Export Control Reform

The Truth About the Obama Administration’s Export Control Reform

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Over the years, private industry, academia, think tanks, and even the government have come to criticize the U.S. Export Control System as outdated, too complex, and inefficient. Chief among these criticisms where complaints that the regulations are too long, littered with frequent cross-references with requirements for a single transaction often spread across hundreds of pages; and that the State Department takes too long to process license applications and industry “commodity jurisdiction” requests for guidance on whether items are subject to control under the State Department’s International Traffic in Arms Regulations (“ITAR”) or Commerce Department’s Export Administration Regulations (“EAR”).

Responding to several of these criticisms, President George W. Bush issued National Security Presidential Directive 56 (“NSPD-56”) on Defense Trade Reform on January 22, 2008. NSPD-56 directly addressed the State Department’s failure to timely process license applications and commodity jurisdictions requests and required that the State Department complete such reviews within 60 days. However, in implementing the NSPD-56 requirements, the State Department created a variety of license processing exceptions and often does not adhere to the 60-day commodity jurisdiction deadline, resulting in continued agency inefficiencies and delays.

Rather than focusing on timeliness of State Department license processing and the commodity jurisdiction process, President Obama established the Export Control Reform Initiative, more popularly known as “ECR,” which his administration promoted as a large scale and comprehensive rewrite of the ITAR and EAR that would create a fundamentally new system of U.S. export controls.

Under ECR, the Obama Administration promised to merge the ITAR U.S. Munitions List (“USML”) and EAR Commerce Control List (“CCL”) into a single list, to establish a single agency to administer the single list and issue licenses for exports, and to create a single information technology system to serve as a one-stop point of entry for exporters. Industry reasonably expected that these ECR changes would update, simplify, and increase efficiency of the system. This would in turn make the system more robust, industry friendly, and better support U.S. national security objectives.

Over 6 years, the Obama Administration implemented very complex regulatory rewrites, resulting in over a thousand pages of detailed regulatory changes in a flood of federal register notices. Despite all these changes, the Administration failed to achieve a single control list, single agency or single information technology system.

Instead of creating a Single Control List, the Administration kept the Department of State’s United States Munitions List and the Department of Commerce’s Commerce Control List, and added another list, now known as the “Commerce Munitions List.”  The new list is confusing because it uses many puzzling definitions and provides Department of Commerce control over certain military items, which, in many cases, still require Department of State authorization to export.

Instead of a Single Agency, the Administration maintained the existing agency structure and created a new Munitions Division and a new Information Triage Unit inside the Department of Commerce.

Instead of a Single IT System, the Administration spent millions in an unsuccessful attempt to combine existing licensing systems and, in the process, created another IT system to duplicate functions served by existing IT platforms.

The departing Obama Administration claimed ECR was a success. Unfortunately, the hard truth is that ECR vastly increased the complexity of already overly complex regulations. This has significantly increased the compliance burden on industry without the benefits of a single list, single agency, or a single IT system.

What Can You Do About ECR?

Unfortunately, it looks like we’re stuck with the mess created by ECR — at least until the next reform comes along.  So you should read the regulations and try to understand them. The Administration thinks this is easier following the reform. But now, more than ever, reading the regulations just feels like the government driving nails into your head.

You can also attend export controls training. When you do, don’t be afraid to ask questions, especially of any government speakers. That’s what they’re there for.

Reform is also another reason why now, more than ever, exporters should seek help from experienced trade compliance professionals to guide them through the rules.

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*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 October 15, 2016. 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.