The framework of export control regulations (ECR) in the United States is an immensely complex structure with historical underpinnings that date to the Cold War era. Much of the statutory authority for today’s laws dates back to the 1970s, yielding regulations that were designed to mitigate threats that have evolved greatly over the subsequent decades. The essential purpose of export controls remains the same, that being to require governmental authorization to export certain information and items to foreign entities, but the patchwork of existing regulations challenges even the most seasoned export control administrator due to the multiplicity of agencies and overlapping, highly technical nature of the regulations.
All Presidential administrations since Kennedy have undertaken various efforts at restructuring export controls to improve and enhance national security and foreign policy objectives. President Obama’s announcement in 2009 of a broad inter-agency review of export regulations was welcomed by industry. In remarks to the Department of Commerce Annual Export Controls Update Conference in 2010, the President said, “We need fundamental reform in all four areas of our current system, in what we control, how we control it, how we enforce those controls, and how we manage our controls.” The timing, though, invited speculation that perhaps a shift toward deregulation was afoot, in light of the administration’s work on the National Export Initiative (NEI). The NEI was indeed focused on economic growth, embodying the President’s stated goal of doubling exports between 2010 and the beginning of 2015. The Administration’s current export control reform initiatives were not developed as a component of the NEI and are expected to enhance and support current national security and foreign policy objectives with respect to items on the International Traffic in Arms Regulations (ITAR) munitions list and the Department of Commerce’s Commerce Control List (CCL).
In spite of the recent rise in enforcement actions against higher education institutions (HEIs) for violations of export control laws, there persists a misconception among many in the HEI community that export regulations do not apply to post-graduate educational institutions. While this deficit in awareness has not been a primary driver, or even a key factor, in the move toward recent reform initiatives, the impact on HEIs from the changes that have been proposed for implementation is expected to be mixed. These effects derive from the fact that HEIs collectively are an important locus of activities that reflect global-scale societal changes which are reshaping the risk landscape for militarily critical technology. University research and education is a fundamental driver of the rapidly increasing pace of technological development worldwide, channeling information into ever more freely-flowing conduits of knowledge exchange to a world population that is more connected and mobile than ever. These trends are well-represented on the campuses of many U.S. HEIs, with the Brookings Institution reporting that the number of foreign students on F-1 visas in U.S. colleges and universities grew almost five-fold between 2001 and 2012. Foreign students and visitors on campus, coupled with the long-standing ethos of openness in academia, present risk for HEI’s in certain circumstances related to “deemed exports.”
While the prevalence of export controlled research activities at universities remains relatively low, the risks and deficits in the intersection of these societal changes with export laws was laid bare in a 2007 report by the Department of Commerce’s Deemed Export Advisory Committee. These findings, together with the broader critique assembled by the National Research Council of the National Academies in their 2009 report “Beyond ‘Fortress America’: National Security Controls on Science and Technology in a Globalized World,” are generally acknowledged to have played a role in motivating the President’s strategy for export control reform. Succinctly summarizing the President’s strategy in remarks at the Business Executives for National Security Conference in 2010, Defense Secretary Robert Gates called for “higher walls . . . placed around fewer, more critical items” to address an existing regulatory framework that is excessively complicated and fragmented, with too much emphasis on lower risk items due to the way those items are classified, listed, and controlled.
The long-term blueprint for the President’s export control reform plan involves three overarching changes. The first change involves the creation of a single list of controlled items, merging the ITAR-based U.S. Munitions List (USML) and the Commerce Department’s CCL, while in the interim transferring thousands of items from the USML to the CCL under a new export control classification number, known as the 600 Series. The second major reform will result in a single licensing entity having jurisdiction over military and dual-use items, with the intent of producing more consistent and higher quality licensing decisions. A Single IT System to integrate these changes is proposed as an additional major reform. Finally, a single enforcement agency is proposed to streamline and harmonize coordination with existing intelligence infrastructure to produce more robust investigation and prosecution with fewer jurisdictional uncertainties.
Update on the Reform Process
In April 2013, the Departments of Commerce and State issued the first set of a number of anticipated final rules that will begin the process of implementing the first phase of the reforms laid out by the President and the Secretary of Defense. Additional rules were issued in October 2013, and January 2014, resulting in the transfer of thousands of ITAR controlled items (primarily parts and components) to the jurisdiction of the Export Administration Regulations administered by the Department of Commerce through the CCL. All of these items will now be classified under a new Export Control Classification Number (ECCN) structure designated as the 600 Series, with a smaller set of items now classified within 9×515 (satellites, spacecraft and components).
These new ECCNs remain restrictive, but pose new challenges for the university export compliance administrator in that they don’t follow the prior standard for dual-use technology established by the “use technology” definition. The technology controls applicable to these new categories may require more careful analysis of licensing requirements and more diligence in avoiding deemed export risk when items from these categories are involved in campus research activities. In addition to reclassification for items, changes have been made to reduce the vagaries and confusion of jurisdiction and classification by moving away from the old “design intent” standard to a new approach of specific enumeration of performance characteristics or other specifications for the highest levels of controls. When this level of specificity is not possible within the USML or CCL, a new definition for “specially designed” will be applicable. Both approaches are intended to apply more objective criteria to the classification process by moving away from the subjective standard of “design intent” that industry felt was the source of variability, uncertainty and risk in the commodity classification process. The newly classified 600 series items will also benefit from more flexibility in the tailoring of controls under the CCL regulations, affording many items the benefit of much more limited control based on item sensitivity, country of destination and end use/user, in contrast to ITAR’s “one size fits all” broad-based controls, which offer very few country-based exemptions. This, coupled with a new Strategic Trade Authorization exception, will benefit commercial exporters of controlled items, but is not expected to offset the increased burden of compliance review that the new rules will require for 600 Series and 9×515 items.
The Bureau of Industry and Security within the Department of Commerce maintains an ECR dashboard that periodically updates progress on the various elements of the President’s ECR priorities. The most recent update available indicates that final rules have been set for a number of categories, and implementations . However, it may be some time before definitions related to public domain and fundamental research, which are important to HEIs, are finalized and the Single IT System is fully implemented.
Written by Reid Smith, Director of Technology Transfer & Business Partnerships, Miami University.
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