Export control reform initiatives will continue in 2011, although which significant changes ultimately will be implemented in the short term remains to be seen. In the last month of 2010, several important proposed rules were issued. These steps indicate the direction of the more concrete reforms.
One Love…One List…Let’s get together and…
Three of these proposed rules relate to the initiative to create a single, positive control list. Both the US Department of Commerce and the US Department of State issued advance notices of proposed rulemaking seeking comments on how best to achieve this goal, and outlining the guidelines and criteria the agencies have been following in their review to date. The goals of this undertaking are to:
- eliminate (or reduce) confusion as to jurisdiction over an item;
- create a “positive” list with very specific technical parameters for each item, as opposed to a focus on original design intent (more of an issue for the US Munitions List than the Commerce Control List); and
- ultimately create one control list divided into three tiers, administered by one agency.
In connection with the two advance notices of proposed rulemaking, the State Department also issued a proposed rule revising Category VII (Tanks and Military Vehicles) to demonstrate the application of the new control criteria. Comments on each of these rules are due in early February, and it will likely take several months for the agencies to review the comments and determine the path forward.
License Exception STA (SKA you say…no, sorry, done with the Jamaican music, it’s STA)
Also in December, the Commerce Department issued a proposed rule introducing the Strategic Trade Authorization (STA) license exception. This license exception will be tiered into three categories:
- One will allow certain items controlled on the Commerce Control List to be exported to 37 designated countries under the license exception
- Another will allow exports to two additional destinations
- A third will authorize the least sensitive items destined for some 125 listed destinations, provided the item is for a civil end-use
A number of Export Control Classification Numbers (ECCNs) will be excluded from eligibility for this license exception. Comments on this rule are also due in early February, so it will be several months or longer before this rule is implemented. Depending on the ultimate text and scope of ECCNs covered; however, it could be a very useful license exception.
And One Export Enforcement Coordination Center
By Executive Order 13558, issued on November 9, 2010, President Obama established an interagency Export Enforcement Coordination Center (EECC) to be placed within the US Department of Homeland Security (DHS). The EECC’s job will be to coordinate export enforcement efforts between the agencies, not to replace the enforcement staff within the agencies. It will likely take several additional months to determine the precise staffing and makeup of the new EECC so we will all need to stay tuned.
The State Department is expected to publish soon its long-awaited new rule on the treatment of dual nationals under the International Traffic in Arms Regulations (ITAR). Also anticipated this year is the State Department’s so-called new “see-through” rule, which many expect will assist those with commercial items that incorporate an item subject to the jurisdiction of the ITAR. The new rules relating to brokering under the ITAR have also been pending for some time. Although it is possible those rules will be published this year as well, it appears they have been placed on the back-burner for the time being.
While numerous export control reform initiatives have been publicized recently, several key “behind the scene” issues also are noteworthy. One is the current effort to move all the agencies involved in export licensing to a single IT system. This is currently ongoing, but if the implementation does not go smoothly, it could result in delays and glitches in license processing. Additionally, like the rest of the federal government, the agencies charged with administrating the export control system are facing budgetary and staffing constraints. Hiring freezes, furloughs, and inadequate budgets in the coming year could have a negative impact on license processing times and other authorization requests critical to the exporting community. All indications, however, are that export enforcement is continuing at pace with ever-higher penalties being imposed now that the $250,000 / violation civil penalty level has been phased into the settlements.