Apr
20
One List to Rule Them All, One Agency to Find Them (UPDATED)
Posted by Clif Burns at 5:10 pm on April 20, 2010
Category: BIS • DDTC • Export Reform
The speech given this morning by Secretary of Defense Robert Gates to a business group detailing the administration’s plan for export reform is now posted on the Department of Defense website and can be found here. It is an ambitious and laudable proposal and one that, unfortunately, will likely die a slow and painful death on the floor of the dead-locked Senate.
Significantly, Gates proposed that the United States treat exports in the way that almost all of our allies do — with one unified list administered by one agency. The only real downside here would be the possibility that the employees of the two rival agencies — the Directorate of Defense Trade Controls (“DDTC”) at State and the Bureau of Industry and Security (“BIS”) at Commerce — would still not be able to play nicely with each other even when under the same roof. Gates alluded to the inability of the two agencies to get along when he mentioned an inter-agency struggle between BIS and DDTC with respect to jurisdiction over millimeter wave scanning machines. This squabble delayed the placement of these high-tech passenger screening machines in foreign airports and needlessly endangered U.S. citizens and others flying through those airports while the issue was being resolved. (BIS ultimately won that battle.)
Repeating the maxim often credited to Frederick the Great — “He who defends everything, defends nothing” — Gates also proposed that the unified list be tiered, with the “crown jewels” requiring the most stringent controls at the top and less sensitive technologies requiring fewer controls be placed in lower tiers. The unification push would also apply to the various lists of prohibited end users, which Gates proposed be consolidated into a single list.
Finally, Secretary Gates touched on an area near and dear to most exporters’ hearts — the impossibly narrow exemptions and license exceptions relating to exports of parts and components for items that have already been legally exported:
[M]any parts and components of a major piece of defense equipment – such as a combat vehicle or aircraft – require their own export 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.
Under DDTC rules an exemption — found in section 123.16(b)(2) of the ITAR — is only available for shipments worth less than $500 (and only 24 shipments per year are permitted.) BIS provides a license exception for parts and components, but only for one-to-one replacement. Parts being shipped to inventory require a license. A unified exemption with a higher shipment value limit and without the one-to-one replacement requirement would be a reform welcomed by most, if not all, exporters.
Rounding out in Gates speech what Defense Department officials referred to in a prior briefing as the “four singles” were the last two: one enforcement agency to bring them all and in one IT system bind them. Of course, Gates refrained from the Tolkien paraphrase that I couldn’t resist.
Regarding a unified IT system, here’s a question for Export Law Blog readers. As between DDTC’s D-Trade electronic licensing system and BIS’s SNAP-R electronic licensing system, which would you like to see survive and why? Or should they both be trashed and replaced with an entirely new system? Please share your thoughts on these questions in the comment section.
UPDATE: This White House fact sheet explains that the proposed reform will be implemented in three phases, with only the last phase requiring action by Congress. The second phase is set to be completed by the end of this year and will include the initial restructuring of the USML and CCL into tiered lists.
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Copyright © 2010 Clif Burns. All Rights Reserved.
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9 Comments:
A new system should be designed in conjunction with a more stramlined form.
Clif
Sadly, I am inclined to agree with your assessment of the slow and painful death of the proposed reforms, despite having myself advocated such reforms. How many times have we been here, or somewhere similar, before?
Now, post the healthcare reforms, US politics are more polarized than they have been for a long time. Add the 2010 midterms into the mix and the omens do not favour progress. “Weak on national security” will be hurled about with increasing frequency; both by opportunists and those who, to be fair, genuinely believe it to be the case.
Many so-called reforms promise much and deliver little. For example, the yet to be ratified US/UK Defence Trade Cooperation Treaty began by offering broad exchanges of goods and technology without licences and currently offers a model for cooperation which is so limited as to be of little practical use, when viewed in the context of extant regulatory requirements.
