The U.S. Export Control System and the President’s Reform Initiative Ian F. Fergusson Specialist in International Trade and Finance Paul K. Kerr Analyst in Nonproliferation May 7, 2013 Congressional Research Service 7-5700 www.crs.gov R41916 CRS Report for Congress Prepared for Members and Committees of Congress The U.S. Export Control System and the President’s Reform Initiative Summary The 113th Congress may consider reforms of the U.S. export control system. The balance between national security and export competitiveness has made the subject of export controls controversial for decades. Through the Export Administration Act (EAA), the Arms Export Control Act (AECA), the International Emergency Economic Powers Act (IEEPA), and other authorities, the United States restricts the export of defense items or munitions; so-called “dual-use” goods and technology—items with both civilian and military applications; certain nuclear materials and technology; and items that would assist in the proliferation of nuclear, chemical, and biological weapons or the missile technology used to deliver them. U.S. export controls are also used to restrict exports to certain countries on which the United States imposes economic sanctions. At present, the EAA has expired and dual-use controls are maintained under IEEPA authorities. The U.S. export control system is diffused among several different licensing and enforcement agencies. Exports of dual-use goods and technologies—as well as some military items, are licensed by the Department of Commerce—munitions are licensed by the Department of State, and restrictions on exports based on U.S. sanctions are administered by the U.S. Treasury. Administrative enforcement of export controls is conducted by these agencies, while criminal enforcement is carried out by the Department of Commerce, units of the Department of Homeland Security (DHS) and by the Department of Justice (DOJ). Aspects of the U.S. export control system have long been criticized by exporters, nonproliferation advocates, allies, and other stakeholders as being too rigorous, insufficiently rigorous, cumbersome, obsolete, inefficient, or any combination of these descriptions. In August 2009, the Obama Administration launched a comprehensive review of the U.S. export control system. In April 2010, Defense Secretary Robert M. Gates proposed an outline of a new system based on four singularities: • a single export control licensing agency for dual-use, munitions exports, and Treasury-administered embargoes. • a unified control list, • a single primary enforcement coordination agency, and • a single integrated information technology (IT) system. The rationalization of the two control lists has been the Administration’s focus to date. Interim steps have also been taken to create a single IT system and to establish an export enforcement coordination center. No specific proposals have been made concerning the single licensing agency, although elements of a future single system such as the consolidated screening list and harmonization of certain licensing policies have been achieved. In contrast to the Administration’s approach, legislation was introduced to reauthorize or rewrite the EAA in the 112th Congress. The Export Administration Renewal Act of 2011 (H.R. 2122, RosLehtinen) would have renewed the currently expired Export Administration Act through 2015, updated its penalty and enforcement provisions, and provided stricter foreign policy controls on countries designated as state sponsors of terrorism. A separate title would have amended the Arms Export Control Act to permit generic parts and components for defense articles to be controlled differently than sensitive defense articles on the U.S. Munitions List. By contrast, the Technology Security Act of 2011 (H.R. 2004, Berman) would have rewritten the dual-use export control Congressional Research Service The U.S. Export Control System and the President’s Reform Initiative statute by giving the President the authority to control exports for national security and foreign policy reasons, require the current system to address homeland security concerns, and to create the mechanisms for doing so. Each bill would, if passed, have implications for the President’s reform efforts. In addition, the National Defense Authorization Act for FY2013 (P.L. 112-239), signed by the President on January 2, 2013, contains a provision to repeal 1998 legislation that placed commercial communications satellites (CCS) under munitions export licensing jurisdiction and to permit the President to determine the export control jurisdiction of CCS. In considering the future of the U.S. export control system, Congress may weigh the merits of a unified export control system—the end result of the President’s proposal—or the continuation of the present bifurcated system by reauthorizing the present EAA or writing new legislation. In doing so, Congress may debate the record of the present dual-use system maintained by emergency authority, the aims and effectiveness of the present non-proliferation control regimes, the maintenance of the defense industrial base, and the delicate balance between the maintenance of economic competitiveness and the preservation of national security. Congressional Research Service The U.S. Export Control System and the President’s Reform Initiative Contents Overview of the U.S. Export Control System.................................................................................. 1 The Dual-Use System ................................................................................................................ 2 The Export Administration Act (EAA) ............................................................................... 2 Administration..................................................................................................................... 3 Implementing Regulations .................................................................................................. 3 Licensing Policy .................................................................................................................. 4 Enforcement and Penalties .................................................................................................. 5 Military Export Controls ........................................................................................................... 5 Arms Export Control Act (AECA) ...................................................................................... 5 Licensing Policy .................................................................................................................. 6 Administration..................................................................................................................... 6 Enforcement and Penalties .................................................................................................. 7 Nuclear Controls........................................................................................................................ 7 Defense Technology Security Administration (DTSA) ............................................................. 7 Enforcement of U.S. Export Controls ....................................................................................... 8 Multilateral Control Regimes .................................................................................................... 9 The President’s Export Control Initiative ...................................................................................... 10 The Four Singularities ............................................................................................................. 11 A Single Licensing Agency ............................................................................................... 11 The Single Control List ..................................................................................................... 14 The Single Enforcement Structure .................................................................................... 19 A Single Information Technology System ........................................................................ 20 Encryption ......................................................................................................................... 21 Recent Congressional Activity....................................................................................................... 22 Satellites .................................................................................................................................. 23 Export Control Reform Legislation ......................................................................................... 23 Export Administration Renewal Act of 2011 .................................................................... 23 Technology Security Act of 2012 ...................................................................................... 24 Figures Figure B-1. Dual-Use Export Licensing Process ........................................................................... 28 Tables Table 1. President’s Export Control Reform Initiative .................................................................. 12 Table A-1. Export Control Characteristics ..................................................................................... 26 Table D-1. Proposed Migration Table ............................................................................................ 31 Appendixes Appendix A. Basic Export Control Characteristics ....................................................................... 26 Congressional Research Service The U.S. Export Control System and the President’s Reform Initiative Appendix B. Dual-Use Export Licensing Process ......................................................................... 28 Appendix C. List of Acronyms ...................................................................................................... 29 Appendix D. Proposed Migration Of Certain USML Items to the CCL........................................ 31 Contacts Author Contact Information........................................................................................................... 32 Congressional Research Service The U.S. Export Control System and the President’s Reform Initiative Overview of the U.S. Export Control System The United States restricts the export of defense items or munitions; so-called “dual-use” goods and technology; certain nuclear materials and technology; and items that would assist in the development of nuclear, chemical, and biological weapons or the missile technology used to deliver them. A defense item is defined by regulation as one that is “specifically designed, developed, or configured, adapted, or modified for a military application,” has neither “predominant civilian application” nor “performance equivalent to an item used for civilian application ... and has significant military or intelligence application such that control is necessary.”1 Dual-use goods are commodities, software, or technologies that have both civilian and military applications. U.S. export controls are also used to restrict exports to certain countries on which the United States imposes economic sanctions, such as Cuba, Iran, and Syria. Through the Export Administration Act (EAA), the Arms Export Control Act (AECA), the International Emergency Economic Powers Act (IEEPA), and other authority, Congress has delegated to the executive branch its express constitutional authority to regulate foreign commerce by controlling exports. In addition, the United States controls certain exports in adherence to several multilateral nonproliferation control regimes. Various aspects of the U.S. export control system have long been criticized by exporters, nonproliferation advocates, allies, and other stakeholders as being too rigorous, insufficiently rigorous, cumbersome, obsolete, inefficient, or any combination of these descriptions. Some contend that U.S. export controls overly restrict U.S. exports and make firms less competitive. Others argue that U.S. defense and foreign policy considerations should trump commercial concerns. In January 2007, the Government Accountability Office (GAO) designated government programs designed to protect critical technologies, including the U.S. export control system, as a “high-risk” area “that warrants a strategic reexamination of existing programs to identify needed changes.” GAO’s report cited poor coordination among export control agencies, disagreements over commodity jurisdiction between the Departments of State and Commerce, unnecessary delays and inefficiencies in the license application process, and a lack of systematic evaluative mechanisms to determine the effectiveness of export controls.2 On August 13, 2009, President Obama announced the launch of a comprehensive review of the U.S. export control system, and this was followed in April 2010 with a speech by Secretary of Defense Robert M. Gates announcing key elements of the Administration’s agenda for reform, with additional elaborations in subsequent months. Secretary Gates proposed a four-pronged approach that would establish: • a single export control licensing agency for both dual-use, munitions and exports licensed to embargoed destinations. • a unified control list; 1 International Traffic in Arms Regulations, 22 C.F.R. 120.3. U.S. Government Accountability Office (GAO), High-Risk Series: An Update, GAO-07-310, January 2010. While GAO noted some improvements, the export control system was still considered a “high-risk” area in 2011; see GAO, High-Risk Series: An Update, GAO-11-278, February 2011. 