Wednesday, November 6, 2013

Export Control Reform is here - Now What?




When the Export Control Reform (ECR) initiative was first announced in 2009, the initial reaction was, “That’s never going to happen and we won’t have to learn about it”.  Well, flash forward four years and it has really happened and we do have to learn about it.   If you are in the business of exporting your product or technology, you should learn about it too.  In an effort to eliminate redundancy, streamline processes and update outdated Cold-War regulations for both Department of State and Commerce there are four goals of ECR which are known commonly as the “four singulars”: single License Authority (SLA), single list of controlled technologies, single export control IT system, and a single enforcement authority.  The singulars are being tackled in a three-Phased approach.  Phases I and II are aligning the regulations, definitions and policies before moving into Phase III which will finalize the singulars.  Each singular is at its own stage of implementation but all are in motion.  Status can be tracked at http://export.gov/ecr
New rules: The latest and by far the biggest change to date are the Final Rules that were published in a Federal Register notice on 16 April 2013 with an effective date of 15 October 2013.  These rules introduce policies and procedures for the licensing of items moving from the International Traffic in Arms Regulations (ITAR) U.S. Munitions List (USML) to the Export Administration Regulations (EAR) Commerce Control List (CCL) and provide much-needed beefed-up definitions for things such as “aircraft” and “specially designed”.  Specifically, the new rule re-writes USML Category VIII (Aircraft and Related Articles) and added a Category XIX (Gas Turbine Engines and Associated Equipment).  For those who have spent their careers studying and enforcing the ITAR; this is a game-changer.  The new regulations require a very detailed understanding of the new ITAR regulations as well as the EAR and the CCL and how to apply it to your product.  Of course there are seminars, webinars, publications and trade groups who have focused on providing training and transition assistance. 
Buyer beware: The key in applying the new regulations is to have a strong understanding of your product, its intended uses and a list of potential or confirmed foreign partners.  The biggest misconception is that if a product is moved to the CCL that it no longer will require a license.  The EAR has its own complex licensing requirements.  An item must be properly classified with an Export Control Classification Number (ECCN) and there are many License Exceptions to navigate before making the determination of a license requirement.  The most commonly-used Exception for the new CCL items will be the Strategic Trade Authorization (STA) exception which will allow a “no license required (NLR)” to 36 countries with other stipulations.    
The new rules do not get us to Phase III of the four singulars, there are still two licensing authorities and two lists of controlled technologies.  This means that for now there are still two Departments with two separate systems for submitting a license request.  Fortunately Department of Commerce does not require a registration fee to submit a license unlike the Department of State.  If assistance is needed in making a classification determination a Commodity Jurisdiction request can still also be filed. 
The biggest take-away is that going forward exporters must have a strong knowledge of both ITAR and EAR and how they apply to their products and in-house compliance programs in order to avoid unnecessary violations.  If you are a small exporter you know how hard it was just to keep up with the ITAR.  If a violation is discovered, exporters are strongly encouraged to file a voluntary disclosure either to Department of State or Commerce as appropriate. 
If you have any questions or need assistance navigating export compliance, contact us – TSA, Inc. can help!       
Heidi France is a Lead International Trade Specialist with Technology Security Associates, Inc.   Email Heidi at heidi_france@theTSAteam.com