Jan 10, 2014

The President’s Export Control Reform

As many of you may know, the President launched his Export Control Reform (ECR) Initiative back in August 2009. It’s only been five years, but what the heck – we are now finally seeing some action! The initiative is underway via a three phase implementation plan. Phases I and II are aimed at fixing export control issues within the current framework by Executive and Regulatory action. The third phase would require legislation (always an iffy proposition in the current political climate) to consummate a mass reorganization of the current Government export control process and systems. The overall goal is to make exporting easier for industry while simultaneously enhancing the Government’s ability to assess compliance. You may be asking yourself, “Why is any reform needed at all?”

Here are a few reasons why this New Year’s Resolution is necessary:

  • Export Control is designed to protect the technology that is important to U.S. national security, i.e., munitions and commercial items that may have military application like night vision goggles, or the semiconductors in your smartphones;
  • U.S. Export Control policy directly affects other areas of U.S. international trade policy and dealings with sanctioned countries, e.g., Cuba and North Korea; and
  • Our current Export Control system has not been comprehensively overhauled since its inception as a result of the concerns raised by the Cold War.

A recent blurb from an October 15, 2013 article from the State Department, Office of the Spokesperson highlighted some of the recent regulatory changes:

“Export Control Reform will move less sensitive items that no longer merit controls under the USML, such as certain parts and components, to the CCL, to allow for more flexible licensing authorizations to allies and partners while increasing the number of enforcement officials available to safeguard against illicit attempts to procure   sensitive defense technologies.” http://www.state.gov/r/pa/prs/ps/2013/10/215428.htm

Although a few final rules have been issued since late November, I’m only going to talk about the most pertinent rule and why its implementation should encourage industry. Click here if you want to see all the recent rules.

 

My last blog explained what commodity jurisdiction is and why it is important. In short, it determines which agency has the authority to grant or deny your license application. Getting this right the first time is really important because licenses can take forever to get approved even when you send them to the right agency for review.

 

The most recent Bureau of Industry and Security (BIS) Final Rule, 79 F.R. 264, actually does something to HELP companies figure out whether the Department of Commerce or State Department has commodity jurisdiction over their products! Don’t be fooled into thinking that this is just some meaningless rule. On the contrary, it is a clear example of what the President’s ECR intends to do, i.e., simplify an already overly burdensome process.

  • First, it releases products that the President has determined to no longer warrant control under the United States Munitions List (USML).  This will save significant time and money for companies that previously had to obtain licenses to export these items.
  • Second, it clarifies some jurisdictional issues regarding whether the USML, Wassenaar Arrangement Munitions List (WAML), or Commerce Control List (CCL) governs. Once again, saving time and money for those companies trying to figure out which List applies to their products.
  • Finally, it takes care of some housekeeping regarding administration issues surrounding the Export Control Classification Number (ECCN) for several items already subject to export control. Although this is only a clarification, it is a good faith effort to cut down on industry confusion that otherwise wastes industry resources.

We should all recognize that the revisions in this final rule are being issued pursuant to part of the Department of Commerce’s “retrospective regulatory review plan” under Executive Order (EO) 13563. The main goal of EO 13563 is to review and improve regulations as an effort to make them more practical, effective and streamlined. Upon review of the first wave of Final Rules, the Department of Commerce and State look to be moving in the right direction.

 

The President’s ECR Initiative rang in 2014 with seemingly small yet meaningful regulations but stay tuned as plenty more changes are certainly on their way.

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