2 Congressional Research Service 1 The U.S. Export Control System and the President’s Reform Initiative • a single enforcement coordination agency; and • a single integrated information technology system, which would include a single database of sanctioned and denied parties. During the 113th Congress, the House Committee on Foreign Affairs (HFAC) received testimony from administration officials at a hearing entitled “Export Control Reform: The Agenda Ahead” on April 24, 2013.3 During the 112th Congress, HCFA held two oversight hearing on the export control reform initiative on May 12, 2011 and February 7, 2012, soliciting administration and private sector views, respectively. Also during the 112th Congress, two pieces of legislation to renew or rewrite the EAA were introduced in HFAC. On May 26, 2011, Ranking Member Howard Berman introduced the Technology Security Act (H.R. 2004), a comprehensive rewrite of U.S. dual-use controls that would have conferred upon the President “broad and flexible authority to deploy controls to counteract current and future national security threats.”4 On June 3, Chairwoman Ros-Lehtinen introduced the Export Administration Renewal Act of 2011 (H.R. 2122), which would have renewed the currently expired Export Administration Act through 2015, amended certain other provisions of the act, and amended the Arms Export Control Act to permit differential control over parts and components on the U.S. Munitions List. In addition, the National Defense Authorization Act (NDAA) of 2013 (P.L. 112-239) repealed a provision of the 1999 NDAA, which transferred “satellites and related items” to the USML, thus allowing the President to transfer satellites and related items to the CCL with certain country restrictions and reporting requirements. In its administration of this authority, the executive branch has created a diffuse system by which exports are controlled by differing agencies under different regulations. This section describes the characteristics of the dual-use, munitions, and nuclear controls. The information contained in this section also appears in chart form in Appendix A. The Dual-Use System The Export Administration Act (EAA) The EAA of 1979 (P.L. 96-72) is the underlying statutory authority for dual-use export controls. The EAA, which is currently expired, periodically has been reauthorized for short periods of time. The last incremental extension expired in August 2001. At other times, and currently, the export licensing system created under the authority of the EAA has been continued by a presidential declaration of a national emergency and the invocation of the International Emergency Economic Powers Act (IEEPA; P.L. 95-223).5 The EAA confers upon the President the power to control exports for national security, foreign policy, or short-supply purposes. It also authorizes the President to establish export licensing mechanisms for items detailed on the 3 Webcast available at http://foreignaffairs.house.gov/hearing/hearing-export-control-reform-agenda-ahead “Background and Key Provisions of the Technology Security Act,” http://democrats.foreignaffairs.house.gov/ press_display.asp?id=844. 5 This national emergency was most recently continued until August 17, 2013, by President Obama on August 15, 2012, 77 Federal Register 49699, August 16, 2012. 4 Congressional Research Service 2 The U.S. Export Control System and the President’s Reform Initiative Commerce Control List (CCL) (see below), and it provides guidance and places certain limits on that authority.6 Several attempts to rewrite or reauthorize the EAA have occurred over the years. The last comprehensive effort took place during the 107th Congress. The Senate adopted legislation (S. 149) in September 2001, and a House version (H.R. 2581) was developed by the then-House International Relations Committee and the House Armed Services Committee. The full House did not act on this legislation. The EAA, which was written and amended during the Cold War, was based on strategic relationships, perceived threats to U.S. national security, international business practices, and existing commercial technologies, many of which have changed dramatically in the past 25 years. Some Members of Congress and most U.S. business representatives see a need to liberalize U.S. export regulations to allow American companies to engage more fully in international competition for sales of high-technology goods, some of which may be commercially available from foreign competitors. Other Members and some national security analysts contend that liberalization of export controls over the past decade has contributed to foreign threats to U.S. national security, that some controls should be tightened, and that Congress should weigh further liberalization carefully. Administration The Bureau of Industry and Security (BIS) in the Department of Commerce administers the dualuse export control system. The export licensing and enforcement functions that now form the agency mission of BIS were detached from the International Trade Administration (ITA) in 1985 in order to separate it from the export promotion functions of that agency within the Department of Commerce. In FY2012, BIS processed 23,229 export license applications worth approximately $204.1 billion—$113.6 billion of which were licenses for crude oil exports. It denied less than 1% of license applications, although some licenses were approved with conditions. BIS was appropriated $99.7 million, including rescissions, by the Consolidated Appropriations Act (P.L. 113-6) in FY2013 with approximately 390 full-time employee positions. For FY2013, the President’s budget requests $112.1 million. In addition to its export licensing and enforcement functions, BIS also enforces U.S. anti-boycott regulations concerning the Arab League boycott against Israel. Implementing Regulations The EAA is implemented by the Export Administration Regulations (EAR; 15 C.F.R. 730 et seq). As noted above, the EAR are continued under IEEPA’s authority in times when the EAA is expired. The EAR set forth licensing policy for goods and destinations, the applications process used by exporters, and the CCL. The CCL is the list of specific commodities, technologies, and software that are controlled by the EAR. The CCL is composed of 10 categories of items: 6 Under IEEPA authority, the President may “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.” P.L. 95-223, §203(a)(1)(B). Congressional Research Service 3 The U.S. Export Control System and the President’s Reform Initiative • nuclear materials, facilities, and equipment; • materials, organisms, microorganisms, and toxins; • materials processing; • electronics; • computers; • telecommunications and information security; • lasers and sensors; • navigation and avionics; • marine; and • propulsion systems, space vehicles, and related equipment. Each of these categories is further divided into functional groups: equipment, assemblies, and components; test, inspection, and production equipment; materials; software; and technology. Each controlled item has an export control classification number (ECCN) based on the above categories and functional groups. Each ECCN is accompanied by a description of the item and the reason for control. In addition to discrete items on the CCL, nearly all U.S.-origin items are “subject to the EAR.” This means that any item “subject to the EAR” may be restricted to a destination based on the end-use or end-user of the product. For example, a commodity that is not on the CCL may be denied if the good is destined for a military end-use or an entity known to be engaged in weapons proliferation. Licensing Policy The EAR set out the licensing policy for dual-use and certain military items. Items are controlled for reasons of national security, foreign policy, or short supply. National security controls are based on a common multilateral control list; however, the designation of countries to which those controls are applied is based on U.S. policy. Foreign policy controls may be unilateral or multilateral in nature. Items are controlled unilaterally for anti-terrorism, regional stability, or crime control purposes. Anti-terrorism controls proscribe nearly all exports to the four countries designated as state sponsors of terrorism by the Secretary of State—Cuba, Iran, Sudan, and Syria—and North Korea. Foreign policy-based controls are also based on adherence to multilateral non-proliferation control regimes, such as the Nuclear Suppliers’ Group, the Australia Group (chemical and biological precursors), and the Missile Technology Control Regime (MTCR). The EAR set out timelines for the consideration of dual-use licenses and the process for resolving interagency disputes. Within nine days of receipt, Commerce must refer the license to other agencies (State, DOD, and Energy, as appropriate), grant the license, deny it, seek additional information, or return it. If the license is referred to other agencies, the agency to which it is referred must recommend that the application be approved or denied within 30 days. The EAR provide a dispute resolution process for a dissenting agency to appeal an adverse decision. The entire licensing process, to include the dispute resolution process, is designed to be completed within 90 days. This process is depicted graphically in Appendix B. Congressional Research Service 4 The U.S. Export Control System and the President’s Reform Initiative Enforcement and Penalties Because of the expiration of the EAA, current penalties for export control violations are based on those contained in IEEPA (50 U.S.C. 1701 et seq). For criminal penalties, the IEEPA sanctions individuals up to $1 million or up to 20 years imprisonment, or both, per violation (50 U.S.C. 1705(b)). Civil penalties under IEEPA are set at $250,000 per violation, or an amount twice the amount of the offending transaction. Enforcement is carried out by the Office of Export Enforcement (OEE) at BIS. OEE has a staff of approximately 170 in Washington, DC, and eight domestic field offices. OEE is authorized to carry out investigations domestically and works with DHS to conduct investigations overseas. OEE also conducts pre-license and post-shipment verification along with in-country U.S. embassy officials overseas. The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (P.L. 111-195) permanently reinstated certain enforcement activities undertaken by the Department of Commerce previously authorized by the EAA. Military Export Controls Arms Export Control Act (AECA) The AECA of 1976 (P.L. 94-329) provides the President with the statutory authority for the control of defense articles and services.7 It sets out foreign and national policy objectives for international defense cooperation and military export controls. Section 3(a) of the AECA sets forth the general criteria for countries or international organizations to be eligible to receive U.S. defense articles and defense services provided under the act. It also sets express conditions on the uses to which these defense items may be put. Section 4 of the AECA states that U.S. defense articles and defense services shall be sold to friendly countries “solely” for use in “internal security,” for use in “legitimate self-defense,” to enable the recipient to participate in “regional or collective arrangements or measures consistent with the Charter of the United Nations,” to enable the recipient to participate in “collective measures requested by the United Nations for the purpose of maintaining or restoring international peace and security,” and to enable the foreign military forces “in less developed countries to construct public works and to engage in other activities helpful to the economic and social development of such friendly countries.” The AECA also contains the statutory authority for the Foreign Military Sales program, under which the U.S. government sells U.S. defense equipment, services, and training on a government-to-government basis. Congressional Requirements A prominent feature of the AECA is the requirement for congressional consideration of certain foreign arms sales proposed by the President. This procedure includes consideration of proposals to sell major defense equipment and services, or to retransfer such military items to other nations. The procedure is triggered by a formal