Sorry for the delayed posting – we were busy catching up with government officials at Commerce’s Annual 2012 Update which was a huge success. You really could visit with someone from Bureau of Industry and Security (BIS), Directorate of Defense Trade Controls (DDTC), and Office of Foreign Assets Control (OFAC) and pose any question to anyone individually. In light of the massive changes coming in the next year, this conference had more significance than others in the past. A large portion of Update this year was focused on export control reform (ECR).
We had three people at the conference, which was a huge firm commitment and shows our focus on what we think clients will need in the next year. For the record, the winning comedic panel clearly goes to the guys in enforcement. They took the show away with substance and humor making the sessions actually fun and leaving the audience begging for more (really!). Here are some of our takeaway tips and notable moments:
- BIS is truly trying to achieve reforms that will benefit business. Under Secretary for Industry and Security Eric L. Hirschhorn noted that BIS is trying to accomplish three things through ECR – “clarity, reliability and predictability.”
- The Department of State’s Assistant Secretary for Political and Military Affairs Andrew Shapiro remarked on the over inclusiveness of State’s current jurisdiction and the necessity for change. Notably he commented that the current system “tries to protect too much” and that the scope of control tries to protect everything “from the weapon system itself, to every nut, bolt, and screw that may be used on that system…But not only does it try to control everything, the current system generally treats all items the same and applies the same controls across the board. For instance, the system doesn’t distinguish between a generic bolt on the F-16 and the F-16 itself.” It was great to hear him, as someone within the government, pronounce, “This, to say the least, is nuts.”
- The ITAR world is changing. The government “gets it.” If an item is not inherently military it will likely move to Commerce control. Just because you have a military spec will no longer mean the item is definitely ITAR. If the military spec has become the commercial standard, the product won’t be inherently military and moves from ITAR.
- The #1 item for licensing at BIS… is night vision goggles. And, they will be the last category reviewed for removal from the list.
- Stop calling the CCL the “dual-use” list! Soon it won’t be!
- Transshipment is a big issue. It might surprise many to learn that Singapore is the #1 transshipment port in the world! Of course, the UAE also has very high reexporting rates, is in close proximity to many US sanctioned countries, and is the number one importer of US military sales. This means if you’re exporting to the UAE know your customer, end-use, and end-user! High-risk locations in the UAE include Deira, Bar Dubai, and the Naif Area. Also notable, a not so obvious transshipment location to keep on your radar is South Sudan.
- Next time you’re frustrated with the export control system, think on this fact – BIS only requires licenses for a surprisingly low percentage of exports. For example, for exports to a country like China, which we perceive as a heavily regulated, BIS only requires licenses for less than 1% of exports under its jurisdiction.
- For OFAC licenses under which you want to include the export of replacement parts, be sure to make those intentions clear. Also, if you want replacement parts included in your license, be sure to list the correct Export Control Classification Number (ECCN) for those parts in the license application.
- Many items that are transshipped are EAR99. This means that it does not matter what you’re sending – it could be paperclips – you must still perform due diligence!
- BIS is focusing its deemed export enforcement on technology transfers. The Office of Export Enforcement is performing a thousand visits a year. The good news is that BIS is developing a new compliance tool to help companies in this area, so keep an eye out!
Come meet us next year or call with questions.
The International Trade Team at Baker Donelson