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Export Control Reform: Implementing the Transition

Export Control Reform: Implementing the Transition. Massachusetts Export Center Export Expo December 11, 2012. Kevin J. Kurland Director, Office of Enforcement Analysis. Massachusetts Exports. Total BIS License Applications (2010): 1202 Approved. 9,161 companies exported; 90% were SMEs

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Export Control Reform: Implementing the Transition

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  1. Export Control Reform:Implementing the Transition Massachusetts Export Center Export Expo December 11, 2012 Kevin J. Kurland Director, Office of Enforcement Analysis

  2. Massachusetts Exports Total BIS License Applications (2010): 1202 Approved • 9,161 companies exported; 90% were SMEs • 28% of manufacturing workers depend on exports Bureau of Industry and Security, Export Enforcement

  3. Export Control Reform Initiative • In August 2009, the President directed a broad-based interagency review of the U.S. export control system to build: • “Higher walls…around fewer, more critical items.” • Secretary of Defense Robert M. Gates, April 20, 2010 • The Administration determined that fundamental reform of the current system is necessary to enhance our national security by: • (i) focusing resources on the threats that matter most • (ii) increasing interoperability with our Allies • (iii) strengthening the U.S. defense industrial base by reducing incentives for foreign manufacturers to design out and avoid using U.S. parts and components Bureau of Industry and Security, Export Enforcement

  4. Key Goal Is to Leverage Existing Flexibilities Bureau of Industry and Security, Export Enforcement

  5. Step 1: Focus on Fewer, More Critical Items via Regulatory Reforms Bureau of Industry and Security, Export Enforcement

  6. ECR Prioritization Pyramid: Rebuilding the USML and CCL Establishing a “bright line” between items controlled on the USML and CCL by identifying items in a “positive” manner is the key deliverable of ECR Bureau of Industry and Security, Export Enforcement

  7. Regulatory Impacts: Dual-Use License Exception STA • Two groups of countries: 36 and 8 eligible destinations • Safeguards • First step in tiering the CCL • $41 million in exports impacted to date Top 5 Dual-Use Licensed Exports from Mass. by Destination (2010) STA Eligible

  8. Regulatory Impacts: Dual-Use Encryption • Replaced 30 day technical review period and sales reports for most items eligible for License Exception ENC and mass market products with registration and self-classification report 0Y521 • Creation of Export Control Classification Number (ECCN) 0Y521 (April 13, 2012) • Items that warrant control on the CCL but not identified in an existing ECCN • E.g., emerging technologies • Currently 9 items identified for 0Y521 controls Bureau of Industry and Security, Export Enforcement

  9. Regulatory Impacts: USML Positive List • Identify what items require USML control • Inherent military function; critical military/intelligence advantage • Convert USML into a “positive list” • Establish objective technical parameters rather than design intent to control items on USML • Items not meeting criteria “positive” USML criteria would be transferred to new “600 series” on CCL* and include: • End-items, parts, components, accessories, and attachments * Requires congressional notification

  10. Regulatory Impacts: Anatomy of a New “600 series” ECCN xY6zz Last two characters (i.e. numbers) will generally track the Wassenaar Arrangement CCL Category 0-9 Product Group A-E The “600 series” derives its name from the 3rd character (i.e., number) of the ECCN.

  11. Anatomy of a “600 Series” ECCN (cont’d) • Items controlled • Enumerated end items • Enumerated parts and components • “Specially designed” parts and components (“.x”) • Enumerated insignificant parts and components (“.y”)

  12. USML – Aircraft and Related Articles

  13. USML F-16 Systems/Components/Parts

  14. Commerce “600 Series” Systems/Components/Parts for the F-16

  15. “600 Series” “.y” Parts for F-16 Hydraulics Cockpit gaugesand indicators Fuel lines Tires

  16. Technology ControlsF-16 Example • Technology controls follow the end-item, part, or component: • Technical data and services for aircraft-level design, development, engineering, manufacture, testing, and modification also remain on the USML • Technology required for design, development, and manufacture of F-16 major components, minor components, parts, accessories, and attachments that move to the “600 Series” (e.g., fuselage, wings, tail sections), also moves to Commerce controls

  17. License Requirements for “600 Series” • End items: License required for export or reexport to all countries except Canada • Parts + components: STA for ultimate government end-use • “.y” items: no license required except to China and terrorist supporting countries • ITAR 126.1 countries subject to State Dept. licensing policy

  18. Other Transition Rule Issues • License validity periods • General Order 5 and DDTC grandfather rules • BIS extension to 4 years • Double licensing issues • License exceptions • STA (ultimate gov’t end use), GOV, RPL, TSU, TMP • ITAR 126.1 carve-out • License review standard and consensus • Foreign direct product rule • MDE reporting • AES requirements • No post-departure filing • Special “600 series” filing requirements • ECCN requirement on DCS

  19. Benefits of “600 Series” • Focus controls and compliance (incl. resources) • Security of supply with allies and partners • Avoid design-out • Eliminate MLAs/TAAs • Eliminate registration requirements

  20. Impact Analysis Sample of Munitions Exports from Mass (2010) • BIS processed ~25,000 licenses in 2011 • State processed ~85,000 licenses in 2011 • BIS estimates that approximately 50% of State licenses will contain items moving to the 600 series • Of that 40,000, at least 50% are estimated to be eligible for License Exception STA • Total Mass. munitions exports (2010): $1,071,046,451 Bureau of Industry and Security, Export Enforcement

  21. Step 2: Erecting Higher Walls Bureau of Industry and Security, Export Enforcement

  22. Higher Walls: Enhanced Compliance & Enforcement • Targeted outreach • OEE permanent law enforcement authorities • Focused evaluation of STA • Desk audits • One-time reviews • Daily AES checks to interdict • Enhanced end-use checks • Information Triage Unit (dedicated IC assets) • BIS-DDTC coordination • Export Enforcement Coordination Center • International cooperation

  23. Other ECR Actions • Single form; harmonized definitions • USXports • Consolidated screening list • Follow along on www.export.gov/ecr • 2013+ priorities

  24. ECR Success = • Focus on what is important • Clearer regulations • More harmonized implementation • Enhanced compliance and enforcement • Greater interoperability with allies • More competitive U.S. industrial base …and • Increased U.S. national security! Bureau of Industry and Security, Export Enforcement

  25. Contact Info Presenter: Kevin J. Kurland (kevin.kurland@bis.doc.gov) Director, Office of Enforcement Analysis, BIS Outreach Assistance: Bernie Kritzer (bernard.kritzer@bis.doc.gov) Director, Office of Exporter Services, BIS 600 Series Licensing: Todd Willis (todd.willis@bis.doc.gov) Director, Munition Controls Division, BIS Local BIS Enforcement POC: John McKenna (john.mckenna@bis.doc.gov) Special Agent-in-Charge, OEE Boston Field Office, BIS www.export.gov/ecr Bureau of Industry and Security, Export Enforcement

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