Export Control Reform
Export Control Reform
October 15, 2013
Export Control Reform: First Final Rules Go Into Effect
The most significant changes to the U.S. export control system in decades become effective today: the first sets of regulatory changes that redefine how the U.S. Government protects sensitive technologies by regulating and enforcing exports of U.S.-origin defense products and services, a major milestone in the President’s Export Control Reform Initiative.
These new rules define the revised list of items regulated for export under the U.S. Munitions List’s (USML) Category VIII – Aircraft and Associated Equipment, and Category XIX – Gas Turbine Engines, and a new corresponding Commerce Control List (CCL) munitions series, will focus the U.S. Government’s export control resources on the most sensitive items, facilitate interoperability with U.S. allies and partners, and will strengthen the U.S. defense and aerospace industrial base, which is responsible for more than $20 billion in annual exports.
Based on technical and policy reviews started led by the Departments of State, Defense, and Commerce, and also including representatives from other departments and agencies, these reforms were developed in close consultation with the private sector and Congress with extensive public review and comment. 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.
The next sets of revised categories, involving military vehicles, vessels, submarines, and auxiliary military equipment will become effective on January 6, 2014. Work continues on the remaining categories and they will similarly be notified to Congress and published over the coming months.
Updating U.S. export control lists is a key component of the President’s Export Control Reform, Initiative which has brought together experts from across the U.S. Government to overhaul the Cold War-era system of regulations on exports of controlled technologies to better meet emerging U.S. national security challenges and foreign policy objectives.
Visit export.gov/ecr/ for more information on the President’s Export Control Reform Initiative, Additional information is available on Export Control Reform page of the Department’s Directorate of Defense Trade Controls website.
In August 2009, President Obama issued a comprehensive review on Export Control Reform.
The Administration said that, “Although the United States has one of the most robust export control systems in the world, it is rooted in the Cold War era and must be updated to address the threats we face today and the changing economic and technological landscape.
The assessment was conducted by an interagency task force created at the direction of the President and included all departments and agencies with roles in export controls. The assessment found that the current U.S. export control system does not sufficiently reduce national security risk based on the fact that its structure is overly complicated, contains too many redundancies, and tries to protect too much.
The current system is based on two different control lists administered by two different departments, three different primary licensing agencies (none of whom sees the others licenses), a multitude of enforcement agencies with overlapping and duplicative authorities, and a number of separate information technology systems (none of which are accessible to or easily compatible with the other), or agencies with no IT system at all that issues licenses. The fragmented system, combined with the extensive list of controlled items which resulted in almost 130,000 licenses last year, dilutes our ability to adequately control and protect those key items and technologies that must be protected for our national security. The goal of the reform effort is “to build high walls around a smaller yard” by focusing our enforcement efforts on our “crown jewels.”
The Administration has determined that fundamental reform of the U.S. export control system is needed in each of its four component areas, with transformation to a:
- Single Control List,
- Single Primary Enforcement Coordination Agency,
- Single Information Technology (IT) System, and
- Single Licensing Agency.
Per the US Chamber of Commerce, the main thrust of the reform effort has been to move toward a single list of items subject to export controls — effectively combining the Commerce Department’s dual use list, which covers high-technology products, and the State Department’s munitions list.
In July 2011, the administration launched the Strategic Trade Authorization license exception that allows essentially license-free exports of thousands of high-technology products to 44 of America’s closest allies. Under this “exception,” U.S. companies will be able to export without a license an array of high-technology products as long as the purchaser is informed and agrees to keep the product in the controlled destination.
This new license exception would potentially eliminate some 3,000 of the 22,000 licenses the department issued last year, which affected an estimated $1.4 billion in exports. Items that are likely to see the biggest benefits will be electronic components, cameras for search and rescue efforts for fire departments, components for civil aviation navigation systems for commercial aircraft, airport scanners, and toxins for vaccine research.
As of July 2011, the US Commerce Department is receiving comment on a extensive new rule that will move a significant number of items from the State Department’s munitions list to Commerce’s revised (and less stringent) commodity control list. The proposed rule also establishes a new method for moving products from the munitions list to the commodity control list.
The goal of reforming export controls is to strengthen U.S. national security by prohibiting foreign sales of sensitive technologies while simplifying or eliminating controls where they serve no real security purpose.
A January 2010 study by the Milken Institute and the National Association of Manufacturers found that “modernizing U.S. export controls could increase exports in high-value areas. By 2019, these policy adjustments could enhance real GDP by $64.2 billion (0.4 percent), create 160,000 manufacturing jobs, and heighten total employment by 340,000.”
