Export License Seekers Encouraged to Share More Consignee Info to Reap Reform Benefits
Applicants for Bureau of Industry and Security export licenses should say whether ultimate consignees will take title to items after shipment, to help maximize effects of reduced processing burdens attributed to export control reform, BIS Deputy Assistant Secretary for Export Administration Matthew Borman said Nov. 1 at the Update 2016 Conference on Export Controls and Policy. BIS processed more than 35,000 license applications in 2015, and the State Department processed 45,000, combining for a total “significantly lower” than before export control reform started in 2010, Borman said. The numbers reflect the “dramatic” movement of items from the U.S. Munitions List (USML) to the Commerce Control List (CCL), as well as license exceptions available for CCL “500 Series” and “600 Series” items, he said.
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In one case, the Commerce Department approved an application seeking approval for shipping remote-operated vehicles to China, but the State and Defense departments denied it. Because of the lack of consensus, the matter escalated to the interagency Operating Committee, a review body consisting of officials from all three departments. The committee issued a licensing decision to deny the application, and BIS in July 2015 issued the applicant an “intent to deny” letter citing concerns with the ultimate consignee. After reviewing the company’s August 2015 rebuttal containing new information -- including on end-user, intended vessel, role of ultimate consignee in the transaction and foreign availability of the product -- the Operating Committee approved the application in September 2015 with the condition that the ultimate consignee not take title to or possession of the remote-operated vehicle, Borman said.
“So this [applicant] could have saved [itself] probably several months, and I don’t know how many hundreds or thousands of dollars in staff time pursuing this, had they put that in the application up front,” Borman said. “And I know it’s not possible for you as the applicants to think of everything we in government might be looking at, but the law is pretty standard: Who are the parties? What are they actually doing in the transaction? And [what is] the likelihood that the item will be used for a legitimate civilian end-use … or a military use?”
Of the more than 35,000 license applications BIS vetted last year, roughly 300 of them rose to the Operating Committee for review, and then about 30 went to the next level of review at the Export Administration Assistant Secretary level, Borman said. It took Borman’s division, on average, about 24 days to reach a decision on those applications. On State Department Directorate of Defense Trade Controls (DDTC) licensing times, the agency averages 28 days to make a decision, DDTC Office of Defense Trade Controls Licensing Director Anthony Dearth said during the conference. On average, DDTC considers about 3,000 license applications "at any given time," he said. Overall, the Defense Department reviewed more dual-use items subject to CCL control in 2015 than items subject to USML control, the first time that has happened in nearly 20 years, DOD Deputy Director for Defense Technology Security Administration Michael Laychak said during the BIS conference.
In addition to information on applications themselves, current events can noticeably impact DDTC's licensing decisions, DDTC Deputy Assistant Secretary Brian Nilsson said during the BIS conference. The State Department stopped a reported planned export of 26,000 rifles to the Philippines, Reuters reported Nov. 1 (here). Neither confirming nor denying the existence of the apparent application, Nilsson said that the office of Senate Foreign Relations Committee Ranking Member Ben Cardin, D-Md., raised concerns to State about the situation. “If you’re watching the news, and you’re seeing what [Philippines] President [Rodrigo] Duterte is saying and doing in the Philippines, I think that’s maybe why the senator is saying what he’s saying. It also gives us reason, carefully, to look at certain license applications, particularly regarding what’s happened in the Philippines,” Nilsson said. “It’s said that he’s killed roughly 2,600 people thus far. And so for those of you that have licenses for certain categories of the USML pending with us, you can expect that flavor with what we’re doing when we’re looking at that.” Cardin's office and DDTC didn't comment.
Office of Foreign Assets Control license applications in the past year have “reflected” what OFAC Acting Director John Smith called the biggest yearlong surge in national security and foreign policy developments directly involving OFAC since 2006, the year he started working at the agency. But it’s tough to draw a direct correlation between the number of license applications and changes such as the implementation of the Joint Comprehensive Plan of Action, the easing of Cuba sanctions and the removal of the national emergency on Myanmar, because OFAC license applications regularly increase year over year, despite any relaxation or tightening of certain regulations, Smith said during the conference. OFAC received 10,000 license applications in 2015, “many for very complex transactions” involving more than one type of product, Smith said.