Archive for the ‘Export Reform’ Category


Feb

11

With All Eyes on Sochi, Russian Ears Are on Ukraine


Posted by at 8:49 pm on February 11, 2014
Category: BISCCLExport ReformSurreptitious Listening Devices

Kremlin.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commonshttp://commons.wikimedia.org/wiki/File%3AVladimir_Putin_at_the_Millennium_Summit_6-8_September_2000-19.jpg

The continuing violence and political instability in Ukraine have raised concerns around the world, especially within the United States and the EU.  Whether some form of sanctions against current officials in the Ukrainian government should be imposed has been debated over the past several weeks, including reports that the Obama administration began preparing financial sanctions against current Ukrainian government officials last month.

Sanctions against Ukrainian officials are, of course, a delicate diplomatic endeavor for EU countries that not only trade extensively with Ukraine but also recognize the effects to EU-Russian relations with any rancor that develops by proxy in former Soviet states.  Such targeted EU or U.S. sanctions, moreover, amount to blocking funds that are unlikely to be found in large amounts in Western banks and a travel ban on individuals who were not likely to travel to the West in the near future in any event.

The telephone conversation posted to YouTube late last week between U.S. Assistant Secretary of State Victoria Nuland and Geoffrey Pyatt, U.S. ambassador to Ukraine, however, exposed just how heated a resolution in Ukraine is becoming between the United States and the EU.  In discussing how officials from the United Nations may assist in reaching a resolution between the current Ukrainian government and opposition leaders, Nuland has now infamously said, “f**k the EU,” presumably an expression of her view that EU involvement thus far to address the situation in Ukraine has been inadequate.  As if that were not enough for diplomatic missteps, it has also been reported that Nuland and Pyatt each used unencrypted cell phones during the conversation.

While the fallout of Nuland’s comments and the Obama Administration’s finger-pointing at Russia for its involvement in hacking the phone call will garner the headlines, the issue also presents an interesting juncture for a shadowy subject of U.S. export controls: surreptitious listening devices.

As we first reported over seven years ago, BIS has not always been sufficiently clear on its standards for classifying surreptitious listening devices that are subject to the EAR’s control under section 742.13.  In Export Control Reform materials presented by BIS last year, BIS articulated five questions to assist exporters in answering the ultimate question, “Is my item subject to the 742.13 Communications Interception policy?”  Those questions, however, don’t help advance the ball much in improving a U.S. exporter’s ability in classifiying surreptitious listening devices short of seeking clarification or a license from BIS.

The United States may never determine what devices were involved in intercepting the Nuland-Pyatt conversation.  Moreover, the “tradecraft,” as Nuland described the interception, may very well continue to develop in ways that outpace any technical specifications that BIS affixes to surreptitious listening devices.  Without further clarity, however, U.S. exporters will still be mostly in the dark about what items require a U.S. export license at the same time that BIS will likely crank up the breadth of its controls over exports of surreptitious listening devices.  But if clarity is a hallmark of Export Control Reform, a little more with respect to surreptitious listening devices would go a long way.

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Nov

7

Naming Names


Posted by at 10:09 pm on November 7, 2013
Category: BISDDTCDeemed ExportsExport Reform

By MediaPhoto.Org (mediaphoto.org Own work) [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARussian_passports.jpgThe Bureau of Industry and Security has released new guidance on deemed re-exports which is intended to deal with issues arising when a U.S. company exports technology to a foreign company that then re-exports that technology to its own employees which are not of the same nationality as the foreign company receiving the technology export. The purpose of the guidance is to address certain issues raised by the current export control reform effort and, specifically, to deal with re-exports of technology relating to the newly created 600 series of items that have been transferred from the United States Munitions List (“USML”) to the Commerce Control List (“CCL”).

