At the same time that The Coalition for Security and Competitiveness called for a reform of DDTC procedures and policies, it also took aim at the Bureau of Industry and Security (“BIS”) with a separate report. The Coalition’s recommendations included streamlining encryption controls, updating the commodity control list, enhancing procedural transparency, and revising the rules relating to foreign availability and to re-exports.

In my view, the Coalition’s most interesting recommendation came with respect to BIS’s deemed export rule. The report stated:

Licensing requirements can also apply to “deemed exports” to company employees in the United States (i.e., the release of controlled technology to a foreign national within the U.S.). The regulations do not take into account the fact that many U.S. companies have company-wide policies on export compliance that apply to their foreign facilities and employees and serve to protect national security. U.S. companies have their own incentives to maintain strong controls to protect their intellectual property.

Commerce should create a license exception for intra-company transfers, including “deemed exports”, for companies that have strong compliance programs. This approach would streamline the export authorization process, reduce the licensing burden on U.S. exporters and enhance international competitiveness without compromising U.S. national security concerns.

The Coalition doesn’t explain why it argues for reform of BIS’s “deemed export” rules without seeking revision of the “deemed export” rules administered by DDTC. Nor does the Coalition suggest how BIS should determine whether a company has the requisite “strong compliance program.” My guess is that given the choice between requesting a BIS audit of compliance procedures and continuing to apply for deemed export licenses, there may be no more than one or two companies in the United States that would opt for the former. This leads me to believe that this recommendation by the Coalition stands about as much chance of being adopted as my dog stands of finally catching that squirrel in the park.

In related news, the Coalition’s complaints on DDTC processing times that we reported yesterday may have already had some impact. The Pentagon announced yesterday that it would examine industry concerns about long processing times at the DDTC and that it would carefully review the Coalition’s complaints regarding these delays.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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