Expect Less Paperwork for Defense Exports to India

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By Dave Sebastian

U.S. exporters starting Aug. 3 may ship an array of defense goods to India without licensing, the Commerce Department said.

India is joining NATO countries and other U.S. allies in a Commerce Department classification that admits countries into export control regimes authorizing exports, re-exports, and in-country transfers for sensitive technology, according to a Federal Register notice scheduled for publication Aug. 3.

U.S. defense companies welcome India’s elevation into the special export status, as it simplifies the licensing and export processes, Benjamin Schwartz, the senior director for defense and aerospace at the U.S.-India Business Council, told Bloomberg Law Aug. 1.

The new status reflects trust that the recipient country has a “robust export control process in place, and that sensitive goods destined for that country will not end up unintentionally diverted to third parties,” Schwartz, a former defense official under the Obama administration, said.

The Federal Register notice came after Commerce Secretary Wilbur Ross announced July 30 that Commerce is granting India special status that eases licensing requirements for exports to the selected countries.

U.S. companies may export high-technology products with dual use in civilian and military sectors without the a license as long as the items are not the U.S.’s prized military or intelligence products, according to Export Administration Regulations.

Products that companies may ship without licenses largely constitute vehicles and engine components, such as wings, parachutes, and aircraft tires, according to the regulations. Items excluded from the license-free status include ready-for-use military products like the F-15 aircraft, missile launchers, and bomb racks—which are among the critical military equipment listed under the U.S. Munitions List.

More Convenient

India’s gaining of defense import perks from the U.S. came with the Commerce Department’s affirmation of the country as a “Major Defense Partner.”

But the move is more of a “technical” development, as more sensitive defense goods would still require export licenses, Kevin Wolf, a former assistant secretary of commerce, told Bloomberg Law Aug. 1.

“It’s a matter of convenience and reduces the amount of time, considerably, that it would take for a U.S. company to ship items that are controlled for exports,” Wolf, a partner in international trade practice at Akin Gump, said. A surge in defense exports to India is also unlikely, Wolf said, as “it will take time for companies, once the rule is published, to adjust to the new compliance requirements.”

The clearer path to exports came amid stronger defense ties between the U.S. and India. The Obama administration had laid the groundwork for closer ties by naming India a “Major Defense Partner” in December 2016. India may also defer imposing more duties on 29 U.S. products for 45 days, Indian newspaper the Business Standard reported. India had proposed retaliating against steel and aluminum tariffs the U.S. had imposed on India in March 2018.

“Problematic trade policies” like the tariff spat between U.S. and India haven’t hindered the Trump administration from moving forward with its defense trade, Michael Kugelman, the senior associate for South Asia at the Wilson Center, told Bloomberg Law Aug. 1.

To contact the reporter on this story: Dave Sebastian at dsebastian@bloomberglaw.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bloomberglaw.com

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