BIS Updates Reexport Guidance to Incorporate Recent De Minimis EAR Exclusions for "Bundled" Software/Hardware
The Bureau of Industry and Security has updated its guidance on reexport controls to incorporate certain de minimis exclusions for foreign produced hardware that is bundled1 with U.S.-origin software, which were added to the Export Administration Regulations effective October 1, 2008.
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(See ITT's Online Archives or 10/02/08 news, 08100220, for BP summary of BIS' October 2008 interim final rule.)
(Prior to October 1, 2008, the de minimis rules did not allow U.S.-origin software to be counted as a part of the content value of the foreign commodity it was bundled with. Rather, calculations of U.S. content value were required to be performed separately for commodities, software, and technology.)
Guidance States De Minimis Rules Apply to Certain Bundled Software/Hardware
BIS' updated guidance states that if U.S.-origin software is incorporated into foreign software, or bundled U.S.-origin software with foreign hardware, or if foreign technology is commingled with or drawn from U.S.-origin technology, reexporters are to follow the process outlined in its guidance, etc.
(BIS' previously published guidance, updated in September 2006, stated that the de minimis exception could only be used for items that are alike - hardware into hardware or software into software, and that the de minimis exception could not be used for incorporating software into hardware.
BIS' October 2008 interim final rule amended 15 CFR 734.4 to add bundled software to the following de minimis exclusions:
10% de minimis exclusion for any country.Reexports of a foreign-made commodity incorporating2 controlled U.S.-origin commodities or "bundled" with U.S.-origin software, valued at 10% or less of the total value of the foreign-made commodity are not subject to the EAR when made to any country in the world (with certain exceptions).
25% de minimis exclusion for all but Country Group E:1.With certain exceptions, reexports of a foreign-made commodity incorporating controlled U.S.-origin commodities or "bundled" with U.S.-origin software valued at 25% or less of the total value of the foreign-made commodity are not subject to the EAR when made to countries other than those listed in Country Group E:1 of Supplement No. 1 to 15 CFR Part 740 (terrorist supporting countries).)
1The interim final rule defined "bundled" to mean software that is reexported together with the item and is configured for the item, but is not necessarily physically integrated into the item. (For instance, printer driver software is generally not incorporated into a printer but is customarily delivered with the printer so that it may be loaded onto the computer to which it will be connected.)
2U.S.-origin controlled content is considered "'incorporated" for de minimis purposes if the U.S.-origin controlled item is: essential to the functioning of the foreign equipment; customarily included in sales of the foreign equipment; and reexported with the foreign produced item. U.S.-origin software may be 'bundled' with foreign produced commodities; see 15 CFR 734.4. For purposes of determining de minimis levels, technology and source code used to design or produce foreign-made commodities or software are not considered to be incorporated into such foreign-made commodities or software.
(See BIS guidance for additional updates, including an updated list of Web forms, etc.)
(See ITT's Online Archives or 10/27/06 news, 06102705, for BP summary of BIS' previously updated reexport guidance.)
BIS' "Guidance on Reexport controls and other Offshore Transactions Involving U.S.-Origin Items" (updated 10/23/08) available at http://www.bis.doc.gov/licensing/reexportguidance.htm