BIS extended a helping hand to the exporting community in interpreting somewhat archaic definition of the “specially designed” clause that is used throughout the Commerce Control List. The clarification opportunity came from the advisory opinion request by the Semiconductor Industry Association. The association kindly made the request available to the public online. See Letter; see Exhibits A, B, C, D, F. The advisory opinion laid out evaluation principles, as well as evidentiary principles to be used in assessing whether your part or component is “specially designed.”
Evidentiary principles applied by BIS are totality of documentation. Id. (“BIS has determined that, in its totality, the documentation shows …”). Possibly in the form of dicta, BIS also suggested that documentation should be contemporaneous. Marketing materials are acceptable for analysis alongside with “other contemporaneous information” (e.g. technical data).
For evaluation principles, BIS suggested a three step inquiry.
First Step
First step concerns the ¶(a) under “specially designed” definition. That is, an “item” is “specially designed” if it:
- As a result of “development” has properties peculiarly responsible for achieving or exceeding the performance levels, characteristics, or functions in the relevant ECCN or U.S. Munitions List (USML) paragraph; or
- Is a “part,” “component,” “accessory,” “attachment,” or “software” for use in or with a commodity or defense article ‘ enumerated’ or otherwise described on the CCL or the USML.
In light of technological advances, where civil industry is not that far behind the industrial-military complex, the civil part that can achieve functions of a controlled item, is “specially designed.”
Second and Third Steps
In light of the vagueness and possible application of ¶(a) fit, BIS turns to exceptions. Exceptions are enumerated under ¶(b). The language in the exceptions is modified by numerous notes, and is not very pleasant to read. BIS suggest the following two step evaluation approach of ¶(b):
- Was an item designed with knowledge of use in a wide range of applications, including a wide variety of different types of commodities, such as medical equipment, passenger vehicles, and consumer electronics? or
- Does the item have the same function, performance capabilities, and the same or equivalent form and fit as its multipurpose counterpart?
Notice the use of syntax: “or.” This means that if you item answers either of two questions affirmatively, then that item is probably not “specially designed.”
For avid readers a copy of “specially designed” clause as written in the regulation is reproduced below.
Specially designed. When applying this definition, follow this sequential analysis set forth below. (For additional guidance on the order of review of “specially designed,” including how the review of the term relates to the larger CCL, see Supplement No. 4 to Part 774 of the EAR—Commerce Control List Order of Review.)
(a) Except for items described in (b), an “item” is “specially designed” if it:
(1) As a result of “development” has properties peculiarly responsible for achieving or exceeding the performance levels, characteristics, or functions in the relevant ECCN or U.S. Munitions List (USML) paragraph; or
(2) Is a “part,” “component,” “accessory,” “attachment,” or “software” for use in or with a commodity or defense article ‘ enumerated’ or otherwise described on the CCL or the USML.
(b) A “part,” “component,” “accessory,” “attachment,” or “software” that would be controlled by paragraph (a) is not “specially designed” if it:
(1) Has been identified to be in an ECCN paragraph that does not contain “specially designed” as a control parameter or as an EAR99 item in a commodity jurisdiction (CJ) determination or interagency-cleared commodity classification (CCATS) pursuant to §748.3(e);
(2) Is, regardless of ‘ form’ or ‘ fit,’ a fastener (e.g., screw, bolt, nut, nut plate, stud, insert, clip, rivet, pin), washer, spacer, insulator, grommet, bushing, spring, wire, solder;
(3) Has the same function, performance capabilities, and the same or ‘ equivalent’ form and fit, as a commodity or software used in or with an item that:
(i) Is or was in “production” (i.e., not in “development”); and
(ii) Is either not ‘ enumerated’ on the CCL or USML, or is described in an ECCN controlled only for Anti-Terrorism (AT) reasons;
(4) Was or is being developed with “knowledge” that it would be for use in or with commodities or software (i) described in an ECCN and (ii) also commodities or software either not ‘ enumerated’ on the CCL or the USML (e.g., EAR99 commodities or software) or commodities or software described in an ECCN controlled only for Anti-Terrorism (AT) reasons;
(5) Was or is being developed as a general purpose commodity or software, i.e., with no “knowledge” for use in or with a particular commodity (e.g., an F/A-18 or HMMWV) or type of commodity (e.g., an aircraft or machine tool); or
(6) Was or is being developed with “knowledge” that it would be for use in or with commodities or software described (i) in an ECCN controlled for AT-only reasons and also EAR99 commodities or software; or (ii) exclusively for use in or with EAR99 commodities or software.
Note 1: ‘ Enumerated’ refers to any item (i) on either the USML or CCL not controlled in a ‘ catch-all’ paragraph and (ii) when on the CCL, controlled by an ECCN for more than Anti-Terrorism (AT) reasons only. An example of an ‘ enumerated’ ECCN is 2A226, which controls valves with the following three characteristics: a “nominal size” of 5 mm or greater; having a bellows seal; and wholly made of or lined with aluminum, aluminum alloy, nickel, or nickel alloy containing more than 60% nickel by weight. The CCL also contains notes excluding from control “parts” and “components” “specially designed” for uncontrolled items. Such uncontrolled items are merely ‘ described’ and are not ‘ enumerated.’ Note 2 to ECCN 1A002 is an example of items excluded from control based on being “specially designed” for a ‘ described’ item. Commodities or software in an ECCN controlled only for AT reasons are other examples of items ‘ described’ on the CCL. ECCN 2B996, which controls dimensional inspection or measuring systems or equipment not controlled by 2B006, is an example of a commodity ‘ described’ in an ECCN controlled only for AT reasons. For purposes of “specially designed,” ECCNs 0B986, 0B999, 0D999, 1B999, 1C992, 1C995, 1C997, 1C999, 6A998 (except for .b), 7A994 (except for the QRS11) and 9A991 are treated as ECCNs controlled exclusively for AT reasons.
