On August 30, 2010, the Bureau of Industry and Security (BIS) published the remarks of Under Secretary Eric Hirschhorn to be made at BIS' Update Conference on August 31, 2010.
In his remarks, Under Secretary Hirschhorn states that President's Obama's export control reform initiative has been overseen by the White House on a daily basis and its champions include the three key cabinet secretaries principally responsible for reviewing export license applications -- Secretary Locke, Secretary Clinton, and Secretary Gates.
Once the government has implemented "a reformed export control mechanism," Under Secretary Hirschhorn states that he expects to see a system based on 3 overarching principles -- three "E"s, i.e., efficiency, education, and enforcement.
With regard to Efficiency, Hirschhorn stated that the government's approach rests on two fundamental principles: (1) the rules should be transparent and predictable, and (2) we must have streamlined processes and higher fences to control sensitive items appropriately while facilitating exports of less sensitive items to destinations and end users that don't pose substantial national security, proliferation, or similar concerns.
Hirschhorn states that the Commerce Control List (CCL) generally controls items based on technical parameters. Items not meeting a specified threshold are not subject to control. Hirschhorn states that, "There typically is no corresponding technical basis, though, for determining when an item is subject to the U.S. Munitions List. Instead, the USML relies heavily on the concept of 'design intent,' even where the function of an item may not be uniquely military."
Hirschhorn continues to state, "Our system should make clear when an item, regardless of the intent of its designers, is subject to control. As SecretaryLocke has indicated, we are restructuring the USML and, where necessary, the CCL, to create 'positive lists' of controlled items." Hirschhorn states that they are beginning by turning Category VII of the USML into a positive list of tanks, military vehicles, and elements of such goods that warrant control as defense articles. Additionally, the government will divide each control list into a three-tiered structure with licensing policies corresponding to specific tiers.
Hirschhorn stated that other initiatives that will lead to a more streamlined system will be implemented, including: (1) harmonizing definitions across all the export control regulations; (2) rationalization (e.g., the new encryption regulations); and (3) merging export control IT systems. With regard to merging export control IT systems, Hirschhorn stated that EAR license applications are reviewed by the Departments of State, Energy, Defense, and Commerce. Currently these 4 departments each use different IT systems, have access to different data, and can't directly communicate with one another. Commerce and the other agencies are developing a single IT system that will allow free and immediate data sharing. Hirschhorn stated that Defense is currently using this system, State will begin doing so early next year, Commerce should be on board later in 2011, and other agencies will follow.
For now, export license applications will continue to be processed through either D-Trade for USML items or SNAP-R for CCL items. When the control lists are merged in Phase III of the export control reform initiative, Hirschhorn stated that he expects to have a single application form that is linked to the common IT system.
The second efficiency principle is to establish streamlined processes and higher control fences. Hirschhorn stated that, "As the new control lists are created, we will tailor our licensing policies to focus on the most sensitive items and on destinations and end-users of concern. We are preparing a regulatory proposal that would provide more flexible licensing authorizations as we move down the tiers." Hirschhorn also stated that, "BIS will closely scrutinize Automated Export System transactions to ensure that exporters are complying with the EAR. We may require foreign consignees to provide end-use assurances against diversion and similar undertakings from, or at least notification to, subsequent purchasers. We will be stepping up outreach, domestically and abroad." Hirschhorn continued to state, "Finally, the Administration is preparing legislation that would combine the administrative enforcement and licensing activities of BIS, the State Department's Directorate of Defense Trade Controls, and the Treasury Department's Office of Foreign Assets Control into an independent licensing agency. We will seek action on this legislation in the near future."
With regard to Education, Hirschhorn stated that, "In addition to outreach publications, seminars, and one-on-one counseling, the Bureau in recent years has expanded its effort to include such cutting edge strategies as on-line training and webinars. Yet we need to spread the word even further-particularly to those who may not even realize they're subject to controls."
Hirschhorn stated, "Every exporter must classify its exports and should screen its customers against such lists as the Denied Persons List and the Entity List. BIS has a responsibility to assist exporters, particularly small and medium-sized businesses, to do this. To that end, we are mining Automated Export System data to identify exporters of interest. We are working with other bureaus and agencies, and with such private sector entities as freight forwarders, to educate exporters. We are employing such outreach techniques as foreign language seminars and CommerceConnect. Moreover, we continue to work with the Census Bureau and Customs and Border Protection on new electronic tools to help exporters make timely and accurate submissions to AES. This will expedite the clearance of exports and facilitate our compliance reviews." [Emphasis added.]
With regard to Enforcement, Hirschhorn stated that concurrently with efficiencies and education efforts, enforcement will become an even higher priority. Hirschhorn stated that, "The new Comprehensive Iran Sanctions, Accountability, and Divestment Act confers permanent law enforcement authorities on our export enforcement agents for the first time. This enhances our ability to deter and prosecute violators of the EAR."
Hirschhorn stated that BIS will ensure coordination with other enforcement agencies, BIS will participate in the National Export Enforcement Coordination Network. BIS will share information and leverage resources by working with colleagues from the Federal Bureau of Investigation (FBI), military security agencies, Immigration and Customs Enforcement (ICE), and the intelligence community. President Obama will soon sign an Executive Order making this coordination center permanent. The order will mandate participation by all relevant law enforcement agencies and the intelligence community.
Hirschhorn stated, "I ask that you carry a message back to your senior management and those who market your products: We are working to create a more efficient export control system and to ensure that those subject to it are aware of that fact. Also, where appropriate, we will seek to minimize penalties for companies that have good internal compliance programs and make demonstrably unintentional errors. But-and this is an important but-we are planning increased efforts against individuals who flout the rules and against companies whose inadequate internal compliance programs tell us that they are indifferent to whether they follow the rules." [Emphasis added.]
Finally, Hirschhorn stated that the proposed single licensing agency would include the administrative enforcement functions of BIS, State, and Treasury. The Administration also plans to seek legislation to transfer BIS's criminal enforcement functions to Immigration and Customs Enforcement, which would have a separate unit dedicated to enforcement of the export control and embargo laws.