ECR to Ramp Up Exports, but no Industry Assessment Mechanism in Place, Says Commerce Official
The Commerce Department Bureau of Industry and Security (BIS) has almost gotten through the licensing backlog caused by the federal government shutdown, said Deputy Assistant Secretary of Commerce for Export Administration Matthew Borman on Oct. 25, speaking at an event hosted by Washington Foreign Law Society. The interagency effort to process applications remained underway during parts of the shutdown and BIS largely polished off the outstanding applications following resolution of the shutdown. “So our folks have said, contrary to what we thought, we don’t really [see] a big bulge that we’re trying to work through,” said Borman. “People think they’re pretty much up to where they would be otherwise.”
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Borman spoke ten days after the first set of USML commodities transferred to the Commerce Control List (CCL), as part of the Export Control Reform (ECR), on Oct. 15 (see 13101618). The Oct. 15 rule transferred U.S. Munitions List Categories VIII (Aircraft), XIX (Gas Turbine Engines), XVII (Classified Articles and Technical Data), and XXI (Miscellaneous Articles), as well as a revision to the “specially designed” rule.
Commerce expects many exporters to take advantage of the transition, notably through the Strategic Trade Authorization license exception, but the Commerce Department has yet to determine precisely how it will gauge industry impact, said Borman. “What I anticipate we will do, once these are all in final form and have been implemented for some time, is figure out different mechanism to go to companies and industry to help us assess what the impact has been,” said Borman. “We haven’t yet decided whether that’s just through technical advisory committee or a Federal Register notice.” The interagency process remains on track to transfer USML Categories VI (Vessels of War and Special Naval Equipment), VII (Tanks and Military Vehicles), XIII (Auxiliary Military Equipment), and XX (Submersibles) on Jan. 6. The State Department and Commerce Department will publish concurrent final rules to revamp Category XV (Spacecraft Systems and Associated Equipment) in the coming weeks, said Borman. The USML Category XI (Military Electronics) is next on the docket for final rule publication in ensuing weeks, followed by Categories XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) and XIV (Toxicological Agents and Equipment and Radiological Equipment), said Borman, adding that Commerce doesn't yet have a firm timeline for publication of the transfers of categoriesXII and XIV.
The USML revamp creates a new “600 series” component to the CCL. The items transferred remain controlled, although not nearly to the degree of USML restrictions, said Borman. “There are some restrictions on the use of license exception for the “600 series.” Of course, you can only use the license exceptions in the EAR that are specifically authorized for the '600 series.' For the D-5 countries, there is limited use of license exceptions,” said Borman. “It’s set in stone as of right now. Going forward, if people make a good case that there should be some change, we can always consider that. We’re not looking at any additional changes right now.” The following license exceptions are immediately available for the “600 series” transferred items, according to Joiner Burton, International Trade Law (see 13101711):
- LVS (shipments of limited value)
- TMP (temporary imports, exports, and re-exports)
- RPL (servicing and replacement of parts and equipment)
- TSU (technology and software unrestricted)
- GOV (governments, international organizations, international inspections under the Chemical Weapons Convention, and the international space station)
- STA (strategic trade authorization) is available for 600 series items
The State Department Directorate of Defense Controls (DDTC), the agency that oversees USML licenses, processed over 85,000 licenses in 2012, largely to 36 allied countries. Needless licensing requirements represent significant wasted resources, said Borman. “An enormous number of those were exactly those kinds of transactions, spare parts, replacement parts for military end items the U.S. government hadalready approved and sold to our allies,” said Borman. “In the Commerce system, as long as that “600 series” item is going to ultimate use by a government of the 36, it can go under the license exception.”
There remain other restrictions for countries the U.S. imposes prohibitions on defense article export, known as D:5 countries. Those countries include Belarus, Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela (here). The U.S. also maintains arms embargoes on Myanmar, Sudan and China. The transition does, however, provide certain flexibilities for de minimis options, said Borman. “If you’ve a “600 series” item in a foreign made product and that foreign made product is going to the D:5 countries, there’s zero de minimis,” said Borman. “For any other destination, it’s the Commerce 25 percent de minimis. So that is a very significant change. Because, again under the State system, with the see-through rule, basically any foreign made item with a USML component needs a State reexport license.”