U.S. Officials Update House Panel on Export Control Reform

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SAN FRANCISCO — U.S. government agencies are making significant progress in their ongoing campaign to streamline rules governing exports, but significant work remains in the effort to create a unified list of items vital to national security and a single agency with authority to oversee the export control process, a panel of witnesses said April 24 during a House Foreign Affairs Committee hearing.

“The Department of Defense strongly supports continued reform and efforts to establish a single control list and a single agency,” said James Hursch, director of the Pentagon’s Defense Technology Security Administration. “Our national security will not be served if we stop halfway.”

Many of the pending export reform measures will affect a wide variety of businesses in the electronics, space and communications industries, said House Foreign Affairs Committee Chairman Ed Royce (R-Calif.). He pointed to legislation approved by Congress as part of the National Defense Authorization Act for 2013 and signed into law by U.S. President Barack Obama in January that gives the U.S. government greater leeway in determining whether the export of various space-related products and services should be controlled by the State Department or Commerce Department as an important example of the work that can be accomplished through close cooperation between Congress and the executive branch.

Royce warned, however, that the path to a new export control regime is not likely to be smooth. While small and medium-size companies are likely to be the primary beneficiaries of new rules, many undoubtedly will struggle to adapt to the new system. “Likewise it is uncertain whether executive branch agencies are fully prepared for these changes both with respect to licensing and export functions,” Royce said. “Missteps are inevitable.”

To date, State and Commerce have focused much of their attention on revising the U.S. Munitions List, a registry of sensitive technologies that require State Department approval to export, and the Commerce Control List, which includes items with potential commercial and military utility that can be exported with Commerce Department approval.

Government agencies have published in the U.S. Federal Register proposals to revise the export rules for items in 12 of 19 categories, including a plan published Jan. 31 to modify the rules for the export of technology related to missiles and launch vehicles. State Department officials have drafted proposed rules for the remaining seven technology categories and are seeking comments from other agencies before publishing those lists, said Thomas Kelly, acting assistant secretary of the State Department’s Bureau of Political-Military Affairs.

In total, tens of thousands of items that do not warrant the stringent controls of the U.S. Munitions List will be moved to the Commerce Control List “to facilitate interoperability with allies and partners as well as strengthen the competitiveness of the U.S. defense and space industrial base,” Kevin Wolf, assistant commerce secretary for export administration in the Bureau of Industry and Security, told the House panel. Many items moved to the Commerce Control List also may be eligible for export without a license to 36 countries, including Canada, Australia, Japan, New Zealand and European nations, if the item will ultimately be used by one of those 36 countries.

The new license exemption, known as Strategic Trade Authorization, which requires the country buying U.S. equipment to maintain records on any re-export of the items and to comply with other U.S. export regulations, could have a significant impact on the U.S. space and defense industrial base, Wolf said in a prepared statement submitted to the House committee. “In fact, we conservatively estimate that 50 percent of the 40,000 International Traffic in Arms Regulations licenses associated with items moving to the Commerce Control List could be eliminated under the Strategic Trade Authorization, with no diminution of national security,” Wolf said in the prepared statement.

The Defense Department has created a new Munitions List that includes only those articles whose export continues to warrant control under International Traffic in Arms Regulations. Munitions and satellite-related items that do not meet those criteria will be transferred to the Commerce Control List, Kelly said. Their transfer to the Commerce Control List does not mean, however, that their export is not controlled. Rather, controls will be tailored to specific items and restrictions like the ones included in International Traffic in Arms Regulations will continue to be enforced for countries subject to arms embargoes, he added.