Recent Changes to U.S. Export Controls

Calendar year 2020 ended with a number of changes to the federal rules governing export controls and trade sanctions.  These actions could have significant impacts on international trade in 2021 and beyond.  Businesses should carefully evaluate prospective international transactions involving goods, software, or technology subject to U.S. export controls.

Specifically, pending forthcoming amendments to the Export Administration Regulations (EAR), the changes will ease restrictions on exports to certain countries.  Notably, the Bureau of Industry and Security (BIS) added Mexico to the EAR country group with one of the most highly favored statuses.  Practically speaking, this means more license exceptions are available for exports to Mexico, particularly for less sensitive items that are subject to export controls for national security reasons.

In addition, BIS no longer recognizes Hong Kong under the EAR as a destination separate from China. Until recently, the United States-Hong Kong Policy Act of 1992 allowed Hong Kong to receive preferential treatment in recognition of the former British colony's autonomy. In accordance with Executive Order 13936 issued in July 2020 by former President Trump, BIS amended the EAR to remove all provisions that provided Hong Kong with differential treatment, and now treats exports, re-exports, and in-country re-transfers to Hong Kong under the same U.S. trade policy as China.

Finally, the latest export control changes continue the federal government's pressure on disfavored companies -- such as China-based technology company Huawei -- that are believed to engage in actions contrary to U.S. foreign policy.  BIS finalized the creation of a Military End User (MEU) List, which is a new supplement to the EAR and requires a license (with a presumption of denial) for the export of listed items, including commercial products such as consumer-grade laptops and smartphones and other low-controlled items like basic commercial aircraft parts.

It is still unclear what action, if any, the Biden Administration will take regarding these measures. Although we are unlikely to see a full-scale reversal, President Biden could alter or modify any of the export controls instituted in the waning months of the Trump Administration.  In any case, businesses should consider these issues before taking any action that may violate export controls, international trade rules, or broader national security laws.  If you have questions, please contact Bill Speros or another attorney in the Business Transactions group at our Firm.


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