U.S. outlines sweeping export control reforms

U.S. outlines sweeping export control reforms    The Obama administration outlined its plan Tuesday for significant export control reform, which it said would make the licensing process more efficient for legitimate shipments while keeping the most sensitive U.S.-made technologies out of the hands of terrorist organizations and militaries of rogue nations.
   The current export control regime hasn't been updated to reflect the post-Cold War era, resulting in a tangle of rules and processes overseen by a handful of federal agencies across different departments.
   'The United States is thought to have one of the most stringent export regimes in the world. But stringent is not the same as effective,' Defense Secretary Robert Gates told attendees of the Business Executives For National Security meeting in a speech.

Gates

   Gates said the ineffectiveness of these export controls has been demonstrated in recent years by several illicit exports of highly sensitive materials and delays with implementing important homeland security capabilities.
   'Several factors contribute to these kinds of scenarios, which at worst could lead to the wrong technology falling into the wrong hands,' he said. 'One major culprit is an overly broad definition of what should be subject to export classification and control. The real-world effect is to make it more difficult to focus on those items and technologies that truly need to stay in this country.'
   The defense secretary noted that the United States reviews 'tens of thousands' of license applications for export to the European Union and NATO countries and in 95 percent of cases approves them. In addition, many individual parts for military equipment require their own licenses.
   'It makes little sense to use the same lengthy process to control the export of every latch, wire and lug nut for a piece of equipment like the F-16, when we have already approved the export of the whole aircraft,' Gates said.
   'We need a system that dispenses with the 95 percent of 'easy' cases and lets us concentrate our resources on the remaining 5 percent,' he added. 'By doing so, we will be better able to monitor and enforce controls on technology transfers with real security implications while helping to speed the provision of equipment to allies and partners who fight alongside us in coalition operations.'
   Gates criticized the myriad agencies, rules and procedures that have evolved around the nation's export controls.
   'In theory, this provides checks and balances — the idea being that security concerns, customarily represented by DoD, would check economic interests represented by the Commerce Department, and balance out diplomatic and relationship-building equities represented by State,' he said. 'In reality, this diffusion of authority — where separate export-control lists are maintained by different agencies — results in confusion about jurisdiction and approval, on the part of companies and government officials alike.
   'It creates more opportunities for mistakes, enforcement lapses and circumvention strategies such as 'forum shopping,' where exporters with problematic license applications try different agencies looking for the best result,' he said.
   'The system has the effect of discouraging exporters from approaching the process as intended,' Gates warned. 'Multinational companies can move production offshore, eroding our defense industrial base, undermining our control regimes in the process, not to mention losing American jobs.'
   On military relations, Gates said current U.S. export controls have been the source of much friction with allies. For example, a British military C-17 plane spent hours disabled on the ground in Australia because U.S. law required the Australians to seek U.S. permission before doing the repair. Similarly, the South Korean military, which purchases U.S. planes, has difficulty obtaining spare parts. Gates said that 'weakens our bilateral relationships, our credibility and ultimately American security.'
   To improve the process, the defense secretary said the administration will first develop a single export control list to make clearer to U.S. companies which items require licenses for export and which do not.
   'Items that have no significant military impact, or that use widely available technology, could be approved for export quickly,' Gates said. 'We envision a more dynamic, tiered control system where an item or technology would be 'cascaded' from a higher to a lower level of control as its sensitivity decreases.'
   The administration's second objective is to develop a single licensing agency, which will have jurisdiction over munitions and dual-use items and technologies (those items with both commercial and military applications) and streamline the review process and ensure that export decisions are consistent and made based on the real capabilities of the technology.
   'This agency would also reduce exporters' current confusion over where and how to submit export-license applications, as well as which technologies and items are likely to be approved,' Gates said. 'The administration is currently preparing options for the agency's location, and I anticipate a presidential decision later this spring.'
   The process will be supported by a single, unified information technology to 'reduce the redundancies, incompatibilities, and waste of taxpayer money that our current system of multiple databases produces,' Gates said. 'A single online location and database would receive, process, and help screen new license applications and end users.'
   Gates said it's important to determine which end users are eligible to receive U.S.-made technologies.
   'In order to facilitate compliance and tracking, we propose to consolidate current lists of banned end users into one single frequently updated list that will be easy for those performing transfers to consult,' he said. 'Entities can be added at any time if there is reasonable cause to believe they are involved in activities contrary to U.S. national security interests.'
   Gates emphasized that 'the new system will be in full compliance with all of our existing multilateral treaties and obligations.'
   The Obama administration indicated that it's prepared to counter opposition to its export control reform plan. 'No system — above all, the current one — is fool proof. But by consolidating most export licensing functions in one agency and creating an enforcement coordination agency, we can focus our energies and scrutiny on technologies that truly threaten American security, making it far less likely that these critical items will fall into the wrong hands,' Gates said.
   The administration plans to roll out the reforms over the next year. While some actions can be taken by executive order, the single licensing and enforcement coordination agencies will require congressional action, Gates said.
   House Armed Services Committee Chairman Ike Skelton, D-Mo., and Ranking Member Howard P. 'Buck' McKeon, R-Calif., both voiced their support for the Obama administration's export control reform plan.
   'While controlling the export of sensitive technologies is fundamental to keeping our nation safe, it cannot be truly effective if the system is muddled and wrought with gaps and inconsistencies across agencies,' Skelton said in a statement.
   Some industry officials believe the administration may concentrate the new export licensing and enforcement activities within the Department of Homeland Security, while others urge the formation of standalone body within the federal government.
   Overall, the industry backs the administration's export control reform after many years of lobbying for changes. Several trade associations, such as the National Association of Manufacturers and Coalition for Security and Competitiveness, have offered their own recommendations in the past year for reform.
   'We support the administration's sequencing plan, which begins with the most difficult issues and then moves on to agency reorganization,' said the Coalition for Security and Competitiveness, in a statement. 'CSC looks forward to hearing more from the administration on implementing many of the near and medium-term reforms we proposed earlier this year.'
   'The international trade community is very interested in the efficiencies that would be truly realized with the administration's reforms,' said Marianne Rowden, president and chief executive officer of the American Association of Exporters and Importers. 'We think streamlining the system is critical to help small-medium size enterprises export goods and technology.'
   The National Association of Manufacturers (NAM) had hoped the three phases of the administration's proposals included details on near-term priorities, such as implementation of the intra-company transfer, a renewed focus on small and medium-sized manufacturers, and a streamlined approach for licensing to support U.S. government programs involving allies.
   'We will continue to urge implementation of near- and medium-term reforms while also working toward a fundamental makeover of the system,' said Frank Vargo, NAM's vice president for international economic affairs. 'Both are needed to enhance U.S. national security, support the industrial base and reach the president's goal of doubling exports within five years.' ' Chris Gillis