Currently, the U.S. Government is revising the U.S. export control and enforcement framework. The new system is designed to facilitate efficiencies and coordination within the U.S. Government, protect national security and critical technologies, and cut costs to U.S. exporters. However, compliance will remain paramount because the U.S. Government is also consolidating its enforcement mechanisms.
In August 2009, President Obama directed a broad-based inter-agency review of the U.S. export control framework. There has not been much change to the International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) since the end of the Cold War. The export control reform will facilitate secure and transparent trade for all U.S. exporters around the world. According to the U.S. Government, 98 % of all identified exporters are businesses that have fewer than 20 employees. Yet, on average they spend 36 % more per employee on compliance. The new system seeks to change this.
Generally, the ITAR control the manufacture and export of defense articles, defense services, and defense technology. The EAR control the export of dual-use goods, software and technology. In addition, U.S. exporters should also be concerned with the Office of Foreign Asset Control Regulations (OFAC). The OFAC administer and enforce U.S. trade sanctions.
Current Export Control Regime Challenges:
Multiple agencies have overlapping jurisdictions, disharmonized enforcement tools, and numerous control lists which have posed many challenges to small businesses and U.S. exporters.
Overlapping Enforcement: There are seven primary departments involved in export controls: Commerce, Defense, Energy, Homeland Security, Justice, State, and the Treasury. The U.S. Departments of Commerce, State, and the Treasury are primarily responsible for export licensing. The U.S. Departments of Homeland Security, Justice, and Commerce are responsible for criminal enforcement investigations.
In addition, the U.S. Department of Defense, the U.S. Department of Homeland Security’s Customs and Border Protection, and the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Federal Bureau of Investigations are also involved in various aspects of export controls. This results in overlapping enforcement actions, multiple investigations based on the same violation, and fundamentally confuses U.S. exporters. It also creates numerous compliance risks because it potentially exposes the same U.S. exporter to multiple agencies based on a single incident.
Disharmonized Enforcement Tools: Before the export control review started, different laws had inconsistent penalties for similar violations which offered unpredictable results for the U.S. Government. For example, in some cases, the maximum penalty for criminal violations of the U.S. Munitions List controls was only ½ of the comparable sentence for violations of the Commerce Control List.
Multiple Export Lists: U.S. exporters were required to spend a lot of time and resources reviewing various screening lists maintained by the U.S. Departments of Commerce, State, and the Treasury before they could make an export. This made it difficult for them to ensure compliance. They had to review the U.S. Munitions List, the Commerce Control List, embargo lists, excluded parties list and entities, and others.
The New and Improved Export Controls Regime
The revisions of the export control and enforcement regime are far from over, but this is what the U.S. Government has accomplished thus far:
Consolidated Screening List: The U.S. Government made substantial improvements to consolidate all the screening lists. In 2015, the U.S. Government introduced a new feature which helps to conduct searches without knowing the exact spelling of different entities listed. This will help U.S. exporters to conduct due diligence but may also require them to review their current compliance policies.
Export Coordination Enforcement Center: Pursuant to the Executive Order 13558, Export Coordination Enforcement Center, the U.S. Government has set up the mandatory de-confliction and coordination of government-wide export enforcement activities. This is designed to address the jurisdictional and enforcement overlap that currently exists between different U.S. departments involved in export controls and enforcement. The new center also allows the U.S. Government to better coordinate its enforcement actions.
According to the 2015 Government Accountability Report CRITICAL TECHNOLOGIES Agency Initiatives Address Some Weaknesses, but Additional Interagency Collaboration Is Needed, multiple agencies have responsibility for export controls and for protecting U.S. critical technologies. The export coordination enforcement center is designed to consolidate enforcement, investigations, and public outreach activities related to enforcement of U.S. export controls in one place. The chart below lists various programs involving export controls and critical technologies and each agency involvement.
|Program||Lead Agencies and Stakeholder Agencies|
|International Traffic in Arms Regulations export controls||State (lead), Defense, Homeland Security, and Justice|
|Export Administration Regulations export controls||Commerce (lead), State, Central Intelligence Agency, Defense, Energy, Homeland Security, and Justice|
|Foreign Military Sales Program||State (lead), Defense, and Homeland Security|
|National Disclosure Policy Committee||Defense (lead), State, and intelligence community|
|Militarily Critical Technologies Program||Defense|
|Committee on Foreign Investment in the United States||Treasury (lead), Commerce, Defense, Energy, Homeland Security, Justice, State, and others|
Harmonization of Criminal Penalties for Illegal Exports: The Comprehensive Iran Sanctions, Accountability, and Divestment Act has harmonized the various statutory criminal penalties for export control violations. According to the U.S. Government, criminal convictions are now all standardized to up to $1 million and or 20 years in prison or both. Some of the recent enforcement actions include an attempted illegal export of up to five tons of carbon fiber to China. The individual was sentenced to 46 months in prison and lost export privileges for 10 years. In another example, a California based company illegally exported pressure transducers to Israel, Malaysia, China and Singapore. The company was fined $850,000 or which $600,000 was suspended.
The new export control reforms will benefit U.S. exporters and small businesses because they consolidate the regulatory oversight and reduce compliance costs. At the same time, the U.S. Government is enhancing its enforcement tools to better address violations and coordinate its control efforts. In order to benefit from the new reforms, and avoid the penalties, it is important to revise compliance policies.
If you would like to learn more about the U.S. Export Control Reforms, please consider attending the “New Opportunities for Small Businesses and U.S. Exporters” webinar on June 23, 2016 between 12 and 1 PM EST. This webinar will address the ITAR, EAR, and OFAC, major export control reforms and opportunities, new enforcement mechanisms, and cost-effective export compliance practices for small businesses.
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Centre has also recently created a Trade Agreements Act Forum on LinkedIn to provide a world-wide forum to discuss best practices for Trade Agreement Act (TAA) and Buy American Act (BAA) compliance issues and new developments.
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