report to Congress under Section 36 of the AECA. In general, the executive branch, after complying with the terms of the applicable section of U.S. 7 This authority was previously vested with Secretary of State. Congressional Research Service 5 The U.S. Export Control System and the President’s Reform Initiative law (usually those contained in the AECA), is free to proceed with an arms sales proposal unless Congress passes legislation prohibiting or modifying the proposed sale. Under Section 36(b) of the ACEA, Congress must be formally notified 30 calendar days before the Administration can take the final steps to conclude a government-to-government foreign military sale or issue an export license for commercial sales of major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. In the case of such sales to NATO member states Japan, Australia, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with the sale. However, the prior notice thresholds are higher for Japan, Australia, and New Zealand. These higher thresholds are $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of nations. Licensing Policy The International Traffic in Arms Regulations (ITAR) set out licensing policy for exports (and temporary imports) of U.S. Munitions List (USML) items. A license is required for the export of nearly all items on the USML. Canada has a limited exemption, as it is considered part of the U.S. defense industrial base. In addition, the United States has recently signed treaties with the United Kingdom and Australia to exempt certain defense articles from licensing obligations to approved end-users in those countries. These treaties were ratified by the Senate in 2010. Unlike some Commerce Department dual-use controls, licensing requirements are based on the nature of the article and not the end-use or end-user of the item. The United States implements a range of prohibitions on munitions exports to countries unilaterally or based on adherence to United Nations (U.N.) arms embargoes. In addition, any firm engaged in manufacturing, exporting, or brokering any item on the USML must register with the Directorate of Defense Trade Controls (DDTC) at the State Department and pay a yearly fee, which is currently on a sliding scale between $2,250 and $2,750, whether or not it seeks to export during the year. Administration Exports of defense goods and services are administered by the Directorate of Defense Trade Controls (DDTC) at the Department of State. DDTC is a component of the Bureau of PoliticalMilitary Affairs and consists of four offices: Management, Policy, Licensing, and Compliance. In FY2012, DDTC is being funded at a level of $11.6 million. It has a staff of 81 and it completed action on 82,095 export license applications in FY2011. DDTC’s FY2013 budget request is for $9.4 million, a reduction primarily due to the proposed use of fees to fund compliance personnel. Critics of the defense trade system had previously decried the delays and backlogs in processing license applications at DDTC. A National Security Presidential Directive (NSPD-56), signed by President Bush on January 22, 2008, directed that the review and adjudication of defense trade licenses submitted under ITAR are to be completed within 60 days, except where certain national security exemptions apply. Previously, except for the congressional notification procedures discussed above, DDTC had no defined timeline for the application process. The average license processing time was 18 days in FY2011. As a result of National Security Council guidelines implemented in June 2009, processing times for resolving commodity jurisdiction cases—another Congressional Research Service 6 The U.S. Export Control System and the President’s Reform Initiative area of concern for GAO in its “high-risk” report—had been reduced to 36 days in 2010 from 112 in 2002.8 Enforcement and Penalties The AECA provides for criminal penalties of up to $1 million or 20 years of imprisonment, or both, for each violation. The AECA also authorizes civil penalties of up to $500,000 and debarment from future exports. DDTC has a small enforcement staff (19 in the Office of Defense Trade Compliance) and works with the Defense Security Service and the Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) units at the Department of Homeland Security (DHS). DDTC assists DHS and the Department of Justice (DOJ) in pursuing criminal investigations and prosecutions. DDTC also coordinates the Blue Lantern end-use monitoring program, in which in-country U.S. embassy officials conduct pre-license checks and post-shipment verifications. Nuclear Controls A subset of the above-mentioned dual-use and military controls are controls on nuclear items and technology. Controls on nuclear goods and technology are derived from the Atomic Energy Act of 1954, as amended, and the Nuclear Non-proliferation Act of 1978, as well as from the EAA and the AECA. Controls on nuclear exports are divided among several agencies, based on the product or service being exported. The Nuclear Regulatory Commission (NRC) regulates exports of nuclear facilities and material. The NRC licensing policy and control list are located at 10 C.F.R. 110. BIS licenses “outside the core” civilian power plant equipment and maintains the Nuclear Referral List as part of the CCL. The Department of Energy licenses the export of nuclear technology. DDTC exercises licensing authority over nuclear items in defense articles under the ITAR. Defense Technology Security Administration (DTSA) DTSA is located in the Department of Defense, Office of the Under Secretary of Defense for Policy under the Assistant Secretary of Defense for Global Security Affairs. DTSA coordinates the technical and national security review of direct commercial sales export licenses and commodity jurisdiction requests received from the Departments of Commerce and State. It develops the recommendation of DOD on these referred export licenses or commodity jurisdictions based on input provided by the various DOD departments and agencies and represents DOD in the interagency dispute resolution process. Not all licenses from DDTC or BIS are referred to DTSA; memorandums of understanding govern the types of licenses referred from each agency. DTSA coordinates the DOD position with regard to proposed changes to the ITAR and the EAR. It also represents DOD in the interagency process responsible for compliance with multinational export control regimes. 8 U.S. Government Accountability Office (GAO), High-Risk Series: An Update, GAO-11-278, February 2011. Congressional Research Service 7 The U.S. Export Control System and the President’s Reform Initiative Enforcement of U.S. Export Controls Enforcement of the U.S. export control system is undertaken by the agencies responsible for export licensing, the Department of Homeland Security (DHS), the Department of Justice (DOJ) (National Security Division and the Federal Bureau of Investigation [FBI]), and the Defense Criminal Investigative Service. Their activities can be summarized as follows: • Office of Export Enforcement (OEE) at the Bureau of Industry and Security (BIS). OEE investigates criminal and administrative violations of the dual-use export control regime. OEE is authorized to conduct domestic investigations and works with the Immigration and Customs Enforcement Agency (ICE) of DHS on investigations of export control violations overseas. OEE refers civil violations to the Office of Chief Counsel at BIS and criminal violations to DOJ. • Office of Defense Trade Compliance (ODTC) at the Directorate of Defense Trade Controls (DDTC). ODTC primarily administers civil enforcement actions, including charging letters and consent agreements, policies of denial, debarments, transaction exceptions, and reinstatements. ODTC provides agency support to investigations and criminal enforcement actions primarily conducted by ICE and the FBI. • Office of Enforcement, Nuclear Regulatory Commission (NRC). Investigates export control violations of nuclear facilities and material licensed by the NRC’s Office of International Programs. The Office of Enforcement refers criminal violations to DOJ. • Immigration and Customs Enforcement (ICE) of DHS. As with its predecessor at the U.S. Customs Service, ICE has been the lead agency for criminal export enforcement activities. The Counter-Proliferation Investigations (CPI) Unit investigates violations of dual-use and munitions export controls, exports to sanctioned countries, and violations of economic embargoes. ICE supplements and provides enforcement capacity to the export licensing agencies (BIS and DDTC) and undertakes investigations based on its own and other agency intelligence. In addition, export controls are enforced at the port of departure by DHS Customs and Border Protection. • National Security Division of DOJ. The counter-espionage section of this division undertakes criminal prosecutions resulting from investigations conducted by the licensing agencies, ICE, and the FBI. An October 2007 DOJ National Export Enforcement Initiative established task forces between the licensing and enforcement agencies and U.S. Attorney’s Offices in 20 cities to coordinate export control prosecutions and has facilitated new counterproliferation coordination among law enforcement agencies, export licensing agencies, and the intelligence community. • Federal Bureau of Investigation (FBI). The FBI’s Weapons of Mass Destruction Directorate receives and analyzes intelligence regarding proliferation networks, provides specialized training on counter-proliferation for the National Export Enforcement Initiative, and cooperates with above-mentioned investigative partners and export licensing agencies. • Defense Criminal Investigation Service (DCIS). DCIS is the criminal investigative arm of the Inspector General of DOD. Among its varied activities, Congressional Research Service 8 The U.S. Export Control System and the President’s Reform Initiative DCIS investigates the transfer of sensitive defense technologies to proscribed nations and criminal elements. Multilateral Control Regimes In addition to U.S. controls, there are four major multilateral control regimes: the Australia Group, the Missile Technology Control Regime, the Nuclear Suppliers Group, and the Wassenaar Arrangement.9 The Commerce Department observed on December 9, 2010, that “[m]ost items on the CCL are controlled in accordance with the United States’ commitments” to four major multilateral export control regimes.10 In addition to the controls described in the box below, all of these regimes have catch-all controls, which allow for the control of non-listed items if they are to be used for a military or proliferation-related purpose. Multilateral Control Regimes • Australia Group: a voluntary, informal, export control arrangement founded in 1985 and consisting of 41 members. It has a set of export guidelines, as well as six common control lists. These lists include dual-use chemical manufacturing and biological equipment, chemical weapons precursors, and biological agents. • Missile Technology Control Regime (MTCR): an informal voluntary export control arrangement established in 1987. The 34 members of the regime agree to adhere to common export policy guidelines applied to lists of controlled items. The MTCR guidelines call on each partner country to exercise restraint when considering transfers of equipment or technology, as well as “intangible” transfers, that would provide, or help a recipient country build, a missile capable of delivering a 500 kilogram warhead to a range of 300 kilometers or more. The MTCR annex contains two categories of controlled items. Category I items are the most sensitive. There is “a strong presumption to deny” such transfers, according to the MTCR guidelines. Regime partners have greater flexibility with respect to exports of Category II items. • Nuclear Suppliers Group (NSG): an informal association of nuclear exporters founded in 1975 and currently consisting of 46 members. NSG members voluntarily agree to coordinate exports of civilian nuclear material, as well as nuclear-related equipment and technology, to non-nuclear-weapon states.11 The group’s guidelines include lists of materials and equipment subject to export control, in addition to requiring importers to offer nonproliferation and physical security assurances. • Wassenaar Arrangement: a voluntary export control regime approved in 1996 and currently consisting of 41 members. Its participants agree to control exports and retransfers of items on a munitions list and a list of dualuse goods and technologies. According to its Guidelines and Procedures, the Wassenaar Arrangement is not formally targeted at “any state or group of states,” but is designed “to contribute to regional and international security and stability, by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilizing accumulations.” Participants exchange information regarding transfers and licenses for items covered by the arrangement. Because, as noted, the Export Administration Act (EAA) has expired, there is only one law in force explicitly requiring the U.S. government to adhere to a multilateral export control regime. The Arms Export Control Act requires the Secretary of State to maintain, as part of the U.S. Munitions List, “a list of all items on the MTCR Annex” that are not controlled pursuant to the EAA. The Atomic Energy Act requires the executive branch to control nuclear-related items, but 9 For more information about these regimes, see CRS Report RL33865, Arms Control and Nonproliferation: A Catalog of Treaties and Agreements, by Amy F. Woolf, Mary Beth Nikitin, and Paul K. Kerr. 10 “Commerce Control List: Revising Descriptions of Items and Foreign Availability,” 75 Federal Register, No. 236, December 9, 2010. 