Export Control Reform: Basics to Benefits

As we blogged on Tuesday, the final rules for the initial implementation of the President’s Export Control Reform (ECR) Initiative have finally been published. They will come into force on October 15, 2013, forcing exporters to get their compliance methodologies in order rather quickly. In the coming weeks, we will be blogging steadily, describing the reforms and how they can benefit our clients. We will start today with a summary of the reform effort and the immediate steps recommended for exporters. We will follow with frequent updates and analysis on the important aspects of unfolding reforms.

1. The Obama Administration has been working since 2009 to simplify the Export Control laws that are currently managed by two separate agencies, one under Department of State (DOS) and another under Department of Commerce (DOC). DOS handles all military and munitions items on the United States Munitions List (USML). DOC regulates all “dual-use” items on the Commerce Control List (CCL) and also, in some cases, unlisted items.
2. The two relevant agencies have been working together to move items from the USML to the CCL, forming what is becoming known as the “600 series,” referring to a designation within the 5-character classification organization scheme of the CCL. Items now on the USML that do not have critical military significance are being considered for this shift. Newly converted categories are being unveiled on a rolling basis, with comment periods being offered to allow for input from experts and industry before any changes are finalized. The first of these, along with many changes in the regulations implementing them, have now been published in final form, effective October 15, 2013.
3. Exporters who were familiar with the USML categories and related regulations must now familiarize themselves with the licensing procedures of DOC/BIS (the Commerce Department, Bureau of Industry and Security). There are distinct differences between DOS’s International Traffic in Arms Regulations (ITAR) and DOC’s Export Administration Regulations (EAR), including control list language and organization, licensing requirements, procedures, and exceptions, classification, and penalties.
4. The first step for exporters is to identify the jurisdiction and classification of each product, part and technology. For items on (or new to) the CCL this requires identification of the correct Export Control Classification Number (ECCN), notably the new “600 series.” While DOC/BIS does provide licensing and classification assistance free of charge, the number of items per request is strictly restricted, and the turnaround time is often lengthened by the sheer volume of such requests.
5. The second step is to determine which of these items will become eligible for “license exceptions,” that is, extenuating circumstances that eliminate the need for an export license. Several such exceptions are available for items controlled under the EAR that are not available for items controlled under the ITAR. This critical task requires an accurate ECCN and a clear understanding of the structure and logic of the EAR. These exceptions are among the major rewards received by exporters that complete the undeniable task of making this conversion.

CTP assists public and private clients with Export Control issues, including classification, licensing, compliance processes, audits, and training. Many of our experts are retired licensing officers or regulations specialists. We stand ready to assist you in the task of adjusting your classifications and procedures to the new system.

Try to remember that the ultimate result of the effort invested in this conversation will be a less complex regulatory system, with eased controls and expedited procedures available for many products now on the USML!