Export Control Final Transition Plan Announced
Posted by Clif Burns at 11:25 pm on April 16, 2013
Category: DDTC • Export Reform
Today DDTC released its final transition plan for the first wave of export control reform under which certain items in Category VIII of the USML are transitioned to a new “600 series” of controls in Category 9 of the CCL. Of course, a major concern of exporters has been where to file licenses for the transitioned items between the date of the publication of the rule and its effective date.
This concern was exacerbated by some confusing language in the proposed transition plan released last summer. That was this language:
License applications [for transitioned items] received by DDTC within the 45 days following the final rule’s publication, but before the rule becomes effective, will be adjudicated only when the applicant provides a written statement certifying that the export or temporary import will be completed within 45 days after the effective date of the final rule.
The concern here, of course, was what would happen to licenses for these items that were filed after the 45 days from publication but before the effective date of the rule when, presumably, BIS would be able to issue licenses for the transitioned items. When informal information subsequently suggested that the period between publication and effective date would be 180 days, the concern was magnified: this would create a licensing limbo of 135 days when DDTC would not accept or grant applications and BIS would not grant them.
Under the final version of the transition plan, this problem goes away:
License applications will be accepted by both DDTC and BIS for items moving from the USML to the CCL, but BIS will not issue approved licenses for such items until on or after the applicable effective date.
Licenses for transitioned items granted by DDTC during the 180-day transition period will be valid for two-years unless an earlier expiration date is specified in the license.
How Many Lawyers Does It Take to Export a Lug Nut?*
Posted by Clif Burns at 6:12 pm on March 12, 2013
Category: Arms Export • Export Reform
Michèle Flournoy, a former undersecretary of defense, writes today in the Wall Street Journal in favor of export law reform in an op-ed piece (subscription required) titled “Want to Export an F-16 Fighter Jet?” Probably a better title would have been “Want to Export F-16 Fighter Jet Parts?” since that’s what her whole piece is about.
In her op-ed, she says
Over the past six decades, Washington has developed a system that applies one-size-fits-all bureaucratic requirements to defense exports. The system is plagued by maddeningly lethargic timetables for approving technology transfers. It handles airplane windshield wipers essentially the same way it handles air-to-air missiles. It forces American companies and foreign partner militaries to await separate approvals for every latch, wire and lug nut on an F-16 fighter jet—even though the U.S. government has already approved the export of the whole aircraft.
Although I see what Ms. Flournoy is trying to get at, she hasn’t said it very accurately at all. For starters, not every latch, wire and lug nut on an F-16 requires separate export approvals when shipped separately from an F-16. Parts that are not “specifically designed and modified” for military or civil aircraft don’t require separate export approval. If an item is usable on both civil and military aircraft but is standard and integral equipment covered by a civilian aircraft type certificate it is controlled by Department of Commerce regulations, which means it will not require a license for exports to most destinations. And not to be too picky but Ms. Flournoy’s point also ignores the exemption in section 123.16(b)(2) of the ITAR for exports of low value parts to a previously approved end user.
This is not to say that there is not room for reform in how the U.S. government handles exports of aircraft parts; it’s only to say that not every latch, wire and lug nut requires a license right now.
*One, but the lug nut really has to want to be exported.
Why Mom and Pop Don’t Export
Posted by Clif Burns at 5:50 pm on January 10, 2013
Category: Export Reform
Common wisdom is that for the United States to increase its exports, it needs to increase the number of exporters. And since most current exports are made by the largest companies, the Department of Commerce has argued that we need to increase exports by small and medium companies.
A recent study presented at the World Bank, and reported yesterday by the Washington Post, suggests that this strategy may be doomed to failure. According to the study,
Big companies grow bigger and export because they are already successful; they don’t become successful and large because they export.
Of course, seasoned exporters probably snicker at the concept of encouraging Mom and Pop companies to start exporting given the complexity of export regulations, the overwhelming costs of compliance, and the massive penalties imposed by State, Commerce and Treasury (not to mention criminal prosecutions) on companies that don’t get every last detail right. Part of the reason why exporting is principally a pastime of the big boys is that they are the only ones who can afford to pay the costs and run the risks involved. For those who can’t, better (and safer) to sell your widgets to people in Muncie and Peoria.
Proposed USML Category X Reforms Praised by Jason Voorhees
Posted by Clif Burns at 6:28 pm on June 14, 2012
Category: BIS • DDTC • Export Reform
The Bureau of Industry and Security (“BIS”) and the Directorate of Defense Trade Controls (“DDTC”) have announced proposed reforms to Category X of the United States Munitions List (“USML”). Category X covers protective personnel equipment and shelters.
For those wondering about the title of the post, one aspect of the reforms has nothing to do with Category X. The proposed rules published by BIS indicate that machetes, favorite of many rebel forces and villains in teen slasher flicks, are to be classified as EAR99. Machetes are currently controlled under ECCN 0A988 and require licenses for exports to Iraq, North Korea and Rwanda. One of the advantages of taking machetes off of the Commerce Control List is that it would eliminate the need to figure out the difference between what is considered a machete controlled by the rule as opposed to a really big knife which, presumably, is not.
The thrust of the proposed reforms deals with hard and soft body armor. Currently body armor is controlled based on the level of protection as measured by the NIJ Standard, with types IIIA and below subject to BIS control under ECCN 1A005 and everything above that (Types III and IV) are on the USML in Category X. (A frequent source of confusion is the NIJ standard for Type IIIA is, somewhat counter-intuitively, below, and provides less protection than, Type III). Current controls do not depend upon whether the body armor was specifically designed for military use or not.
Under the proposed rules, soft armor that meets Type III standards or that is “manufactured to military standards” would be moved to the new ECCN 1A613. Hard armor plates meeting Type III standards would also be moved to the new ECCN 1A613. All Type IV armor would remain in Category X of the USML. The new ECCN 1A613 would be subject to NS Column 1 controls which are stricter than the NS Column 2 controls applicable to the body armor covered by ECCN 1A005. Items controlled under NS Column 1 require a license to all destinations other than Canada. The proposed rule would mitigate this restriction somewhat by making items controlled by ECCN 1A613 eligible for license exception STA which permits unlicensed exports, if certain other conditions are met, to a number of countries including most of Europe.
Probably the most significant of the proposed changes is that body armor, other than Type IV armor still on the USML, may now be exported under license exceptions TMP and BAG. This means that body armor may be exported, in checked luggage or separately, for personal use without the requirement for a license. There has been considerable public criticism of the current regime which makes it difficult, if not impossible, for U.S. employees travelling to dangerous destinations to carry protective gear with them.
Export Reform on a Slow Boat to China
Posted by Clif Burns at 6:52 pm on March 14, 2012
Category: Arms Export • China • DDTC • Export Reform
ABOVE: Gregory Schulte
The House Armed Services Committee last week held a hearing on whether the Thales sale of an ITAR-free satellite to the Chinese had, in fact, leaked U.S. space technology to the Chinese. During that hearing, Gregory L. Schulte, deputy assistant defense secretary for space policy, tried to allay concerns by the Committee that export reform would be a boon to the Chinese.
And we are not proposing removing the Tiananmen Square sanctions that would remain in place even with export-control reform, meaning that items still on the Munitions List could not be exported to China. And, also meaning, that we would not allow the launch of satellites from Chinese launch vehicles.
He went on to say that although some space items would, as part of export reform, be moved to the less restrictive Commerce Control List, those would only be “space items that are already widely available.” Even then, according to Schulte, such space items that were moved to the CCL would still be subject to strict controls with respect to licensing exports to China.