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General Prohibition No. 3: Foreign-Produced Direct Product Rule

 

§ 736.2(b)(3) of the EAR

(A) Foreign-produced direct products of U.S.-origin non-“600 series” and non-9x515 “technology” or “software,” OR produced by a foreign manufacturing plant or major-component of a plant (made from U.S.-origin non-“600 series” and non-9x515 “technology” or “software”) are subject to the EAR and may require a license or license exception for export from abroad if all of the following apply:

(1)   1)   The U.S.-origin “technology” or “software” requires a written assurance as a supporting document for a license as defined in paragraph (o)(3)(i) of Supplement No. 2 to part 748, or as a precondition for use of License Exception TSR in § 740.6 or the EAR (Generally, this means the US technology/software is controlled for NS reasons);

(2)    2)  The foreign-produced direct product is subject to national security (NS) controls as designated in the ECCN on the CCL (Supp. No. 1 to part 774 of the EAR), i.e., NS is listed in the reason for control paragraph of the ECCN; and

(3)   3) The foreign-produced direct product is destined to a destination listed in Country Group D:1, E:1 or E:2 (Supp. No. 1 to part 740 of the EAR).

(B) Foreign-produced direct product is produced from U.S. “600 series” or 9x515 “technology” or “software,” OR produced by a foreign-produced manufacturing plant or major component of a plant (made from U.S.-origin “600 series” or 9x515 “technology” or “software”) are subject to the EAR and may require a license or license exception to export from abroad if all of the following apply:

(1) 1) The foreign-produced direct product of “600 series” or 9x515 U.S.-origin “technology” or “software;”

(2) 2) The foreign-produced direct product is specified in a “600 series” or 9x515 ECCN of the CCL (Supp. No. 1 to part 774 of the EAR); and

(3) 3) Either or both of the following are true:

(a) a) For “600 series” foreign-produced direct products, the destination is listed in Country Group D:1, D:3, D:4, D:5, E:1 or E:2 (Supp. No. 1 to part 740 of the EAR); or

(b) b) For 9x515 foreign-produced direct products, the destination is listed in Country Group D:5, E:1 or E:2 (Supp. No. 1 to part 740 of the EAR).

NOTE 1: “600 series” or 9x515 foreign-produced direct products of U.S.-origin “technology” or “software” subject to GP3 do not require a license for export from abroad to the new destination unless the new destination would have been prohibited or made subject to a license requirement or prohibition by part 742, 744, 746, or 764 of the EAR.

NOTE 2: This guidance does not address items classified as ECCN 0A919. Please see that ECCN entry in the Commerce Control List for guidance.

NOTE 3: As specified in Note to paragraph (a)(1) and (a)(2) of License Exception ENC in § 740.17, all items produced or developed with items exported, reexported, or transferred (in-country) under paragraphs (a)(1) or (a)(2) of § 740.17 are subject to the EAR. These items may require the submission of a classification request before sale, reexport or transfer to non‑“U.S. subsidiaries,” unless otherwise authorized by license or license exception.

(C) Entity List Foreign-Produced Direct Product Rule of August 17, 2020 (see footnote 1 to Supp. No. 4 to part 744 and § 736.2(b)(3)(vi) of the EAR)

Foreign-produced items are subject to the EAR if either of the follow applies:

(a) When it is a direct product of “technology” or “software” that is:

(b) When it is produced by any plant or major component of a plant that is:

 

Clarifying Notes.

  1. A major component of a plant located outside the United States means equipment that is essential to the “production” of an item, including testing equipment.

 

  1. A foreign-produced item includes any foreign-produced wafer whether finished or unfinished.

License Requirement. Foreign-produced direct products that are subject to the EAR based on the criteria in (C) above, require a license or license exception when you have “knowledge” that:

  1. The foreign-produced item will be incorporated into, or will be used in the “production” or “development” of any “part,” “component,” or “equipment” produced, purchased, or ordered by any entity with a footnote 1 designation in the license requirement column of the Entity List (Supplement No. 4 to part 744 of the EAR); or

  1. Any entity with a footnote 1 designation in the license requirement column of the Entity List is a party to any transaction involving the foreign-produced item, e.g., as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end user.”

License Review Policy.