Generally, the newly amended Part 120 seeks to prioritize a clearer regulatory framework and roadmap by taking a functional approach to grouping regulatory measures and statements. Namely, rather than situating general definitions and statements at disparate locations, Part 120 is now divided into three subparts based on the function of the underlying provisions. Subpart A consolidates general information useful for understanding the ITAR, such as the legislative authorities and regulatory intent underlying the ITAR’s provisions. Subpart B consolidates statements of policy and other information about processes under the ITAR. And Subpart C provides a consolidated set of defined terms that are applicable throughout the rules.

Section-specific changes to Part 120 focus on clarifying edits and deleting redundancies. These changes are described by DDTC as “non-editorial.” Edits include express reference to Blue Lantern—the program used by DDTC for end-use monitoring—the creation and grouping of international organizations and arrangements, and the removal, in its entirety, of the Missile Technology Control Regime Annex formally found at § 121.16. And section 120.12 has been revised in its entirety so that it now describes the process for obtaining a Commodity Jurisdiction determination. Note that, for certain revisions, DDTC specifically mentions that the change is non-substantive or otherwise not intended to reflect a substantive change, such as for certain changes relating to the introduction of and references to the U.S. Munitions List. Interim final rule is effective as of September 6, 2022. And, for clarity, the rule features a table that details the movement of all sections.

Please contact our export control and sanctions compliance team if you have any questions about this development.

In particular, under the new sanctions E.O., the Office of Foreign Assets Control (“OFAC”) may select among a “menu” of options to sanction parties associated with the conflict in Ethiopia. The “menu” options include both blocking and non-blocking sanctions:

• Blocking sanctions on all property and interests of that sanctioned person (and inclusion on OFAC’s SDN list);
• A prohibition on U.S. persons from investing in or purchasing significant amounts of equity or debt from the sanctioned person;
• A prohibition on U.S. financial institutions from making loans or extending credit to the sanctioned person;
• A prohibition on foreign exchange transactions that are subject to U.S. jurisdiction in which the sanctioned person has any interest; and
• Imposition of sanctions on the leaders, officials, officers, and directors of the parties above.

OFAC also issued three general licenses that authorize U.S. persons to engage in otherwise prohibited transactions and activities that are (1) related to the official business of certain international organizations, (2) ordinarily incident and necessary in support of nongovernmental organizations’ humanitarian activities, and (3) related to the exportation or reexportation of agriculture, medicine, and medical devices. Non-U.S. persons do not risk sanctions exposure for engaging in transactions and activities that would be exempt or authorized for U.S. persons under the general licenses.

Separately, the Directorate of Defense Trade Controls (“DDTC”) will publish an amendment to the International Traffic in Arms Regulations (“ITAR”) that adds Ethiopia to the list of countries for which the agency imposes a presumption of denial for export licenses of defense articles and services. This policy will effectively cut off the flow of U.S.-origin defense items and services to Ethiopia.

Companies that operate or do business in Ethiopia should carefully review the new E.O. and potential exposure to any forthcoming sanctions, as well as the forthcoming Federal Register notice updating the ITAR.

The most significant change announced today is the State Department’s decision to add Russia to the International Traffic in Arms Regulations’ (ITAR) list of “proscribed countries,” commonly known as the Section 126.1 list. Countries on this list are subject to a policy of denial for license applications, so the change will effectively subject Russia to a U.S. arms embargo, prohibiting the export of most ITAR-controlled defense articles and defense services to Russia. Limited exceptions to the policy of denial will be made for exports in support of government space cooperation. The State Department will also review licenses related to commercial space launches on a case-by-case basis, but only for six months, after which license requests related to commercial space launches will face a presumption of denial. As noted below, the Commerce Department has announced corresponding changes to its licensing policy regarding exports related to commercial space flight activities in Russia. Additionally, certain transactions with 126.1 countries are subject to mandatory disclosures to the DDTC, instead of the general rule that violations are subject to voluntary disclosures to the agency.

Below is a summary of the actions taken by other key U.S. regulators today, including the Treasury, State, and Commerce Departments:

• New SDNs: OFAC added seven Russian government officials and three entities to the Specially Designated Nationals (SDN) List and imposed new sanctions on existing Russian SDNs;
• Entity List Additions: The Commerce Department added 14 entities in Russia, Switzerland, and Germany to its Entity List due to their connection to WMD and chemical weapons production, barring exports of items subject to the Export Administration Regulations (EAR) to the designated entities.
• Dual Use Export Control License Restrictions: The Commerce Department will limit the availability of certain license exceptions and licenses for exports of NS-controlled items to Russia. Commerce indicated that exports of NS-controlled items to Russia will no longer be eligible for license exceptions Service and Replacement of Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR). Commerce will reverse its existing licensing policy and replace it with a presumption of denial to license requests related to exports of NS-controlled items for commercial end-users related to civil end-uses in Russia. In six months, Commerce will also adopt a policy of denial for license requests involving exports of NS-controlled items to Russia related to commercial space flight activities.
• Secondary Sanctions: The State Department added six scientific institutes to its Section 231 List of persons known to operate for or on behalf of the Russian defense or intelligence sectors. As a result of the designations, non-U.S. persons that conduct significant transactions with these parties could be subject to U.S. secondary sanctions in the future.

Specifically, the proposed rule targets for a move to the EAR products that are not inherently military, or do not possess characteristics that provide a military advantage to the U.S. These rules, once finalized, would reduce the compliance burden on exporters in the industry. However, the proposed rules do not represent a wholesale deregulation of the industry, as many items would remain highly controlled under the EAR’s “600-series” and other ECCNs, and would still require licenses to many destinations. Affected parties should carefully review the proposed rules and take the opportunity to comment on the proposed reforms.