11 The Nonproliferation Treaty (NPT) defines a nuclear-weapon state as “one which has manufactured and exploded a nuclear weapon or other nuclear explosive device” prior to January 1, 1967. These states are China, France, Russia, the United Kingdom, and the United States. Congressional Research Service 9 The U.S. Export Control System and the President’s Reform Initiative the law does not explicitly require that these items be the same as those controlled by the Nuclear Suppliers Group. The President’s Export Control Initiative On August 13, 2009, President Obama announced the launch of a comprehensive review of the U.S. export control system. Defense Secretary Robert M. Gates announced key elements of the Administration’s agenda for reform in a speech on April 20, 2010, with additional elaborations in subsequent months. Secretary Gates proposed a four-pronged approach that would create a single primary export control licensing agency for both dual-use and munitions exports; adopt a unified control list; establish a single enforcement coordination agency; and create a single integrated information technology system, which would include a single database of sanctioned and denied parties. The Administration’s blueprint envisioned that these changes would be implemented in three phases, with the final phase requiring legislative action. In Phase I, preparatory work would be undertaken to harmonize the Commerce Control List (CCL) with the U.S. Munitions List (USML). Standardized licensing processes among the control agencies would be developed, and an “Enforcement Fusion Center” to synchronize enforcement would be created along with a single electronic gateway to access the licensing system. Phase II would implement a harmonized licensing system with two identically structured tiered control lists, potentially allowing for a reduction in the amount of licenses required by the system. Certain items could be moved from the USML to the CCL, for which congressional notification would be required; unilateral controls on certain items would be examined; and consultations would take place with multilateral control regime partners to add or remove multilateral controls on certain items. The Export Enforcement Coordination Center (EECC), also known as the “fusion center,” which was created by executive order on November 9, 2010, is being housed and funded by the Department of Homeland Security. Under the proposal, the new export control system would debut in Phase III. A single licensing agency would be established; the two harmonized, tiered control lists would be merged with mechanisms for review and updating; the two primary export control enforcement agencies, OEE and ICE would be merged; and a single IT system for licensing and enforcement would become operational. Changes in agency structure would require legislation and may be proposed in the 113th Congress. In a February 2011 speech, BIS Assistant Secretary Kevin Wolf elucidated seven principles driving the Administration’s export control reform efforts: • Controls should focus on a small core set of key items that can pose a serious national security or intelligence threat to the United States and its interests. • Controls should be fully coordinated with the multilateral export control regimes in order to be effective. • Unilateral controls must address an existing legal or foreign policy objective. • Control lists must clearly identify which items are controlled and be easily updated as technology emerges, matures, or becomes widely available. • Licensing processes must be predictable and timely. Congressional Research Service 10 The U.S. Export Control System and the President’s Reform Initiative • Enforcement capabilities must be enhanced to address non-compliance and increase capacity to interdict unapproved transfers. • Controls must address counterterrorism policy and the need to export items that support homeland security priorities.12 The Four Singularities A Single Licensing Agency In his speech introducing the Administration’s reform efforts, Secretary Gates described the bureaucratic structure of the U.S. export control system as a “byzantine amalgam of authorities, roles, and missions scattered around different parts of the federal government.”13 As noted above, licensing is divided among the Department of Commerce for dual-use and certain military items, the Department of State for munitions, the Department of the Treasury for certain sanctions, and the Nuclear Regulatory Commission and Department of Energy for certain nuclear materials and technologies. These entities operate under different statutory authorities and enforce different regulations. While there are mechanisms in place for license referrals and to address licensing disagreements, critics have long maintained that the multi-agency structure contributes to institutional squabbling among the different agencies responsible for export control licensing. Having one licensing system would also end disputes about commodity jurisdiction over a given item. On June 30, 2010, then-National Security Adviser General Jim Jones announced that the Administration intended to create an independent licensing agency with Cabinet members from existing control agencies serving as a board of directors. While the Administration has not proffered specific details about this new agency, it is expected to take over the licensing functions of BIS, DDTC, and OFAC. Civil and administrative enforcement functions of BIS and DDTC are likely to be housed in the new unified licensing agency. Licensing procedures of the NRC for nuclear materials and of the Department of Energy for technology will not be moved. According to an Administration official, this is due to the relatively small volume of licensing undertaken by these agencies as well as by the small universe of exporters.14 One rationale advanced by General Jones is that a unified licensing structure would end the stovepipe situation whereby no agency collectively knows what has been licensed (or denied) by the U.S. government. Under current referral processes, dual-use and certain military items licenses are referred by BIS to the Department of Defense, the Department of State (Economic Energy and Business Bureau [EEB], International Security and Non-Proliferation [ISN] Bureau, and the regional bureaus), and the Department of Energy for review. However, Department of Commerce licenses are not referred to DDTC. DDTC refers munitions licenses to DOD and to the above-mentioned bureaus at State, and in some instances to Energy, but not to Commerce. Some OFAC licenses are referred only to State’s EEB. As a result, situations have arisen whereby 12 Remarks of BIS Assistant Secretary for Export Administration, Kevin Wolf, to Exportkontrolltag 2011, Munich, Germany, February 25, 2011. 13 Secretary of Defense Robert M. Gates, speech before the Business Executives for National Security, April 20, 2010, available at http://www.defense.gov/speeches/speech.aspx?speechid=1453. 14 Discussion with National Security Council official, March 18, 2011. Congressional Research Service 11 The U.S. Export Control System and the President’s Reform Initiative licenses requested by the same exporter to the same destination have been approved by one license agency and denied by another. While a single licensing agency may do away with the stovepipe issue, the envisioned single information technology system (see below) among the current agencies may also address this problem. Yet, licenses would still need to be referred to other bureaus at State and DOD to ensure continued checks and balances, thus interagency policy differences may continue to exist. Table 1. President’s Export Control Reform Initiative Control List I Refine, understand, harmonize definitions to end jurisdictional confusion between two lists; establish new control criteria Implement regulatory-based improvements to streamline licensing Synchronize and deconflict enforcement; create Enforcement Fusion Center Determine enterprise-wide needs II Restructure two lists into identical tiered structures; apply criteria; remove unilateral controls where appropriate; submit proposals multilaterally to add/remove controls Complete transition to mirrored control list; fully implement licensing harmonization Expand outreach and compliance Transition toward a single electronic licensing system Merge two lists into a single list; implement process for updating list Implement single licensing agency Consolidate enforcement activities under one agency Implement a single system for licensing and enforcement (requires congressional notification; requires additional funding) III (requires legislation) Licensing Information Technology Phase Enforcement Source: Prepared by Dianne Rennack, CRS, based on White House Fact Sheet, April 20, 2010. Dual-Nationals One example of the effort that will be necessary to create a unified export control system may be seen in the dual-national issue. The White House announced on March 11, 2010, that it would take action to eliminate “obstacles to exporting to companies employing dual nationals.” Specifically, the Administration announced that it would “begin to harmonize” conflicting standards used by the Departments of Commerce and State to determine a foreign person’s nationality—a step that these departments must take in order to make certain export control decisions.15 The Commerce Department, according to a 2010 Government Accountability Office (GAO) report, determines “nationality for release of technology to a foreign national” based on that person’s “most recent citizenship or permanent residence.”16 15 For example, determining the appropriateness of releasing technical data to employees of a foreign firm engaged in a defense project with a U.S. firm. 16 Government Accountability Office, Export Controls: Observations on Selected Countries’ Systems and Proposed Treaties, May 2010, GAO-10-557. Congressional Research Service 12 The U.S. Export Control System and the President’s Reform Initiative The State Department, however, considers not only a foreign national’s current citizenship status, but also their country of birth if it differs from the person’s country of citizenship or permanent residency. Even if a foreign entity is approved for a manufacturing license agreement or a technical assistance agreement with a U.S. firm, the State Department must approve the transfer of technical data, defense services, and defense articles to dual nationals and third-party nationals employed by the foreign entity.17 “If a person’s country of birth is prohibited from receiving U.S. arms, as are China, Iran, and North Korea, State collects additional information to confirm that the individual has no significant ties to his or her country of birth,” according to the GAO. Both the State Department and private-sector experts argue that these requirements are contentious because, in addition to being administratively burdensome, they are a potential employment discrimination issue in other countries; in order to comply with the regulations, nonU.S. employers may need to limit employment opportunities in potential violation of their countries’ employment laws.18 After publishing a proposed rule on August 11, 2010,19 the State Department published a final rule on May 16, 2011, that would amend the ITAR to allow the transfer of defense articles and technical data to dual or third-party nationals who are “bona fide, regular employees, directly employed by the foreign consignee or end-user.”20 Such transfers must take place completely within the physical territory of the country where the end-user is located, where the governmental entity or international organization conducts official business, or where the consignee operates, and be within the scope of an approved export license, other export authorization, or license exemption. The end user or consignee must take a variety of measures designed to prevent the diversion of any exports; the final rule includes a requirement for the end user to screen employees for “substantive contacts with restricted or prohibited countries” listed in the ITAR.21 The rule, which became effective on August 15, 2011, also explains that, although “nationality does not, in and of itself, prohibit access to defense articles or defense services, an employee that has substantive contacts” with persons from prohibited countries “shall be presumed to raise a risk of diversion,” unless the State Department determines otherwise. 