United States: The Obama Administration Proposes Significant Steps Towards Export Control Reform

On 9 December 2010 President Obama announced the publication of proposed rules, requests for comments, and other developments to advance the Administration's Export Control Reform Initiative. The announcements are consistent with the three-phased approach previously announced on 30 August 2010 for implementing a new, reformed export control system. In addition on 9 November 2010 the President announced the establishment of the Export Coordination Enforcement Center, a new interagency center residing at the Department of Homeland Security to coordinate the government's enforcement efforts.

With the 9 December announcements, the Administration has taken another tangible step towards implementing a new export control system. These announcements also represent a significant opportunity for companies to provide feedback on the Administration's export control reform efforts and to seek changes or clarifications with regard to specific controlled items.

A White House press release provides a detailed summary of the proposed rules, requests for comment, and other developments. These developments include:

• Restructuring Category VII of the U.S. Munitions List (USML) - The State Department published a proposed rule amending Category VII to provide a "positive list" of controlled defense articles relating to tanks and military vehicles. The State Department expects that, once this rule is implemented, about 74 percent of the items formerly controlled under Category VII will be shifted to the Department of Commerce's Commerce Control List (CCL), after the required Congressional notifications are made. See 75 Fed. Reg. 76930 (Dec. 10, 2010).
• Revisions to the USML - The State Department published an advance notice of proposed rulemaking requesting comments on revising nearly all the other categories on the USML. The rulemaking seeks input on converting the USML categories into a "positive list" of controlled categories with specific technical parameters, recommending each defense article's proposed tier of control, and identifying any current defense article that does not meet the criteria for any of the USML tiers (which would result in that item being shifted to Commerce Department jurisdiction). See 75 Fed. Reg. 76935 (Dec. 10, 2010).
• Revisions to the CCL - The Commerce Department published a similar advanced notice of proposed rulemaking seeking public input on controlled entries on the CCL. Specifically, the notice requests recommendations on how the CCL entries could be made more clear and "positive", and in which tiers each controlled items should be placed. The Commerce Department also is seeking information on the foreign availability of controlled items on the CCL. See 75 Fed. Reg. 76664 (Dec. 10, 2010).
• Broad license exception for strategic trade - The Commerce Department published a proposed rule that would create a new license exception, License Exception Strategic Trade Authorization (STA). License Exception STA would allow exports, re-exports, and in-country transfers of specified items (including certain items controlled for national security reasons) to certain countries that pose little risk of unauthorized end-use or diversion. The use of the License Exception is subject to notification, destination control statement, and statement of assurance requirements. See 75 Fed. Reg. 76653 (Dec. 10, 2010).
• Consolidated Restricted Parties List - The White House also announced the establishment of a single list that consolidates the various Restricted Parties Lists maintained by the Departments of Commerce, State, and Treasury. This consolidated list can be found by clicking here.

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