BIS Details Export Reform's "Bright Line" Efforts for USML and CCL

(See ITT’s Online Archives or 09/01/10 news, 10090114, for BP summary of BIS Under Secretary Hirshorn’s conference remarks on Automated Export System (AES) data mining and increased penalties for weak compliance programs. See ITT’s Online Archives or 08/31/10 news, 10083113, for BP summary of President Obama’s conference remarks via videotape on export control reform.)

Four Key Export Control Reforms in Phases I - III

The Administration’s export reform plan consists of four key elements: (1) a single control list, (2) a single licensing agency, (3) coordination of enforcement and (4) unified information technology. These changes will be implemented in three phases.

(Phase I will harmonize the definitions of common terms in the International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), and sanctions regulations. Phase I will also establish new independent control criteria to screen items for control into new tiered control list structures, streamline license processes (including a common export license application form for the Departments of State, Commerce, and Treasury), develop a single list of proscribed persons and entities, and coordinate enforcement.

Phase II will restructure the U.S. Munitions List (USML) and Commodity Control List (CCL) into identical tiered structures, apply criteria, and remove unilateral controls as appropriate. Phase II will also fully implement licensing harmonization to allow export authorizations within each control tier to achieve a significant license requirement reduction, expand outreach and compliance, and transition toward a single electronic licensing system.

Phase III completes the transition to the new U.S. export control system. Legislation will be required for this phase in order to merge the two lists into a single list and implement a single licensing agency.)

Phase II Changes Include Identical USML and CCL Structures, Bright Line

While most of the public’s attention has been focused on Phase III (single list, single agency), Wolf states that Phase II changes are quite significant. They also lay the ground work for Phase III and can be worked on now as they do not need legislation.

Elements of Phase II that are being worked on include:

3-tier control criteria. Developing the three-tiered control criteria (high, middle and low) to indicate what should be controlled for different types of destinations, end-uses, and end-users. If an item type falls within the scope of one of the three tiers, the item should be controlled for export, reexport, and in-country transfer at the level set forth in the licensing policy. If an item type is determined not to be within the scope of any of the three tiers, it should not be on a control list;

Screening against the 3-tiers. Screening items on the two control lists -- the USML and the CCL -- against those criteria;

Bright line between USML and CCL. Revising the USML and the CCL to create a “bright line” between the two lists to clarify jurisdictional determinations and reduce government and industry uncertainty about whether particular items are subject to the jurisdiction of the ITAR or the EAR. After this structural alignment, the lists will later be combined into a single list of controlled items by the end of Phase III;

Positive list. Revise the USML and CCL lists to make them more “positive;” and

Tier 2 and 3. Develop a licensing policy for Tier 2 and Tier 3 items.

Details of BIS’ Bright Line Efforts to Reduce Jurisdictional Uncertainty

According to Wolf, the creation of an aligned, positive, “bright line” is a vital interim step in the U.S. Government’s plan to have, by the end of Phase III, a single list of controlled items that is divided into three tiers and administered by a single licensing agency under a single set of export control regulations. The interim “bright line” is necessary because the structures of the USML and the CCL are significantly different.

The first step in the list review effort will be for subject matter experts assigned to each category of items to apply their expertise and judgment to decide what the general universe of defense articles are that should be ITAR controlled.

USML structure to track CCL’s. After a review team identifies the general types of items that should remain USML-controlled defense articles, it will organize each USML category so that it tracks the A, B, C, D, E structure of the CCL and also has an additional F and G “Group” to address ITAR-specific defense service and manufacturing controls.

Within each category Group (A, B, C, etc.), the review team will identify the types of defense articles that fall within that category Group’s heading and any one of the three control Criteria.

Revisions to do away with parts, specific designs. When revising the lists of defense articles, the review teams must abide by various guidelines. For example, the current plan is that revised USML categories must not contain any (a) catch-all controls for generic parts, accessories, attachments, or end-items or (b) other types of controls for specific types of defense articles because, for example, they were “specifically designed or modified” for a defense article.

Limited listing on both USML and CCL. Items are not to be listed on both the CCL and the USML unless there are specific technical or other objective criteria -- regardless of the reason why any particular item was designed or modified -- that distinguish between when an item is USML-controlled and when it is CCL-controlled.

Placement on the CCL. ITAR items that are to be moved to the CCL will fall into one of five controls on the EAR: (a) an amended existing ECCN, (b) a new Holding ECCN, (c) a new CML ECCN that Commerce plans to create in coordination with State, (d) a new ECCN, or (e) EAR99 status. The details on the structure of each of these approaches and the various levels of controls within them are still being worked out.

(See ITT’s Online Archives or 04/21/10 news, 10042125, for BP summary of the Administration’s announcement of “fundamental reform” plans for U.S. export controls.)