export control reform: implementing the transition
DESCRIPTION
Export Control Reform: Implementing the Transition. Massachusetts Export Center Export Expo December 11, 2012. Kevin J. Kurland Director, Office of Enforcement Analysis. Massachusetts Exports. Total BIS License Applications (2010): 1202 Approved. 9,161 companies exported; 90% were SMEs - PowerPoint PPT PresentationTRANSCRIPT
U.S.. Department of Commerce, Bureau of Industry and Security
Export Control Reform:Implementing the Transition
Kevin J. KurlandDirector, Office of Enforcement Analysis
Massachusetts Export CenterExport ExpoDecember 11, 2012
Massachusetts Exports
Bureau of Industry and Security, Export Enforcement
Value% of 2010
Massachusetts’s Exports
Licensed Dual-Use Exports $171,959,276 0.65%Licensed Munitions Exports $1,071,046,451 4.07%Total Controlled Trade $1,243,005,727 4.73%
Total BIS License Applications (2010):
1202 Approved
9,161 companies exported; 90% were SMEs
28% of manufacturing workers depend on exports
Bureau of Industry and Security, Export Enforcement
Export Control Reform Initiative
In August 2009, the President directed a broad-based interagency review of the U.S. export control system to build:
“Higher walls…around fewer, more critical items.”Secretary of Defense Robert M. Gates, April 20, 2010
The Administration determined that fundamental reform of the current system is necessary to enhance our national security by:
(i) focusing resources on the threats that matter most
(ii) increasing interoperability with our Allies
(iii) strengthening the U.S. defense industrial base by reducing incentives for foreign manufacturers to design out and avoid using U.S. parts and components
Key Goal Is to Leverage Existing Flexibilities
USML CCLLicense requirement Worldwide license -
CanadaRanges from worldwide license to license exceptions to no license required
Exemptions/exceptions Limited GOV, STA, TSU, TMP, RPL, etc.De minimis None 25% / 10%Registration Yes NoProhibitions ITAR 126.1 T-5; end-use/user controlsTemporary Import Controls
All USML items None
Enforcement ICE, FBI BIS, ICE, FBI
Bureau of Industry and Security, Export Enforcement
Step 1: Focus on Fewer, More Critical Items via Regulatory Reforms
Bureau of Industry and Security, Export Enforcement
Military or Intelligence Advantage
Foreign Availability
Tier 1 Critical Almost none
Tier 2 Substantial Regime members
Tier 3 Significant Worldwide
Establishing a “bright line” between items controlled on the USML and
CCL by identifying items in a “positive” manner is the key
deliverable of ECRBureau of Industry and Security, Export Enforcement
Regulatory Impacts: Dual-UseLicense Exception STATwo groups of countries: 36 and 8 eligible destinations
SafeguardsFirst step in tiering the CCL$41 million in exports impacted to date
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Country ECCN ECCN/Description ECCN Value
China 3B001 Equipment for the Manufacturing of Semiconductor Devices
$18,268,509
Qatar 3A101 Electronic Equipment, Devices and Components $17,879,113
Taiwan 3C003 Organo-inorganic Compounds $13,940,827
Taiwan 3C001 Hetero-epitaxial Materials $9,946,351Great Britain 9A004 Space Launch Vehicles and Space-craft $9,118,253
Top 5 Dual-Use Licensed Exports from Mass. by Destination (2010)
STA Eligibl
e
Regulatory Impacts: Dual-Use
Bureau of Industry and Security, Export Enforcement
EncryptionReplaced 30 day technical review period and sales reports for most items eligible for License Exception ENC and mass market products with registration and self-classification report
0Y521Creation of Export Control Classification Number (ECCN) 0Y521 (April 13, 2012)
Items that warrant control on the CCL but not identified in an existing ECCN
E.g., emerging technologies Currently 9 items identified for 0Y521 controls
Regulatory Impacts: USML Positive List Identify what items require USML control
Inherent military function; critical military/intelligence advantage
Convert USML into a “positive list” Establish objective technical parameters rather than
design intent to control items on USML Items not meeting criteria “positive” USML
criteria would be transferred to new “600 series” on CCL* and include: End-items, parts, components, accessories, and
attachments* Requires congressional notification
9
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Regulatory Impacts: Anatomy of a New “600 series” ECCN
CCL Category0-9 Product
Group A-E
The “600 series” derives its name from the 3rd character (i.e., number) of the ECCN.