The stakes are high: America’s high-tech and defense industries generate $350 billion in exports, a sum representing nearly one-third of U.S. merchandise exports. These industries constitute a remarkable competitive strength for the U.S. economy and support approximately 3.5 million well-paying high technology jobs across the United States. As the study cited above shows, the current export control system needlessly undermines their ability to generate jobs and innovative growth.
In November 2011 at the APEC Conference in Honolulu, President Obama said,” the goal of reform is to clear away impediments for exports of items that do not have military implications or dated technology in order to focus on truly sensitive items.”
The President’s Export Council met in November 2011 and recommended that the administration devote high-level attention to completing the next phase of it export control reform initiative.
The Administration is engaged with Congress regarding proposed reforms. To deploy a new system, the Administration has prepared a comprehensive, three-phase approach and is currently moving forward to make specific reforms which can be initiated immediately and implemented without legislation. A single export control list administered by a single agency under a single set of regulations would require congressional action, which may not be likely in 2012.
The Administration will engage with Congress to consult and seek its input on the proposed reforms. To deploy the new system, the Administration has prepared a comprehensive, three-phase approach and is currently moving forward to make specific reforms which can be initiated immediately and implemented without legislation. The approach will make the necessary changes to the current system to transition it to the revised, enhanced system in Phase III:
- Phase I makes significant and immediate improvements to the existing system and establishes the framework necessary to create the new system, including making preparations for any legislative proposals. This phase includes implementing specific reform actions already in process and initiating review of new ones.
- Control List – refine, understand, and harmonize definitions to end jurisdiction confusion between the two lists; establishes new independent control criteria to be used to screen items for control into new tiered control list structure.
- Licensing – implement regulatory-based improvements to streamline licensing processes and standardize policy and processes to increase efficiencies.
- Enforcement – synchronize and de-conflict enforcement by creation of an Enforcement Fusion Center.
- IT – determine enterprise-wide needs and begin the process to reduce confusion by creating a single U.S. Government (USG) point of entry for exporters.
- Phase II results in a fundamentally new U.S. export control system based on the current structure later this year. This phase completes deployment of specific Phase I reforms and initiates new actions contingent upon completion of Phase I items. Congressional notification will be required to remove munitions list controls or transfer items from the munitions list to the dual-use list, and additional funding will be required both for enhanced enforcement and the IT infrastructure.
- Control List – restructure the two lists into identical tiered structures, apply criteria, remove unilateral controls as appropriate, and submit proposals multilaterally to add or remove controls.
- Licensing – complete transition to mirrored control list system and fully implement licensing harmonization to allow export authorizations within each control tier to achieve a significant license requirement reduction which is compatible with national security equities.
- Enforcement – expand outreach and compliance.
- IT – transition toward a single electronic licensing system.
- Phase III completes the transition to the new U.S. export control system. Legislation would be required for this phase:
- Control List – merge the two lists into a single list, and implement systematic process to keep current.
- Licensing – implement single licensing agency.
- Enforcement – consolidate certain enforcement activities into a Primary Enforcement Coordination Agency.
- IT – implement a single, enterprise-wide IT system (both licensing and enforcement).
*White House Fact Sheet : Export Control Reform – April 20, 2010
- President’s Export Control Reform Initiative
- Reforming Export Controls Could Boost Sales by $64 billion, Create 340,000 Jobs,
– Myron Brilliant, US Chamber of Commerce, January 27, 2010
The Coalition for Security and Competitiveness (CSC) released the following statement:
“The CSC welcomes the President’s reiteration of his commitment to export control reform. Our system has not been significantly changed in over twenty years and is badly out of date. Updating the system will enhance our security by allowing the government to focus its resources on enforcement against illicit exports of the most critical goods and technologies. At the same time it will enhance U.S. companies’ competitiveness by providing a clearer and more efficient licensing system.
“We particularly appreciate the President’s announcements today on encryption and dual nationals. If implemented as announced, both changes meet the twin goals of enhancing our security and our competitiveness. The President’s remarks were an important step in the right direction. We look forward to the rollout of the comprehensive reform plan in the coming weeks and reviewing the new regulations that will explain in greater detail the changes he announced.”
CSC members include the Aerospace Industries Association, the Association of American Exporters and Importers, the AMT – Association for Manufacturing Technology, The Business Roundtable, the Coalition for Employment Through Exports, the General Aviation Manufacturers Association, the Industrial Fastener Institute, the Information Technology Industry Council, the National Association of Manufacturers, the National Defense Industrial Association, the National Foreign Trade Council, the Satellite Industry Association, the Space Enterprise Council, The Space Foundation, TechAmerica and the U.S. Chamber of Commerce.