U.S.-India defense cooperation taken to the next level with favorable licensing policy for exports to India

On January 27, 2017, the Commerce Department’s Bureau of Industry and Security (BIS) recently made two significant changes to the Export Administration Regulations (EAR) concerning India that will facilitate the export of controlled items to that country.

The regulations reflect a June 7, 2016 joint U.S.-India statement in which the United States recognized India as a Major Defense Partner, laying the ground work for facilitating technology sharing with India on a level commensurate with that of the United States’ closest allies and partners. The two countries reached an understanding under which India would receive license-free access to a wide range of dual-use technologies in conjunction with steps that India committed to take to advance its export control objectives.

Favorable Licensing Policy

BIS has amended section 742.4 and section 742.6 pertaining to controls for purposes of National Security and Regional Stability reasons to state that export, reexport, or transfer items, including “600 series” items, for civil or military end uses in India will be assessed under a general policy of approval. The items can also be for the ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as such items are not for use in nuclear, missile, or chemical or biological weapons activities. The rule does not amend any licensing policies with respect to Missile Technology items.

Companies seeing to export controlled items to India can now expect that their license applications will be reviewed more favorably and will routinely receive approvals for transactions as opposed to the “case-by-case” approach previously followed by BIS in reviewing license applications for India, which involved more rigorous scrutiny and possible denials of license applications.

It is useful to note that BIS has been incrementally liberalizing U.S. export control policy towards India in light of the two countries’ intention to expand cooperation in civil space, defense and other high technology sectors. For example, in 2011 BIS moved India from designation under certain restricted Country Groups to Country Group A:2, which lists countries that are adherents to the Missile Technology Control Regime (MTCR). Likewise in 2015, in recognition of the Government of India’s efforts at ensuring that U.S. origin items controlled for crime control and regional stability reasons are not reexported from India without a license, BIS removed license requirements for exports of items controlled for crime control and regional stability reasons to India.

Expanded Validated End-User program for India

BIS also amended the end user and end use provisions of the Validated End User (VEU) authorization in section 748.15 of the EAR. The VEU program allows items which are controlled under the EAR and which otherwise require a license to be shipped to certain approved end-users in China or India without a license. An End-user Review Committee comprised of representatives of the Departments of State, Defense, Energy, and Commerce and other agencies, as appropriate, must decide by a unanimous vote to grant VEU status to an applicant.

The recent changes made by BIS to the Authorization VEU Program expand the list of applicable end-use for items obtained under an authorization VEU for India. Under the amended provision, items obtained under authorization VEU in India may be used for either civil or military end uses. This is in distinction to the end-uses permitted for China, for which items exported under authorization VEU to China can only be used for civil purposes. Items exported under VEU to either country cannot be used for any activities described in part 744 of the EAR, i.e. for use in nuclear, missile, chemical or biological weapons activities. Currently, however, there is only 1 company authorized under VEU in India. The expansion of the VEU program for India should encourage companies to seek VEU status for a larger number of Indian entities to take advantage of a more liberalized export control regime now in force for India.