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Changes in drone export control

The USA’s drone industry is witnessing ongoing development, and updated development with regards to commercial regulations may make it simpler for U.S. based drone producers to reach out to the international marketplace. 

In January, The Bureau of Industry and Security (BIS) put out new rules modifying the license review policy to make exporting of unmanned aerial systems (UAS) more flexible. This is with regards to UAS that are managed for missile tech (MT) reasons. 

The new ruling modifies the US Export Administration Regulations to demonstrate the President’s July 24, 2020 policy modifications. These modifications soften the implementing of the Missile Technology Control Regime’s vehement presuming of denial with regards to transferring of Category 1 systems and in lieu, treated “a meticulously chosen subset of MTCR Category I UAS (max airspeed <800 kmph) as being Category 2. This enables a more tolerant by scenario review and presents trading avenues for select U.S. drone manufacturers. The rule is applicable with immediate effect. 

The MCTR, founded in 1987, of which the USA is one of the founders, is a multilateral attempt against missile proliferation. Its objective is to coordinate national export licensing efforts targeted at averting the proliferation of unmanned delivery systems with the potential of mass destruction. In order to accomplish this, its 35 constituent countries have collaborated to determine global guidelines with regards to common controlled items and connected export policies to leverage a benchmark for their proprietary national policy. Constituent nations voluntarily concur with regards to adopting the regime’s directions for Sensitive Missile-Relevant Transfers (MTCR Guidelines) and to limit the transferring of items included in the Regime’s Equipment, Software, and Technology Annex. 

The Annex contains Category 1 and Category 2. Category 1, the more sensitive category, consists of rocket systems and UAS with a range capacity of >300 km and a payload capacity of > 500kg, in additional to their production facilities, and primary subsystems. Category 2, which is not as sensitive, and with several uses other for delivery of WMD, consists of rocket systems and UAS with ranges of > 300 km but under a payload capacity of 500 kg. Owing to this difference, the guidelines attribute a robust presumption of license denial to Category 1 drones and enable for a more relaxed individual review of Category 2 drones. The U.S.A. had taken up this approach in the past in Section 742.5 of the EAR. 

For the previous half a decade, America has failed in trying to establish consensus to renew the MCTR guidelines congruent with U.S. policies and “to address the ongoing revolution with regards to UAS tech and their application.” Therefore, this new move is unilateral. 

The ruling adds an explicit note to paragraph (b)(1) of EAR Sec. 742.5, mostly disavowing the vehement presuming of denial with regards to Category 1 drones and substituting it with the same scenario-by-scenario review deployed for Category 2. The logic is that Category 1 drones can additionally be leveraged for non-security based commercial reasons. 

There is a noteworthy stipulation in this regard. The updated USDOC ruling still tows the line on Category 1 drones that are broadly deployed in intelligence scenarios, surveillance, and recon missions and could additionally be leveraged for the delivery of WMD. These will be subjected to a vehement presuming of denial if they are targeted for utilization as WMD delivery systems, or if they cause a risk of diversion to such utilization, to attain a balance in the wish to enable the commercial drone industry to flourish with the requirement to treat non-proliferation with the seriousness that it deserves. 

This is similar to the vehement presuming of denial with regards to export licensing denial in place in new modifications to the USA’s economic blacklist. Late last year, the BIS included DJI to that listing to manage the flow of American items, technology, and source code to persons and enterprises. Extra licensure is now needed for exporting, re-exporting, or transferring to the China-based organization, but requests will presumptively face denial. On the other hand, this USDOC ruling eliminates that presumption for US exporting of specific MT-connected drones “to help allies and partners meet their pressing national security and commercial needs.” 

The USDOC has estimated this modification in the ruling will have impacts on 20 license applications, annually. As the saying goes, “Flexibility is key to airpower.” The same is applicable for export controls. 

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