17 The State Department’s Directorate of Defense Trade Controls, according to the GAO, “considers a third-country national to be an individual from a country other than the country which is the foreign signatory” to a “technical assistance or manufacturing license agreement. A third-country national may also be a dual national if he or she holds nationality from more than one country.” GAO-10-557. 18 “Amendment to the International Traffic in Arms Regulations: Dual Nationals and Third-Country Nationals Employed by End-Users,” Federal Register, vol. 75, no. 154, August 11, 2010, p. 48625. 19 Ibid. 20 “International Traffic in Arms Regulations: Dual Nationals and Third-Country Nationals Employed by End-Users,” Federal Register, vol. 76, no. 94, May 16, 2011, p.28174. Paul Conlin, Sebastien Beauregard, R. Luc Beaulieu, and Richard A. Wagner, “Proposed ITAR Amendment Regarding Dual Nationals and Third-Country Nationals,” Mondaq, August 31, 2010. 21 “Substantive contacts,” according to the rule, “include regular travel to such countries, recent or continuing contact with agents, brokers, and nationals of such countries, continued demonstrated allegiance to such countries, maintenance of business relationships with persons from such countries, maintenance of a residence in such countries, receiving salary or other continuing monetary compensation from such countries, or acts otherwise indicating a risk of diversion.” Congressional Research Service 13 The U.S. Export Control System and the President’s Reform Initiative It is worth noting that, according to the State Department, “most diversions of U.S. Munitions List ... items appear to occur outside the scope of approved licenses, not within foreign companies or organizations providing access to properly screened dual national or third country national employees.”22 The Single Control List To date, the Administration has concentrated on rationalizing the control lists to form the basis from which other reforms will flow. The Administration first seeks to transform the current USML from a “negative list” characterized by general descriptions of articles and design-intentbased criteria to one resembling the current CCL, a “positive” list of dual-use items that are controlled according to objective criteria or parameters. This is being done through the so-called “bright line” process to determine which items should be controlled as dual-use goods and which should be controlled as munitions. The bright line is being determined at the commodity level, based on technical specification and military needs, and is not an overarching concept or framework. The Administration describes the bright line as necessary, in part, because of the USML’s current reliance on design intent (i.e., whether an item was “specifically designed, modified, or adapted” for military use) and its catch-all controls of parts and components of these items.23 While the CCL is described as more “positive,” it too contains entries containing the term “specially designed” for a specific purpose that may need to be modified to conform to bright line standards. Originally, each of the items on the resulting USML list was to have been assigned to a tier to determine its level of control. The Administration created three tiers applicable to both the CCL and the USML to categorize a different level of control.24 However, the tiering process was postponed, reportedly because it would have been necessary to decide on the tiers for all USML items prior to publishing any revised USML categories, which the Administration has proceeded to do on a rolling basis.25 While the tiering process was dropped for the bright line process, it still is expected to be used to establish tiers of control, once the lists are rewritten. Each category of the USML is being screened by an interagency team led by DOD, and proposed rewrites to each USML category, including certain items proposed to be moved to the CCL, are being published as proposed rulemakings. Proposed revisions to Category IV (launch vehicles, missiles, rockets, torpedoes, bombs, mines, and other military explosive devices); ( Category V (Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents); Category VI (vessels of war and naval equipment); Category VII (tanks and military vehicles); Category IX (Military Training Equipment); Category X (Protective Personal Equipment and 22 Federal Register, vol. 75, no. 154. “Revisions to the U.S. Munitions List, Advanced Notice of Proposed Rulemaking,” 75 Federal Register 76935, December 9, 2010, at 76937. 24 As originally postulated, Tier 1 articles are those that are almost exclusively available from the United States and provide a critical military or intelligence advantage. Tier 2 articles are those that are almost exclusively available from countries that are members of the multilateral export control regimes that control such items and (1) provide a substantial military or intelligence advantage, or (2) make a substantial contribution to the indigenous development, production, use, or enhancement of a Tier 1 or Tier 2 item. Tier 3 articles are those that provide a significant military or intelligence advantage; make a significant contribution to the indigenous development, production, use, or enhancement of a Tier 1, Tier 2, or Tier 3 item; or are otherwise controlled for national security, foreign policy, or human rights reasons. 25 “Administration Identifies Problem, Alters Stance on Export Control Reform,” Inside U.S. Trade, November 3, 2011. 23 Congressional Research Service 14 The U.S. Export Control System and the President’s Reform Initiative Shelters); Category XI (military electronics); Category XIII (auxiliary military equipment); and Category XX (submersible vessels and oceanic equipment) have been published in the Federal Register since 2011. Final rules on the migration of items in Category VIII (aircraft and associated equipment) and a new Category XIX (gas turbine engines) were issued on April 16, 2013 to be effective 180 days from issuance.26 (See Appendix D for the status of current proposals to move certain items from the USML to the CCL.) A final rule on a new “OY521” classification series has also been issued. The OY521 series will be used for items that the U.S. government determines warrant control due to a significant military or intelligence advantage it would confer or due to foreign policy reasons, but are not identified under an existing ECCN, nor are controlled under an existing U.S. or multilateral framework.27 According to Administration thinking, the USML will contain “only those items that provide at least a significant military or intelligence applicability that warrant the controls the AECA requires.”28 The reconstituted Munitions List may then be aligned with the CCL by adopting its A-E commodity organization structure and adding two additional categories: F and G for ITAR specific controls. As a result of this alignment, each USML category will be divided into seven groups: A—equipment, assemblies, and components; B—test, inspection, and production equipment; C—materials; D—software; E—technology; F—defense services; and G— manufacturing and production authorizations. “600 Series” As a result of the bright line process, the Administration has begun to move some USML items to the CCL. Under Section 38(f) of the Arms Export Control Act (P.L. 90-629), the President may not remove any article from the USML until 30 days after providing notice to the House Foreign Affairs Committee, and the Senate Foreign Relations Committee, including a description of the nature of any subsequent controls on the item. The Administration issued its first notifications to Congress for Category VIII (aircraft and associated equipment) and Category XIX (Gas Turbine Engines) on March 8, 2013. In order to comply with Section 38(f), the manner in which USML items transferred to the CCL are to be controlled is described in a proposed rulemaking on July 15, 201129, and is part of the “mega rule” issued on April 16, 2013.30 It involves the creation of a “600 Series” subcategory of Export Control Classification Numbers (ECCNs) for each category on the CCL.31 This new series will be populated by items that are judged not to need the relatively stricter controls mandated 26 “Revisions to the Export Administration Regulations (EAR): Initial Implementation of Export Control Reform,” 78 Federal Register 22660, April 16, 2013. This rulemaking, which will come into effect on October 16, 2013, also incorporates the final “framework rule” on the “600 series,” the “specially designed rule” and other changes to the EAR. 27 “Revisions to the Export Administration Regulations: ECCN 0Y521 Series,” 77 Federal Register 22191, April 13, 2012. 28 Remarks of BIS Assistant Secretary for Export Administration Kevin Wolf to the Update 2011Conference; Washington DC; July 19, 2011. 29 “Proposed Revisions to the Export Administration Regulations: Control of Items the President Determines No Longer Warrant Control Under the U.S. Munitions List,” Proposed Rule, 76 Federal Register 41958, July 15, 2011. 30 “Revisions to the Export Administration Regulations: Initial Implementation of Export Control Reform,” 78 Federal Register 22660, April 16, 2013. 31 The 600 Series has also been referred to as the Commerce Munitions List. Series 600 items are to be designated with a 6 in the ECCN. For example, applicable aircraft will have a 9A610 ECCN. Congressional Research Service 15 The U.S. Export Control System and the President’s Reform Initiative under the USML. Items moved to the CCL in this manner will require a license to all destinations except Canada. All items controlled pursuant to multilateral control regimes would retain their existing controls. In addition, “600 Series” items will be subject to a general policy of denial to countries subject to a U.S. or U.N. arms embargo. The rule also places restrictions on the extent to which certain license exceptions can be applied. End-use items transferred to the 600 Series would be eligible for the recently announced Strategic Trade Authorization (STA) license exception (described below) only after a determination is jointly made by the State, Defense, and Commerce Departments that a license exception should be made available for the item in question. Most parts, components, and accessories transferred under this process would be automatically eligible for an STA license exception for exports to the governments of STA-eligible countries. Items expressly defined as “less significant” would be eligible for a license exception for destinations other than those controlled for anti-terrorism reasons. “600 Series” items would also be eligible for other preexisting license exceptions. The U.S. control status of parts and components also is addressed by the 600 Series. Under the EAR, the license requirement is based on the finished product, generally without regard to its parts and components. However, a foreign product containing more than 25% controlled U.S. content (10% controlled U.S. content in the case of a transaction to a country identified as a state sponsor of terrorism) may require a reexport license from the United States. However, for ITARcontrolled items, DDTC has employed a jurisdictional interpretation known as a “see-through” rule, which may require U.S. reexport controls on parts and components incorporated into end products manufactured overseas.32 For items migrating to the 600 Series, a 25% rule will apply, but no de minimus amount would apply to embargoed destinations. “Specially Designed” To facilitate the transfer of items from the USML to the CCL, the Administration has proposed a new definition of “specially designed.” As noted above, the Administration has sought to move away from the design-intent standard of the USML and the use of the catch-all phrase “specifically designed” for military use to subject parts and components to ITAR jurisdiction. The new definition was seen as necessary given that “specifically designed” in the USML did not have the same meaning as the term “specially designed” which appears in the CCL and also in various multilateral control lists. It was also seen as infeasible to remove the term(s) entirely by enumerating each part and component being moved from the USML to the CCL. After two previous iterations, the Administration published its final rulemaking on the definition of “specially designed” on April 16, 2013.33 The two-part definition has been dubbed a “catch and release” approach in that the first part of the definition may capture and item as specially designed for military use and the second part may release the item from control under the definition if it does not qualify under certain parameters. Under the first part of the regulation, an item qualifies as specially designed if: 32 Export Administration Regulations, Part 772.2(b). “Revisions to the Export Administration Regulations: Initial Implementation of Export Control Reform,” 78 Federal Register 22660, April 16, 2013; “Revisions to the International Traffic in Arms Regulations: Initial Implementation of Export Control Reforms,” 78 Federal Register 22740, April 16, 2013. 