Summary of BIS 2011 Update Conference on Export Controls and Policy (Part 1 of 2)

For those readers that were not able to attend last month's Update 2011 Conference on Export Controls and Policy in Washington, DC, we are presenting a two part summary of the conference prepared by Benjamin Tarr, a law student at the American University's Washington College of Law who is focusing on international law.

Day 1 - Tuesday July 19, 2011

The Update 2011 conference presented by the Commerce Department's Bureau of Industry and Security (BIS) commenced with a short welcome address from Mr. Bernard Kritzer, who serves as the Director of the Office of Exporter Services. He applauded President Obama for his August 2009 pledge to reform the export system to create a classification system which allows government organizations to focus on examining sensitive items for classification while allocating less effort to classifying conventional, non-sensitive items for national security reasons.

After Mr. Kritzer’s speech, Deputy Under Secretary for Industry and Security Daniel O. Hill addressed conference attendees. He announced that President Obama’s export control policies have succeeded, despite widespread skepticism and opposition expressed during Update 2010. Mr. Hill placed special emphasis on the fact that President Obama has led the effort to place the Defense, State and Commerce departments all on the same export control IT system, thus enabling greater efficiency in the export control process. Mr. Hill commended the participants in Update for attending, as the sold-out nature of the conference indicates a surge in interest and attention given to this field.

The morning’s events culminated with a by Eric L. Hirschhorn, Under Secretary for Industry and Security. Under Secretary Hirschhorn opined that the current export control system is based on outdated Cold War technologies and “is not responsive to current threats.” He noted that export control policy and American global competitiveness is directly linked to national security. He applauded the current efforts to implement of a more simplified U.S. Munitions List that created a tiered structural system designed to control sensitive items. This is important, according to Mr. Hirschhorn, because the private sector now manufactures most of the goods used by the military. He believes that the government should focus its resources on the most sensitive items going to countries that pose great risks to U.S. national security. Less important military items should be subject to lesser scrutiny than should items of high sensitivity.

Mr. Hirschhorn elaborated on the Administration's three-tiered control list and mentioned the recent implementation of license exception Strategic Trade Authorization (STA) where exporters can export certain items license-free, absent any specific statutory requirements, to 36 countries including Canada, Australia and countries in the European Union. Specifically, these export reform efforts have focused on eliminating “easy cases” from governmental scrutiny vis-à-vis licensing to enable government resources to focus more of its energy on cases that require further examination as to whether or not to grant licenses. License exception STA will potentially eliminate 3,000 of the 22,000 licenses issued by BIS.

Under Secretary Hirschhorn also mentioned the Administration's role in continuing the sanctions regimes on North Korea, Iran, and Cuba. He also noted BIS's role in efforts to implement UN Security Council Resolution 1540, which directs U.N. members to establish an export control system and to collaborate to advance non-proliferation and counterterrorism goals. Additionally, he noted the Executive Order requiring the BIS, FBI, and military intelligence to share information in counterterrorism efforts.

With respect to enforcement of export control laws and regulations, Mr. Hirschhorn mentioned that BIS will continue to penalize individuals for deliberate violations of BIS regulations with punishment including, but not limited to, fines, imprisonment, and a denial of export privileges. However, the penalties can be mitigated if voluntary self-disclosed. (Editor's note: the full text of Under Secretary Hirschhorn's speech can be found here.)

The next speaker was Assistant Secretary for Export Administration Kevin Wolf who noted that his three goals since joining BIS were: first, to ensure aggressive compliance with the laws and regulations that we have now; second, trying to address the biggest problems that exporters face on a day-to-day basis, such as unnecessary impediments on trade with U.S. allies and dealing with the overlap between the U.S. USML and the CCL. His long-term goal is to address the compliance burden faced by those subject to the U.S. export control system.

Assistant Secretary Wolf then provided detailed information on the recently published proposed rule on how items removed from the USML will be eventually controlled on the CCL. He also mentioned that later this year BIS will be issuing a notice soliciting public comments on efforts that can be taken to streamline and clarify the EAR and are reviewing the public comments received on the notice seeking information on making the CCL a more positive list. He noted that it is BIS's goal by the end of 2012 to have a comprehensive proposal to simplify the EAR and start addressing the regulatory compliance burdens that drain corporate resources. (Editor's note: the full text of Assistant Secretary Wolf's speech can be found here.)

The lunch speaker was William Daley, President Obama’s Chief of Staff and a former Secretary Commerce. He noted that President Obama’s goals will allow the U.S. to double its exports in five years. He also criticized the U.S. control system because it still contains two control lists, each with its own control and IT policies and noted that “One branch doesn’t know what the other is doing.” (Editor's note: The White House's summary of Daley's remarks can be found here).

In one of the afternoon break out sessions, panelists from BIS, OFAC, the State Department and DTSA briefed attendees on sanctions policy issues. Among other things, they noted the recent sanctions imposed on certain companies under the amended Iran Sanctions Act and recently listed Iran Air and Tidewater Mid East Company as supporters of Iran’s WMD program and has imposed sanctions on these two companies. Regarding the situation in Libya, BIS has suspended all licenses to Libya. However, no changes have been implemented vis-à-vis exception eligibility for licenses to Libya.

South Sudanese independence has resulted in challenges to BIS since the U.S. must decide which sanctions, if any, apply to South Sudan. Currently, South Sudan is not subject to anti-terrorism controls that previously applied to all of Sudan. But, sanctions do apply to areas where Sudan and South Sudan cooperate, including much of the oil and gas industry.

Editor's note: The presentations from the Sanctions Panel and other panel presentations can be found here on the BIS website.