Export Control Reform

The Single IT Platform Blues


Administration officials claim that complex changes being made as part of the President’s Export Control Reform (“ECR”) Initiative are necessary prerequisites to establishing a single export control list and single export licensing agency. ECR promises to support these “singularities” with a single export agency information technology (“IT”) platform. However, more than five years since the start of the reform, these “singularities” are far from sight.

No deadline is set for establishment of a single export control list and the ECR Task Force advised that the Obama Administration has no plans to introduce legislation it says is necessary to establish a single export-licensing agency.

For the single IT platform, the Administration promised to consolidate export agency licensing, commodity jurisdiction, and commodity classification processes within USXPORTS — the Department of Defense’s IT platform for processing export license applications submitted to the Departments of State and Commerce. The Administration recently claimed significant progress toward this goal. However, according to a recently released Office of the Inspector General (“OIG”) report, migration to USXPORTS has been largely unsuccessful and associated costs now exceed $25 million dollars. [F/N 1]

Worsening the situation, changes to existing IT platforms have adversely impacted the ability of agency personnel to process commodity jurisdiction requests. There are also indications that the Administration may be abandoning its plan for USXPORTS to function as a single IT platform.

Major Setbacks, Delays, and Costs

The troubled history of the ECR Task Force’s attempt to migrate Department of Commerce and State IT platforms to USXPORTS dates back several years to shortly after the Department of Defense announced the effort in 2011 under the “U.S. Export Systems (USXPORTS) Automation Initiative.” [F/N 2]   This project received $30 million dollars in funding with a scheduled completion date in 2013.

Schedule slippages and procurement issues were noted during the first month of the project. [F/N 3]

Nevertheless, in early public statements, the Administration claimed USXPORTS would be operational at Commerce, State, and the Department of Homeland Security by late-2012. [F/N 4] This goal was not met.

More recently, the Administration announced that the Department of State DTrade license-processing platform has migrated to USXPORTS, [F/N 5] and that the Department of Commerce has made significant progress in converting interagency aspects of its ECASS export-licensing platform to USXPORTS. [F/N 6]

However, according to the OIG report, reoccurring development and programming problems caused extended delays and nearly half of the project milestones remain incomplete. The report also indicated that more than $3 million was spent on project milestones that are now suspended, and, as a result of repeated delays, over $5 million in additional unexpected costs will be incurred in FY 2014 to maintain ECASS.  These costs are in addition to approximately $18 million incurred in USXPORTS migration attempts and other associated costs since October 2012.

The Department of Commerce continues to operate ECASS to process EAR license requests, which thus far appears largely unaffected by the IT platform changes.  However, on June 3, 2014, the Department of State alerted industry that IT changes were impacting the Commodity Jurisdiction process and that, although commodity jurisdiction requests are being accepted for processing, submitters should expect delays. [F/N 7]

A Second Single IT Platform to the Rescue?

As it turns out, the Task Force determined that USXPORTS will only incorporate license processing and referrals. So it created the Commerce USXPORTS Export Support System (“CUESS”) to serve as another IT platform to provide support for staffing and adjudication of commodity jurisdiction and commodity classification requests. CUESS could possibly be used to process licenses, but this capability is reportedly dependent on resolution of the open issues with USXPORTS. [F/N 8]

According to the OIG report, certain CUESS functions are now operational.  This may mean that an end to the IT obstacles impacting the commodity jurisdiction process is in sight. However, publicly available information on key deliverables for the CUESS project report that many key project deliverables are incomplete and/or suspended. [F/N 9]

As of August 21, 2014, the Department of Commerce lists various aspects of the CUESS project at a moderate- to high-risk in terms of the investment’s ability to accomplish its goals. [F/N 10]

Uncertain Future of Migration to USXPORTS

The OIG maintains a hotline to report waste, abuse, or mismanagement in Department of Commerce programs. Thus far, there has been at least one whistleblower hotline complaint about the migration to USXPORTS.  In a memorandum written in response to the complaint, the OIG expressed concerns about inadequate performance in executing migration to USXPORTS and in compliance with certain Office of Management and Budget requirements. [F/N 11]

Despite the OIG memorandum, and more than five years since the start of ECR, the Task Force was unable to provide the OIG with an expected completion date for migration to USXPORTS.  In addition, statements contained in the OIG Report indicate that the Administration may now be abandoning its plans to use USXPORTS as a single IT platform. [F/N 12]  If the Administration does continue attempts to integrate ECASS and other agency platforms into USXPORTS, this will likely require additional expenditures above the $30 million already provided for the project.

