Export Control: SEMI Submits Industry Comments on BIS “Specially Designed” Rule

Export Control: SEMI Submits Industry Comments on BIS “Specially Designed” Rule

 In August 2010, President Obama launched the Export Control Reform (ECR) Initiative  to identify potential reforms to the current export control system and ease burdensome regulations for U.S. exporters while improving national security protection. From its inception, the ECR interagency task force consistently found the export control system to be convoluted, outdated, and at times harmful for U.S. businesses. While the interplay between national security and export competitiveness has long made the subject of export controls controversial, the need for significant reform was clearly identified.

To address these concerns, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) and the U.S. Department of Commerce, Bureau of Industry and Security (BIS) were called upon to harmonize the U.S. control regimes.  The DDTC is charged with controlling the export of defense articles and services, while the BIS controls the export of commercial and dual-use items.  Respectively, these agencies maintain and enforce the two current control lists for US exports: the U.S. Munitions List (USML) and the Commerce Control List (CCL).

A significant step in this harmonization effort came on June 19 when the DDTC and the BIS proposed a new definition of the term “specially designed,” a concept that can apply to a wide range of both military and commercial items. At the same time, the ECR interagency task force is reviewing items intended for military, satellite, or intelligence applications.  Such items are currently subject to U.S. export control restrictions under the International Traffic in Arms Regulations (ITAR); however this new project hopes to reduce the number of items subject to the ITAR.

Both the CCL and the USML have existing concepts related to “specially designed.”  Those concepts not only appear broadly throughout the CCL and USML, but they can lead to controls based on the intended use of an item regardless of its technical capabilities.  As a result, the classification of many items is not objectively quantifiable. The proposed definition of “specially designed” reflects the ECR’s primary goal of unifying the control system, as this single definition would apply to items on both the CCL and the USML, and therefore represents a major step in the functional merger of the two lists.

The semiconductor equipment and materials industries have welcomed the ECR and are similarly supportive of efforts to remove ambiguity from the control lists.  When exporting products with both military and commercial applications, it can be extremely difficult to discern the classification of items and the regulations applied to them under the current regime. Therefore, clarity on the definition of “specially designed” would be a significant accomplishment.

SEMI formally submitted comments to BIS on their proposal (link below), to ensure that “specially designed” is defined in the most effective way for semiconductor equipment and materials companies.  That said, this proposed definition will not ease the administrative burden of U.S. export compliance by itself.  There remains much work to be done to craft an export control system that supports U.S. commercial interests as well as it protects U.S. national security and SEMI will continue to work with its members in support of this effort.  SEMI's Washington, D.C. office coordinates industry efforts with the U.S. Department of Commerce. If you have questions or would like to participate in the SEMI Export Control Working Group, please contact Taylor Sholler, manager, North America Public Policy, at tsholler@semi.org.

BIS public comments on proposed "specially designed" definition:

 

September 4, 2012