On July 24, 2024, the Commerce Department’s Bureau of Industry and Security (BIS) announced amendments to the U.S. Export Administration Regulations (EAR), expanding the reach of U.S. export jurisdiction over certain foreign-produced items destined to Iran.  BIS’s rulemaking implements the “No Technology for Terror Act,” enacted in April 2024.  That law required the expansion of U.S. export jurisdiction with respect to foreign-made items in an effort to hinder Iran’s ability to procure technology and components for military systems, such as Unmanned Aerial Vehicles (UAVs), which it reportedly supplies to terrorist organizations in the Middle East and to Russia for use against Ukraine.  

Under U.S. export control regulations, foreign-produced items can be subject to U.S. export jurisdiction, without regard to the incorporation of any U.S. origin content, if they are the direct products of certain U.S. software or technology, or equipment subject to U.S. jurisdiction.  BIS’s latest amendments to the EAR further expand U.S. jurisdiction over such items through an enlarged scope of the Iran Foreign Direct Product (FDP) rule.  Now, U.S. jurisdiction will reach any foreign-made item destined to Iran, if it is an EAR99 item identified in Supplement No. 7 to Part 746 of the EAR (i.e., a list of high-priority electronics and other components relevant for building UAVs) or an item specified in categories 3 through 9 of the Commerce Control List (CCL), and if certain production criteria are met.   

Under the Iran FDP, the foreign-made item must be the direct product of technology or software that is U.S. origin and controlled under categories 3 through 9 of the CCL, or it must be produced by a plant or major component of a plant that is itself the direct product of such CCL-controlled software or technology.  Previously, only categories 3 through 5 and 7 of the CCL, covering controls on electronics, computers, telecommunications and information security, and navigation and avionics qualified as triggering software and technology inputs under the Iran FDP rule.  Now, categories 6, 8, and 9 of the CCL have been added, which cover controls on lasers and sensors, marine, and aerospace and propulsion as triggering software and technology inputs.  Categories 0, 1, and 2 of the CCL, which cover various nuclear energy, materials, and industrial process items, remain excluded from the scope of the Iran FDP rule. 

The amendment also expands the scope of the Iran FDP to cover transactions where an exporter has knowledge (1) that the foreign-produced item is destined for Iran or will be used or incorporated in certain controlled items located in or destined in Iran or (2) that the government of Iran is a purchaser, intermediate consignee, ultimate consignee, or end-user.  Knowledge means both actual knowledge that the circumstance exists or is likely to occur and reason to know, such as an awareness of a high probability of its existence or future occurrence.  

EAR99 items are generally excluded from the U.S. export embargo against Iran, aside from those EAR99 items listed in in Supplement No. 7 to Part 746. The Treasury Department’s sanctions have filled in the gap by prohibiting U.S. persons from engaging in most transactions with EAR99 items involving Iran, but those sanctions are limited in their reach to non-U.S. persons. This expansion of the Iran FDP enables U.S. export jurisdiction to reach non-U.S. persons’ activities with respect to these EAR99 items as well as items in categories 3 through 9 of the CCL. As a finetuning of the expanded reach, BIS has now added exemptions to the Iran export embargo for food, medicine, and medical devices designated as EAR99, as well as mass market encryption items that would be eligible for Treasury’s general license authorizing consumer communications activities in Iran. 

With these latest amendments, a wide variety of foreign-made items will now become subject to U.S. export jurisdiction by operation of the Iran FDP.  As with the EAR’s other FDPs, this rule has particularly broad extraterritorial reach over items produced by non-U.S. companies outside of the United States.  Non-U.S. companies that produce goods that are controlled for export to Iran under the EAR (currently those described on the CCL and EAR99 items listed in Supplement No. 7 to Part 746) need to be alert to these amendments and to update internal controls to ensure compliance.