Reforms Ease US Export Controls, Constraint on Competitiveness
by Bill Armbruster, blog anchor
Export controls have long bedeviled US business. Obviously, for national security purposes, some controls are needed. We don’t want our adversaries, or potential adversaries, to have easy access to items that could be used to attack the US or our allies.
The US has by far the most restrictive controls, which may be appropriate in some instances. But in far too many cases, the desire for security has put US companies at an unnecessary competitive disadvantage. The controls affect not only exporters, but also companies, very often smaller businesses, that sell their products to direct exporters.
John Engler, former president of the National Association of Manufacturers, once told me that Japanese companies had stopped designing products manufactured with US plasma-cleaning equipment because of the delays and uncertainties posed by our export-control system. “Liechtenstein proved to be a more dependable supplier,” he added.
To obtain a license for goods that may be subject to export controls, you have to apply for a license from the State Department, which controls items that have a strictly military purpose, while the Commerce Department’s Bureau of Industry and Security regulates items that have both commercial and military applications. It’s much easier to obtain licenses under BIS Export Administration Regulations (EAR).
In 2009, the Obama administration initiated a review aimed at reforming the licensing process.
Those reforms began to take effect in 2013. Exporters can now obtain exceptions from BIS known as strategic trade authorizations for certain items without a transaction-specific license.
So if, for example, you manufacture tables that have to be modified for naval vessels, you no longer have to get a license to export them, notes Lauren Airey, NAM’s director of trade facilitation.
Implementation of more comprehensive reforms began on October 15, when the State Department announced final rules for two of the 21 product categories on its US Munitions List that are subject to its International Traffic in Arms Regulations (ITAR): Category VIII – Aircraft and Associated Equipment, and Category XIX – Gas Turbine Engines.
Rules for another set of product categories, involving military vehicles, vessels, submarines, and auxiliary military equipment, took effect on January 6. Airey says she hopes that the administration will publish final rules for the remaining product categories by the end of 2014.
Items that are no longer subject to State Department controls, such as certain parts and components, are being moved to the BIS revised Commerce Control List. The CCL is divided into 10 broad categories, and each category is further subdivided into five product groups. To determine whether you need a license from BIS you must know whether your product has a specific Export Control Classification Number (ECCN).
The State Department said the reforms will allow the government to focus on the most sensitive items, facilitate interoperability with US allies and partners, and strengthen the US defense and aerospace industrial base, which is responsible for more than $20 billion in annual exports.
The main benefit as far as the business community is concerned is much simpler: it will be easier to do business. “This is a big deal,” said Bill Reinsch, president of the National Foreign Trade Council, noting that the lists hadn’t been reviewed since 1994. “It will mean a simpler, clearer, procedure where decisions will be made more efficiently,” he told me.
The reforms also include an initiative to create a more integrated IT system. “We’re hoping that it will create a single portal so that exporters won’t have to determine whether to apply under EAR or ITAR,” said Airey.
The NAM official said the reforms create a lot of opportunities for small and medium businesses, including companies that do not currently export.
“You could open your business to customers abroad. They offer a lot more flexibility, though you’re going to have to learn how to take advantage of those opportunities,” she told me.
The Commerce Department website has a page devoted to export controls that provides a lot of useful links. Besides studying the various websites and lists noted above, you can learn more by attending one of the BIS seminars (the 2014 seminar schedule has just been released).
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Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected]
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: January 23, 2014