President Barack Obama delivered a pre-recorded opening address to attendees at the Department of Commerce, Bureau of Industry and Security (BIS) annual Update Conference on Export Controls and Policy. The President’s unprecedented role in the event was to reiterate the Obama Administration’s commitment to broad export control reforms, which include unifying the current trifurcated system for export controls administration, licensing, and enforcement, and consolidating lists of controlled items to a single, three-tiered, “positive” list. According to the president, these reforms will bring “clarity and consistency” to US export controls, and allow the United States to “build higher walls around the export of our most sensitive items while allowing the export of less critical ones under less restrictive conditions.”
While personnel from both Commerce and the State Department have been engaged in initial planning for the Obama Administration’s proposed reforms, Commerce has meanwhile implemented numerous enhancements to controls of dual-use items under the EAR. Most important among these measures are various revisions to the CCL, clarification of the jurisdictional scope of BIS Commodity Classifications and Advisory Opinions, and the overhaul of controls on exports of encryptions items. The following is a brief overview of each of these initiatives.
1. CCL Revisions
In 2010 the CCL has undergone numerous revisions, some to implement controls from multilateral arrangements including the Wassenaar Arrangement, Missile Technology Control Regime (MTCR) and Australia Group. The most notable among these revisions include:
- The addition of Export Control Classification Number (ECCN) 6A981, which controls passive infrasound sensors (capable of detecting sound from 0.01 to 16 Hertz), which can be used to detect natural or man-made infrasound sources such as earthquakes, volcanic eruptions, rocket launches, nuclear explosions or other events. See 75 Fed. Reg. 37742 (June 30, 2010).
- The addition of three new ECCNs to enhance US homeland security and the security of key US allies by controlling certain concealed object detection equipment operating in the frequency range from 30 GHz to 3000 GHz and related software and technology (2A984, 2D984 and 2E984), which are subject to Regional Stability and Anti-Terrorism controls. Commerce amended the EAR to incorporate also a presumption of approval of requests to export concealed object detection equipment to governments or government-approved end-users in certain cooperating countries. See 75 Fed. Reg. 14435 (March 25, 2010).
- The amendment to ECCN 1C117 to add new controls for solid tungsten and tungsten alloy billets for the fabrication of missile components, as agreed to by members of the MTCR at the November 2009 Plenary. Other CCL revisions from the MTCR Plenary include clarification that “production equipment” is within the scope of controls of “production facilities” and the removal of controls of “turbo-compound engines,” which were deemed not to be a missile proliferation concern. See 75 Fed. Reg. 20520 (April 20, 2010).
- To implement Wassenaar Arrangement 2009 Plenary Meeting agreements: the amendment to CCL entries for certain items that are controlled for national security reasons in CCL Categories 1, 2, 3, 4, 5 Part I (telecommunications), 6, 7 and 9, revising reporting requirements for certain Sensitivity List items covered by ECCNs 4D001, 4E001 and 6A003.b.3, and adding, removing and amending certain EAR definitions. See 75 Fed. Reg. 54271 (September 7, 2010).
2. Clarification of the Jurisdictional Scope of BIS Commodity Classifications and Advisory Opinions
BIS has revised Section 748.3 of the EAR to clarify the jurisdictional scope of the agency’s commodity classifications and advisory opinions. While not a sweeping reform, the rulemaking nevertheless includes an important message to those seeking and relying on BIS advice. That is, a BIS commodity classification or other BIS advice cannot be relied on as a US government determination that an item is subject to the EAR.
In its notice announcing the rulemaking, BIS stressed that it does not have authority (as the State Department does) to issue commodity jurisdiction determinations. Accordingly, a commodity classification by BIS only reflects whether the subject item is described in the CCL, not whether the item is or is not subject to the EAR. Before requesting a commodity classification or advisory opinion, parties are advised to first determine that the item is not subject to the exclusive export control jurisdiction of another US government agency. The commodity classification or advice does not serve this purpose. See 75 Fed. Reg. 45052 (August 2, 2010).
3. Encryption Export Controls Overhaul
On June 25, 2010, BIS published in the Federal Register an interim final rule implementing sweeping revisions to the EAR’s encryption export controls. See 75 Fed. Reg. 36482. Cited as the first step in the Obama Administration’s initiative to streamline the regulations governing the export and reexport of encryption items, the reforms deliver on the president’s pledge to relax controls on the least sensitive encryption commodities, software and technology.
The most significant changes under the new encryption rules apply to less sensitive encryption items and most mass-market encryption items. Previously, exporters were required to submit these items to BIS for 30-day technical review on a product-by-product basis before seeking export authorization. The new rules eliminate BIS technical review for encryption items of lesser national security concern. Instead, exporters that register with BIS are permitted to self-classify certain mass-market encryption items and use License Exception ENC, “Encryption Commodities, Software and Technology,” to immediately export certain non-mass-market encryption items without BIS review. The new rules also eliminate burdensome, semi-annual post-export reporting requirements for most items exported under License Exception ENC, requiring registrants instead to file annual reports to BIS that identify the encryption items that the registrant has self-classified.
The new encryption rules include numerous other significant reforms. For example, they expand the scope of License Exception ENC eligibility for encryption technology classified under ECCN 5E002 (except technology for “cryptanalytic items,” “non-standard cryptography” or “open cryptographic interfaces”) to allow exports and reexports under the license exception to nongovernment end-users in countries not listed in country group D:1 or E:1. The rules also remove “ancillary cryptography” items – items that are not used for computing, communications, networking or information security – from CCL Category 5. Finally, in addition to limiting the scope of encryption items subject to encryption review requests, the new rules eliminate the requirement to submit such requests to both BIS and the National Security Agency. Encryption review requests are now submitted only to BIS.