As the guidance notes, one of the overarching principles of the export control effort is that military items moved from the USML to the CCL should not thereby be subjected to more stringent controls than were applicable to the item when it was on the USML. Under the International Traffic in Arms Regulations (the “ITAR”) “technical data” is subject to certain license exemptions permitting technical data, in certain cases, to be transferred without license by foreign companies to their employees who are not of the same nationality as the foreign company. These employees include “third country nationals” who are nationals of countries other than the nationality of the foreign company involved and “dual nationals” which are nationals of two countries, one of which may, but does not necessarily include, the nationality of the foreign company.

The first of these exceptions, found in section 124.16 of the ITAR,  allows such retransfer from companies in NATO countries, the EU, Australia, Japan, New Zealand and Switzerland to retransfer technologies to third country nationals who are also from such countries and subject to certain further conditions. And the other exception, found in section 126.18, permits intra-company transfers of technical data from the foreign company to employees without regard to the country restrictions of 124.16 but subject to certain other restrictions such as requiring the third country national employees to sign non-disclosure agreements and requiring the company to assure that the third country national doesn’t have “substantive contacts” with countries subject to arms embargoes under section 126.1 of the ITAR.

Nothing in the Export Administration Regulations (the “EAR”) provides equivalent license exceptions to permit the transfer of technology to nationals of NATO countries, the EU, Australia, Japan, New Zealand, and Switzerland without a license as permitted by section 124.16 of the ITAR. Accordingly, the new guidance indicates that it is the policy of BIS to permit transfers of technology relating to series 600 items without a license if the conditions of 124.16 are fulfilled. Also to the extent that section 126.18 of the ITAR permits transfers to third country nationals outside of the EU, Australia, Japan, New Zealand and Switzerland if they sign an NDA and are screened for contacts with embargoed countries, BIS will permit similar transfers of series 600 technology.

The situation with section 126.18 is more complicated because section 126.18 addresses an issue under the ITAR that is not a problem under the EAR, namely the problem of dual nationals born in countries subject to arms embargoes. Section 126.18 was designed to deal with the thorny problem of dual nationals under DDTC which require that a dual national should be treated as a citizen of both countries. Accordingly a naturalized U.K. citizen born in China would still be treated as Chinese, and thus ineligible to receive ITAR-controlled technical data even if he had been awarded the OBE by the Queen because, in DDTC’s eyes, that dual national was irrevocably and permanently tainted with Chinese blood. Although such discrimination would be illegal if applied by DDTC in the United States, DDTC saw no problem with applying this rule in foreign countries even if it would, as it often did, violate the human rights laws of that foreign country to discriminate against someone solely based on place of birth. Under BIS rules, in contrast,
a person is treated as a citizen of the country of his or her most recent nationality. A naturalized UK citizen would be treated simply as a UK citizen without regard to the fact that he or she was born in China and was once Chinese. Thus, strictly speaking, the BIS guidance does not need to implement those parts of 126.18 as they relate to dual nationals.

There is, however, one problem relating to technology re-exports for series 600 items where the transfer from the USML to the EAR will subject the technology to more stringent requirements and which is not addressed by this guidance. Under DDTC’s application procedures, a U.S. exporter seeking authority for a foreign company to transfer technical data to its third country and dual nationals, the U.S. exporter need only list the nationalities of the employees. In other words, the U.S. exporter says, for example, that the technical data will be exported to French, German and Mexican nationals. Under BIS application guidelines, however, the U.S. exporter must give the names, passport numbers and addresses for each employee that will receive the technology re-export. In addition to that, a resume for each individual, showing education, employment history and military service, must be provided for each employee.

Over and above the obvious burden of compiling this information in the first place, the U.S. exporter will be required to obtain amendments or new authorizations each time the foreign transferee hires new employees in the affected program area. Under DDTC’s rules, an amendment is required only if an employee with a nationality not previously approved is hired. Granted this burden can be minimized to some extent through reliance on section 126.18, but this may not be possible where the foreign employer is either unable or unwilling to comply with all of the conditions required by section 126.18, including screening employees for contacts with embargoed countries, maintaining records of this screening, and fulfilling the other requirements of section 126.18.