Note 2: A ‘ catch-all’ paragraph is one that does not refer to specific types of “parts,” “components,” “accessories,” or “attachments” but rather controls non-specific “parts,” “components,” “accessories,” or “attachments” because they were “specially designed” for an enumerated item. For example, ECCN paragraph 9A610.x is a catch-all, because it controls “parts,” “components,” “accessories,” and “attachments” “specially designed” for military aircraft, but does not identify specific types of “parts,” “components,” “accessories,” or “attachments” within its control. Another example of a ‘ catch-all’ is the heading of 7A102, which controls “specially designed” components for the gyros enumerated in 7A102, but does not identify the specific types of “components” within its control.
Note to paragraph (a)(1): Items that as a result of “development” have properties peculiarly responsible for achieving or exceeding the performance levels, ‘ functions’ or characteristics in a relevant ECCN paragraph may have properties shared by different products. For example, ECCN 1A007 controls equipment and devices, specially designed to initiate charges and devices containing energetic materials, by electrical means. An example of equipment not meeting the peculiarly responsible standard under paragraph (a)(1) is a garage door opener, that as a result of “development” has properties that enable the garage door opener to send an encoded signal to another piece of equipment to perform an action (i.e., the opening of a garage door). The garage door opener is not “specially designed” for purposes of 1A007 because although the garage door opener could be used to send a signal by electrical means to charges or devices containing energetic materials, the garage door opener does not have properties peculiarly responsible for a achieving or exceeding the performance levels, ‘ functions’ or characteristics in 1A007. For example, the garage door opener is designed to only perform at a limited range and the level of encoding is not as advanced as the encoding usually required in equipment and devices used to initiate charges and devices containing energetic materials, by electrical means. Conversely, another piece of equipment that, as a result of “development,” has the properties (e.g., sending a signal at a longer range, having signals with advanced encoding to prevent interference, and having signals that are specific to detonating blasting caps) needed for equipment used to initiate charges and devices containing energetic materials, would be peculiarly responsible because the equipment has a direct and proximate causal relationship that is central or special for achieving or exceeding the performance levels, ‘ functions’ or characteristics identified in 1A007.
Note 1 to paragraph (b)(3): Commodities in “production” that are subsequently subject to “development” activities, such as those that would result in enhancements or improvements only in the reliability or maintainability of the commodity (e.g., an increased mean time between failure (MTBF)), including those pertaining to quality improvements, cost reductions, or feature enhancements, remain in “production.” However, any new models or versions of such commodities developed from such efforts that change the basic performance or capability of the commodity are in “development” until and unless they enter into “production.”
Note 2 to paragraph (b)(3): With respect to a commodity, ‘ equivalent’ means that its form has been modified solely for ‘ fit’ purposes.
Note 3 to paragraph (b)(3): The ‘ form’ of a commodity is defined by its configuration (including the geometrically measured configuration), material, and material properties that uniquely characterize it. The ‘fit’ of a commodity is defined by its ability to physically interface or interconnect with or become an integral part of another item. The ‘ function’ of the item is the action or actions it is designed to perform. ‘ Performance capability’ is the measure of a commodity’s effectiveness to perform a designated function in a given environment (e.g., measured in terms of speed, durability, reliability, pressure, accuracy, efficiency). For software, ‘ form’ means the design, logic flow, and algorithms. ‘ Fit’ means the ability to interface or connect with an item subject to the EAR. The ‘ function’ means the action or actions it performs directly to an item subject to the EAR or as a stand-alone application. ‘ Performance capability’ means the measure of software’s effectiveness to perform a designated function.
Note to paragraphs (b)(3) and (b)(4): ECCNs controlled for AT-only reasons that use “specially designed” are eligible for paragraphs (b)(3) and (b)(4). However, the criteria for release under (b)(3) or (b)(4) must be met by another ECCN controlled for AT-only reasons or an EAR99 item in addition to the AT-only ECCN being reviewed for release from “specially designed.” For example, if a single gasket is used in ECCN 9A990 tractors (9A990 includes a control on “specially designed” “parts”) and also pick-up trucks designated as EAR99 that are in “production”, the single gasket would be released from “specially designed” on the basis of paragraph (b)(3). Or if the single gasket is or was used in 9A990 tractors and also 9A991.b aircraft (another AT-only controlled ECCN), that are in “production,” the gasket would be released from “specially designed” on the basis of paragraph (b)(3). Alternatively, if the single gasket is or was only used in ECCN 9A990 tractors that are in “production,” then paragraph (b)(3) would not be available. This same concept applies for paragraph (b)(4).
Note to paragraphs (b)(4), (b)(5) and (b)(6): For a commodity or software to be not “specially designed” on the basis of paragraphs (b)(4), (b)(5) or (b)(6), documents contemporaneous with its “development,” in their totality, must establish the elements of paragraphs (b)(4), (b)(5) or (b)(6). Such documents may include concept design information, marketing plans, declarations in patent applications, or contracts. Absent such documents, the “commodity” may not be excluded from being “specially designed” by paragraphs (b)(4), (b)(5) or (b)(6).
