International Trade Law News

Defense Secretary Robert Gates outlined yesterday the Obama administration's long-awaited proposal to reform the U.S. export control system. While there have been many export control reform efforts in recent years, this one is very different because it is being driven by senior government officials as part of a broader effort to increase U.S. exports and related employment, one of the White House's top priorities. The new proposal also responds to longstanding arguments that reform is needed to both more effectively limit the transfer of goods and technology to bad actors abroad as well as improve the global competitiveness of U.S. companies.

The revised export control system outlined by Secretary Gates will be based on four key principles.

Single Export Control List - (1) combine the U.S. Munitions List with the Commerce Control List, which would provide clarity as to which items require export licenses and enable the government to concentrate on controlling critical technologies and items instead of spending time on inter-agency commodity jurisdiction disputes, and (2) consolidate the numerous lists of prohibited exporters and end-users into one single, frequently updated list in order to make it easier for exporters to ensure that they do not ship products to a restricted person or entity involved in activities contrary to U.S. national security interests

Single Licensing Agency - establish a single export licensing agency with jurisdiction over both defense articles and dual-use items and technologies in order to reduce confusion over where and how to submit export license applications, streamline the review process and enhance consistency in licensing approval

Single Enforcement Coordination Agency - create a single, integrated agency to enforce export controls (a function currently divided among the Commerce Department's Office of Export Enforcement, the Department of Homeland Security's U.S. Immigration and Customs Enforcement and the Federal Bureau of Investigation) in order to strengthen enforcement, particularly abroad, and enhance cooperation and coordination with the intelligence community

Single Information Technology System - develop a single, unified IT infrastructure that would receive, process and help screen new license applications and end-users in order to reduce the redundancies, incompatibilities and costs associated with the current system of multiple databases. 

The administration wants to complete the proposed revamp in three phases. The first phase would begin the transition toward the single export control list and the single licensing agency by making changes to the current system. Certain aspects of this first phase have already been announced, including changes in the encryption licensing process and the harmonization of rules applying to the export of technical data to foreign national employees. In phase two the administration would implement the tiered export control list, create a single IT structure and move toward a single licensing system. The final phase would involve the creation of the single licensing agency and the single enforcement agency.

However, the proposed changes are likely to be slow in coming. While phases one and two could be accomplished by regulatory changes and executive order, resistance and criticism from entrenched interests in both the public and private sectors are expected. In addition, the creation of new export control agencies would require congressional action, and Congress remains as deeply divided over this issue as it has for the past decade. The administration also faces numerous jurisdictional and statutory hurdles as well as potential conflicts with existing multilateral export control treaties.

Manufacturers and exporters should continue to monitor this situation closely to determine how and when export controls on their products may change. For assistance, or for further information on export control compliance matters, please contact:

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Sandler, Travis & Rosenberg, P.A., is a customs and international trade law firm concentrating in assisting clients with the global movement of goods, ideas and personnel and the setting of global trade policy. Our affiliated consulting company, Sandler & Travis Trade Advisory Services Inc., is a leading provider of trade-related management and consulting services to government and industry. For more information about ST&R and STTAS, please visit our Web site.