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Sep

9

Export Control Reform Roundtable in Dallas


Posted by at 9:06 pm on September 9, 2013
Category: Export Reform

On Wednesday, my colleague Susan Kovarovics will be in our Dallas office conducting a roundtable on export control reform. The roundtable will discuss the current status of export control reform, particularly the transitioning of certain items from the USML to the CCL, and the steps that exporters should begin to take to be prepared for the new rules. Details on the subjects to be covered, the location of our office in Dallas, and how to reserve a place can be found here.

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Jun

6

Export Control Reform Roundtable in Boulder


Posted by at 12:46 pm on June 6, 2013
Category: Export Reform

By Brylie Oxley (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABoulder_Colorado_-_Perl_Street_Mall_-2005-10-14T205944.pngNext Tuesday, June 11, I’ll be in Boulder leading a round-table discussion on export control reform. And the best part: it’s free. So, if you’re in the area, please feel free to come and join in.

The format for the discussion will be pretty open, so if people who are attending want to talk about other export issues or have other questions, we can talk about that too.

Details on time, location and how to RSVP are here.

I hope to see you there.

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Apr

23

Arms Treaty Foe Cites Export Reform As Reason for Opposition


Posted by at 1:26 pm on April 23, 2013
Category: Arms ExportExport Reform

Baker Spring http://www.youtube.com/watch?v=kY9ZTCu2wWc (Fair Use)
ABOVE:Baker Spring

I don’t know who Baker Spring is, other than some flak for a Washington think tank, but he has, for some reason, decided to join Iran, North Korea and Syria in opposing the U.N. Arms Trade Treaty. According to Baker, the treaty will interfere with the export control reform process:

There are many reasons to dislike the ATT, but one of them … it [sic] that it urges signatories to regulate a wide range of arms exports just as the U.S. reform process is trying to build higher walls around fewer items.

For instance, the new rules on aircraft and turbine engines transfer these items from the strict and inflexible Munitions List, maintained by the Department of State, to the more flexible Commodity Control List, maintained by the Department of Commerce. …

The review process has been meticulous, involving the Departments of Defense, State, and Commerce; the White House; Capitol Hill; industry; allied governments; think tanks; and other interested parties. The specialists in the Administration who have worked in this complex area of federal regulation deserve to be commended for achieving this major milestone in the reform effort. Their work should not be frustrated by uncertainties created by the ATT.

Let’s leave aside for the moment the silliness of this argument given that the White House, which is spearheading export reform, also supports the Arms Trade Treaty. The United States did, after all vote for it. (As did everyone else in the world but North Korea, Syria, and Iran.) If the White House thought that the treaty would gum up export control reform, it’s doubtful it would have supported the treaty.

The bigger problem with Baker Spring’s argument is that he apparently has not read the treaty that he is criticizing or, at least, he does not understand it. The treaty simply requires adherents to impose export controls on the items listed in Article 2, which the United States already does and which it will continue to do whether the item is on the USML or the CCL.

Baker Spring also has not read, or, at least he does not understand, the export control reform proposals that were just adopted. Certainly if he did, he wouldn’t have come up with this whopper quoted above:

For instance, the new rules on aircraft and turbine engines transfer these items from the strict and inflexible Munitions List … to the more flexible Commodity Control List …

Er, no, aircraft and turbine engines are not being transferred to the CCL. Some are and some aren’t. Article 2 of the ATT covers “combat aircraft” and it is safe to say that all those aircraft remain on the USML. As to turbine engines, they are not even covered by the Arms Trade Treaty at all. Article 4 covers “parts and components” such as aircraft engines but only “where the export is in a form that provides the capability to assemble the conventional arms covered under Article 2,” in other words, only when the entire aircraft or other article is exported in the form of disassembled parts and components. An export of a turbine engine by itself obviously fails to meet that criterion.

Somehow I suspect that Baker Spring’s objections to the Arms Trade Treaty are the result of considerations other than the flimsy excuses he proffered in the article at hand.

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