Part 740.20(g)).

The reason so many conditions are placed on the use of license exception STA for 600 series items, is that 600 series items were controlled on the ITAR’s U.S. Munitions List prior to export reforms. STA effectively allows for the re-export/restransfer of these items without a license from the U.S. government. The U.S. government needs to be sure that following the jurisdictional change from the ITAR to the EAR, these formerly USML controlled items will be carefully guarded as they are still relatively sensitive in nature. In fact, some 600 series ECCNs will specifically state that STA cannot be use to export/re-export or retransfer them.

Should your company use STA?
Australian companies receiving EAR controlled items under STA must ensure that they implement record keeping policies and procedures that are in compliance with the EAR. The use of STA will necessitate that Australian companies agree to documentation and/or end use checks by officials from the BIS. These checks may start to occur as early as late 2014. It is unclear at this stage whether a representative from DECO will accompany the BIS agent on their visists to Australian companies. In either case, the BIS agent will want to view documentation related to STA transactions, including consignee statements and records of re-exports and retransfers.

If your company is unable to implement a record keeping system that is able to reproduce the records required by STA, the best course of action is to use BIS licenses for all transactions. The use of license exceptions, including STA, is optional. Australian companies that will only be receiving or re-exporting/retransfering under STA infrequently may prefer to obtain a license from BIS for each transaction, rather than invest the resources required to develop compliance and recordkeeping processes and procedures to meet the requirements of the STA license exception.

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