Last two characters (i.e. numbers) will generally trackthe Wassenaar Arrangement
Anatomy of a “600 Series” ECCN (cont’d)
Items controlled Enumerated end items
Enumerated parts and components
“Specially designed” parts and components (“.x”)
Enumerated insignificant parts and components (“.y”)
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USML – Aircraft and Related Articles
Federal Register Proposed RulesFederal Register Proposed Rules• Bombers• Fighters, fighter bombers, and fixed-wing
attack aircraft• Jet-powered trainers used to train pilots• Attack helicopters• Unmanned aerial vehicles (UAV’s)• Military intelligence, surveillance, and
reconnaissance aircraft• Electronic warfare, airborne warning, and
control aircraft
• Air refueling aircraft and Strategic airlift aircraft
• Target drones• Aircraft equipped with any mission systems
controlled under this subchapter; or,• Aircraft capable of being refueled in flight
including hover-in-flight refueling• Launching and recovery equipment
• Developmental aircraft and “specially designed” parts, components, accessories, and attachments therefore developed under a contract with the DoD
• Aircraft components, parts, accessories, attachments, and associated equipment as follows:‒ Components, parts, accessories, attachments,
and equipment “specially designed” for the following U.S.-origin aircraft: B-1B, B-2, F-5SE, F/A18E/F/G, F-22, F-35 (and variants thereof), F-117, or U.S. Government technology demonstrators
Illustrative list onlyReference Federal Register / Volume 76, No. 215 / Monday, November 7, 2011 / Proposed rules, page 68697
USML F-16 Systems/Components/Parts
F-16 Specific USML ItemsF-16 Specific USML Items Other Aircraft USML ItemsOther Aircraft USML Items• Assembled engines• Weapons pylons• Mission systems• Bomb racks• Missile launchers• Fire control computer• Radar• Radar warning receiver• Radar jammer• Laser/Missile warning system• Countermeasures dispensing system• Aerial refueling receptacle• Helmet mounted displays/sights
• Aircraft wing folding systems, parts, and components
• Tail hooks and arresting gear, and parts and components
• Missile rails, weapon pylons, pylon-to launcher adapters, UAV launching systems, and external stores support systems and parts and components
• Damage/failure-adaptive flight control systems• Threat-adaptive autonomous flight control
systems• Air-to-air refueling systems and hover-in-flight
refueling (HIFR) systems and parts and components
• UAV flight control systems and vehicle management systems with swarming capability
Illustrative list onlyReference Federal Register / Volume 76, No. 215 / Monday, November 7, 2011 / Proposed rules, page 68697
Commerce “600 Series” Systems/Components/Parts for the F-16
• Wings, Rudder, Fin, Panels• Fuselage – forward, center, aft• Cockpit structure• Forward equipment bay• Horizontal stabilizer• Conformal fuel tank• Cartridge Actuated Device, Propellant
Actuated Device (CAD / PAD)• Control surfaces, activation and control
systems• Internal and exterior fuel tanks
• Engine inlets and ducting• Wing box• Flaperon• Static structural members• Exterior skins, fairings, radomes, access
doors, leading edge flap• Landing gear• Technology associated with above items
Illustrative list onlyReference Federal Register / Volume 76, No. 215 / Monday, November 7, 2011 / Proposed rules, page 68689
“600 Series” “.y” Parts for F-16
Cockpit gaugesand indicators
Fuel lines
Hydraulics
F-16 Specific .y ItemsF-16 Specific .y Items Other Aircraft .y ItemsOther Aircraft .y Items• Aircraft tires• Analog cockpit gauges and indicators• Hydraulic System Filters• Check valves• Hydraulic and Fuel hoses, Fittings, Clips,
Couplings, Nut plates, Brackets• Cockpit mirrors• Beacons• Urine collection systems• Cockpit panel knobs, Switches, Buttons, Dials
• Audio selector panels• Check valves for hydraulic and pneumatic
systems• Crew rest equipment• Ejection seat mounted survival aids• Energy dissipating pads for cargo (for pads
made from paper or cardboard)• Filters and filter assemblies for hydraulic, oil,
and fuel systems• Steel brake wear pads (does not include
sintered mix) • Propellers, propeller systems, and propeller
