On July 29, 2024, both the Departments of Commerce and State issued separate but complementary proposed rules seeking public comment on enhanced restrictions on exports, reexports, or support to military or intelligence end users and end uses in countries of concern, consistent with the Fiscal Year 2023 National Defense Authorization Act (NDAA). The Department of Commerce’s Bureau of Industry and Security (BIS) has proposed two rules seeking to provide BIS with the authority to impose controls on the activities of U.S. persons, wherever located, relating to foreign military services, foreign intelligence services, and foreign security services. The Department of State’s Directorate of Defense Trade Controls (DDTC) has proposed a rule that would amend the definition of “defense services” to clearly include the furnishing of intelligence-related assistance, and also proposes a new subcategory to U.S. Munitions List Category XI.

By publishing both rules simultaneously and seeking public comment on the proposed changes, BIS and DDTC have stated that they hope to ensure awareness as to the distinct areas of coverage of U.S. person activities under their respective legal and regulatory authorities. Both BIS and DDTC will accept public comment on the proposed rules until September 27, 2024. [Note: BIS and DDTC have extended the public comment period on their proposed rules until October 15, 2024. This extension is being made to allow for commenters to have additional time to review the proposed rules and to be informed by the public outreach that BIS and DDTC are conducting on the rule.]

Commerce Department Proposed Rules

The specific controls proposed by BIS in today’s rules include:

  • U.S. Persons’ Activity Controls: This proposed rule seeks to expand restrictions on U.S. persons’ support activities regarding end uses and end users of concern, including facilitating the acquisition of certain foreign-origin items by military, intelligence, and security services of concern, as well as performing maintenance, repair, and overhaul of such foreign-origin items. To do so, BIS proposes establishing certain Foreign-Security End User (FSEU) and “U.S. persons” activities controls and Commerce Control List-based controls. With this proposed rule, BIS would require a license for exports, reexports, and transfers (in-country) for items subject to the EAR that are specified on the Commerce Control List (CCL) when they are destined for identified “foreign-security end users.”

    In addition, BIS is proposing new restrictions on the export of certain facial recognition technologies that can enable mass surveillance to protect and promote human rights. The proposed rule would create new export controls for facial recognition systems specially designed for mass-surveillance and crowd scanning.

  • Military and Intelligence End-Use and End-User Controls: This proposed rule seeks to expand the scope of the definition of “military end user” by adding “any person or entity performing the functions of a ‘military end user,’ including mercenaries, paramilitary, or irregular forces.” The proposed rule would also expand export restrictions to “military-support end users” when destined to the armed forces or national guard of countries subjected to a U.S. arms embargo, as well as civilian or military intelligence agencies (i.e., intelligence end users) of over 40 countries of concern. Such controls are also proposed to apply to all items on the CCL when destined to foreign-security end users or military-support end users in countries subject to a U.S. arms embargo.

    This proposed rule would also revise the term “military-intelligence end user” by dropping the qualifier “military,” resulting in the term “intelligence end user.” This revision would expand the scope of controls to all intelligence end users of the covered countries, instead of only intelligence end users that are part of the armed services or national guard of the covered countries. As a result of this revision, an “intelligence end user” would encompass not only military, but also other governmental (e.g., civilian) intelligence and reconnaissance organizations.

State Department Proposed Rule

The DDTC undertook a review of the definition and controls related to “defense service” under the International Traffic in Arms Regulations (22 C.F.R. parts 12–130). According to DDTC, this review “focused on identifying activities of U.S. persons that (1) provide a critical military or intelligence advantage such that they warrant control under the ITAR and are activities that are not currently subject to the ITAR; or (2) are controlled under the ITAR, but the current control language would benefit from additional clarity.” Following the review, the DDTC proposed rule offers a revised definition of “defense service” to better describe existing controls and the scope of activities it would regulate through the revised definition, and also proposes certain additions to the ITAR’s United States Munitions List (USML).

Included in this proposed rule is specific language regarding the furnishing of intelligence-related assistance that is not directly related to a defense article to certain types of foreign persons (i.e., a foreign unit, force, or government) or their proxies or agents. DDTC assessed that these activities warrant and require control equivalent to those of intelligence-related defense articles since such assistance (including training or consulting) similarly furnishes a critical military or intelligence advantage to the foreign person.

In addition, the proposed rule details two new proposed USML entries under Category IX that would control defense services related to intelligence and military assistance. A new “Category IX(s)” would be added and would control “[a]ssistance, including training or consulting, to a foreign government, unit, or force, or their proxy or agent, that creates, supports, or improves intelligence activities, including through planning, conducting, leading, providing analysis for, participating in, evaluating, or otherwise consulting on such activities, for compensation.” It would also control providing various forms of assistance in intelligence activities. These new proposed categories have numerous exceptions for allowable assistance and should be reviewed carefully.