On July 24, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a final rule implementing an expansion of controls on the export, reexport, or in-country transfer of certain foreign-produced items located in or destined to Iran. The rule implements the requirements of the No Technology for Terror Act, which President Biden signed into law in April of 2024, and is intended to address ongoing concerns regarding Iran’s potential use of U.S. technology in weapons systems. The expansion, which is effective as of July 23, 2024, is designed to further impede Iran’s ability to procure technology and components critical for military systems, including advanced drones.
Specifically, the rule expands the scope of the Export Administration Regulations’ (“EAR”) Foreign Direct Product (“FDP”) rule for Iran and applicable license requirements, thereby increasing restrictions under the EAR vis-à-vis Iran. Under the expanded Iran FDP rule, foreign-produced items are subject to the EAR, and thus potentially subject to licensing requirements, if the items: (1) meet both the product scope and the destination and end-use scope of the rule or (2) meet both the product scope and the end-user scope of the rule. Among other changes, BIS expanded the range of items in the product scope of the Iran FDP rule and added the new end-user scope to the Iran FDP rule. The expanded product scope now includes the “technology” and “software” for Category 6 of the Commerce Control List—Lasers and Sensors, Category 8—Marine, and Category 9—Aerospace and Propulsion. The new end-user scope of the Iran FDP rule applies if there is knowledge that the Government of Iran is a party to any transaction involving the foreign-produced item, e.g., as a purchaser, intermediate consignee, ultimate consignee, or end user.
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