BIS Officials Cite Export Control Reform's 'Massive Challenge' for Enforcement
Export Control Reform is going to create a “massive challenge” to the Obama administration in how it approaches export enforcement, said Kevin Kurland, Director of the Bureau of Industry and Security’s Office of Enforcement Analysis. Speaking at the Update 2012 Conference on Export Controls and Policy, July 17-19 in Washington, Kurland said ECR will pose challenges for exporters and other agencies such as CBP as well. To respond to these challenges, BIS created an Information Triage Unit, will step up end-use monitoring, and will increase its outreach efforts, he said.
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BIS Creates Info Triage Unit, Steps up End-Use Monitoring to Confront Increased Burden from ECR
In 2011, BIS processed about 25,000 licenses and the State Department processed about 85,000, Kurland said, but BIS estimates that about 50% of State licenses will contain items moving to the 600 series of the Commerce Control List. While about 30% of these licenses are estimated to be eligible for the Strategic Trade Authorization (STA) license exception, the requirements of STA still require more BIS resources than other license exceptions due to certain conditions, he said. BIS did receive more resources on the licensing side, Kurland said, but it needs to be careful with enforcement because of this sharp increase in the licensing burden faced by BIS.
BIS has already taken several steps to implement the transition, Kurland said. First, it has set up an Information Triage Unit in the Office of Enforcement Analysis, comprised of intelligence analysts and supported by the intelligence community, the Defense Department and the Department of Energy. The Information Triage Unit will review and evaluate the bona fides of foreign parties to export transactions to ensure that front companies are not involved and to target for end-use checks (physical verifications of the end-user, ultimate consignee, or intermediate consignee).
Second, BIS is increasing end-use monitoring coverage worldwide to focus on 600 series items. In fiscal year 2011, BIS completed 891 end-use checks in 60 countries, of which 18% found an unfavorable result. This is up from FY 2010’s total of 708 end-use checks, of which 22% were unfavorable, and for FY 2012 BIS is well on its way to over 800 end-use checks and continues to see unfavorable results, said Michael Rufe of the Office of Export Enforcement. End-users with unfavorable results in end-user checks may be put on the BIS Watch List, the Unverified List, or the Entity List, he said. In FY2011, 10% were of the end-user checks were pre-license checks, while 90% were license and non-license post-shipment verifications, said Rufe.
BIS is stepping up cooperation with State on its end-user monitoring program to conserve resources, such that State and BIS end-use monitoring will look at shipments of both CCL and USML items, Rufe said.
CBP and Other Agencies Also Face Challenges; BIS to Conduct Interagency Outreach
The move of tens of thousands of items from the U.S. Munitions List to the Commerce Control List will pose challenges for other agencies too, Kurland said. The move has significant ramifications for customs inspectors, enforcement analysts, intelligence assets, and special agents. “An expectation has built up in the trade community to have one list to turn to,” Kurland said, but “that is going to change.” The traditional division based on whether an item is dual-use or a defense article will cease, he said.
As such, CBP needs to understand the transition, and BIS will be conducting outreach to that effect, Kurland said. Targeting shipments will be a challenge, as Automated Export System filings may involve State or BIS controls on the same items, particularly for “grandfathered” items during the transition period. Such filings may also be under BIS authorizations for munitions items traditionally requiring a State license, such as the STA license exception. Facilitating licit exports will require expanded BIS-CBP cooperation so that such exports aren’t stopped at the border, said Kurland.
Exporters who Find Violations During Transition Should Come Forward with a VSD
The transition will also pose challenges for exporters for many of the same reasons. Kurland cautioned exporters that, should one find a violation during the transition period, he or she should come forward with a Voluntary Self Disclosure.