BIS Update 2011

Well true to this year's BIS Update 2011 namesake - Implementing Export Control Reform - attendees were shown proof of real progress made in reforming America's outdated system of export controls. Quick to dismiss previous year's skeptics, Under Secretary of the Bureau of Industry and Security, Eric L. Hirschhorn, in his opening remarks, commended the agency for its tremendous efforts over the past 16 months and pledged that there is more to come.

Mr. Hirschhorn's remarks echoed the familiar origins of export control reforms (ECR) with the early meetings with President Obama, then National Security Advisor General James Jones, and former Defense Secretary Gates charge for changes to the existing export control system. He also pointed out the obvious flaws in a system that requires the same level of government scrutiny to the export of every nut, bolt and screw for a F-18 fighter aircraft that is applied to the entire aircraft. But this year's remarks had much more to report than just words. Under Secretary Hirschhorn reported on several recent (and well timed) changes and proposed changed to our current system of export control reforms.

The most touted of reforms, echoed by other speakers throughout the day, was last Friday's Notice of Proposed Rule that moves certain items from the U.S. Munitions List (USML) to the Commerce Control List (CCL) and creates the framework to move additional items from Department of State (defense articles) to Department of Commerce (dual-use) jurisdiction. This proposed rule fulfills several objectives of export control reforms. First, to allow our government to focus its efforts on the most critical items to destinations of concern. Secondly, this move would eliminate the Dept. of State registration requirement for many manufacturers as their lower-level components would no longer be subject to their jurisdiction. Additionally, this would eliminate the "see through rule" which makes items manufactured offshore subject to U.S. reexport control if they contain any U.S.-origin ITAR parts or components, regardless of the value or significance of those U.S.-origin items.

Under Secretary Hirschhorn also spoke about the recently implemented license exception, Strategic Trade Authorization (STA), which allows for the license free export of many dual-use commodities to 36 (mostly European) countries and an additional 8 countries for items controlled for NS-only reasons. According to Hirschhorn, the STA exception would have potentially will eliminated 3000 of the 22,000 licenses BIS issued last year. He also stressed that the STA does not "decontrol" these items but will reduce the level of control so as to facilitate trade with U.S. allies. An important aspect of STA is that it will pave the way for future license exceptions for items moving from the USML into the proposed "600" series ECCN classifications.

Mr. Hirschhorn was quick to point out that the U.S. government will continue its comprehensive sanctions against Cuba, Iran, North Korea, Syria, and Northern Sudan. Additionally, there are no plans to alter the U.S. prohibitions on exporting Munitions List items to China or dual-use items for military end use in China.

These key proposed and implemented controls were not the only highlights of Mr. Hirschhorn's speech. He also addressed continuing efforts of the BIS to increase its education and outreach by addressing the DHS Form I-129 export control certification, consolidated end-user screening list, and items to be added to the agency's export compliance tool kit including industry practices. Finally, he addressed the importance of export enforcement activities and the President's executive order to increase coordination among export control enforcement agencies and the expectation for companies to self-police and file voluntary self-disclosures when required.

This year's BIS Update is certainly not short on substantive regulatory changes. As with all things, the devil is in the details and it remains to be seen how the export community will deal with these significant changes now, or soon to be, in play. The breakout sessions that followed brought up a number of very good questions that will need to be addressed in order for these reforms to work in the real world. Stay tuned for future posts on how exporters can put these export control reforms to work at their companies.

A full transcript of Under Secretary Hirschhorn's remarks can be found on the BIS website or at the following link: http://www.bis.doc.gov/news/2011/hirschhorn_update.htm.

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