U.S. Increases Export Restrictions against Nicaragua

The U.S. Department of Commerce amended the Export Administration Regulations (EAR), effective March 15, 2024, to move Nicaragua from Country Group B to Country Group D, and added it to the list of countries subject to the military end use and military end user restrictions. Additionally, the State Department’s Directorate of Defense Trade Controls (DDTC) amended the International Traffic in Arms Regulations (ITAR) to add Nicaragua to the list of countries for which it is U.S. policy to deny licenses or other approvals for exports of defense articles and defense services. This will restrict EAR license exceptions and ITAR exemptions that may have previously authorized certain exports, reexports, and transfers of controlled items to Nicaragua and will place limitations on what technology and technical data can be released to Nicaraguan nationals in the United States.

Background
This decision comes as a result of concerns over Nicaragua’s erosion of democratic institutions, assaults on civil society, and heightened collaboration with Russia, particularly in support of Russia’s invasion of Ukraine. This accompanies other actions by the U.S. government intended to provide support for the Nicaraguan people, including a decision by the U.S. Department of State to restrict visas to more than 100 Nicaraguan municipal officers on February 16 and the Office of Foreign Assets Control’s sanctioning of Nicaragua’s Attorney General on March 21.

Export Administration Regulations Revisions
The U.S. Commerce Department’s Bureau of Industry and Security (BIS) amended the EAR to (i) move Nicaragua from Country Group B to Country Group D:1, (ii) add Nicaragua to Country Group D:5, consistent with its status as an arms embargo country (discussed below), and (iii) add Nicaragua to the list of countries subject to the military end use and military end user restrictions in EAR § 744.21.

As a result of Nicaragua’s removal from Country Group B, exporters will no longer be able to use License Exceptions GBS (Shipments to Country Group B) and LVS (Shipments of Limited Value) for exports, reexports, or transfers to Nicaragua. Similarly, License Exception ACE (Authorized Cybersecurity Exports) will generally not be available for exports, reexports, or transfers to Nicaragua, with limited carveouts.

Additionally, since Nicaragua is now in Country Group D:1, all national security (NS) controlled items will generally require a license to be exported, reexports, or transferred to Nicaragua. Notably, this means License Exception TSR (Technology and Software under Restriction) will no longer be available, and licenses will generally be required to release NS-controlled technology to Nicaraguan citizens in the United States.

Finally, the rule added Nicaragua to the countries that are subject to the military end use and military end user restrictions in EAR § 744.21. Accordingly, a license is required for the export, reexport, or transfer of any item subject to the EAR listed in Supplement No. 2 to EAR § 744 to Nicaragua if there is knowledge that such item is intended, entirely or in part, for a military end use or military end user.

ITAR Arms Embargo Impact
Nicaragua was also added to the list of countries subject to an arms embargo pursuant to ITAR § 126.1 in paragraph (p). Accordingly, it is now U.S. policy to deny applications to export, reexport, or temporarily import defense articles or provide defense services to Nicaragua. There is an exception for non-lethal military equipment intended solely for humanitarian assistance, including natural disaster relief, which will be reviewed on a case-by-case basis.

Importantly, license exemptions under the ITAR will generally not be available now that Nicaragua is included in the list of arms embargo countries, including exemptions authorizing certain deemed exports to Nicaraguan nationals (including dual U.S.-Nicaragua citizens). A release of ITAR technical data inside the United States to a foreign person is a deemed export and generally requires authorization.

Exemptions commonly relied on for deemed exports that will no longer be available to Nicaraguan nationals include the university research exemption in ITAR § 125.4(b)(10) authorizing certain disclosures of unclassified technical data in the U.S. by U.S. institutions of higher learning to foreign person employees, and the exemption in ITAR § 125.4(b)(3) authorizing the release of certain technical data, including classified information, in furtherance of a contract with a U.S. Government agency. Furthermore, the exemption in ITAR § 125.4(b)(9) authorizing U.S. persons to carry ITAR technical data, subject to certain restrictions, on their laptop or other device while on temporary assignment or traveling abroad would not apply to travel to Nicaragua.

Companies that have touchpoints to Nicaragua or Nicaraguan nationals should review their compliance programs to ensure they account for these updates.