According to a Task Force representative, the OIG Report fails to emphasize the delays and extra expenses caused by continuing resolutions, sequestration, and the government shut-down. The representative further noted, “It is neither quick nor cheap to shut down an IT contractor and then try to start it all up again.”  However, another U.S. Government source documents that repeated project delays and increased costs in attempts to migrate to USXPORTS existed well before the 2013 sequestration went into effect. [F/N 13]

*     *     *

[F/N 1] “BIS’ Implementation of Export Control Reform Requires Several Improvements to Address Challenges,” Final Report No. OIG-14-028-A, U.S. Department of Commerce Office of the Inspector General, pp. 9-11, September 4, 2014 (the “OIG Report”), available at http://www.oig.doc.gov/Pages/BIS-Implementation-of-Export-Control-Reform-Requires-Several-Improvements-to-Address-Challenges.aspx

[F/N 2] See “U.S. Export Systems (USXPORTS) Automation Initiative,” Department of Defense, January 16, 2011, available at http://www.defense.gov/news/jan2001/d20010116exportfacts.html

[F/N 3] See “BIS Commerce USXPORTS Exporter Support System (CUESS),” FY2015 Edition IT Dashboard Y2015 Edition, available at https://itdashboard.gov/investment/evaluation-history/1080

[F/N 4] “Update on U.S. Export Control Reform & DoD’s Technology Security Foreign Disclosure Reform,” delivered by J. Hursch at COMDEF 2012 conference, September 5, 2012, at Slide no. 4 (“Expect full operational capability with all agencies by late-2012 (Departments of Commerce, State, Treasury, Energy, Intelligence Community, Homeland Security, NASA”); Remarks of Under Secretary Eric L. Hirschhorn Update 2012 Conference, July 17, 2012 (“We anticipate that sometime this fall, Commerce will have initial operating capability on the Department of Defense’s USXports I.T. platform.”); see also more current White House indication that BIS will begin using USXPORTS in early 2014 (“…the Department of Commerce is scheduled to begin using USXports in early 2014.”), available at http://www.whitehouse.gov/the-press-office/2013/10/15/fact-sheet-announcing-revised-us-export-control-system

[F/N 5] “Panel Remarks to the U.S. Department of Commerce Bureau of Industry and Security Update Conference,” Beth M. McCormick, Deputy Assistant Secretary, Bureau of Political-Military Affairs, July 24, 2013, Washington, DC (“I am pleased to report that last week, a major milestone was reached when DDTC transitioned from DTRADE2 to the Department of Defense’s secure export licensing database – called “USXports,” which will help to make the export licensing review process a more seamless one.”), available at http://www.state.gov/t/pm/rls/rm/2013/212545.htm

[F/N 6] Remarks of Under Secretary Eric L. Hirschhorn Update 2014 Conference, July 29, 2014 (“We have made significant progress but more work remains to be done. In the past year, working closely with the Department of Defense, BIS has made significant progress in converting the interagency aspects of its export licensing from our thirty year-old ECASS I.T. system to the Department of Defense’s USXPORTS system.”).

[F/N 7] See “New Items and Announcements,” available at http://pmddtc.state.gov/index.html

[F/N 8] OIG Report at p. 10 (“The capability to process licenses could not be implemented until USXPORTS end-to-end testing was completed (which has since happened) and any issues were resolved.”).

[F/N 9] See “BIS Commerce USXPORTS Exporter Support System (CUESS),” FY2015 Edition IT Dashboard Y2015 Edition, available at https://itdashboard.gov/investment/project-summary/1080?order=data_controller_column_17&sort=desc

[F/N 10] See “BIS Commerce USXPORTS Exporter Support System (CUESS),” IT Dashboard Y2015 Edition, available at https://itdashboard.gov/print/investment/project-summary/1080?order=data_controller_column_6&sort=asc

[F/N 11] OIG Report at p. 11.

[F/N 12] OIG Report at p. 10 (“If delays in migrating to USXPORTS continue into FY 2015 as a result of problems uncovered by end-to-end testing that need resolving, BIS informed us that it would not spend additional funds on USXPORTS—but would continue operating ECASS at a cost of $1.3 million per quarter.”).

[F/N 13] See “BIS Commerce USXPORTS Exporter Support System (CUESS),” FY2015 Edition IT Dashboard Y2015 Edition, available at https://itdashboard.gov/investment/evaluation-history/1080


*The above is not intended as an exhaustive list of restrictions that may apply to a particular transaction nor advice for a specific transaction because the specifics of an individual case may implicate application of other U.S. laws as well as foreign laws that carry added or different requirements.  In addition, U.S. export control and sanctions laws are frequently subject to change.  Such changes can affect the continued validity of the information above, which is based on U.S. law existing as of September 14, 2014. For these reasons, assistance from a qualified attorney competent to advise on such matters is highly recommended.

Matthew A. Goldstein is an International Trade Attorney in Washington D.C. licensed to practice in the District of Columbia.  He can be reached at (202) 550-0040 and Matthew@GoldsteinPLLC.com.

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