Status Report on

Export Control ReformTony Dearth

Director, Office of Defense Trade Controls Licensing, Bureau of Political Military Affairs, Department of State

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How Are We Doing?

• Have made great progress in realizing the goals of the President’s ECR initiative– 15 of 21 Munitions List categories updated

– Changes have resulted in a 44% decline in authorization requests

– Exporters and allies taking advantage of more flexible controls administered by DOC to realize urgent acquisition needs

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Export Control Reform: Fundamentally a national security effort intended to achieve greater regulatory efficiency and rationality while focusing our export controls on the most significant items and destinations

ECR Pillars

• Single Export Enforcement Coordination Agency– Export Enforcement Coordination Center (E2C2) created by

Executive Order 13558 (Nov 9, 2010) under DHS

• Single IT System (USXPORTS)– Single portal delayed – still use D-Trade and SNAP-R

– DDTC implemented July 2013 – DOC/BIS implementation on-going

• Single Control List– 71% implemented by May 2015 (15 of 21 USML Categories)

– Effort to “harmonize lists” on-going – first major rule published May 22

• Single Licensing Agency– To occur during Phase III

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Recent Rule Activity

• Corrections, Clarifications, and Definitions (final) – published Oct 2014

• Categories VIII & XIX (review) – published March 2015

• Category XII (proposed) – published May 2015

• Exports/Temporary Imports Made to or on Behalf of the Department or Agency of the U.S. Government (proposed) – published May 2015

• Registration and Licensing of U.S. Persons Employed by Foreign Persons, and Other Changes (proposed) – published May 2015

• Revisions to Definitions of Defense Services, Technical Data, and Public Domain (proposed) – published June 2015

• Categories XIV & XVIII (proposed) – estimate: Summer 20154

The Impact: By Category

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• This drop is even more significant when one considers that unrevised categories experienced an 8% increase during the 2014-2015 period

No. of Authorization Requests

The Impact: Transition Learning Curve

• Trends for revised categories remain consistent– Initial drop in applications accompanied by reciprocal rise

in RWAs– RWAs begin slow, but steady decline toward pre-ECR

levels almost immediately

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Non-ECR

ECR

• Only 65% of RWAs attributed to ECR-related reasons

ECR: Incorrect sub/category

ECR: CCL identified as USML

ECR: All articles CCL

ECR: Sub-paragraph does not allow for parts

ECR: End-item not appropriate

The Impact: Transition Learning Curve

Conclusion

• Category changes will continue

• The USG is counting on exporters to apply proper controls

• The new enumeration system requires specificity

• ECR is the New Normal. We are in the transition period which is hard but the results will be worth the effort.

– DDTC’s website – www.pmddtc.state.gov (lots of resources).

– Generic Questions: DDTC Response Team, 202-663-1282, DDTCResponseTeam@state.gov.

– DTC IT Issues: DDTC Help Desk, 202-663-2838, dtradehelpdesk@state.gov.

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Backup Slides

15 of 21 Categories Revised

USML Description Status

IV Launch Vehicles/Missiles Rule 3 – Effective 7/1/13

V Explosives/Propellants Rule 3 – Effective 7/1/13

VI Vessels of War Rule 2 - Effective 1/6/14

VII Ground Vehicles Rule 2 - Effective 1/6/14

VIII Aircraft and Related Articles Rule 1 - Effective 10/15/13

IX Training Equipment Rule 3 – Effective 7/1/13

X Personal Protective Equipment

Rule 3 - Effective 7/1/13

XI Electronics Rule 5 –Effective 12/30/14

XIII Miscellaneous Rule 2 - Effective 1/6/14

XV Spacecraft/Satellites Rule 4 – Effective 6/27/14 & 11/10/14

XVI Nuclear Rule 3 – Effective 7/1/13

XVII Classified Articles Rule 1 - Effective 10/15/13

XIX Gas Turbine Engines Rule 1 - Effective 10/15/13

XX Submersible Vessels Rule 2 - Effective 1/6/14

XXI Articles Not Enumerated Rule 1 - Effective 10/15/13

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Bulk of RWAs Non-ECR Related

The Start of a Good Thing

• In August 2009, President Obama directed U.S. export control system agencies to conduct a broad-based review of export controls to identify additional ways to enhance U.S. national security.

• The NSC and NEC were directed to jointly review the existing controls, structure, and policy and recommend a way forward.

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The Approved Plan

• In 2010, the President approved a plan that envisions:– A Single Licensing Agency to receive and adjudicate licenses

currently processed by State, Treasury, and Commerce

– A Single Control List, tiered based on sensitivity of the commodity

– A Single IT system for submission, review, and adjudication of licenses

– A Single Export Enforcement Coordination Agency

• To be implemented in 3 phases:– I: Immediate improvements, create the framework

– II: Implement the new framework within existing structures/authorities

– III: Complete transition: Merge and consolidate

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Control List Updates

• Current control lists have parallel constructs

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DOS DOC

The Law Arms Export Control Act (AECA) - Section 38

Export Administration Act of 1979*

Governing Regulation

International Traffic in Arms Regulations (ITAR)

Export Administration Regulations (EAR)

Embedded Control List

U.S. Munitions List (USML)

Commerce Control List (CCL)

Major List Component

Category (I – XXI) Export Control Classification Number (ECCN) Series

*Expired in 2001. POTUS extends authority each year via the International Emergency Economic Powers Act and Executive Order