A senior U.S. Commerce Department official told a group of exporters attending a conference in Washington Tuesday that while recent reforms to the country’s export control regulations should make it easier for them to market their goods to companies in countries friendly to the United States, it doesn’t mean they should soften on their compliance commitments.
“There is no free lunch, however, and [export control reform] increases your compliance responsibilities,” warned Eric L. Hirschhorn, undersecretary for industry and security, in a speech at the BIS Update.
“A more nuanced export control system means a more complex system,” he added. “We could have a simpler system that maintains controls on virtually everything. But the price for removing some license requirements is greater nuance and greater reliance upon exporters to see to compliance.”
Hirschhorn, who was sworn into his position at the Bureau of Industry and Security in 2010, said successful export compliance programs should include:
- Internal coordination of export control reform planning ranging from the training of staff, reclassifying products and revamping your IT compliance tools.
- Communication, such as training one’s supplier base, customers and overseas subsidiaries about the changes brought by the reform.
- Engaging in early collaboration with the U.S. government to address complex cases or instances of rules violations.
BIS provides a range of outreach services to exporters, such as seminars, online interactive tools, weekly teleconferences and one-on-one exporter counseling.
“As we continue to implement ECR (Export Control Reform), we will offer training materials, conduct webinars, and undertake related actions, including the possibility of conducting joint outreach to your foreign partners,” Hirschhorn said. “It is imperative, though, that you play an important role in educating your employees, suppliers and customer base.”
He said BIS will focus its education heavily on small- and mid-sized firms, adding that many of the items transferring from the State Department’s U.S. Munitions List (USML) to the Commerce Department’s Commerce Control List (CCL) are manufactured by small businesses.
Hirschhorn further outlined the government’s progress on the reform since 2010, namely the shift of items once considered military-sensitive under the USML to the CCL.
“We made these changes because Commerce's regulations allow for country-based license exceptions as well as distinctions based on the technical parameters of an item. This is important because the EAR (Export Administration Regulations) enable the government to ‘right-size’ controls on less sensitive military items, such as parts and components for a military vehicle, that are destined for our country's allies and other multilateral control partners,” he explained.
Commerce and State have published final rules covering controls on 15 categories of the CCL and USML. Commerce also published in April 2013 a transition rule describing how items previously controlled by the International Traffic In Arms Regulations (ITAR) are dealt with under the EAR.
In January 2013, President Obama signed legislation restoring his authority to determine the appropriate export controls for satellites and related items. The May 2014 Commerce and State final satellite rules will transfer many items to the CCL, including commercial communications and lower performing remote sensing satellites, ground control systems, and radiation-hardened microelectronics formerly controlled in Category XV of the ITAR. The radiation-hardened microelectronics portions of the rules took effect June 27. The rest of the rules will take effect Nov. 10.
Also, on July 1, Commerce and State rules added to the CCL certain military electronics equipment and related articles formerly controlled by USML Category XI, plus certain cryogenic and superconductive equipment that have been controlled by "catch-all" provisions of the ITAR. The addition of software and technology for certain wing-folding systems to Commerce Export Control Classification Numbers took effect on the date of publication. The other provisions of Commerce rule will be effective on Dec. 30, Hirschhorn said.
Hirscchorn said the result of these list reviews, including the satellite and electronics rules, provide exporters with a number of benefits, including:
- Vastly improved interoperability with U.S. allies.
- Availability of 25 percent de minimis treatment to non-embargoed destinations, which is in line with former Defense Secretary Robert Gates' instruction to reduce incentives for non-U.S. companies to design out or avoid U.S.-origin content and services.
- Eligibility for various license exceptions, notably License Exceptions STA (Strategic Trade Authorization), certain government end users, and replacement parts.
- Elimination, in many cases, of the requirement for Manufacturing License Arrangements and Technical Assistance Agreements — though BIS will continue to control releases of technology through simpler authorizations.
- Ability to apply for a license before a purchase order has been received.
- Elimination of registration requirements.
- End of defense service controls, though again, BIS will continue to control releases of technology in other, simpler ways.
- Elimination of brokering constraints for less sensitive military items, though BIS still controls the transfer of the items themselves.
- No registration or licensing fees.
“Many satellite and electronics items that have been transferred to Commerce will be eligible for License Exception STA, which permits the export of certain items to 36 allied and friendly countries. STA, in effect, established a license-free zone to cover the first transaction, while creating new safeguards to ensure that items are not diverted outside the designated country group and the designated end users within that group,” Hirschhorn said.
However, Hirschhorn said more work at BIS remains to be done. For example, during the past year, BIS has worked closely with the Defense Department to start converting the inter-agency aspects of its export licensing from Commerce’s 30-year-old ECASS IT system to the Defense Department's USXPORTS system. As part of the export control reform initiative, President Obama directed all U.S. government agencies involved in export licensing join USXPORTS.
“We have started the important late stage of this effort known as end-to-end testing, and I'm hopeful that all work will be completed within the next few months,” Hirschhorn said.