33 Congressional Research Service 16 The U.S. Export Control System and the President’s Reform Initiative (1) As a result of “development” has properties peculiarly responsible for achieving or exceeding the performance levels, characteristics, or functions in the relevant ECCN or U.S. Munitions List (USML) paragraph; or (2) Is a “part,” “component,” “accessory,” “attachment,” or “software” for use in or with a commodity or defense article ‘enumerated’ or otherwise described on the CCL or the USML. Under the proposed regulation, if none of the two above criteria apply to an item, then the item is not specially designed. If one or more of these criteria describes an item, it potentially qualifies it as specially designed and is subject to the following six exclusions, any one of which would exclude the item from being specially designed: (1) Has been identified to be in an ECCN paragraph that does not contain “specially designed” as a control parameter or as an EAR99 item in a commodity jurisdiction (CJ) determination or interagency-cleared commodity classification (CCATS); (2) Is, regardless of ‘form’ or ‘fit,’ a fastener (e.g., screw, bolt, nut, nut plate, stud, insert, clip, rivet, pin), washer, spacer, insulator, grommet, bushing, spring, wire, solder; (3) Has the same function, performance capabilities, and the same or ‘equivalent’ form and fit, as a commodity or software used in or with an item that: (i) Is or was in “production” (i.e., not in “development”); and (ii) Is either not ‘enumerated’ on the CCL or USML, or is described in an ECCN controlled only for Anti-Terrorism (AT) reasons; (4) Was or is being developed with “knowledge” that it would be for use in or with commodities or software (i) described in an ECCN and (ii) also commodities or software either not ‘enumerated’ on the CCL or the USML (e.g., EAR99 commodities or software) or commodities or software described in an ECCN controlled only for Anti-Terrorism (AT) reasons; (5) Was or is being developed as a general purpose commodity or software, i.e., with no “knowledge” for use in or with a particular commodity (e.g., an F/A-18 or HMMWV) or type of commodity (e.g., an aircraft or machine tool); or (6) Was or is being developed with “knowledge” that it would be for use in or with commodities or software described (i) in an ECCN controlled for AT-only reasons and also EAR99 commodities or software; or (ii) exclusively for use in or with EAR99 commodities or software.”34 Under this decision tree approach, the item is potentially “caught” as specially designed by the first two criteria, but it may be “released” from that definition if any of the six subsequent qualifiers apply. The Commerce regulations would apply to the “600 series” of items moved from the USML. The proposed regulation to define specially designed in the ITAR as a replacement for the currently utilized “specifically designed” is similar in nature. The final rule for this was published on April 16, 2013.35 34 35 Ibid. Ibid. Congressional Research Service 17 The U.S. Export Control System and the President’s Reform Initiative In a speech on July 17, 2012, BIS Assistant Secretary Kevin Wolf acknowledged that the specially designed concept is “inherently difficult to apply in reality,” and that it is “not consistent with the “ultimate goal of creating a truly positive, objective list of controlled items.”36 However, he noted that concurrent with this approach, BIS also published an advanced notice of proposed rulemaking (ANPR) in June 2012 seeking comments on the feasibility of enumerating or positively identifying each item determined classified as specially designed on the CCL.37 Strategic Trade Authorization License Exception In 2011, the Administration devised a new license exception known as the Strategic Trade Authorization (STA), which is designed to facilitate transfers to low risk countries and to promote interoperability to allies in the field.38 To be eligible, exporters have to provide notification to BIS of the transaction and a destination control statement notifying the foreign consignee of the terms of the exception’s safeguard requirements, and they must obtain from the foreign consignee a statement acknowledging its understanding and willingness to comply with the requirements of the license exception. Under the final rulemaking, STA is available in various degrees to 44 countries. To a group of 36 countries made up of NATO partners and members of all 4 multilateral non-proliferation control regimes, dual-use items controlled for national security (NS), chemical or biological weapons, nuclear non-proliferation, regional stability, crime control, or significant items (hot section jet technology) are eligible for an STA. This includes almost all items on the CCL that are not controlled for statutory reasons. An additional eight countries are eligible for exports, reexports, or transfers controlled for NS-only and that are not designated as STA-excluded.39 Dual-use items controlled for missile technology (MT), chemical weapons (CW), short supply (SS), or surreptitiously listening (SL) are not be eligible for export under STA. Certain implements of execution and torture, pathogens and toxins, software and technology for “hotsections” of aero gas-turbine engines, and encryption have also been excluded from the STA. According to former Commerce Secretary Locke, the license exception will eliminate the need for licenses for over 3,000 yearly types of transactions, affecting $1.4 billion in exports.40 36 Remarks of Kevin Wolf, Assistant Secretary for Export Administration, to the Update 2012 Conference, July 17, 2012. http://www.bis.doc.gov/news/2012/wolf_update_2012.htm. 37 “Feasibility of Enumerating “Specially Designed” Components,” 77 Federal Register 36419, June 19, 2012. 38 “Export Control Reform Initiative: Strategic Trade Authorization License Exception,” 76 Federal Register 35276, June 16, 2011. 39 However, the final rule excludes NS controlled items from the Wassenaar Arrangement’s Sensitive List to the 8 countries. 40 BIS Press Release, June 16, 2011, http://www.bis.doc.gov/news/2011/bis_press06162011.htm. Congressional Research Service 18 The U.S. Export Control System and the President’s Reform Initiative Commercial Communications Satellites Although most items on either the CCL or the USML were placed there by executive discretion or by international agreement, one category of items is on the USML by statute: commercial communications satellites (CCS). Prior to 1990, CCS were controlled exclusively by the Department of State under the authority of Section 38 of the Arms Export Control Act (P.L. 90-629). Despite having both military and civilian uses, CCS were considered munitions, as many satellites and associated technologies were originally designed “specifically” for military purposes and continue to have “significant military or intelligence applications as defined by regulation.” In 1990, however, President George H. W. Bush ordered a review of dual-use items, including CCS, on the U.S. Munitions List (USML), which resulted in satellites without military performance characteristics being moved to Department of Commerce jurisdiction. In 1996, President Clinton transferred all CCS (along with commercial jet “hot section” technology) to Commerce jurisdiction with enhanced licensing procedures. Following 1998 revelations by the Cox Committee that U.S. satellite manufacturers provided missile design information and skills to China through the improper transfer of launch failure analysis, Congress passed legislation transferring the authority, effective March 15, 1999, to license exports of CCS to the Department of State (P.L. 105-261). The satellite industry claims that this transfer has led to licensing delays and lost sales resulting from regulatory uncertainty, and it has lobbied to revert export controls to Commerce Department jurisdiction. Satellites launched for commercial communication purposes may contain embedded sensitive technology, such as positioning thrusters, signal encryption, mating and separation mechanisms, and multiple satellite/reentry vehicle systems, which as standalone items are also controlled under the USML. Industry claims that because of State’s “see-through” policy of requiring licenses for parts and components embedded in CCS, foreign satellite manufacturers are designing out U.S. parts and components and advertising them as ITAR-free (i.e., free of munitions licensing requirements). In addition, Tiananmen Square sanctions and other waiver restrictions have precluded U.S. exports to China, a competitive launch destination. Section 1248 of the 2010 National Defense Authorization Act (P.L. 111-84) directed the Secretaries of State and Defense to conduct a review of U.S. space export control policy, including a risk assessment of removing satellite and related components from the USML. An interim assessment, which was reported to Congress in May 2011, found that CCS, related components, and integration and launch information “with certain exceptions, conditions and limitations” could be removed from the USML and transferred to the CCL ”without posing an unacceptable security risk.” The final review, which was delivered to Congress on April 18, 2012, recommended that Congress should return export control jurisdiction for CCS to presidential discretion, as well as to authorize the Department of Defense to determine the need for special export control monitoring and oversight services for CCS and authorize DOD to be reimbursed for those services. The National Defense Authorization Act of 2013 (P.L. 112-239), contains language (§1261) to repeal the 1999 NDAA provision transferring “satellites and related items” to the USML, potentially allowing the President to transfer satellites and related items to the CCL with certain country restrictions and reporting requirements. It would continue the prohibition on satellite sales to or launches by China, or to countries designated as state sponsors of terrorism (Cuba, Iran, Sudan, Syria) and North Korea. In addition, a license application to export satellites and related items to a country in which the United States maintains a comprehensive arms embargo will face a presumption of denial, although not an outright prohibition. The Single Enforcement Structure The third singularity involves the creation of a streamlined export enforcement system. Under Phase I of the new approach, a single export “fusion center” would be created to “coordinate and de-conflict investigations, serve as a central point of contact for coordinating export control enforcement with Intelligence Community activities, and synchronize overlapping outreach programs.”41 On November 9, 2010, the Obama Administration issued Executive Order 13558, which created the Export Enforcement Coordination Center (EECC). The center officially opened in March 2012 within the Department of Homeland Security and replaced and expanded on the functions of the existing National Export Enforcement Coordination Network (NEECN) in ICE. 41 Speech of General Jim Jones, June 30, 2010, available at http://www.aia-aerospace.org/assets/ speech_jones_06302010.pdf. Congressional Research Service 19 The U.S. Export Control System and the President’s Reform Initiative It consists of a director from the Department of Homeland Security and two deputies appointed from the Departments of Commerce and Justice, with an intelligence community liaison designated by the Director of National Intelligence. The center functions as the primary forum to coordinate export control enforcement efforts among the Departments of State, the Treasury, Commerce, Defense, Justice, Energy, and Homeland Security and the Director of National Intelligence and to resolve potential conflicts in criminal and administrative export control enforcement. The center is also able to screen all license applications. Previously, the OEE at BIS was the only entity that could screen dual-use licenses, whereas ICE could screen licenses from DDTC and OFAC. The unit will also establish government-wide statistical tracking capabilities for criminal and administrative enforcement activities. Also in March 2012, an Information Triage Unit was established in the Department of Commerce to serve as an information gathering and screening unit among law enforcement agencies, the intelligence community, and the export licensing agencies. The unit is designed to serve as a central point to disseminate relevant information for each license application