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Status Report on
Export Control ReformTony Dearth
Director, Office of Defense Trade Controls Licensing, Bureau of Political Military Affairs, Department of State
1
How Are We Doing?
• Have made great progress in realizing the goals of the President’s ECR initiative– 15 of 21 Munitions List categories updated
– Changes have resulted in a 44% decline in authorization requests
– Exporters and allies taking advantage of more flexible controls administered by DOC to realize urgent acquisition needs
2
Export Control Reform: Fundamentally a national security effort intended to achieve greater regulatory efficiency and rationality while focusing our export controls on the most significant items and destinations
ECR Pillars
• Single Export Enforcement Coordination Agency– Export Enforcement Coordination Center (E2C2) created by
Executive Order 13558 (Nov 9, 2010) under DHS
• Single IT System (USXPORTS)– Single portal delayed – still use D-Trade and SNAP-R
– DDTC implemented July 2013 – DOC/BIS implementation on-going
• Single Control List– 71% implemented by May 2015 (15 of 21 USML Categories)
– Effort to “harmonize lists” on-going – first major rule published May 22
• Single Licensing Agency– To occur during Phase III
3
Recent Rule Activity
• Corrections, Clarifications, and Definitions (final) – published Oct 2014
• Categories VIII & XIX (review) – published March 2015
• Category XII (proposed) – published May 2015
• Exports/Temporary Imports Made to or on Behalf of the Department or Agency of the U.S. Government (proposed) – published May 2015
• Registration and Licensing of U.S. Persons Employed by Foreign Persons, and Other Changes (proposed) – published May 2015
• Revisions to Definitions of Defense Services, Technical Data, and Public Domain (proposed) – published June 2015
• Categories XIV & XVIII (proposed) – estimate: Summer 20154
The Impact: By Category
5
• This drop is even more significant when one considers that unrevised categories experienced an 8% increase during the 2014-2015 period
No. of Authorization Requests
The Impact: Transition Learning Curve
• Trends for revised categories remain consistent– Initial drop in applications accompanied by reciprocal rise
in RWAs– RWAs begin slow, but steady decline toward pre-ECR
levels almost immediately
7
Non-ECR
ECR
• Only 65% of RWAs attributed to ECR-related reasons
ECR: Incorrect sub/category
ECR: CCL identified as USML
ECR: All articles CCL
ECR: Sub-paragraph does not allow for parts
ECR: End-item not appropriate
The Impact: Transition Learning Curve
Conclusion
• Category changes will continue
• The USG is counting on exporters to apply proper controls
• The new enumeration system requires specificity
• ECR is the New Normal. We are in the transition period which is hard but the results will be worth the effort.
– DDTC’s website – www.pmddtc.state.gov (lots of resources).
– Generic Questions: DDTC Response Team, 202-663-1282, [email protected].
– DTC IT Issues: DDTC Help Desk, 202-663-2838, [email protected].
8
15 of 21 Categories Revised
USML Description Status
IV Launch Vehicles/Missiles Rule 3 – Effective 7/1/13
V Explosives/Propellants Rule 3 – Effective 7/1/13
VI Vessels of War Rule 2 - Effective 1/6/14
VII Ground Vehicles Rule 2 - Effective 1/6/14
VIII Aircraft and Related Articles Rule 1 - Effective 10/15/13
IX Training Equipment Rule 3 – Effective 7/1/13
X Personal Protective Equipment
Rule 3 - Effective 7/1/13
XI Electronics Rule 5 –Effective 12/30/14
XIII Miscellaneous Rule 2 - Effective 1/6/14
XV Spacecraft/Satellites Rule 4 – Effective 6/27/14 & 11/10/14
XVI Nuclear Rule 3 – Effective 7/1/13
XVII Classified Articles Rule 1 - Effective 10/15/13
XIX Gas Turbine Engines Rule 1 - Effective 10/15/13
XX Submersible Vessels Rule 2 - Effective 1/6/14
XXI Articles Not Enumerated Rule 1 - Effective 10/15/13
10
The Start of a Good Thing
• In August 2009, President Obama directed U.S. export control system agencies to conduct a broad-based review of export controls to identify additional ways to enhance U.S. national security.
• The NSC and NEC were directed to jointly review the existing controls, structure, and policy and recommend a way forward.
12
The Approved Plan
• In 2010, the President approved a plan that envisions:– A Single Licensing Agency to receive and adjudicate licenses
currently processed by State, Treasury, and Commerce
– A Single Control List, tiered based on sensitivity of the commodity
– A Single IT system for submission, review, and adjudication of licenses
– A Single Export Enforcement Coordination Agency
• To be implemented in 3 phases:– I: Immediate improvements, create the framework
– II: Implement the new framework within existing structures/authorities
– III: Complete transition: Merge and consolidate
13
Control List Updates
• Current control lists have parallel constructs
14
DOS DOC
The Law Arms Export Control Act (AECA) - Section 38
Export Administration Act of 1979*
Governing Regulation
International Traffic in Arms Regulations (ITAR)
Export Administration Regulations (EAR)
Embedded Control List
U.S. Munitions List (USML)
Commerce Control List (CCL)
Major List Component
Category (I – XXI) Export Control Classification Number (ECCN) Series
*Expired in 2001. POTUS extends authority each year via the International Emergency Economic Powers Act and Executive Order