Export Reform Forges Ahead Despite Funding Uncertainty, Say Officials at PECSEA Meeting
The Bureau of Industry and Security (BIS) is facing funding hurdles as the agency eyes the Oct. 15 implementation of the first set of U.S. Munitions List (USML)-Commerce Control List (CCL) transfers under the administration’s Export Control Reform (ECR) initiative, said Under Secretary of the Commerce Department’s BIS Eric Hirschhorn at a Sept. 18 meeting with the President’s Export Council Subcommittee on Export Administration (PECSEA). Hirschhorn said congressional failure to pass an appropriations bill or continuing resolution by the beginning of Fiscal Year (FY) 2014 on Oct. 1 will virtually shut down ECR licensing operations at BIS. Lawmakers are currently scrambling to provide the government funding for FY2014 (see 13091129). But should funding be provided, Hirschhorn also said the House is targeting significantly lower funding for BIS than the president requested. The House mark will hamper ECR outreach and awareness efforts, said Hirschhorn.
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The president requested $112 million for BIS for FY14, which begins Oct. 1. "The House mark is $94 million,which is just about the same as which with been under in [FY]13" and has left the agency unable to meet its goals, said Hirschhorn. “The Senate mark is $112 million…I think no one knows where this is headed in the short term, whether we’re going to be open on Oct. 1 or whether we’re going to have a continuing resolution, how long it will be if there is one, when we will see a Commerce Appropriations bill…we don’t know.” BIS has yet to determine where specifically cuts would fall in the event of a government shutdown or continued sequestration, said Hirschhorn, noting that furloughs at the Defense Department are already having an effect on the ECR effort.
ECR Effort Continues Unabated
Despite the funding uncertainty, BIS is forging ahead with ECR implementation, said Hirschhorn. The Oct. 15 implementation set will include Category VIII (aircraft and related articles), category XVII (classified articles, technical data and defense services not otherwise enumerated), category XXI (articles, technical data and defense services not otherwise enumerated) (see 13041518). Hirschhorn said licenses will not be issuedprior to Oct. 15, adding that BIS is hiring additional licensing officials despite the prospect of cuts. BIS is also ramping up its interagency coordination efforts, including the outbound branch of CBP.
Revisions to USML categories IV (Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines), V (Explosives, Propellants, Incendiary Agents, and their Constituents), IX (Military Training Equipment), and X (Protective Personnel Equipment) will publish by the fall, said Hirschhorn. “We and State and Defense are also reviewing some of the more difficult categories: category XII, which includes sensors and night vision items, and category XIV, which includes toxicological agents,” said Hirschhorn, adding that the agencies will publish before Oct.15 a “CCL clean up rule” and minor corrections to the impending April 16 implementation rule. BIS is also providing two tools on its website to help exporters navigate and understand ECR.
“There’s the specially designed decision tool and the CCL order of review decision tool. The specially designed tool will help exporters determine whether an item is specially designed under the new definition of specially designed, which was published in April,” said Hirschhorn. “The second tool is a CCL order of review tool. That’s sort of an electronic decision tree, which helps you determine if an item is, first, classified as a 600 series in a military ECCN, in a non-military ECCN, which is basically our existing list or as EAR 99.” Also in attendance at the PECSEA meeting, Secretary of Commerce Penny Pritzker emphasized the importance on the implementation of this first set of transfers. “This is something that has eluded us for decades and so this is not something to be taken lightly. So the first step has really significant far ranging benefits…interoperability with our allies is not the least of which,” said Pritzker.
Commerce Targets VSD Remodeling
The Commerce Department will be circulating a draft to the public and PECSEA at some point in the Fall that spells out how the agency intends to remodel its Voluntary Self Disclosure (VSD) protocol, said Assistant Secretary of Export Enforcement at BIS David Mills at the PECSEA meeting. Mills said Commerce has recently eliminated the backlog of VSDs and streamlined the process of submission and response, adding that Commerce concluded 180 days was the appropriate time limit for submission of comprehensive narrative accounts for VSDs to within 180 days of the initial VSD notification (see 12110619). Mills also said Commerce intended to put into effect penaltyguidelines for violations, modeled off of the guidelines used currently by the Treasury Department’s Office of Foreign Assets Control (OFAC). Those guidelines, Mills said, recently slapped a $2.8 million penalty on a United Arab Emirates (UAE) for exporting computer systems to the Syrian government, after declaring the destination was the Iraqi Ministry of Communications.
“We are looking at guidelines of our own that would be modeled after that fundamentally looks at the transaction value of an issue, which is what the statute says: the price of the value of the goods or $250,000, which ever is greater. And that is what OFAC’s guidelines are premised on and that is what we’re looking at,” said Mills. “And then you might add ‘well how do you address an issue where an item of very little monetary value is used in an explosive device and is used against our troops and how do you address that?’ And there is a mechanism in these guidelines against that that are already in OFAC’s to call it egregious. And then all bets are off and the schedule of imposition of penalties, which provides some transparency to the exporters, is set aside and you put it up to the statutory maximum.”