Last week the Office of Foreign Assets Control (OFAC) held its 3rd International Trade Symposium at the Convention Center in Washington DC. Adam Szubin, OFAC’s Director, opened the Symposium with descriptions of sanctions efforts regarding Iran, Syria and North Korea. He also highlighted two important new resources: a fuzzy logic Specially Designated Nationals (SDN) List search tool and an online application system for OFAC licenses.
Here is link to the online registration page, as well as other useful OFAC resources: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20130418_33.aspx
On April 24, during a hearing entitled: “Export Control Reform: The Agenda Ahead, ”Acting Assistant Secretary of State Tom Kelly, Assistant Secretary of Commerce Kevin Wolf, and Defense Technology Security Administration Director James Hursch all testified before the House Foreign Affairs Committee. They discussed the goals and status of the President’s Export Control Reform (ECR) Initiative and answered questions on a variety of related topics. The hearing video is now available on the committee website, and copies of the respective opening remarks can be found using the links below:
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.
- 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.
- 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.
- 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.
- 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.
- 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!
Introduction: Major reforms are officially under way in the United States export control system. Many items that were considered Military in nature, and thus subject to stringent controls, will soon be re-classified. The aim of the reform is to move less significant Military items from State Department control to the Commerce Department where they will be subject to more liberal controls. These items, newly labelled as the ‘600’ series, could result in easier exporting for you! The details were announced today (April 15th, 2013) and the changes will take effect on October 15th, 2013.
What does this mean to me? If you produce goods or technologies that are currently on the US Military List, and are thus controlled by the International Traffic in Arms Regulations (ITAR), these changes will apply to you. Such items currently controlled under the ITAR will need to be reclassified. In addition to items moving to Commerce department control, the ITAR Categories are being re-written and you will need to ensure that you have the correct classification for your goods.
How can I classify my goods? By following the State and Commerce department websites, and the site set up specifically for Export Control Reform (http://export.gov/ecr/) you can read about the changes and their implementation. If you need assistance in re-classifying any of your goods, CTP Inc. has a team of experts who can assist you with this process.
What if my goods move to Commerce Department control under the 600 Series? This may be good news for you. Your items will still be under export control but will be listed under the Export Administration Regulations (EAR) rather than ITAR. The EAR has some relaxations that are not available under the ITAR and you may be able to export your goods under a license exception or other expedited processes. However, if you have always dealt with the State Department under ITAR, you will now need to understand the processes used by the Commerce department. Several CTP employees are former BIS experts, so we are familiar with the DOC system and can guide you through in the most effective way.
I have already exported goods to Europe. How can I deal with these? The extra-territorial nature of the ITAR controls means that goods sent abroad will still come under ITAR controls for re-transfer. It is important that these goods are also re-classified as it may mean that these controls can be relaxed. The pending changes to the U.S. legislation will have an impact worldwide and it is important that U.S. exporters or multinationals quickly re-assess their inventories in third countries. Within Europe, CTP works with Interexport Management Systems Ltd (IMS) who are experts on classifications within the EU region. IMS will guide you through the ‘600’ series changes while also advising on existing EU legislation. Remember that a U.S. Military item that is moved to the ‘600’ series will still be considered as a Military item in most other countries in the world. IMS– with its experts in the UK, Germany, Holland and Estonia–can advise you on the classification of your goods under different legislation.
Where can I get more information? The State and Commerce departments are keeping U.S. Industry informed through their websites as these changes unfold. For more specific advice and services, call Rick Phipps to discuss your compliance situation.
Phone: 1-703-683-5806; firstname.lastname@example.org.
The time has come. As promised, the Departments of Commerce and State have just published the final rules that will guide the initial implementation of the Obama Administration’s Export Control Reform. Since there is a six month waiting period, these rules will be effective on October 15th, 2013. See full text of DOC/BIS announcement below. DOS/DDTC made a very similar announcement a few minutes later.
Full Text of DOC/BIS Release: “As part of the Export Control Reform (ECR) Initiative, the Bureau of Industry and Security (BIS), and the Directorate of Defense Trade Controls (DDTC), Department of State, have published multiple proposed amendments to the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR), respectively, to strengthen national security by fundamentally reforming the export control system. This final rule implements the initial ECR changes by adding a structure and related provisions to control munitions items that the President has determined no longer warrant export control on the U.S. Munitions List (USML) on the Commerce Control List (CCL), specifically aircraft, gas turbine engines, and related items. “Today’s publication of implementation rules is the result of extraordinary interagency cooperation to realize the President’s vision of export control reforms that enhances national security by focusing our resources on the threats that matter most,” said Under Secretary of Commerce Eric L. Hirschhorn. This rule is being published in conjunction with a Department of State rule that revises the USML so that upon the effective date of both rules, the USML and CCL and corresponding regulatory structures will be complementary. Both rules become effective October 15, 2013.
Find links to both DDTC and BIS Final Rules using this link: http://beta-www.bis.doc.gov/index.php/about-bis/newsroom/export-control-reform-news
In another indicator that the reform initiative is heating up, BIS announced a special two hour Webinar will be held next Wednesday at 2:30PM EST, hosted by Assistant Secretary for Export Administration Kevin Wolf. The first hour will describe the structure of the initial implementation rule and the second hour will describe the structure of the definition of “specially designed,”
Note: CTP will be publishing several blogs and tweets in the coming days summarizing the transition to date, the important upcoming milestones, and the various services we can provide to exporters and law firms to cope with the pending changes.
Instructions for accessing the webinar on April 17:
Audio: To hear the presentation dial in at 2:30pm Eastern Time or just before:
1. Dial Toll Free number: 1-888-889-0538 or dial the toll number: 1-210-838-9521
2. Enter the pass code by speaking the word RULE
Visual: To view the charts:
1. Go to: https://www.mymeetings.com/nc/join/
2. Enter conference number: PW9710678
3. Enter Pass code on your keyboard: RULE