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U.S. Government Proposes to Ease Aerospace Export Restrictions

Date: Nov 09, 2011

The U.S. Commerce and State Departments have proposed regulations to ease the export licensing requirements for companies selling items used on military aircraft. These proposals are part of the U.S. government's recent push for reforms that would help the United States compete better globally while still restricting items of national concern. Reforms are especially needed for suppliers to military aircraft manufacturers because the International Traffic in Arms Regulations ("ITAR") require a license for the export of most products specifically designed or modified for a military application, even if the product does not resemble an "arm" in any way. The newly proposed reforms could benefit those suppliers the most. Further refinements are likely needed, however, given uncertainties the new proposals create, particularly for suppliers of items like special paints and electronics.

 

The main change in the proposals would be to move many types of military aircraft and "specially designed" items from the ITAR to the less restrictive Export Administration Regulations ("EAR"). Key benefits of doing so would be:

 

  1. A license would often not be required to export items and related technology for military aircraft;

 

  1. If a license would otherwise be required, new exceptions might apply (particularly for certain foreign government sales);

 

  1. Applying for a license would be easier (for example, cumbersome licensing agreements now required to provide technical assistance would often not be needed) and

 

  1. Foreign-made products incorporating U.S. items would be subject to U.S. regulation less often.

 

An initial reading of the proposals, however, reveals that aerospace suppliers will likely have difficulty determining with certainty that the proposals would benefit them. For instance, it will be critical for companies to identify the specific aircraft for which a product was "specially designed," and suppliers will need to evaluate competing definitions the agencies have proposed for that term.

 

The proposals also raise other complicated interpretation issues that could make compliance difficult. For example, special paints are expressly subject to the current ITAR, but wording in the reformed ITAR and EAR would leave open the possibility that they would not be covered. That was most likely not intended. For products like electronics, the reformed ITAR would be ambiguous as to whether electronic parts would remain subject to the ITAR due to other ITAR restrictions on military electronics.

The potential benefits of the new proposals are significant, but aerospace suppliers in particular will likely want to carefully analyze whether the proposals adequately meet their needs. Comments are due on December 22, 2011.