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By Len Zuga, Partner TBI.

04 Sep 11. Complicated, highly bureaucratic and convoluted with nebulous and overlapping administrative and enforcement authorities best describes the current state of U.S. export regulations and oversight. The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce administers a complex list of export controlled items but the bewildering array of legal entities responsible for enforcing export controls has resulted in a veritable minefield of legal interpretations and regulations. Ensuring compliance is costly and time consuming at best to even the largest and most well-staffed U.S. defence and dual use equipment, sub systems and components producers.

Until very recently U.S. export control regulations were loosely enforced but since taking office the Obama administration put export controls under tighter scrutiny, increasing the risks to manufacturers and sellers of being caught in inadvertent or intentional violations of any of the export control regimes.

But at the same time, early after settling in (August 2009), the administration initiated planning to overhaul the country’s Cold War-era system for controlling technology exports with more centralized and streamlined processes. As a result, the Administration launched the Export Control Reform Initiative (ECR Initiative), which will fundamentally reform the U.S. export control system.

With the objective of focusing resources on the threats that matter most, and to:“better reflect contemporary national security and foreign policy objectives, reduce confusion about which items are controlled and how, and improve the ability of the U.S. Government to monitor and enforce controls on technology transfers with national security implications while helping to speed the provision of equipment to allies and partners who fight alongside United States armed forces in coalition operations.
the overhaul is also aimed at enhancing the competitiveness of the U.S. manufacturing and technology sectors by increasing exports and creating jobs.

The Administration’s implementing export control reform is being accomplished in three phases. Domestically the politics are not nearly as high profile as health care, deficit spending and budget reform but they are perhaps just as important to the defense and high tech dual use industrial base and their foreign competitors.
Phases I and II of export control reform reconcile various definitions, regulations, and policies for export controls, all the while building toward Phase III, which will create a single control list, single licensing agency, unified information technology system, and enforcement coordination center.

The export control reform process is now closing in on Phase III. On July 15, 2011, the Department of Commerce published a proposed rule that is the next significant step in the President’s ECR Initiative – the creation of a framework for controlling militarily less significant defense articles, largely generic parts and components, on the Commerce Control List rather than the United States Munitions List.

After reviewing BIS’s Proposed Revisions to the Export Administration Regulations (EAR) (http://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17846.pdf), it is clear that the proposed changes promise that cutting the Gordian Knot of current export control regulations and listings will be neither a simple nor an inexpensive proposition.
This last phase will demand careful review and commentary by industry. Details of the President’s Export Control Initiative are available at BIS’s export control web site (http://export.gov/ecr/index.asp) where interested parties can follow progress and recent news of the reform initiative. Defense and dual use goods and services producers, both in the US as well as their foreign competitors, need to closely monitor these proposals and long overdue changes as they are implemented t

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