Export Controls for Superalloys Committee

Winter 2015-2016

As in the year prior, there were no significant changes to those U.S. export controls most germane to the superalloys industry in 2015. The year did, however, see a substantial shift in U.S. policy toward Cuba, the only country still restricted under the Trading with the Enemy Act. This update begins with that development.

Cuba Sanctions

At the end of 2014, President Obama announced his intention to begin easing sanctions on Castro-controlled Cuba. While only Congress can officially end the embargo, the Executive Branch’s enforcement authority gives it considerable leverage in dictating how the ban is implemented. Acting through the Treasury and Commerce Departments, the President used that leverage to significantly expand the range of activities that U.S. persons can engage in with respect to Cuba. While the general rule remains that all transactions involving that country are prohibited, new exceptions provide considerable opportunities to lay groundwork for future endeavors.

Two of these exceptions will be of particular interest to superalloys producers.

The first is new travel authorizations provided under Office of Foreign Assets Control (OFAC) general licenses. Among twelve new licenses, two authorize travel to Cuba to conduct professional research and participate in professional meetings and conferences. Both require that the activities involved be related to the traveler’s profession, professional background, or area of expertise. Both also prohibit excessive free time and recreational travel.

The second notable exception comes under the Export Administration Regulations (EAR) in the form of License Exception Support for the Cuban People (SCP). As the name suggests, the exception allows parties to export and reexport certain subject items to Cuba for purposes of supporting grassroots activity in the country, as opposed to projects undertaken by the Cuban government. The items must either be controlled for anti-terrorism (AT) only, or must be designated as EAR99. They must also fall into one of three categories, which include tools, equipment, supplies, and instruments for use by private sector entrepreneurs. Qualifying for License Exception TSR opens up a range of additional license and sanctions exceptions, up to and including authorization to establish a physical presence on the island.

The trend toward reestablishing full diplomatic and commercial ties with Cuba is obviously subject to fickle political will, and the next presidential election may well bring it to a screeching halt. Still, there is much for superalloys producers to be optimistic about should the movement continue, particularly from an import perspective given Cuba’s vast nickel deposits. This Committee will continue to monitor the situation closely and report information as it becomes available.

Russia Sanctions

In 2014, Russia invaded the Crimea region of Ukraine, prompting OFAC to place a number Russian and Crimean actors on its list of Specially Designated Nationals (SDNs), or parties with whom U.S. persons cannot do business. The agency also placed broad prohibitions on U.S. persons investing in, or participating in transactions involving, Crimea.

OFAC then published four directives taking aim at select Russian industry sectors. The first three of these limited whether and how U.S. persons are allowed to deal in the debt or equity of designated parties involved in the Russian defense, energy, and financial sectors. “Debt” is defined broadly, and includes credit extensions in sales transactions.

The fourth OFAC directive prohibits U.S. persons from providing goods, non-financial services, or technology to anyone if (1) the items are to be used in frontier activities that have the potential to produce oil in Russia, and (2) the activities involve specified parties and entities that those parties own 50% or more of.

The Commerce Department’s Bureau of Industry and Security (BIS) mirrored OFAC’s fourth directive in the EAR by implementing a requirement that anyone dealing in subject items must obtain BIS approval before providing them to designated parties for use in frontier activities. The designated parties are named on the agency’s Entity List.

Another EAR provision requires one to obtain a BIS license before shipping specified subject items to anyone if one knows, or is unable to determine whether, the items will be used in Russian frontier activities. Some of the specified items are delineated in specified Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL). Others are listed by Harmonized Tariff Schedule (HTS) code in Supplement No. 2 to Part 746 of the EAR. Oil well tubing made of stainless steel and other alloys, for example, are among the items listed in the supplement. One must therefore obtain a BIS license before exporting such tubing to Russia if one cannot reasonably rule out that it will be used in restricted frontier activities.

A third EAR restriction requires one to obtain a license before exporting specified subject items to Russia for use in “military end-uses” or by “military end-users.” The specified items are listed in Supplement No. 2 to Part 744 of the EAR, and includes aircraft controlled under ECCN 9A991.

As suggested in prior guidance, superalloy industry members would do well to: (1) stay abreast of changing sanctioned party designations and restrictions, (2) thoroughly vet all customers and end-users for ties to sanctioned parties, and (3) obtain reasonably detailed end-use statements for sales to Russia to determine whether frontier or military applications are involved.

Export Control Reform

Export Control Reform (ECR) has done little to affect how unfinished alloy products are controlled under the EAR and the International Traffic in Arms Regulations (ITAR). An array of alloys and other metals of all chemical compositions and forms are still controlled under the CCL’s Category 1. Examples of controlled items include:

Over 40 different subcategories of aluminides and nickel, niobium, titanium, and aluminum alloys (ECCNs 1C002 and 1C202)

Certain magnetic metals (1C003)

Certain uranium titanium alloys or tungsten alloys with a matrix based on iron, nickel, or copper (1C004)

Alloy production equipment and tooling remains controlled under ECCN category 1B, as does a variety of upstream production equipment (pumps, presses, valves, etc.) under CCL Category 2. This equipment is often more tightly controlled than the finished products it can create. The same is true of related technology in ECCN categories 1E and 2E, under the notion that knowing how to make an item and having the equipment needed to do it are more dangerous than simply possessing finished items.

This last point bears emphasis. Managing EAR-controlled technology and ITAR-controlled technical data is one of the most challenging – and one of the most important – aspects of export compliance. Technology and technical data can take many forms and come from a variety of sources. Customers routinely send vendors item drawings, technical specifications, and other data for use in order fulfillment. Sometimes the data are marked as controlled for export, sometimes not. Risks of inadvertent unauthorized deemed exports – unlicensed data exports to non-U.S. persons physically located in the U.S. – abound. Identifying, tracking, and limiting access to controlled data are therefore critical steps in the compliance process. This is particularly true as items continue to transition from one control regime to another under ECR. Technology and technical data control concerns can easily be overlooked in the shuffle.

As that shuffle continues, a number of the finished products that alloy materials might be used to make have shifted from ITAR to EAR control. Certain military aircrafts, for example, are now controlled under new ECCN 9A610. That ECCN is controlled for several reasons, including national security, making items controlled under it almost as tightly restricted for export as their counterparts on the United States Munitions List (USML). This is true of many 600-series ECCNs, which include both commodities and technology. Still, there are advantages to EAR control that make even broad BIS licensing requirements preferable to being subject to the ITAR, such as certain license exceptions that would otherwise be unavailable.

It is worth noting here that, under ITAR provision 22 C.F.R. § 121.10, “forgings, castings, and other unfinished products . . . that have reached a stage in manufacturing where they are clearly identifiable . . . as defense articles” are subject to the ITAR. Whether an item is “clearly identifiable” depends on a number of factors, including its mechanical properties, material composition, geometry, or function. Exporters of both finished and semi-finished products should therefore review their existing export control product classifications to see if they still apply in the wake of ECR.


This brief outline of recent events is in no way intended to be a substitute for tailored advice and a proper export compliance system. For the sake of brevity and broad applicability, its scope is necessarily narrow and shallow. For advice specific to your business, please contact Kelley Drye & Warren’s Larry Lasoff or Michael Dobson at (202) 342-8530 (llasoff@kelleydrye.com) or (202) 342-8517 (mdobson@kelleydrye.com).

This memorandum does not contain legal advice. Rather, it provides a summary of some, but not all, key aspects of the regulations relating to special metals product controls. Every company should consult experienced export counsel regarding rules applicable to its products and technologies. Kelley Drye & Warren LLP, would be pleased to provide initial or detailed advice regarding any export control matter.