Export Control Reform

DTAG White Paper on ECR

The Department of State Defense Trade Advisory Group (DTAG) Export Control Reform (ECR) Working Group white paper is now available for download at the State Department website. [F/N 1]  

The DTAG is a Federal Advisory Committee Act committee.  Its members are highly qualified representatives of the defense trade industry that serve the Department of State solely in an advisory capacity.  They 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] 

The ECR Working Group white paper contains DTAG observations and recommendations made in response to a State Department tasking to research industry views of ECR, analyze whether there is greater flexibility for exporters resulting from ECR list transfers, and to review and identify potential unintended consequences of the reform. [F/N 3]


The DTAG observed several benefits of the reform:

  • Many industry members were able to avoid the need for Technical Assistance Agreements following the list transfers.
  • EAR license exceptions provide more options than were available under the ITAR.
  • Transfer of export jurisdiction over various military items, mostly parts and components, has “significantly benefitted U.S. defense companies.”

The DTAG further observed the following failures and adverse consequences of the reform:

  • “The ECR objective of establishing a positive list (i.e., a ‘look up table’) for export controlled items has not come to fruition.”
  • Years after the start of reform, the reclassifications of hardware and technical data required by ECR is still problematic for industry and “significant expenditures of time, money, and company resources continue to tax industry in reclassifying products to fully implement ECR.”  This “negates lower unit cost and adversely impacts U.S. industry’s competitive edge in the international marketplace.”
  • “Foreign recipients of U.S. technical data and or hardware continue to experience difficulty in classifying the items they already have in their inventories which in turn increases the level of difficulty for tracking de minimis application. As a result, the see-through rule applicability to ECR appears flawed when dealing with positive control lists.”
  • Despite the reform’s attempt to clarify meanings of terms common to the ITAR and EAR, “[i]n reality, many of the clarification attempts have generated more inconsistencies in interpretations amongst industry themselves as well as with the government licensing authorities.”
  • The most important definition of ECR, “specially designed,” is unclear. “The adage that 10 people given the same pieces of information will yield the same jurisdiction and classification in using specially designed simply is not reality.”
  • “The bright line was never supposed to be a terms or definitions thing—it was supposed to be a list which has not occurred.”
  • “DoD is asking for a large scale reversal of the items moved to the CCL and their return to the USML,” and “is reverting back to the belief that crown jewels equate to any item in the U.S. military inventory.”
  • “Having a part properly classified only to have it seized by Customs under the assessment that the item should have remained on the ITAR and requires a DSP-5 license remains problematic.”
  • As a result of inconsistent interagency acceptance of USML/CCL classifications, “[i]n many cases the independent judgment industry could rely on prior to the change in the regulations no longer remains.”
  • Industry still has difficulty interpreting the scope and requirements of License Exception STA.

 

*   *   *

[1] See DTAG ECR Working Group White Paper (October 28, 2015), Documents and Presentations from October 29, 2015 DTAG Plenary. Available at http://www.pmddtc.state.gov/DTAG/index.html

[2] Defense Trade Advisory Group Charter for 2014, available at http://pmddtc.state.gov/dtag/index.html

[3]  White Paper at p. 1.

___________________

*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 March 18, 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

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