BIS Reviews Progress of U.S. Export Controls Reform at the C5 European Forum

On February 7, 2011, Daniel O. Hill, Deputy Under Secretary for Industry and Security, spoke at the C5 European Forum on Export Controls in Brussels, Belgium, commenting on the U.S. export controls system reform. 

Mr. Hill emphasized the need to reform the U.S. export controls to keep pace with geopolitical changes and innovations in industries: 

Our current system operates under two different control lists with distinctly different approaches to identifying and controlling products. The Department of State administers the Munitions List, which generally includes items specifically designed for military applications, a concept as opaque as it is outdated. And the Commerce Department administers the Commerce Control List, or CCL, which is a far more specific list of mostly "dual use items" - that is commercial items that could have military applications - items like truck parts, electronic components and even computers. 

There are three primary U.S. licensing agencies - each with different procedures and different information technology systems - and scores of different regulatory definitions. It would be hard for anyone to argue that this existing system is maximizing our security or is a model of efficiency. 

The Munitions List was created during the Cold War.  Most of the items used by the military were developed by, or solely for the military.  But times have changed.  The commercial sector alone now develops nearly two-thirds of the technologies our military uses. 

For exporters and companies with production lines spread across the globe, time they could be spending creating innovative, game-changing products to sell in different countries is instead spent navigating a confusing and time-consuming export control bureaucracy. 

An equally disturbing phenomenon is that U.S. companies are sometimes being "engineered out" of collaborative foreign projects due to U.S. export control requirements. We have heard of examples of sales contracts including provisions that explicitly bar the use of U.S.-manufactured articles because companies don't want to have to deal with our export control system.
America puts our exporters in an untenable position when we forbid or delay them from selling a widely available item to an overseas market even when comparable foreign items face no similar restrictions from their home country." 

Mr. Hill also spoke of improving the export controls regime by reforming the United States Munitions List (USML), changing the export controls structure, and establishing a licensing policy that ensures an appropriate agency review. 

As for the USML, the "goal is to create one list that will include every item or technology that requires control; have one agency that will administer these controls; have one enforcement coordination agency that handles every investigation of criminal violations; and run everything using one IT platform." The Department of Defense and the Department of State are working on harmonizing the way the USML and the Commerce Control List (CCL) control items, software and technology. USML is being converted into a positive list of controls. Mr. Hill also stated that a three-tiered licensing system is being created that will apply in the same manner to items on both the USML and the CCL. 

When the two control lists are updated, the plan is to implement common criteria for classifying items on both lists. This will be achieved by dividing each of the two lists into a three-tiered structure, which will distinguish between the most sensitive items available only in the U.S., items in the middle tier that provide a substantial military or intelligence advantage, and items in the lowest tier reserved for items that provide a significant military or intelligence advantage and which are more broadly availably. 

These tiers are expected to improve the U.S. national security and competitiveness by permitting the government to adjust controls in a timely manner over a product's life cycle. 

A corresponding licensing policy will be implemented to ensure appropriate agency review. Top tier items will generally require a license for all destinations, many of the items in the middle tier will be eligible to be exported to allies and most multilateral partners under a license exception or general authorization, and licenses for the lowest tier items not considered proliferation concerns will typically not be required. 

In the final phase of export controls reform, U.S. government plans to merge the USML and the CCL into one list. 

The upcoming changes will be documented in the Federal Register.