Despite having begun its life in relatively benign political circumstances, this has still not been ratified by the Senate. If a very narrowly defined, bilteral agreement with a close ally cannot progress, what chance is there of fundamental and far reaching reform of the whole apparatus making better progress?
SNAP-R, hands down. Why? Because I don’t need a freakin’ notary to get access.
Considering that Senator Shelby put a hold on Eric Hirschhorn’s appointment but not on Wolf, I don’t know that we can expect any consistency. As long as Berman is on board, as he appears to be, the House will pass it, so Shelby is the key. All NAITA members (you know who you are) ought to be lighting up Shelby’s phone and email. If we do that, his damnYankee staffers won’t dare get in the way.
That said, BIS should be the lead. Many of their licensing officers actually have some idea as to how the real world operates, whereas at DDTC we have to deal with passed over military officers who are on end of career rotations so they can get their 20 and get out.
Unfortunately, I must agree with David. I give this initiative two chances of survival in recognizable form: slim and none, and slim may have left town. We are all too familiar with the tenacity of the constituent bureaucracies and their determination to hang on to, if not aggrandize, their respective grips on the system.
I’m no IT expert (obviously), but between the two electronic licensing systems, DTRADE probably is farther along to realization because of its growing capability to manage agreements. The other side of that coin is that it may be time for all TAA/MLA/WDA formats to be simply adopted by reference, leaving only the specific appendices (viz., SOW) for hard-copy or pdf submission.
One take is that it’s a swing-for-the-fences gambit that may lead to some helpful compromise measures, if nothing else. Despite all the perennial problems with our multiple regimes, there have been any number of measurable process improvements. And say what you will about DDTC, they have made strides in licensing administration. On the substantive side, I’d take any positive change to the ITAR dual/third country nationality criteria as a win, even if it is only the abrogation of the country of birth criterion.
Fundamental issues such as what should be controlled and by whom carry all the political and bureaucratic freight that keener minds have already noted. And I’m afraid I share the pessimism that the “four singles” may not end up leading to a home run.
In any case, certainly this is an interesting time to be a trade compliance practitioner….
“That said, BIS should be the lead. Many of their licensing officers actually have some idea as to how the real world operates, whereas at DDTC we have to deal with passed over military officers who are on end of career rotations so they can get their 20 and get out.”
As an former agreements officer in DDTC, I have to comment on this. I am not sure what database “Hillbilly” gets his facts from… In the last 4 years the number of military officers who actually left DDTC and were promoted exceeds those “who are on end of career rotations.” Much like most of the industry folks I had to deal with while in DDTC, he has his facts incorrect and is once again using DDTC as the bad guy, when the fact is that industry ROUTINELY makes promises to foreign partners they know can’t be kept… Because you would HOPE that they know, as well as the licensing officers, what can and can’t be done, but yet they consistently make promises to foreign partners that aren’t possible. So you would expect any professional in industry to “have some idea” of what can be done before they even submit… Call me when the export divisions in industry stand up to their operations/marketing divisions and tell them what is possible… Then we can have a conversation about what the real problem is!
With respect to NOT, while the LOs and AOs are sincere and hardworking, the lack of familiarity by those in uniform with modern business practices negates much of that sincere effort. For example, an LO who RWA’d a DSP-5 for lack of a purchase order because he didn’t recognize a written contract submitted with application as a contract that satisfied the documentation requirements of 123.1(c)(4). Or an AO that couldn’t comprehend that one party to a multiparty effort might well order and pay for equipment but never take title or possession. Many of these folks try to reduce everything to a traditional textbook relationship of buyers and sellers, when real word business models for technically complex systems are themselves very complex more often than not. This can be very vexing when having to get a license for a commercial transaction because one of the components or technology invokes the “transparency” rule.
One List, One Agency, One Desk, One Employee? It appears the White House must have took notice of your March 10th 2010 OFAC Desk photo and had a vision.
Perhaps this “agency” could have just two RWA stamps
“You wont get that from US”
“You wont hear that from US”
