The United States prohibits the export of a broad range of telecom equipment, systems and technologies if the exporter does not first obtain a government license. Controlled telecom products can be as diverse as parts and components, network equipment, encryption technology and satellites. Failure to comply with export control restrictions can result in a fine of $250,000 or more per violation, loss of export privileges and even jail. For years, exporters of telecom products relevant to the military have usually been subject to the onerous International Traffic in Arms Regulations (“ITAR”), rather than the less restrictive Export Administration Regulations (“EAR”). The U.S. government, however, has launched a comprehensive export control reform effort that could benefit companies looking to export military or satellite hardware and technologies.
Most recently, the Commerce and State Departments (the respective agencies overseeing the EAR and ITAR) have proposed revisions to the export controls covering many electronic products. A wide variety of electronic products are considered to be military in nature and controlled under the ITAR – even if they were originally intended for general commercial use. Additional background on the scope of electronic products covered by the ITAR and the liberalizing impact of the proposed rules is set out in a recent Client Alert. For the telecommunications sector, applicable requirements for radar systems and communications systems presently subject to the ITAR would be simplified and clarified, thereby eliminating many restrictions and ambiguity as to which set of export control regulations applies.
The applicable export controls on satellites and other space-related equipment, however, remain complicated. These items fall within Category XV on the ITAR’s U.S. Munitions List (“USML”). The Administration’s efforts to limit the restrictions on exports of space-related hardware and technologies on the USML are constrained by legislation. There is substantial interest within industry to transfer jurisdiction over space-related technologies to the Commerce Department and the less restrictive EAR. The EAR would require a license for fewer exports and, where applicable, licensing procedures would be more transparent. Two bills pending in Congress, H.R. 4310 (Section 1241) and S. 3211, would authorize the shift to the EAR.
President Obama’s reelection increases the likelihood that telecom export control reform will remain a focal point as the 113th Congress convenes in January. Stay tuned.