On February 24, 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule amending the Export Administrations Regulations (EAR) to impose new export control measures on Iran. These measures address the use of Iranian Unmanned Aerial Vehicles (UAVs) (aka, Unmanned Aircraft System (UAS), aka drones) by Russia in its ongoing war against Ukraine. The Final Rule has been implemented “in order to degrade Iran’s ability to support Russia’s military aggression in Ukraine.” Specifically, BIS has taken the following actions targeting Iranian UAVs.
- BIS has imposed license requirements for a subset of generally low-technology (EAR99) items when destined for Iran, Russia or Belarus, regardless of whether a U.S. person is involved in the transaction. Accordingly, BIS has established a new list (Supplement no. 7 to part 746 of the EAR) identifying these EAR99 items by their six-digit Harmonized Tariff Schedule (HTS) subheading and description to allow BIS and other U.S. government agencies to track and quantify these exports. This rule adds 12 entries to the new supplement. BIS notes that these HTS codes cover a greater range of items than those described in existing Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL), and “will consequently capture items that are designated EAR99 (i.e., not specifically described on the CCL).” The items will be subject to the license requirements under both the new Iranian FDP rule and revised Russia/Belarus FDP Rule, as described below. BIS has indicated that an HTS description under supplement no. 7 is only intended to assist exporters with their Automated Export System (AES) filing responsibilities and, importantly, adds that if an item is classified under any 10-digit Schedule B, or 8-digit HTS code beginning with the six-digit HTS code identified in supplement no. 7 to part 746, then it is subject to the license requirements.
- BIS has created a new “Iran Foreign Direct Product (FDP) Rule” (Iran FDP rule) specific to Iran for items in certain categories of the CCL and EAR99 items identified in the new supplement no. 7. The Iran FDP rule is modeled after the Russia/Belarus FDP rule, but with slight differences to make the Iran FDP rule more narrowly targeted at Iran’s UAV activities of concern. The Iran FDP rule establishes jurisdiction over foreign-produced items that are the direct product of U.S.-origin software or technology and classified in Categories 3 through 5 and Category 7 of the CCL or are produced by a plant or major component of a plant which itself is the “direct product” of such software or technology. The new rule also includes in its product scope foreign-produced items identified in supplement no. 7 to part 746, including items designated EAR99.
- BIS has revised and expanded the existing Russia/Belarus FDP rule to include items identified in the new supplement no. 7 list to part 746, even when such items are designated as EAR99. Such foreign-produced items have been found in UAVs containing parts and components branded U.S. or U.S.-origin (although they may not actually be U.S. branded or U.S.-origin). This revision is intended to ensure that U.S. products exported abroad are not available for shipment to Iran for use in the manufacture of UAVs being used by Russia in Ukraine. For additional background on the Russia/Belarus FDP rule see Update of February 25 2022 and Update of March 4, 2022.
This Final Rule is effective on February 24, 2023. However, shipments of items subject to the Final Rule that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on February 24, 2023, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under such previous eligibility, provided the export, reexport, or transfer (in-country) is completed no later than March 27, 2023.