Canada-US Border

By: Capital Customs  09-12-2011

The following was reported on in today’s edition of “WorldTrade Interactive”.

The Export Control Practitioners Group recently submitted to the Obama administration a number of recommendations for reform of the U.S. export control system, an issue the White House is currently reviewing. The ECPG’s recommendations were drafted by export controls professionals from industry, associations and law firms… They were submitted just ahead of several high-level meetings on export control reform issues that were held in Washington, D.C., this week.

“Many of these recommendations, if enacted, would have a favorable impact on our firm’s clients that produce products subject to the USML and EAR,” Jacobson said. “In particular, reform of the commodity jurisdiction process would be of significant benefit to exporters since it is often difficult for exporters to know with certainty whether their products are subject to the ITAR or EAR. In addition, the EPCG’s recommendations relating to revamping the process and structure for the imposition of penalties for violating export control laws and regulations would be welcome news.”

The group’s recommendations focus on process and policy changes as well as a number of substantive and practical ways to modernize and improve the current system. They include many similarities to, but some substantive differences from, the reforms being advocated by the Coalition for Security and Competitiveness. Among the group’s specific proposals are the following.

Agency Structure

- maintain the overall interagency export control structure but attempt to ensure more cooperation, including physical collocation where possible

- do not add more layers of bureaucracy, including a single point of entry at the front end of the process or an overarching supervisory structure as some have advocated

Commodity Jurisdiction

- establish the national security advisor as the final decision maker to resolve conflicting CJ claims by different agencies

- move items that do not belong on the USML to the Commerce Control List at an
appropriate level of control so that Wassenaar Arrangement Munitions List items are placed on the USML, multilaterally controlled dual-use items are placed on the CCL, and items not controlled by a multilateral regime or treaty are subject to the Export Administration Regulations

- quickly implement a uniform, common sense and objective definition of defense article that focuses on core military functionality

Control List Review and Reduction

- conduct regular annual reviews of export control lists with a “default to decontrol” provision that would require items to be removed in the absence of a timely, documented, genuine review and justification for retaining controls

- create a special mechanism to automatically decontrol certain items based on their anticipated life cycle and the forecast arrival of the next generation

Foreign Availability

- base analyses of foreign availability on controllability; i.e., whether the item is available in sufficient quantity and comparable quality so as to render attempts to control ineffective in achieving their intended purpose

- if foreign availability is determined to exist for an item but the president decides to maintain an export control, that control should clearly be labeled as a unilateral control and the president should have to renew his/her determination pursuant to an automatic foreign availability review every year

Licensing

- with respect to the ITAR: simplify the use of exemptions by locating all of them in one section of the ITAR, combine similar exemptions for transactions with parties in destinations that pose the least risk to national security, allow all exemptions to apply to defense articles, technical data and defense services, and create an exemption for re-exports with less than 10% U.S.-origin ITAR controlled content to relieve pressure to design out U.S.-content

- with respect to the EAR: expand the validated end-user program to include additional countries and end users, implement the long-awaited intra-company transfer rule, eliminate licensing requirements for NATO and other allied countries, consider preferential treatment for trusted exporters, and broaden exemptions for mail and telephone communication to include instant communication technologies, personal communications software and Web services

Enforcement

- establish a civil penalty structure that (a) draws meaningful distinctions among violations resulting from willful or knowing conduct, gross negligence, negligence or strict liability and (b) includes tiers of penalties with caps on the amounts that may be assessed based on levels of culpability as well as significant mitigation for voluntary self-disclosures

- conduct periodic agency review, update and enhancement of enforcement policies and guidelines to establish uniformity in their application, particularly with respect to agency handling of VSDs

- encourage enforcement agencies to improve procedures for sharing information to facilitate global settlements of prosecution and penalty cases

Deemed Exports

- limit deemed export licensing requirements to sensitive, multilaterally controlled technology

Intracompany Transfers

- provide trusted party license exceptions for dual-use intra-company transfers to and among non-embargoed destinations

- grant two distinct intra-enterprise license exceptions for (a) exports, re-exports and retransfers of software and technology, including deemed exports and (b) production and test equipment, parts and products that will be placed in inventory

Encryption

- remove encryption controls on products that do not have cryptography as their core function

- remove review requirements from mass-market and other commodity products and components

- ensure mass-market treatment for components that are designed for use in mass-market products or are otherwise widely available

- eliminate post-export reporting requirements

- eliminate controls on products utilizing only publicly available software

End-User and End-Use Screening

• link end-use/end-user controls and screening requirements (e.g., expectations of due diligence) imposed by OFAC, BIS and DDTC to specific control levels and transaction categories

• consolidate the various end-user lists maintained by the various agencies into one centralized list, including names and data in the end users’ native languages, to afford easier access by exporters and other interested parties


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