Commerce Under Secretary Talks Export Control Reform

September 26, 2012

On Tuesday, the National Small Business Association (NSBA) and Small Business Exporters Association (SBEA) hosted a teleconference featuring The Honorable Eric Hirschhorn, Under Secretary of the U.S Commerce Department’s Bureau of Industry and Security (BIS). Mr. Hirschhorn discussed the Export Control Reform (ECR) initiative and how these changes will likely impact small- and mid-sized exporters.

As the Under Secretary at BIS, Mr. Hirschhorn oversees efforts to advance U.S. national security, foreign policy and economic objectives by ensuring an effective export control and treaty compliance system. A long-time expert on exporting and national security, Mr. Hirschhorn answered questions on the challenges exporters face with export controls as well as provided an inside look at key efforts within BIS to improve exporting.

In August 2009, President Barack Obama directed a broad-based inter-agency review of the U.S. export control system, with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats, as well as adapting to the changing economic and technological landscape. This review determined that the current export control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishes our ability to focus our efforts on the most critical national security priorities.

As a result, the administration launched the Export Control Reform Initiative (ECR Initiative), with the goal of fundamentally reforming the U.S. export control system. The ECR Initiative is designed to enhance U.S. national security and strengthen U.S. ability to counter threats such as the proliferation of weapons of mass destruction.

The administration is implementing the reform in three phases. Phase I—already completed—and Phase II—hoping to be completed by the middle of next year—reconcile various definitions, regulations, and policies for export controls, all the while building toward Phase III, which will create a single control list, single licensing agency, unified information technology system, and enforcement coordination center.

This system is a national security-based program that requires exporters to obtain government permission before exporting controlled items—munitions and commercial items with military applications to countries, end-users or end-uses of concern. The current system is spread across seven departments – the Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury. To further complicate the program, there are two different control lists administered by two different departments, Commerce (Commerce Control List, CCL) and State (U.S. Munitions List, USML), under different statutory authorities that have significantly different requirements. Maintaining two different control lists has caused significant ambiguity, confusion and jurisdictional disputes between the departments, delaying clear license decisions for months, and sometimes, for years.

Therefore, the agencies are working on control list-related reforms that will move less sensitive items, mostly parts and components, predominantly manufactured by small businesses, from the State USML to the more flexible CCL.  Commerce’s statutory authorities allow these items to continue to be controlled but eligible to be shipped to close allies and partners with certain enhanced compliance requirements without a specific license. These items are still shipped via a type of authorization; the items are not de-controlled.

Clarifying what is controlled on which list and ending jurisdictional confusion will make it easier for exporters, especially small businesses, to comply and therefore remain competitive, which will help maintain and create jobs. It will also help create reliable supplier relationships between U.S. exporters and foreign customers and make it easier for U.S. companies, especially small businesses, to engage in secure trade, ensuring that the nation’s export control system is working as intended to prevent items from ending up where they should not.

This teleconference was a unique opportunity for NSBA and SBEA members to talk with Under Secretary Hirschhorn about export control reforms and various other issues that matter most to small- and mid-sized exporters.

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