Compliance 360: Export control reform rolls on

    The U.S. Munitions List is now streamlined and objectively based on items that only confer a critical military or intelligence advantage on the United States. That means licensing requirements don’t catch all products in broad categories any more. And many militarily less sensitive items have been transferred to the licensing jurisdiction of the Commerce Department.

    The departments of Commerce and State have published final rules on 15 out of 21 categories of the Commerce Control List and USML. 

    Officials say the reform process will, by its nature, be ongoing.

    “The important thing is to create the idea that it’s a dynamic process, that the agencies are committed to keeping this moving so that we don’t find ourselves in 10 to 15 years out of date, and then are scrambling to catch up,” Eric Hirschhorn, the Commerce Department’s undersecretary for industry and security, told reporters during a briefing at the annual Update Conference on Nov. 2. 

    Another important step was the establishment of Strategic Trade Authorization, which streamlines export licensing of many items to 36 close allies and friendly nations. Since July 2011, 622 companies have used STA at least once to deliver close to 20,000 shipments valued at $1.2 billion, officials said.

    Hirschhorn acknowledged in his speech that getting a company to the point where STA is more efficient than the old system takes time and resources because compliance systems must be revised, items reclassified, foreign partners educated and old habits changed. 

   “But we believe that once such initial tasks have been completed, export control reform works as intended.  We are confident that the exceptions will be used more as exporters and their customers become accustomed to them and make the requisite changes to their systems,” he said.

Conference conflicts
    U.S. Customs and Border Protection’s Trade Symposium in Baltimore Nov. 4-5 overlapped with the final day of the Bureau of Industry and Security’s Update Conference on export control reform in Washington.
   It would have been nice to have them back-to-back in the same city so corporate compliance officers could have attended both events, although I’m not sure how many could have afforded to spend a whole week away from their regular jobs even if the schedule had allowed it. 
   CBP’s hands were tied a bit by the threat of another government shutdown if lawmakers didn’t agree on funding levels—which made it difficult to book a venue until the last minute. 

   Both conferences were heavily attended by hundreds of trade professionals. In a private conversation, one industry leader questioned whether these types of government events are appropriate use of taxpayer dollars, especially since there are so many trade associations holding conferences at which government officials dot the agenda. It could be argued that between industry conferences, webinars, other meetings and media reports that plenty of outreach and education about CBP initiatives takes place. 

   But events like the Trade Symposium allow Customs to control the entire message and hit on multiple topics it wants to emphasize at one time. 

Raid on Customs fees 
   It’s ironic that a government program that relies on user fees to cover most of its mission is now being partly supported by a raid on another program supported by user fees.  
   I’m talking about the recent enactment of the FAST Act. The bulk of the roughly $300 billion, five-year surface transportation reauthorization, used to pay for highway infrastructure, transit and safety activities, comes from motor fuel taxes drivers pay at the pump. That money goes into the Highway Trust Fund to help states with infrastructure projects. And it’s pretty much protected from other committees in Congress that might want to redirect the dollars for other governmental purposes. 

   Problem is there’s not enough money in the HTF to cover projects already in the pipeline. So, Congress has had to prop up the HTF with about $75 billion from the Treasury—including debt and other diversions—over seven years. The FAST Act includes $70 billion in offsets and one of those is a $5.7 billion transfer of Customs fees to the HTF over 10 years. 

   Importers expect that the fees they pay will go for their intended purpose. Some freight transportation executives even get upset that some HTF money goes for transit and bike paths, but at least those are transportation-related. It’s ridiculous that Congress has to steal from a dedicated fund in another bucket to help pay for desperately needed transportation infrastructure because it can’t find the collective backbone to raise the fuel tax once in 22 years, or create a new revenue scheme to supplement the gas and diesel tax.

   “Diversion of user fees by Congress is essentially a ‘bait and switch’ which is a bad practice that will undermine the private sector’s support for user fees,” the American Association of Exporters and Importers said in written comments to Congress before the FAST Act was passed.