prior to decision making.42 The EECC is not to be confused with the National Export Control Coordinator, housed in the Justice Department, which is “responsible for ensuring full coordination between the Justice Department and the many other US law enforcement, licensing, and intelligence agencies that play a role in export enforcement.”43 The role of the coordinator has been described as the chief prosecutor of export control enforcement with the authority to determine which cases to bring for criminal prosecution. In Phase III, the Administration may request the movement of the BIS Office of Export Enforcement to ICE. Currently, ICE conducts investigations and criminal enforcement for DDTC and OFAC, and by virtue of its authority under the IEEPA, it shares dual-use investigations with OEE. Removal of OEE to ICE will end this overlap of authority. It is envisioned that the Phase III consolidated licensing agency will continue to have authority over administrative enforcement actions.44 A Single Information Technology System The fourth singularity is the creation of a single information technology system to be used to administer the export control system. The USXPORTS database, currently used by the Department of Defense to track license applications referred to it, is being expanded to State and Commerce. When completed, it will become the platform for a proposed single export license application form to be used by State, Commerce, and the Treasury’s Office of Foreign Assets Control. It will also be used by the Department of Energy, Immigration and Customs Enforcement, and the Export Coordination Enforcement Center. The new system was reportedly still being tested in December 2012.45 42 Department of Commerce, Press Release, March 7, 2012. http://export.gov/static/2012-0307%20Commerce%20on%20ITU_Latest_eg_main_047470.pdf 43 Department of Justice Press, Release, June 20, 2007, http://www.justice.gov/opa/pr/2007/June/07_nsd_440.html. 44 Conversation with NSC Official, March 18, 2011. 45 “DOD Official Says Single IT System for Export Controls Still Being Tested,” Inside U.S. Trade, December 13, 2012. Congressional Research Service 20 The U.S. Export Control System and the President’s Reform Initiative This reform is being proposed to streamline the interagency review process. Currently, the agencies’ computer systems are not compatible and cannot seamlessly share licensing application information with referring agencies. Until recently, OFAC used a paper-based licensing system, but in April 2013 announced it had transitioned to an electronic filing system.46 BIS, in particular, has had difficulties in securing its system, which was hacked in late 2006. In response, BIS completed a replacement of all its computers in 2010—a step that will help prepare it for the adoption of the single IT system.47 The Administration’s plan calls for the adoption of USXPORTS first for internal communications such as license referrals, while exporters would continue to use the existing SNAP-R and D-Trade electronic license filing portals. Currently, a license submitted to BIS using the SNAP-R system must be converted to BIS’s internal ECASS system for internal deliberation, and to be sent for referral, it must be converted to the USXPORTS system.48 The Administration has indicated that eventually it would like to facilitate interoperability between the license portals, the internal system, and Customs’ Automated Export System (AES), the information system that tracks actual movement of goods. In conjunction with the single IT system, the Administration has developed a single license application form. To make this possible, the Administration has standardized certain definitions between the different regulations, such as the use of the term “technology” in the EAR as opposed to the term “technical data” used in the ITAR.49 To assist in compliance with U.S. export regulations, the Administration has also compiled a consolidated screening list of over 24,000 entities from existing Commerce, Treasury, and State Department screening lists. The list consolidates the BIS Denied Person List, Unverified List, and Entity List; the Department of State’s Nonproliferation Sanctions List; the Directorate of Defense Trade Controls Debarred List; and the Office of Foreign Assets Control Specially Designated Nationals List. Encryption While not announced as part of the four singularities, reform of encryption controls has been proposed as one of the first deliverables in the export control reform process. The Administration announced on March 11, 2010, that it would change a filing requirement for exporters of products with encryption capabilities. At the time, exporters of such products were required to file for a technical review by the Commerce Department, a process that, according to the White House announcement, could take “between 30-60 days.” The announcement advocated replacing this process with “a more efficient one-time notification-and-ship process,” which would ensure that 46 “Submitting OFAC License Applications Electronically,” April 18, 2013, http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20130418_33.aspx 47 Export Practitioner, September 2010, p. 22. 48 “It May Take Two Years to Adopt Single Electronic Licensing System, BISer Says,” Export Practitioner, August 2010, p. 26. 49 “Single Export Application for All Agencies to be Unveiled, White House Official Says,” Export Practitioner, January 2011, p. 31. Congressional Research Service 21 The U.S. Export Control System and the President’s Reform Initiative the “U.S. government still receives information it needs for its national security requirements while facilitating U.S. exports and innovation for new products and new technologies.”50 The Commerce Department announced on June 25, 2010, that it was amending the Export Administration Regulations (EAR) as “the first step in the President’s effort to reform U.S. encryption export controls.”51 As described by the Commerce Department’s Bureau of Industry and Security, the amendment to the EAR includes52 • replacing, for encryption products “of lesser national security concern,” the “30day waiting requirement for a technical review” with a “provision that allows immediate authorization to export and reexport these products” after the exporter submits an electronic encryption registration to BIS; • similarly replacing the 30-day requirement for most mass-market encryption products;53 • an “overarching note to exclude particular products that use cryptography from being controlled as ‘information security’ items”—a measure that implements changes approved by the Wassenaar Arrangement members in December 2009; this regulatory change eliminates controls under the CCL on “[m]any items in which the use of encryption is ancillary to the primary function of the item”; and • a provision that makes most encryption technology eligible for export and reexport to non-governmental end-users in countries other than those of “greater national security concern.” According to the June 2010 announcement of the EAR amendment, the United States “will also review other issues related to encryption controls.” The Obama Administration is currently developing new proposals to decontrol additional items. However, such measures would require approval by the members of the Wassenaar Arrangement. Recent Congressional Activity No export control-related legislation has yet been introduced in the 113th Congress However, during the 112th Congress legislation to reauthorize or rewrite the EAA was introduced, and Congress passed legislation to alter the export control jurisdiction of satellites and related components. 50 According to an Administration official, controlling the export of products with encryption capabilities differs from controlling other exports because the United States generally wants to obtain information on exported encryption technology rather than prevent its export. 51 “Encryption Export Controls: Revision of License Exception ENC and Mass Market Eligibility, Submission Procedures, Reporting Requirements, License Application Requirements, and Addition of Note 4 to Category 5, Part 2,” 75 Federal Register 36481, June 25, 2010. 52 Quotations describing the June 25 announcement are taken from 75 Federal Register, no. 122 and from BIS statements available at http://www.bis.doc.gov/encryption/default.htm. 53 The Commerce Department classifies certain products with encryption capabilities as “mass market” pursuant to a procedure described in the EAR. Congressional Research Service 22 The U.S. Export Control System and the President’s Reform Initiative Satellites During the 2nd session of the 112th Congress, the National Defense Authorization Act (NDAA) of 2013 (P.L. 112-239, January 2, 2013) included a provision to repeal Section 1513(a) of the Strom Thurmond NDAA of 1999, which removed satellites and related items from the Commerce Control List (CCL) and placed them on the U.S. Munitions List (USML). This provision has the effect of allowing the President to determine the jurisdiction of the satellites and related items that were transferred at that time, potentially allowing the President to transfer them back to the CCL subject to certain determinations and reporting requirements. (See text box, “Commercial Communications Satellites,” above) Export Control Reform Legislation In addition, two bills were introduced to reform the U.S. export control regime in the 112th Congress. One would have reauthorized the Export Administration Act (EAA) and would have amended some of its provisions, as well as amended certain provisions in the Arms Export Control Act (AECA) governing munitions licensing. The other would have replaced the EAA with a new act that would have provided the President the authority to create—within certain guidelines—a new dual-use export control licensing system. Each bill would have implications for the President’s export control initiative and may be reintroduced in the 113th Congress in whole or in part. In addition, the Administration may put forward legislation to implement portions of the Export Control Reform Initiative. Export Administration Renewal Act of 2011 The Export Administration Renewal Act of 2011 (H.R. 2122) was introduced by House Foreign Affairs Committee (HFAC) Chairwoman Ros-Lehtinen on June 03, 2011. The legislation would have renewed the currently expired Export Administration Act through 2015, would have increased the penalty structure consistent with current IEEPA penalties, and would have provided enhanced statutory investigative and overseas enforcement authority to the Department of Commerce, consistent with the Comprehensive Iran Sanctions and Divestment Act of 2010 (P.L. 111-195). The bill also would have amended the EAA’s foreign policy controls to extend the period of time to 36 months that a government previously designated as a state sponsor of terrorism must abstain from acts of terrorism before it can be removed from that designation. In addition, it would have provided for congressional oversight by requiring that “significant” proposed regulations be submitted to the committees of jurisdiction (House Foreign Affairs, Senate Banking) for a 30-day period of advanced review. Title II would have permitted generic parts and components for defense articles on the U.S. Munitions List to be treated differently than sensitive defense articles on the USML if such parts and components “do not have specialized or unique military or intelligence capabilities or significance.” Items removed from the USML would have been subject to the same level of control as on the USML unless the President determined that it was (1) in the national interest to do so and (2) complied with notification requirements in the EAA, and (3) a consensus-based interagency process between State, Commerce, and Defense determined the subsequent level of control of items removed from the USML. Items removed from the USML would have also faced heightened restrictions to certain countries. Licenses for items removed from the USML on the Wassennaar Sensitive and Very Sensitive Lists would have faced a presumption of denial to China unless the President issues a national interest waiver and adheres to congressional Congressional Research Service 23 The U.S. Export Control System and the President’s Reform Initiative notification requirements. In addition, a license for any item removed from the USML under this process would have been denied to any country subject to U.N. or U.S. sanctions, or prohibited from purchasing arms from the United States under the ITAR. Technology Security Act of 2012 On May 26, 2011, HFAC Ranking Member Berman introduced the Technology Security Act of 2011 (H.R. 2004), touted as the “the first comprehensive export control legislation to be proposed since 2001.”54 The legislation would have given the President the authority to control exports for national security and foreign policy reasons generally, including the prevention