blades used with reciprocating enginesIllustrative list onlyReference Federal Register / Volume 76, No. 215 / Monday, November 7, 2011 / Proposed rules, page 76081
Tires
Technology ControlsF-16 Example
Technology controls follow the end-item, part, or component: Technical data and services for aircraft-level
design, development, engineering, manufacture, testing, and modification also remain on the USML
Technology required for design, development, and manufacture of F-16 major components, minor components, parts, accessories, and attachments that move to the “600 Series” (e.g., fuselage, wings, tail sections), also moves to Commerce controls
License Requirements for “600 Series” End items: License required for export or reexport
to all countries except Canada
Parts + components: STA for ultimate government end-use
“.y” items: no license required except to China and terrorist supporting countries
ITAR 126.1 countries subject to State Dept. licensing policy
License validity periods General Order 5 and DDTC grandfather rules BIS extension to 4 years Double licensing issues
License exceptions STA (ultimate gov’t end use), GOV, RPL, TSU, TMP
ITAR 126.1 carve-out License review standard and consensus Foreign direct product rule MDE reporting AES requirements
No post-departure filing Special “600 series” filing requirements ECCN requirement on DCS
Other Transition Rule Issues
Benefits of “600 Series” Focus controls and
compliance (incl. resources)
Security of supply with allies and partners
Avoid design-out
Eliminate MLAs/TAAs
Eliminate registration requirements 19
USML “defense articles”
CCL “600 series” items
End-items Worldwide license - Canada
Worldwide license - Canada
Identified P+C Worldwide license - Canada
License Exception STA
Specifically/specially designed P+C
Worldwide license - Canada
(“.x”) License Exception STA
Insignificant P+C Worldwide license - Canada
(“.y”) NLR except T-5 + China
De minimis None 25% except ITAR 126.1 countries
Registration Yes No
Prohibitions ITAR 126.1 ITAR 126.1
Exemptions/exceptions
limited GOV, STA (ultimate government end-use), TSU, TMP, RPL
Temporary Import Controls
All USML items None
Impact Analysis BIS processed ~25,000 licenses in 2011 State processed ~85,000 licenses in 2011
BIS estimates that approximately 50% of State licenses will contain items moving to the 600 series
Of that 40,000, at least 50% are estimated to be eligible for License Exception STA
Total Mass. munitions exports (2010): $1,071,046,451
Bureau of Industry and Security, Export Enforcement
Category
Description Value
CAT I Firearms $26,820,263
CAT III Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines
$241,111,540
CAT VIII Aircraft and Associated Equipment $221,361,942
CAT XI Military Electronics $135,941,982
CAT XII Fire Control, Range Finder, Optical and Guidance and Control Equipment
$146,891,041
CAT XXII
Miscellaneous Articles $13,431,461
Sample of Munitions Exports from Mass (2010)
Step 2: Erecting Higher Walls
Bureau of Industry and Security, Export Enforcement
Targeted outreach OEE permanent law enforcement
authorities Focused evaluation of STA
Desk audits One-time reviews Daily AES checks to interdict Enhanced end-use checks
Information Triage Unit (dedicated IC assets)
BIS-DDTC coordination Export Enforcement Coordination
Center International cooperation
Higher Walls: Enhanced Compliance & Enforcement
Other ECR Actions Single form; harmonized definitions USXports Consolidated screening list Follow along on www.export.gov/ecr 2013+ priorities
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ECR Success =
Bureau of Industry and Security, Export Enforcement
Focus on what is important Clearer regulations More harmonized implementation Enhanced compliance and enforcement Greater interoperability with allies More competitive U.S. industrial base…and Increased U.S. national security!
Contact Info
Bureau of Industry and Security, Export Enforcement
Presenter:Kevin J. Kurland ([email protected])Director, Office of Enforcement Analysis, BIS
Outreach Assistance:Bernie Kritzer ([email protected])Director, Office of Exporter Services, BIS
600 Series Licensing:Todd Willis ([email protected])Director, Munition Controls Division, BIS
Local BIS Enforcement POC:John McKenna ([email protected])Special Agent-in-Charge, OEE Boston Field Office, BIS
www.export.gov/ecr