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American Shipper

Lawmakers push bill to codify export control reform

The Export Control Reform Act of 2018 would formally authorize the executive branch to administer export controls, thus increasing congressional oversight.

   The bipartisan leadership of the House Foreign Affairs Committee during a Wednesday hearing pushed for advancement of a February-introduced bill that would re-codify control of dual-use and some military items licensed for export by the Commerce Department, and repeal the “Cold War-era” Export Administration Act (EAA) of 1979, according to a legislative summary.
   Introduced Feb. 15 by committee Chairman Ed Royce, R-Calif., and co-sponsored by committee ranking member Eliot Engel, D-N.Y., the Export Control Reform Act of 2018 would, among other things, require the President to establish a regular interagency review of both executive branch export control lists, and for Commerce to regularly update the lists to ensure proper adjustments and control of new items. H.R. 5040 remains pending in the committee.
   The bill defines “dual-use” items as having civilian as well as
military, terrorism, or weapons of mass destruction-related
applications.
   The Bureau of Industry and Security (BIS) generally regulates the export and re-export of sensitive commercial and dual-use items through its Commerce Control List (CCL), while the State Department regulates the export and re-export of defense articles and defense services on its U.S. Munitions List (USML).
   H.R. 5040 would also officially delegate administration of export controls to the Commerce, Defense, and State departments, as well as the Office of the Director of National Intelligence and other “appropriate federal agencies,” according to the summary.
   During the hearing, Rep. Brad Sherman, D-Calif., noted that the Export Administration Regulations (EAR) have continued “the last quarter century” under emergency authority pursuant to the International Emergency Economic Powers Act (IEEPA).
   The EAA expired in 2001, meaning the EAR no longer exists under a permanent legislative mandate, though all regulations previously authorized under the EAA have continued in effect.
   This is permissible under IEEPA Section 1701(a), which authorizes the President to block transactions and freeze assets pursuant to the existence of an “unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”
   However, the continuance of the EAA “is not regular order,” Sherman said. “This is not the rule of law, as it is supposed to be carried out.”
   He acknowledged “it has worked, more or less,” but added that Congress has allowed the executive branch to head up export control policy, and suggested greater Capitol Hill oversight. Sherman also advocated Royce’s and Engel’s bill.
   Royce pointed out that the EAA was designed to handle trade controls against the Soviet bloc, and has never been comprehensively updated since then.
   BIS didn’t respond to an email seeking an update on how its ongoing agency export control reform efforts are progressing.
   Lawmakers and witnesses also broadly considered the possibility of foreign governments underhandedly gaining control over sensitive U.S.-origin technology through the interagency Committee on Foreign Investment in the U.S. (CFIUS) examination process for proposed foreign investments into this country.
   Royce said export controls and the CFIUS process complement each other, but that export controls should be predicated on statute. Covington & Burling Senior International Policy Advisor Alan Larson, who previously served as a senior CFIUS, sanctions, and export controls official for the State Department, voiced his agreement.
   But both Royce and Mario Mancuso, senior visiting fellow for international security at The Hudson Institute and former under secretary of commerce for industry and security, noted that CFIUS has blocked few transactions over its 42-year lifespan.
   U.S. presidents have blocked only five total proposed transactions reviewed by CFIUS, including two by the Trump administration, counting in Monday’s order blocking on national security grounds a bid by Singapore-based telecommunications company Broadcom to acquire U.S.-based chipmaker Qualcomm, which would have been the largest deal in the history of the technology industry.
   In reviewing the attempted acquisition, CFIUS had disseminated concerns that the move could help China gain access to sensitive wireless technologies such as 5G.
   Royce asked whether the blockage suggests that CFIUS is taking a stricter approach to proposed transactions, regardless of potential legislation.
   Commenting generally on the latest merger bids reviewed by CFIUS, Mancuso said the recent blockages suggest the executive branch is taking foreign investment-related national security issues “more seriously.”
   Hearing witness Kevin Wolf, attorney for Akin Gump Strauss Hauer and Feld and former assistant secretary of commerce for export administration in the Obama administration’s BIS, said CFIUS has an integral role to perform for proposed transactions falling outside the ordinary realm of transactions subject to export controls.
   “The key to all of this is to spend the time and the resources, and to have the creativity to identify those emerging technologies of concern, that aren’t normally looked at in the traditional export control system, which we’re used to, in terms of weapons of mass destruction of traditional military items,” Wolf said. “For…permanent efforts to succeed and policy efforts in both to be achieved…what really needs to be spent is a lot of very clever thinking, [and] the addition of new resources to the existing system, to reach outside the box.”

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