Presenting a live 90-minute webinar with interactive Q&A Export Control Reform: Are You Ready for Compliance? Preparing for New Commodity Jurisdiction, Classifications, Licensing Changes and More TUESDAY, AUGUST 6, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Benjamin H. Flowe, Partner, Berliner Corcoran & Rowe , Washington, D.C. Brandt Pasco, Associate, Kaye Scholer , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Export Control Reform: Are Your Clients Ready for Compliance? Preparing for New ITAR and EAR Rules, Commodity Jurisdictions, Classifications, and More Changes August 6, 2013 Ben H. Flowe, Jr., Berliner, Corcoran & Rowe, LLP bflowe@bcr-dc.com Brandt Pasco, Kaye Scholer, LLP brandt.pasco@kayescholer.com
ECR Agenda • Where Have We Been? The Current Bifurcated System of ITAR and EAR Proposals for Four Singles and Three Phases • Where Are We Now? IT System, Enforcement, Agencies More Similar Proposed Rules for Positive USML, Moving Items to EAR 600 Series Framework New Final Rules for USML Cats. VIII and XIX, CCL 9Y610 and 9Y619; VI, VII, XIII, XX, CCL8Y609, 0Y606, 0Y617, 8Y620; Other Categories Proposed Jurisdictional Analysis and “Specially Designed” License Exceptions and AT + PRC Transition Rules for ITAR and EAR • Where Are We Going? More Final Revisions to USML and 600 Series How to Help Your Clients Prepare and Implement! 6 6
The Current System Two Primary Regulatory Systems: • “Defense Articles” controlled by the International Traffic in Arms Regulations (“ITAR”) and subject to Department of State jurisdiction. ITAR controls are based upon broad, often poorly defined categories. “Design Intent” and government policy review are key components. • “Everything else” (with a few exceptions) is subject to the Export Administration Regulations (“EAR”) and subject to Department of Commerce jurisdiction. Tightest controls are on “dual - use” items with military applicability. EAR controls are “positive,” generally based on enumerated criteria. • “Commodity Jurisdiction” determines which system applies. • Separate Enforcement, IT, Licensing, Lists, definitions. 7
Background on Export Control Reform • President Bush National Security Policy Directives 55-56 2008 EAR-ITAR Reform – Faster Processing, Improve CJs, Better Lists, CCL Reform, Etc. • Nat’l Science Foundation Study 1/2009 – “Export Control System is Broken” • August 2009, White House Announced Broad Interagency Review of Export Controls to Identify Ways to Enhance National Security • December 2009, Presidential Study Directive 8 – 13 Member Interagency Task Force To Recommend Reforms to State, Commerce, and OFAC • April 2010, Defense Secretary Gates explained how national security and U.S. industrial base desperately needed export control reform and he laid out a basic framework. • Main goals of Export Reform: Improve interoperability with NATO and other close allies. Reduce incentives for companies to design out U.S. origin items. Allow Administration to focus on real priorities for security – Higher Walls Around Fewer Items. 8
Goals of Export Control Reform Four “Singularities”/Singles : • Single, Positive Control List “Smaller Yard.” Get away from overlapping, overbroad, and inconsistent control lists. • Single Primary Enforcement Agency “Higher Fences.” More robust enforcement. • Single IT System • Single Licensing Agency Three Phases: 1. “Easy” Admin Reforms – Crypto, ITAR Dual-Nationals 2. “Hard” Admin Reforms – Revising Control Lists, Creating License Exception STA, etc. 3. Legislative and Multilateral Reforms, Single Agency and List (Needs Congress, May Never Come) 9
Why do Clients care? Licensing a “Smaller Yard” • Vast quantities of items, especially parts and components, are moving from the ITAR to the EAR 74% of Category VII (Military Vehicles) moving to EAR 10
Why do Clients care? Export enforcement and “Higher Fences” • Export Enforcement Coordination Center (“E2C2”) Members include: Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, Treasury, and the Office of the Director of National Intelligence. In 60% of enforcement cases since E2C2 was established, other agencies had independently developed relevant evidence Investigations more coordinated, efficient, effective. • Things still on the ITAR will get lots of scrutiny Intelligence Community support of licensing and enforcement is new Penalties can be significant, strict liability civil for most. • Complex New EAR controls may lead to confusion and violations • Voluntary disclosures can put past violations in the past 11
Export Reform Achievements To Date Control List Changes • DDTC Final Rules to Date: April 16, 2013 (effective Oct. 15, 2013) – 78 Fed. Reg. 22740 (Apr. 16, 2013). Revised USML Cat. VIII (Aircraft), removing some aircraft and even more parts/components from the USML. Created new Cat. XIX (Gas Turbine Engines), consolidating engines previously classified in Cats. IV, VI, VII and VIII. July 8, 2013 (effective Jan. 6, 2014) – 78 Fed. Reg. 40922 (July 8, 2013). Revised USML Cats. VI (Surface Vessels and Naval Equipt.), VII (Vehicles), XIII (Aux. Mil. Equipt.), and XX (Submersibles), removing many items and parts/components from USML. • BIS Final Rules to Date: April 16,2013 (effective Oct. 15, 2013) – 78 Fed. Reg. 22660 (Apr. 16, 2013). Created New “600 Series” in CCL to house items moving from USML. Made many conforming changes to the rest of the EAR, such as to License Exceptions. July 8, 2013 (effective Jan. 6, 2014) – 78 Fed. Reg. 40892 (July 8, 2013). Created new “600 Series” ECCNs to house items moving from USML. • Final rules also announced new definitions for “Specially Designed” and laid out a number of “Transition Rules.” 12
Export Reform Achievements To Date USML Category and Rule CCL 600 Series Rules Nothing Yet I. Firearms………..………...……. Nothing Yet………………………………… Nothing Yet II. Guns….……...…………….…….. Nothing Yet.……………………………….. Nothing Yet III . Ammo…………...………………. Nothing Yet………………………………... Proposed Rule (3/18/13) – ECCN 0Y604 or 9Y604 IV. Missiles.………...………………. Proposed Rule (6/18/12)………….… Proposed Rule (6/18/12) – ECCN 1Y608 V. Explosives……..……………….. FINAL RULE (7/8/13)…………………... FINAL RULE (7/8/13) – ECCN 8Y609 VI. Vessels……………..……………. FINAL RULE (7/8/13)…………………... FINAL RULE (7/8/13) – ECCN 0Y606 VII. Vehicles……..………………….. FINAL RULE (4/16/13)……………….… FINAL RULE (4/16/13) – ECCN 9Y610 VIII. Aircraft……..…………………… Proposed Rule (7/30/12)………….… Proposed Rule (7/30/12) – ECCN 0Y614 IX. Training Equipment……….. Proposed Rule (7/23/12)………….… Proposed Rule (7/23/12) – ECCN 1Y613 X. Protective Equipment……. Proposed Rule (11/28/12)………….. Proposed Rule (11/28/12) – 3Y611 XI. Electronics…………………….. Nothing Yet.……………………………….. Nothing Yet XII. Sensors…………………………..
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