By Lipu Lee, CEO & Managing Partner of Formosan Brother, Attorneys-at-Law /

Pei-Yuan Wei, Legal Consultant of Formosan Brothers, Attorneys-at-Law & U.S. Attorney (New York)

Starting March 16, 2021, no U.S. persons shall “support” “military intelligence end-uses” or “military intelligence end-users” of China, Cuba, Russia, or Venezuela absent a license from the U.S. government. The word “support” includes “export, reexport, or transfer”, or facilitate or perform “any contract, service, or employment” with knowledge that may assist or benefit to the military intelligence end-uses or end-users of the aforementioned countries.

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Following their announcement at the end of April 2020, the U.S. Bureau of Industry and Security (“BIS”) again announced the latest interim final rule of the Export Control Reform Act of 2018 (or ECRA) on January 15, 2021 (the “Rule”). It aimed to amend and broaden the Export Administration Regulations (“EAR”) related to the scope of export to specific military end-uses or end-users by adding stricter export license requirements and restrictions on specific commercial activities of end-users and U.S. persons (including natural persons and entities).

The BIS announced, starting March 16, 2021, absent a license from the BIS, no U.S. persons shall “support” “military intelligence end-uses” or “military intelligence end-users” of China, Cuba, Russia, or Venezuela. The word “support,” in a broad sense, includes “export, reexport, or transfer (including domestic U.S.),” or facilitate or perform “any contract, service, or employment” with knowledge that may assist or benefit to the military intelligence end-uses or end-users of the aforementioned countries.

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One thing worth noting is, even for goods not subject to EAR, the Rule still increased the license requirements for U.S. persons providing “support” activities for weapons of mass destruction (“WMD”) and missiles and broadened the scope of “military intelligence end-uses” and “military intelligence end-users.”

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“Military intelligence end-uses” means to the design, development, production, use, operation, installation (including on-site installation), maintenance (checking), repair, overhaul, refurbishing of, or incorporation into, items described on the US Munitions List (USML) or classified under ECCNs ending in “A018” or under “600 series” ECCNs, which are intended to support the actions or functions of a military-intelligence end user. “Military-intelligence end user” means any intelligence or reconnaissance organization of the “armed services” (army, navy, marine, air force or coast guard) or National Guard. Military intelligence end-users include but are not limited to the following:

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Cuba: Directorate of Military Intelligence (DIM) and Directorate of Military Counterintelligence (CIM); China: Intelligence Bureau of the Joint Staff Department; Iran: Islamic Revolutionary Guard Corps Intelligence Organization (IRGC-IO) and Artesh Directorate for Intelligence (J2); North Korea: Reconnaissance General Bureau (RGB); Russia: Main Intelligence Directorate (GRU); Syria: Military Intelligence Service; Venezuela: General Directorate of Military Counterintelligence (DGCIM).

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In practice, the amended Rule expanded the due diligence obligation of U.S. persons to ensure that any items or activities provided by a U.S. person (including hardware, software, technology, or technical data) will not “support” any of the above-listed organizations. In addition, based on BIS obligations in the Export Control Reform Act of 2018 (“ECRA”), the Rule amended various provisions of the EAR, including the following:

1. Imposing stricter license requirements for all items intended for “military intelligence end-uses” or “military intelligence end-users” in China, Russia, Venezuela, etc. on top of current control measures. (See 15 C.F.R.§744.21)

2. Expanding restrictions on materials for certain chemical and biological weapons

3. Broadening the definition of “support” when specific EAR restrictions are applicable

4. Imposing stricter control of U.S. person activities, covering activities and items not originated in the U.S.

5. Even when dealing with persons not listed specifically by the BIS, BIS may still inform the parties the additional license requirements.

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Overall, U.S. persons possibly “supporting” technical or specific activities of foreign military intelligence end-uses or end-users of China, Russia, Venezuela, and countries supporting terrorist organizations will be subject to stricter control. The amended Rule also strengthened control measures to prevent U.S. person “supporting” unauthorized WMD, including weapon launch applications and production facilities and plants.

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Based on the aforementioned amendments, both U.S. and foreign companies need to exercise due diligence to identify whether their clients meet the definition of “military intelligence end-users” or supporting “military intelligence end-uses” to evaluate whether they might violate the Rule. Moreover, they need to review their current contracts with such clients to evaluate the possibility of breach of contract in case the BIS refuses to issue the required export license so that they may identify the impact and risks to client relationship and business interests. In addition, if you are a U.S. citizen or permanent resident and are involved in a business activity or transaction involving U.S. “military intelligence end-uses” or “military intelligence end-users,” please be aware that you might be subject to monitoring by the U.S. government.

(This article was published in the Expert’s Commentary Column of the Commercial Times. https://view.ctee.com.tw/legal/27108.html )

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