Lawyer Article

Published in the September 7, 2004 issue of Southeast Tech Wire.

On July 29, 2004, President Bush issued Executive Order 13350 terminating the national emergency declared in August of 1990 following Iraq's invasion of Kuwait. Except for dealings in certain blocked Iraqi property and with specified Iraqi individuals and entities, the President's action terminates export and trade prohibitions imposed under earlier Executive Orders and implemented by the Department of Treasury's Office of Foreign Assets Control (OFAC) in the Iraqi Sanctions Regulations, 31 CFR Part 575.

Simultaneously with the President's action, the Department of Commerce's Bureau of Industry and Security (BIS) announced interim revisions of the Export Administration Regulations (EAR), and OFAC issued revisions to the Iraqi Sanctions Regulations.¹ As a result, BIS has reclaimed responsibility for licensing exports and reexports to Iraq of "dual-use" items - items which have both military/strategic uses and civil applications, or which have solely civil uses.

These actions are the latest U.S. responses to the lifting of most multilateral economic sanctions against Iraq by the United Nations Security Council on May 22, 2003. At that time, President Bush responded by signing Executive Orders in May and August of 2003, implemented by OFAC General Licenses, which authorized contracts with Iraq, as well as exports and reexports to Iraq of goods and technology controlled under the EAR. However, following those changes, OFAC remained responsible for export licensing with respect to Iraq.

The new rules, which were effective on July 30, substantially further the U.S. goal of ensuring that items intended for Iraqi civil infrastructure rebuilding are not subject to undue export licensing delays. There are several notable aspects of the new rules:

• BIS is immediately responsible for licensing dual-use exports and reexports to Iraq.
• Existing OFAC licenses remain valid until the dates specified on the licenses or, if no date is specified, until July 30, 2005; however, BIS requirements, such as recordkeeping (15 CFR 746.3(e)), are applicable to these licenses.
• Items exported or reexported to Iraq, under either an OFAC or a BIS license, may not be transferred within Iraq to a new end-user, or reexported from Iraq, without BIS approval.
• A license is required for the export, reexport or transfer of any item to Iraq if one knows, has reason to know, or is informed by BIS that the item is intended to be used for a military end-use or by a military end-user; this requirement does not apply to items intended for use by the U.S. Government, the Interim Government of Iraq, or the Multinational Force in Iraq.
• The Special Iraq Reconstruction License (SIRL) - which BIS promises will receive expedited licensing attention - is now available for exports or reexports to Iraq, or transfers within Iraq, if:

• * the exports, reexports or transfers further civil reconstruction or other projects funded by the U.S. Government, the United Nations, the World Bank, the International Monetary Fund, or organizations affiliated with these entities; and,
• * special end-use or end-user controls are not applicable.

 

Significant end-use and end-user restrictions continue to apply. For example, EAR foreign policy and national security controls apply to the export, reexport or transfer to, or the subsequent transfer within, Iraq of any EAR-controlled item if one knows, has reason to know, or is informed by BIS that the item will be used:

• * in the design, development, production or use of weapons of mass destruction or the means of their delivery; or,
• * by designated terrorists or terrorist organizations.

• A license is not required for the export or reexport of the following items, except pursuant to end-user and end-use controls:
• *items subject to the EAR but not listed on the Commerce Control List (CCL) (15 CFR part 774); or,
• * items controlled only for anti-terrorism reasons, except items classified under specified export control classification numbers on the CCL.
• BIS de minimis rules are amended to provide, generally, that reexports of items to Iraq from abroad are subject to licensing only when U.S.-origin controlled content in such items exceeds 25% (as opposed to the existing 10%).
• Iraq is now on the list of countries (Country Group D:1) for which several license exceptions are available, assuming the specific transaction meets all terms and conditions of the individual license exception and is not excluded by any of the restrictions applicable to all license exceptions (see, e.g., 15 CFR 740.2). Among the License Exceptions now available for Iraq are the following:
• CTP (15 CFR 740.7): for computers up to and including 190,000 millions of theoretical operations per second (MTOPS); however, licenses may be required for transfers within Iraq of certain computers at or below 190,000 MTOPS, as well as for exports or reexports to Iraq, and transfers within Iraq, of high performance computers exceeding 190,000 MTOPS;
• TSU (15 CFR 740.13): technology and software - unrestricted;
• CIV (15 CFR 740.5): civil end-users;
• TMP (15 CFR 740.9): temporary imports, exports, and reexports;
• RPL (15 CFR 740.10): servicing and replacement of parts and equipment;
• ENC (15 CFR 740.17): encryption commodities and software; and,
• KMI (15 CFR 740.8): key management infrastructure.

Defense articles must be licensed by the State Department's Directorate of Defense Trade Controls (DTC) under the International Traffic in Arms Regulations (ITAR).

BIS emphasizes that license applications for exports or reexports to Iraq, and transfers within Iraq, will be reviewed on a case-by-case basis, and that United Nations resolutions reaffirming Iraq's disarmament obligations relating to nuclear, chemical, and biological weapons and ballistic missiles will be strictly honored.

Note

1 BIS interim rules are effective as of July 30, 2004. These are subject to change when final rules are announced, presumably, later this year. OFAC revisions to the Iraqi Sanctions Regulations were issued as final rules.

James K. Kearney
Womble Carlyle
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