May

21

House Committee Passes Export Reform Proposal


Posted by at 8:08 pm on May 21, 2009
Category: Arms ExportCriminal PenaltiesExport Control Proposals

Howard Berman
ABOVE: Howard Berman
Chair, House Foreign Affairs


Yesterday, the House Committee on Foreign Affairs approved legislation that would, among other things, amend parts of the Arms Export Control Act (“AECA”). The Bill, H.R. 2410, is titled the ‘‘Foreign Relations Authorization Act, Fiscal Years 2010 and 2011’’ and was sponsored by Rep. Howard Berman, chair of the committee.

Like many of its predecessors, the bill would set processing time goals for licenses and commodity jurisdiction requests, each to be no more than 60 days. And commodity jurisdiction determinations would be required to be posted by the Directorate of Defense Trade Controls (“DDTC”) on its website. The processing times are just “goals” so, even if the legislation passes, I wont be holding my breath waiting for CJ requests to blast out the door in 60 days. But I think we can all give some polite golf claps, and maybe even a louder hooray or two, to the requirement that CJs be posted on the website.

Section 826 of the bill permits the President to remove “satellites and related components” from the United States Munitions List, but it is poorly drafted and has a confusing China exception which reads:

(b) Exception- The authority of subsection (a) may not be exercised with respect to any satellite or related component that may, directly or indirectly, be transferred to, or launched into outer space by, the People’s Republic of China.

Come again? Does this mean that satellites and parts that might be transferred to China stay on the USML and, like all other items, require a license to all destinations? Or does it mean that DDTC can decide that the satellite-related items in Category XV can be exported to every destination but China without a license? And where does the Bureau of Industry and Security (“BIS”) fit into this? Can it require BIS licenses for satellites and parts removed from the USML? Your guess is as good as mine.

A third provision of interest in the proposed legislation might be referred to as the Full Prisons Act. Section 831 increases the maximum criminal penalty from 10 years imprisonment to 20 years imprisonment. For whatever reason, Congress seems unable to enact any reform with increasing prison sentences, even though this appears to be an effort to conform the criminal penalties under the AECA to the increased penalties provide under the International Emergency Economic Powers Enhancement Act (“IEEPEA”) for violations of other export laws. Look for life imprisonment to be a penalty for false AES entries in the not-so-distant future.

Section 831 also attempts to conform civil penalties under the AECA to those enacted under IEEPEA by providing for a penalty equal to the greater of $250,000 per violation or twice the value of the export involved. But Representative Berman’s legislation doesn’t quite manage to get this right either. First, it fails to amend section 38(e), 22 U.S.C. § 2778(e) of the Arms Export Control Act which sets the maximum civil penalty at $500,000. Does this mean that a transaction valued at $1 million, and thus eligible for a $2 million penalty under the amended 38(c), is limited to a penalty of $500,000?

Worse the language of the bill, unlike the language in IEEPEA, makes the penalty payable “upon conviction.” Does that mean that the civil penalty is only available after a criminal conviction? Again, this is probably a drafting oversight, but with all the newly unemployed lawyers in town, can’t the committee hire somebody to clean up its bills?

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Copyright © 2009 Clif Burns. All Rights Reserved.
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4 Comments:


Kind of reminds me of the sausage-making process that resulted in IEEPA. Roger Majak, who was the staff director of what was then HCFA trade subcommittee and who is the nicest guy but not a lawyer, drafted IEEPA based on the presumption that TWEA 5(b) was the primary authority for all embargo rules, which was a true assumption for asset snatching and financial transactions controls, but not for trade controls: Trade is defined in TWEA section 2, and trade controls were authorized under section 3. Under standard rules of construction the fact that trade is specifically the subject of Section 3 means that it is excluded from section 5(b), so when Congress passed IEEPA it really only authorized foreign asset and financial transaction controls. Certainly, the Senate Report doesn’t mention trade controls. Furthermore, the EAA was the subject of the third chapter of the same statute that contained IEEPA, so no one can claim that the drafters were ignorant of the existence of EAA. So reliance on IEEPA for statutory authority for trade controls is meretricious at best.

Given the negative impact of the trade deficit on GDP, its about time Congress gave serious attention to exporting. The time for amateur hour when drafting export control statutes is over.

Comment by Hillbilly on May 22nd, 2009 @ 10:37 am

IEEPEA also arguably changed the scienter requirement for criminal prosecutions from willfully violating IEEPA to willfully committing an unlawful act. That brings it closer to the way DoJ has been drafting indictments and arguing in recent criminal cases, i.e., instead of tracking the words of the statute, DoJ has been crafting the indictments as willfully exporting without a license, which they know most juries and certain judges will interpret as simply (1) willfully exporting and (2) not having a license, instead of willfully violating some very complex regulations. Most jurors go into the court with the misconception that you have to have a license for all exports or at least for exporting and once some AUSA proves that the defendant knew it was exporting something to some “foreigner”, juries are ready to hang the defendant themselves. Amending the AECA to mirror IEEPEA will increase juror confusion and let DoJ rack up a higher body count.

The folks at the Trade Ministry in Beijing are no doubt very pleased.

Comment by Hillbilly on May 22nd, 2009 @ 1:44 pm

Regarding the satellite provision, I read it as limiting the power of the President.

Section 826(a) of the bill permits the President to remove satellites from the USML (1) consistent with the procedures of Section 38(f) of the Arms Export Control Act, and (2) consistent with Section 826(b)(China) and (d) (90 days notice). But under Section 38(f) of the AECA the President is already empowered to remove items from the USML; thus the bill only adds the China restriction and the 90 days notice restriction to that power!

Am I missing something?

Comment by Josh on May 25th, 2009 @ 7:13 am

I also read the satellite provision as limiting the power of the President to remove satellites and associated equipment from the USML unless the removal results in the items being classified in an ECCN that does not allow export to China.

(Thus only partially undoing the FY99 National Defense Authorization Act requirement that all satellites and associated equipment, including commercial and research satellites, be ITAR-controlled.)

Comment by JH on May 26th, 2009 @ 9:37 am