Modernizing Export Controls

ABA International Law Section

Matthew S. BormanActing Assistant Secretary for Export

AdministrationBureau of Industry and Security

April 15, 2009

Department of Commerce• Bureau of Industry and Security

– Under Secretary – Assistant Secretary for Export Administration– Assistant Secretary for Export Enforcement

• Office of General Counsel– Chief Counsel for Industry and Security

BIS Mission• To advance U.S. national security, foreign

policy, and economic objectives by ensuring:– an effective export control system through

implementation of the Export Administration Regulations (EAR);

– an effective treaty compliance system; and – a strong, technologically superior U.S. defense

industrial base.

Export Administration Act (EAA)• EAA of 1979, as amended

– Cold War statute

– In lapse since August 2001

• Executive Order 13222– Continue provisions of the EAA and EAR to the

extent permitted by law

– International Emergency Economic Powers Act

Export Administration Act (EAA)• Numerous attempts to reauthorize

– S. 149 • Passed by the Senate in September 2001

– S. 2000• Introduced by Senator Dodd in 2008

– H.R. 6828• Introduced by Representative Sherman in 2008

• Specific legislation– National Defense Authorization Acts

• High Performance Computers• Commercial Communications Satellites

Export Administration Regulations (EAR)

• Apply to “dual use” items and strictly commercial items– “Dual use”: manufactured for commercial use

but can be used in WMD, conventional arms or terrorist applications

• Exports, reexports, deemed exports & reexports and certain activities

• Scope of the EAR: broad jurisdiction but narrow license requirements

Scope of Dual Use Controls

CY 2007 2008

Overall U.S. Trade

$1.16 trillion $1.30 trillion

Exported Under an

Export License

$2.8 billion $3.1 billion

Percentage of Overall U.S. Trade

0.24% 0.24%

Jurisdiction of Product or Activity• Licensing Jurisdiction

– Is the item (commodity, software, technology) or activity subject to: • Department of State (ITAR) or• Department of Commerce (EAR) licensing

jurisdiction• Other

– Department of the Treasury» Office of Foreign Assets Control

– Nuclear Regulatory Commission– Department of Energy

Classification of Product or Activity

• Subject to the EAR

• Commodity Classification– Specific to dual-use items that are subject to

the EAR

– Process of matching the technical characteristics of the item with the control parameters of an Export Control Classification Number (ECCN) on the Commerce Control List (CCL) or EAR99

Need for Modernization

• Dual-use controls still largely based on past of clearly defined enemy, one which our allies shared

• Significant technological advantage

• Extensive controls

– In 1985, a desk-top computer required an export license to all destinations except Canada

NSPD on Dual-Use Trade• January 2008

• Recognized diffusion of threats, technologies, and markets

• Modernization tasks included:

– Updating control levels

– Differentiating among end-users in most countries

– Transparency

NSPD Tasks

• Expanded Entity List

• Validated End-User Program

• Intra-Company Transfer License Exception

• Commerce Control List review

• Revised de minimis rule

Expanded Entity List• Published

– August 21, 2008

– Foreign persons acting adverse to U.S. national interests

– Appeal process

• Amended with additional foreign parties

– September 22, 2008

– December 5, 2008

• Results

– Removals and denials

Validated End-User (VEU) Program

• Companies have a track record of responsible civilian end-use of U.S.-controlled technology

• Authorization permits transfer of certain U.S.-controlled items without individual licenses

• Market-based incentive for companies to use U.S. items responsibly

License Exception Intra-Company Transfer (ICT)

• Proposed rule published on October 3, 2008

• Would approve U.S parent company and its wholly-owned or controlled-in-fact entities– exports, reexports, or transfers (in-country) of

CCL items for internal company use

• Prior authorization from BIS required

• Comments were requested and are currently being reviewed

Dual and Third Country Nationals• Deemed Exports

– Domestic transfer of controlled technology to a foreign national

– Does not apply to naturalized U.S. citizens, legal permanent residents or asylees/refugees

• Deemed Export Advisory Committee– Report – December 2007– Emerging Technologies and Research

Advisory Committee

NAS report

• Recommendations

– Justify controls rather than exemptions

– Create single intake and appeals structures