Export Control Reform

DTAG Presentation on ECR Impacts and Consequences

The Department of State Defense Trade Advisory Group (“DTAG”), a Federal Advisory Committee Act committee, held an open session meeting today. Topping the agenda was a DTAG working group presentation on the potential negative impacts and unintended consequences of the President’s Export Control Reform Initiative (“ECR”). [F/N 1]

DTAG members are appointed by the Assistant Secretary of State for Political Military Affairs to provide “regular consultation and coordination with U.S. private sector defense exporters and defense trade specialists on issues involving U.S. laws, policies, and regulations for exports of defense articles, services, and related technical data.” [F/N 2] It serves the Department solely in an advisory capacity.

At the beginning of its presentation, the DTAG alerted attendees that it did not focus on issues that have “already left the station” and that it focused on a specific Department of State tasking.  Despite this narrow focus, negative impacts of ECR identified by the group included:

  • The continuous stream of ECR changes have destabilized industry’s ability to establish consistent compliance programs.
  • Industry has been forced to invest significant time, money, and resources in compliance with the new ECR requirements.

The DTAG stated its belief that these impacts are temporary and recommended that U.S. Government regulators remain sensitive to the effects of the regulatory changes on company compliance programs and on the global competitiveness of U.S. industry.

The DTAG also identified ECR’s negative impact on managing existing authorizations, an apparent disconnect with the Foreign Military Sales program caused by certain item transfers, and problems with the new Strategic Trade Authorization (“STA”) license exception.

New license exception STA forms the core of the administration’s effort to increase interoperability with allies.  As noted in previous DTL Blog posts, STA is also an essential part of the administration’s plan not to seek new country-based exemptions in the ITAR through amendment of the Arms Export Control Act, a plan that has resulted in destabilizing list transfers, new Congressional notification requirements, overlapping licensing jurisdiction, a new EAR “see through” rule, and other complexities. [F/N 3]

Ironically, the DTAG noted that the requirements for use of STA in exports of Commerce Munitions List (i.e., 600 series) items actually interfere with trade between the U.S. and its allies and create duplicative administrative requirements.  To address part of this problem, the group recommended that the departments of State and Commerce create a public database of foreign parties approved for STA use.

A likely result of its narrowed focus, the DTAG presentation did not address many of the other negative impacts and unintended consequences of ECR identified in public comments, seminars, and other sources.  Perhaps the largest of these to date was how, as a result of list transfers, certain shipments that had once required one license from the Department of State would require separate licenses from the departments of State and Commerce because they contain U.S. Munitions List articles accompanied by items transferred to the Commerce Munitions List.  In response to this unintended consequence, the administration amended a 1977 executive order to provide the Department of State with overlapping export licensing jurisdiction for certain mixed shipments of U.S. Munitions List and Commerce Munitions List items. [F/N 4] As with other ECR changes, the correction imposes new requirements on exporters and the need for exporters to review lengthy agency guidance. [F/N 5]

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[F/N 1] Defense Trade Advisory Group; Notice of Open Meeting, 78 Fed. Reg. 71022, November 27, 2013.

[F/N 2] Defense Trade Advisory Group Charter for 2012, available at http://pmddtc.state.gov/dtag/index.html

[F/N 3] See “Status of Single List and Single Agency,” January 10, 2014, available at https://defensetradelaw.com/2014/01/10/status-of-single-list-and-single-agency/ (…”there was an alternative to the present ECR approach if the only true primary, or only truly achievable, ECR goal is to increase interoperability with allies.  Here, a simple amendment to the Arms Export Control Act to allow country-based exemptions outside of bilateral defense trade treaties, such as that offered to the administration by Congress in 2012 would have sufficed. With such an exemption in place, the administration could have still positively enumerated items subject to control on the USML and CCL, transferred commercial communication satellites to the CCL, harmonized differing agency definitions, removed outdated sections, clarified regulatory requirements, consolidated enforcement responsibilities and IT systems, and made other changes to improve the existing framework.”); “Taming the Beast,” November 15, 2014, available at https://defensetradelaw.com/2013/11/15/unleashing-the-beast-and-fulfilling-the-promise-of-ecr/ (“Had the only ECR goal been to increase interoperability with allies, a simple amendment to the Arms Export Control Act to allow country-based exemptions outside of bilateral defense trade treaties would have sufficed. Congress offered the Administration such an amendment in 2012.”).

[F/N 4] Executive Order 11958, “Administration of Arms Export Controls,” January 18, 1977, as amended by Executive Order 13637, “Administration of Reformed Export Controls,” March 8, 2013.

[F/N 5] See e.g., “Paragraph (x),” available at http://pmddtc.state.gov/faqs/ecr.html#h