[authors: Shannon Doyle Barna, Jordan Shepherd, and Elizabeth Owerbach]

State and Commerce Departments Seek Input from Industry on Elements of Export Control Reform

In recent weeks, the State Department and the Commerce Department have published in the Federal Register several proposed revisions to the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR) that, if adopted, would continue to move the Obama Administration's Export Control Reform initiative forward. The notices address proposed changes to Categories XII, XIV, and XVIII of the United States Munitions List (USML), additional controls related to cybersecurity items, the harmonization of the required destination control statement under the EAR and ITAR, and a proposed change in the treatment of encrypted data that is exported from the United States. The Commerce Department also has published a request for additional comments from industry on improving export clearance requirements under the EAR. Comments on these proposed rules are due at various points in July and August. All of the Federal Register notices are available on the Bureau of Industry and Security's website.

• On May 5, both agencies published proposed revisions to Category XII of the USML that would move certain fire control, range finder, optical and guidance and control equipment that the President determined no longer warrant control under the USML to the Commerce Control List (CCL). Comments on this proposed rule are due July 6, 2015.

• On May 20, the Commerce Department proposed changes to the EAR that would increase export controls with respect to cybersecurity items such as intrusion software, Internet Protocol network communications surveillance systems, and related equipment, software, and technology. Comments on this proposed rule are due July 20, 2015.

• A proposed revision published on May 22 would harmonize the destination control statements that are required to be included on shipping documents under the EAR and the ITAR. The State Department rule also would revise the ITAR to clarify how parties may obtain authorization from the State Department to export or retransfer items subject to the EAR when those items are for use in or with defense articles authorized under a license or other approval. Comments on this proposed rule are due July 6, 2015.

• Also on May 22, the Commerce Department published an advanced notice of proposed rulemaking requesting comments from industry on how the export clearance requirements under the EAR can be improved. The Commerce Department provided several examples of changes to the export clearance process that might be considered in a future rule, such as requiring that Export Control Classification Numbers (other than EAR99) be listed on export control documents or requiring Automated Export System filings for certain exports to Canada which currently do not require such filings. Comments on the advanced notice of proposed rulemaking are due July 6, 2015.

• On June 3, both agencies proposed amendments to their regulations that would harmonize the definitions of various terms used in both the EAR and the ITAR. Notably, the proposed rules represent a departure from the U.S. government's stance on the transmission and storage of encrypted data. Under the proposed revisions to the EAR and ITAR, sending, taking, or storing technical data or software outside the United States would not be considered an export if the data or software is unclassified and is secured using end-to-end encryption in a manner that is certified by the U.S. National Institute for Standards and Technology as compliant with the Federal Information Processing Standards Publication 140-2. The encrypted data or software may not be stored in a country against which the United States enforces an arms embargo or the Russia Federation. Comments on this proposed rule are due on August 3, 2015.

• On June 17, both agencies published proposed revisions to Categories XIV and XVIII of the USML that would move certain toxicological agents and directed energy weapons from the USML to the CCL. Comments on this proposed rule are due on August 17, 2015.

For more information on export control reform, please see the August 2014, February 2014 and November 2013 editions of the Trade and Manufacturing Alert and King and Spalding's June 2013 Client Alert.

Free Trade Area Launched Among Southern and Eastern African Countries

The Tripartite Free Trade Area (TFTA), a long-time goal of African countries to unite their economies, was launched on June 10 at a summit in Sharm El Sheikh, Egypt. The TFTA will unite the twenty-six countries that comprise three of Africa's regional economic communities: the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). A map showing the geographic coverage of the TFTA is available here.

The TFTA will facilitate trade among these communities, which represent a total of 632 million people and a gross domestic product of $1.3 trillion in 2014—nearly 60 percent of both Africa's population and Africa's total production.

The Sharm El Sheikh declaration separates the negotiating process into two phases. The first phase of tariff and goods-related negotiations is all but complete, but the second phase (covering services, intellectual property, and other issues) has not yet begun. The countries are aiming for a 2017 implementation date. In addition to finalizing the TFTA, analysts note that African economies need to improve infrastructure and political capacity to more fully integrate and support continent-wide economic development.

Iran Nuclear Talks Continue Past June 30 Deadline

Top diplomats have decided to continue negotiating a nuclear deal with Iran beyond the self-imposed June 30 deadline. The Treasury Department announced that it is extending the limited sanctions relief provided under the Joint Plan of Action (JPOA) through July 7 while talks continue. As King & Spalding has reported, the JPOA was initially established in November 2013 for the purposes of granting limited sanctions relief to Iran while it negotiated its nuclear program with the P5+1 countries (China, France, Russia, the United Kingdom, the United States, and Germany). Importantly, this limited sanctions relief generally does not apply to U.S. persons or U.S.-owned or controlled entities. If a longer-term deal is reached with Iran in the future, sanctions relief may then apply to U.S. persons. On April 2, 2015, parties to the JPOA announced parameters for a nuclear deal with Iran, whereby Iran would take a series of phased steps to dismantle its nuclear program in exchange for sanctions relief. This could lead to opportunities for increased global business with Iran if and when a deal is implemented.