of proliferation of weapons of mass destruction, the prevention of terrorism, and the prevention of activities designed to interfere or disrupt critical infrastructure. The legislation would have asserted that U.S. national security required the maintenance of leadership and competitiveness in the science, technology, and manufacturing sectors and that the implementation of export controls should be evaluated on an ongoing basis, and that export controls should be implemented on a multilateral basis (§102). In exercising his authority to export controls, the President would have been directed to establish and maintain lists of items subject to control, lists of foreign persons or end-uses subject to control, licensing criteria and licensing alternatives—such as advanced notice in lieu of licensing, and compliance and enforcement measures. It would have expanded the definition of dual-use items to include those that could be used for cyber or terrorist attacks. The legislation would have established penalties consistent with the IEEPA penalties (see above). The legislation also would have directed the President to establish an inter-agency Transfer Policy Committee to identify strategic threats requiring export controls and to implement policies to counter those threats. This committee also would have been charged with regularly reviewing the control list and establishing and maintaining a licensing system. The legislation would have required the President to maintain current license requirements on countries supporting international terrorism, as well as current sanctions regarding missile proliferation and chemical and biological weapons proliferation. It also would have reauthorized the anti-boycott provisions from the EAA. The Technology Security Act (H.R. 2004) would have given the President wide discretion in the creation of a dual-use export system. Under this legislation, the President would have been given the authority to establish such a system and to determine where it would be located in the government. Conversely, the President could have maintained the current system with some changes, such as the creation of the Transfer Policy Committee under the new authority. By contrast, the EAA Reauthorization Act (H.R. 2122) would have locked in the current dual-use system and updated some features of it. Passage of this act likely would have prevented the establishment of a unified licensing agency envisioned by the Administration as the EAA vests the dual-use system with the Secretary of Commerce. It also may have affected efforts to streamline enforcement, as the EAA confers certain powers to the Commerce Department to enforce export controls. However, neither act would amend or modify the organizational aspects of the munitions licensing process. In considering any new legislation and the President’s proposals, Congress could consider how to balance between national security and economic competitiveness in a changing global 54 “Congressman Howard Berman Introduces Overhaul of US Exports Controls,” http://democrats.foreignaffairs.house.gov/press_display.asp?id=844. Congressional Research Service 24 The U.S. Export Control System and the President’s Reform Initiative environment. In addition, Congress could address the benefits and costs of continuing the current bifurcated export control system or the creation of a unified system. At the same time, it may wish to scrutinize the current system administered under emergency authority. It may examine the relationship between U.S. multilateral non-proliferation commitments and the current export control regime. Congress may assess the ability to maintain the U.S. defense industrial base in terms of the current system, as well as the competitiveness of U.S. strategic sectors. These strategic, institutional, and economic considerations may shape the future of U.S. export controls. Congressional Research Service 25 The U.S. Export Control System and the President’s Reform Initiative Appendix A. Basic Export Control Characteristics Table A-1. Export Control Characteristics Characteristic Dual-Use Munitions Nuclear Legislative Authority Export Administration Act (EAA) of 1979 (expired); International Emergency Economic Powers Act of 1977 (IEEPA) Arms Export Control Act of 1968, 1976 (AECA) Atomic Energy Act of 1954; Nuclear NonProliferation Act of 1978 Agency of Jurisdiction Bureau of Industry and Security (BIS)(Commerce) Directorate of Defense Trade Controls (DDTC)(State) Nuclear Regulatory Commission (NRC) (facilities and material) Department of Energy (DOE) (technology) BIS (“outside the core” civilian power plant equipment) DDTC (nuclear items in defense articles) Implementing Regulations Export Administration Regulations (EAR) (15 C.F.R. 730 et seq) International Traffic in Arms Regulations (ITAR) (22 C.F.R. 120 et seq) 10 C.F.R. 110—Export and Import of Nuclear Material and Equipment (NRC) 10 C.F.R. 810— Assistance to Foreign Atomic Energy Activities (DOE) Control List Commerce Control List (CCL) Munitions List (USML) List of Nuclear Facilities and Equipment; List of Nuclear Materials (NRC) Nuclear Referral List (CCL) USML Activities Requiring Specific Authorization (DOE) Relation to Multilateral Controls Wassenaar Arrangement (dual-use) Wassenaar Arrangement (munitions) Missile Technology Control Regime (MTCR) MTCR Nuclear Suppliers’ Group International Atomic Energy Agency Australia Group (CBW) Nuclear Suppliers’ Group Licensing Policy Based on item, country, or both. Anti-terrorism controls proscribe exports to five countries for nearly all CCL listings Congressional Research Service Most Munitions License items require licenses; 21 proscribed countries. General/Specific Licenses (NRC) General/Specific Authorizations (DOE) 26 The U.S. Export Control System and the President’s Reform Initiative Characteristic Dual-Use Munitions Nuclear Licensing Application Timeline Initial referral within nine days; agency must approve/deny within 30 days; 90-day appeal process (see Appendix B) 60 days with national security exceptions; congressional notification period for significant military equipment No timeframe for license applications Enforcement Office of Export Enforcement (BIS) (OEE) (domestic) Office of Defense Trade Compliance (DDTC) Office of Enforcement (NRC) Defense Criminal Investigation Service (DCIS)(DOD) Defense Security Service (DOD) BIS-OEE DDTC-ODTC DHS: ICE, CBP DHS: ICE, CBP Justice (DOJ): National Security Division; FBI DOJ: National Security Division; FBI DOJ: National Security Division; FBI Criminal: $1 million/20 years imprisonment Criminal: $1 million/20 years imprisonment Civil: $250,000/Denial of export privileges Civil: $500,000/forfeiture of goods, conveyance Criminal: Individual— $250,000/12 years to life imprisonment; Firm— $500,000 (NRC and DOE) (IEEPA) Denial of export privileges for either Civil: $100,000 per violation (NRC) Homeland Security (DHS): Immigration and Customs Enforcement (ICE); Customs and Border Protection (CBP) Penalties DCIS (DOD) Source: Congressional Research Service (CRS). Congressional Research Service 27 The U.S. Export Control System and the President’s Reform Initiative Appendix B. Dual-Use Export Licensing Process Figure B-1. Dual-Use Export Licensing Process (Executive Order 12981, December 1995) Source: Prepared by Ian F. Fergusson, Congressional Research Service (CRS). Notes: 1The time periods for the appeal procedure reflect a five-day window of appeal and an 11-day period for each body to make a decision. 2A license application must be resolved or appealed to the President within 90 days. The order does place a time limit on a presidential decision. * SNEC, Sub-Groups on Nuclear Export Policy, MTEC, Missile Technology/Export Control Group; SHIELD Chemical and Biological Weapons Control Group. CRS-28 The U.S. Export Control System and the President’s Reform Initiative Appendix C. List of Acronyms AECA—Arms Export Control Act AES—Automated Export System BIS—Bureau of Industry and Security, Department of Commerce CBP—Customs and Border Protection, Department of Homeland Security CCL—Commerce Control List CML—Commerce Munitions List CPI—Counter-Proliferation Investigations CW—Chemical Weapons DCIS—Defense Criminal Investigation Service DDTC—Directorate of Defense Trade Controls, Department of State DHS—Department of Homeland Security DOJ—Department of Justice DTSA—Defense Technology Security Administration EAA—Export Administration Act EAR—Export Administration Regulations ECCN—Export Control Classification Number EECC—Export Enforcement Coordination Center EEB—Economic, Energy, and Business Bureau, Department of State FP—Foreign Policy Controls GAO—Governmental Accountability Office IEEPA—International Emergency Economic Powers Act ICE—Immigration and Customs Enforcement Agency, Department of Homeland Security ISN—International Security and Nonproliferation Bureau, Department of State ITA—International Trade Administration, Department of Commerce Congressional Research Service 29 The U.S. Export Control System and the President’s Reform Initiative ITAR—International Traffic in Arms Regulations MTCR—Missile Technology Control Regime NEECN—National Export Enforcement Coordination Network NRC—Nuclear Regulatory Commission NS—National Security Controls NSG—Nuclear Suppliers Group OEE—Office of Export Enforcement ODTC—Office of Defense Trade Compliance, DDTC OFAC—Office of Foreign Assets Control, Department of the Treasury SI—Significant Items Controls SL—Surreptitious Listening Controls SS—Short Supply Controls STA—Strategic Trade Authorization USML—U.S. Munitions List Congressional Research Service 30 The U.S. Export Control System and the President’s Reform Initiative Appendix D. Proposed Migration Of Certain USML Items to the CCL Table D-1. Proposed Migration Table USML Category Proposed CCL Destination Status: Date/Federal Register Category IV: launch vehicles, missiles, rockets, torpedoes, bombs, mines, and other military explosive devices Category 0: Nuclear Materials, Facilities and Equipment, and Miscellaneous; Category 9: Aerospace and Propulsion Proposed January 16, 2013: 78 Fed. Reg. 6750 (EAR), 78 Fed. Reg. 6765 (ITAR) Category V: Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents Category 1: Materials, Chemicals, “Microorganisms”, Toxins Proposed May 2, 2012: 77 Fed. Reg. 25932 (EAR), 77 Fed. Reg. 25944. Category VI: Vessels of War and Naval Equipment Category 8: Marine; Category 9 (GTE) Proposed December 23, 2011: 76 Fed. Reg. 80291(EAR); 76 Fed. Reg. 80302 (ITAR) Category VII: Tanks and Military Vehicles Category 0: Nuclear Materials, Facilities and Equipment, and Miscellaneous; Category 9 (GTE) Proposed July 15, 2011: 76 Fed. Reg. 41957 (EAR); Revision: December 6, 2011: 76 Fed. Reg. 76085 (ITAR); 76 Fed. Reg. 76085 (EAR) Category VIII: Aircraft and Associated Equipment Category 9: Propulsion Systems, Space Vehicles, and Related Items Proposed November 7, 2011: 76 Fed. Reg. 68675 (EAR); 76 Fed. Reg. 68694 (ITAR); Final Rule, April 16, 2013: 78 Fed. Reg. 22660 (EAR); 78 Fed. Reg. 22740 (ITAR). Category IX: Military Training Equipment Category 0: Nuclear Materials, Facilities and Equipment, and Miscellaneous; Proposed June 13, 2012: 77 Fed. Reg. 35310 (EAR); 77 Fed. Reg. 35319 (ITAR) Category X: Protective Personal Equipment and Shelters Category 1: Materials, Chemicals, “Microorganisms,” Toxins Proposed June 7, 2012: 77 Fed. Reg. 33688 (EAR); 77 Fed. Reg. 33698 (ITAR) Category XI: Military Electronics (Includes certain cryogenic and superconductive eq. operated in motion in Cats. VI,VII,VIII & XV) Category 3: Electronics; Category 9: Aerospace and Propulsion Proposed November 28, 2012: 77 Fed. Reg. 70945 (EAR); 77 Fed. Reg. 70958(ITAR) Category XIII: Auxiliary Military Equipment Category 0: Nuclear Materials, Facilities and Equipment, and Miscellaneous; Proposed May 18, 2012: 77 Fed. Reg. 28250 (EAR); 77 Fed. Reg. 29575 (ITAR); Category XVI: Nuclear Weapons Related articles. Category 1: nuclear materials; some items also under NRC, Energy Dept. control. Proposed January 30, 2013: 78 Fed. Reg. 6269 (ITAR) Category XIX: Gas Turbine Engines (GTE) (New category consolidating GTE from Categories VI, VII, VIII). Category 9: Aerospace and Propulsion Proposed December 6, 2011: 76 Fed. Reg. 76072 (EAR); 76 Fed. Reg. 76097 (ITAR); Final Rule, April 16, 2013: 78 Fed. Reg. 22660 (EAR); 78 Fed. Reg. 22740 (ITAR). Congressional Research Service 31 The U.S. Export Control System and the President’s Reform Initiative USML Category Category XX: Submersible Vessels and Oceanic Equipment Proposed CCL Destination Category 8: Marine Status: Date/Federal Register Proposed December 23, 2011: 76 Fed. Reg. 80291 (EAR); 76 Fed. Reg. 80305 (ITAR) Source: Congressional Research Service Note: GTE: Gas Turbine Engine Author Contact Information Ian F. Fergusson Specialist in International Trade and Finance ifergusson@crs.loc.gov, 7-4997 Congressional Research Service Paul K. Kerr Analyst in Nonproliferation pkerr@crs.loc.gov, 7-8693 32