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Export Control Reform

Export Control Reform Initiatives

U.S. export controls regulate the process by which defense and commercial items, technologies, and related technical data are transferred to foreign customers. Administered by the State Department and the Department of Commerce, theses controls and restrictions were set up for national security purposes. However, when controls become too restrictive and time consuming for U.S suppliers, the process impedes upon a company’s ability to obtain a license for a more commercialized item that is International Traffic in Arms Regulations (ITAR) controlled – or is part of a defense system that is ITAR controlled. This adversely affects the competitiveness of key U.S. manufacturing and technology sectors, and gives customers the option of buying from foreign competitors with fewer restrictions.

 

Export Control Reform (ECR), an initiative of the Obama Administration, seeks to revamp an outdated, complicated, and sluggish export control regime. Aerospace and defense companies rely heavily on the international market for sales. As the restrictive nature of the Budget Control Act (BCA) of 2011 continues to cut into U.S. domestic defense spending, these export reform efforts increase in importance. In many instances, a simple definition modification of an item’s classification reduces the regulatory burden holding a product from being exported. For example, transferring less sensitive commercialized items from the State Department’s U.S. Munitions List (USML) to the Department of Commerce’s more flexible Commerce Control List (CCL) – as a 600 series “dual-use” item – objectively clarifies the end use determination of an item, and reduces hold-ups in the licensing approval process.

 

These reforms also give the Department of Defense authority to provide guidance in assessing the proper licensing avenues for items and technologies, based on their importance to the U.S. military’s technological superiority. In this capacity, the Defense Technology Security Administration (DTSA) coordinates the inter-agency review of changes to the USML and CCL lists, based on an item’s uniqueness and technological advancement. This protects the most vulnerable items from getting into the hands of third parties, while expediting the transfer of less sensitive items for commercial use.

 

By shifting items to the CCL list, the U.S. government can focus on security priorities by directing ITAR controlled resources to the most pressing security threats. This fundamental change in authority for commercial and dual-use controlled items – from ITAR to Export Administration Regulation (EAR) controls – also gives foreign customers the flexibility in obtaining more non-standard products that are mission specific to their commercial or security needs.

 

Export Control Reform Phases

Phase I and Phase II of ECR creates the following reforms:

  • A more “positive” USML list, where defense items are controlled for their sensitivity and appropriate technical use within specific parameters; 
  • A new 600 series list that accommodates items transferred from the USML to the CCL list, a black box of items that are still regulated with ongoing determination if a specific item is either subject to ITAR or EAR provisions without a general “catch-all” provision; 
  • A “specially designed” component that requires determination of whether an item’s end use is ITAR or EAR controlled when determining the authority of its export or re-export license; and 
  • The eligibility for an item (mostly 600 series items) to have a license exception under the Strategic Trade Authorization (STA) to over 36 countries for end use in defense matters.

While Phase I and II of ECR are generally completed, Phase III will see “a single control list, a single licensing agency, unified information technology system, and enforcement coordination center.”

 

As industry adapts to these new regulations, there will be considerable compliance costs in the short term. An organic element of Export Control Reform, however, is the continual streamlining of past and current regulations through open industry-government dialogue and collaboration.

International

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