Changes to Export License Exceptions Demand Caution by Industry

Subtle changes to the export license exceptions that are frequently used by the aviation industry could harm your business if you do not ensure continued compliance with the standards as they are evolving.

Many parties in the aviation industry have noticed and used the license exception for servicing and replacement of parts and equipment.  This exception is known as the “RPL” exception, because that is the code used in the electronic export information filing to indicate use of the exception.  This exception generally applies to articles that would require an export license, and it permits those articles to be exported without a license when they have been brought into the US for servicing and are then exported to their original owners (the transaction must also meet certain other criteria).  It is therefore highly useful to U.S. repair stations that are servicing parts for non-U.S. customers, and also to U.S. distributors that manage repairs for non-US customers.

The old scope clause read like this:

(1) Scope. The provisions of this paragraph (b) authorize the export and reexport of items that were returned to the United States for servicing and the replacement of defective or unacceptable U.S.-origin commodities and software.  15 CFR 740.10(b)(1) (2013).

The new scope clause reads like this:

(1) The provisions of this paragraph (b) authorize the export and reexport to any destination, except for 9×515 or “600 series” items to destinations identified in Country Group D:5 (see Supplement No. 1 to this part) or otherwise prohibited under the EAR, of commodities and software that were sent to the United States or to a foreign party for servicing and replacement of commodities and software “subject to the EAR” (see Sec.  734.2(a) of the EAR) that are defective or that an end user or ultimate consignee has found unacceptable.  Corrections and Clarifications to the Export Administration  Regulations; Correction, 79 Fed. Reg. 48660-48661 (August 18, 2014); 15 CFR 740.10(b)(1) (effective August 18, 2014).

This new text confirms certain limitations on the use of the RPL exception.  It may not be used for article bearing ECCN 9×515 or any “600 series” ECCN if the article is destined for Group D:5 country.

The new text also adds the detail that if the article is not defective, then the end-user or ultimate consignee must have found the article to be unacceptable.  Articles that are not defective may be overhauled or tested to confirm their airworthiness – this may be accomplished by a non-U.S. distributor.  The term “ultimate consignee” is defined in 15 C.F.R. 748.5(e):

(e) Ultimate consignee. The principal party in interest located abroad who receives the exported or reexported items. The ultimate consignee is not a forwarding agent or other intermediary, but may be the end-user.

When the non-U.S. distributor is the party that determined the need for servicing of a non-defective article, the non-US distributor must remain the ultimate consignee in the transaction.  When might the non-U.S. distributor become something other than the ultimate consignee?  When the unit is sold to a third party and the US person holding the serviced unit is directed to drop ship it to the third party buyer.   In any other unlicensed transaction, this should be fine (assuming no other laws are implicated by the transaction), but in an RPL transaction, this can cause a problem if the conditions of RPL are no longer met by the transaction model.  To clarify, if a non-defective unit is sent to the US for servicing (like calibration, or confirmation of airworthiness), then the person who found it unacceptable (the one who found it in need of servicing) must remain either the end user or the ultimate consignee.  If that person was a non-U.S. distributor, then the non-U.S. distributor must remain as the ultimate consignee to continue to meet the requirements of RPL.

Remember, RPL is an exception – you always have the option of obtaining a license for the export.  And luckily, most civil aviation articles exported from the U.S. do not require export licenses from BIS.

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About Jason Dickstein
Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.

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