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Padilla Disses DDTC During House Subcommittee Hearing
Posted by Clif Burns at 3:44 pm on August 3, 2007
Category: BIS • DDTC
An article (subscription only) in today’s edition of Inside U.S. Trade reports on the hearing held last Friday by the House Foreign Affairs Subcommittee on export controls. We have previously described the prepared testimony of Christopher Padilla, who heads Export Administration at the Bureau of Industry and Security (“BIS”), which he gave during that hearing. During the Subcommittee’s questioning of Padilla, the subject of processing times for license applications at the Department of State’s Directorate of Defense Trade Controls (“DDTC”) came up:
Padilla also criticized the staffing level of DDTC, which processes several times the licenses processed by … [BIS] with roughly half the staff. “In my personal opinion, I don’t think the State Department has sufficient resources to do the job,” Padilla said at the hearing.
Foreign Affairs Subcommittee Chairman Brad Sherman has been considering a user fee for export license applications processed by DDTC in order to try to speed up processing times. According to the Inside U.S. Trade linked above, aides to Sherman are circulating a draft of the proposal and are trying to keep the fees low enough to attract sufficient support and yet still be sufficient to ameliorate the processing delays.
Not everyone, however, is happy with the user fee proposal. The Vice-Chairman of the Subcommittee David Scott, who represents Marietta, Georgia, where Lockheed has operations, had this to say:
Any move toward a user fee to process a license could severely restrict the ability of industries to do business in a free market way
That’s what they might call hogwash in Georgia since the requirement to get an export license has pretty much tossed the ability “to do business in a free market way” out the window. Obviously, Scott just wants the taxpayer to bear the costs of processing the licenses and not the companies benefiting from them.
However, there is a compromise position that might have a better chance of acceptance by everyone involved. DDTC could impose, in the same way that the Citizenship and Immigration Services does, a premium processing fee, so that companies that need export licenses on a faster track would have that option but would have to pay for the privilege.
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Copyright © 2007 Clif Burns. All Rights Reserved.
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8 Comments:
In a BIS event on the west coast an audience member asked the keynote speaker a similar question. The keynote responded that in his time as a chief of staff at DOS not once did a complaint about processing times cross his desk. The event was several months ago and I’m not sure who the keynote was (think it was Padilla)but I sure remember that answer. Our table concluded that 1) processing times are not of any importance to DDTC 2) complaints are falling on deaf/uncaring ears and 3) somehow the complaints of industry are being squelched.
Obviously any increase to staffing at DDTC is a needed commodity and welcomed addition by any exporter of defense articles. However, the idea of having a processing fee is outrageously unfair to smaller companies, who already pay a $3,500 registration fee for 1 – 5 licenses every 2 years. Moreover, the notion that a premium-processing fee for those that want to and/or can pay for the speed is acceptable is additionally unfair as; again, this forces smaller companies to pay an even higher price to compete in the defense industry.
Stating that “the requirement to get an export license has pretty much tossed the ability “to do business in a free market way†out the windowâ€, is a bit rash. If your export department works in concert with your sales/business development teams and can forecast the coming trends then the export department can apply for and receive technical data licenses to market your items.
Here is a simple solution:
Congress & Department of State should appropriately fund and staff DDTC Licensing and Compliance.
Remember the harbor tax that was supposed to facilitate rebuilding and maintenance of harbors. It was ruled unconstitutional as applied to exports because of the constitutional prohibition on taxes on exports. An export licensing fee begs the same question. In any event, ITAR imposes a regulatory burden on otherwise lawful businesses, and thereby increases the trade deficit and cuts down on GDP. The political appointees at State ought to have the political courage to ask Congress for the funds and staff required to do the job right. Industry ought to savage them before Congress when they fail to do so.
“the prepared testimony of Christopher Padilla, who heads the Bureau of Industry and Security (â€BISâ€),”
Hummmm…did Padilla get promoted?? last check, Padilla was the A/S (Assistant Secretary) of Export Administration (EA). EA is one part of BIS; Export Enforcement(EE) is the other. There is more than one A/S in BIS. The person who “heads” BIS would be Under Secretary Mario Mancuso.
I meant to write “head of Export Administration” and didn’t — one of the hazards of trying to post something every day. Thanks for pointing out the error, which has been fixed.
Sorry for the late comment but, here goes!
What about the CJ process? With only two analysts (1 part-time), if you fall in the “gray” category, you’re looking at a 12 month plus processing time at best.
“Obviously, Scott just wants the taxpayer to bear the costs of processing the licenses and not the companies benefiting from them.”
How exactly do companies benefit from the licensing process? One could use a variation of Milton Friedman’s arguments about professional licensing (for doctors, lawyers, barbers, etc.), i.e., it is not designed for quality purposes but to restrict entry into the fields to ensure higher wages/fees for those already in the profession, and argue that munitions licensing is not designed to protect national security but to protect the market for those companies big enough to set up the mechanisms to comply.
Alternative –
In reference to Mike Deal’s comment above (which I totally agree with). I’ve long wondered how the registration fee itself was justified. Doesn’t that amount to the same thing as a processing fee or the equivalent harbor maintenance fee?
No tax or duty shall be laid on articles exported from any state.
