Status Report on Export Control Reform Tony Dearth Director, Office of Defense Trade Controls Licensing, Bureau of Political Military Affairs, Department of State 1

How Are We Doing? Have made great progress in realizing the goals of the President’s ECR initiative –15 of 21 Munitions List categories updated –Changes have resulted in a 44% decline in authorization requests –Exporters and allies taking advantage of more flexible controls administered by DOC to realize urgent acquisition needs 2 Export Control Reform: Fundamentally a national security effort intended to achieve greater regulatory efficiency and rationality while focusing our export controls on the most significant items and destinations

ECR Pillars Single Export Enforcement Coordination Agency –Export Enforcement Coordination Center (E2C2) created by Executive Order (Nov 9, 2010) under DHS Single IT System (USXPORTS) –Single portal delayed – still use D-Trade and SNAP-R –DDTC implemented July 2013 – DOC/BIS implementation on-going Single Control List –71% implemented by May 2015 (15 of 21 USML Categories) –Effort to “harmonize lists” on-going – first major rule published May 22 Single Licensing Agency –To occur during Phase III 3

Recent Rule Activity Corrections, Clarifications, and Definitions (final) – published Oct 2014 Categories VIII & XIX (review) – published March 2015 Category XII (proposed) – published May 2015 Exports/Temporary Imports Made to or on Behalf of the Department or Agency of the U.S. Government (proposed) – published May 2015 Registration and Licensing of U.S. Persons Employed by Foreign Persons, and Other Changes (proposed) – published May 2015 Revisions to Definitions of Defense Services, Technical Data, and Public Domain (proposed) – published June 2015 Categories XIV & XVIII (proposed) – estimate: Summer

The Impact: By Category 5 This drop is even more significant when one considers that unrevised categories experienced an 8% increase during the period No. of Authorization Requests

The Impact: Transition Learning Curve Trends for revised categories remain consistent –Initial drop in applications accompanied by reciprocal rise in RWAs –RWAs begin slow, but steady decline toward pre-ECR levels almost immediately

7 Non-ECR ECR Only 65% of RWAs attributed to ECR-related reasons ECR: Incorrect sub/category ECR: CCL identified as USML ECR: All articles CCL ECR: Sub-paragraph does not allow for parts ECR: End-item not appropriate The Impact: Transition Learning Curve

Conclusion Category changes will continue The USG is counting on exporters to apply proper controls The new enumeration system requires specificity ECR is the New Normal. We are in the transition period which is hard but the results will be worth the effort. –DDTC’s website – (lots of resources). –Generic Questions: DDTC Response Team, , –DTC IT Issues: DDTC Help Desk, , 8

9 Backup Slides

15 of 21 Categories Revised USMLDescriptionStatus IVLaunch Vehicles/MissilesRule 3 – Effective 7/1/13 VExplosives/PropellantsRule 3 – Effective 7/1/13 VIVessels of WarRule 2 - Effective 1/6/14 VIIGround VehiclesRule 2 - Effective 1/6/14 VIIIAircraft and Related ArticlesRule 1 - Effective 10/15/13 IXTraining EquipmentRule 3 – Effective 7/1/13 XPersonal Protective EquipmentRule 3 - Effective 7/1/13 XIElectronicsRule 5 –Effective 12/30/14 XIIIMiscellaneousRule 2 - Effective 1/6/14 XVSpacecraft/SatellitesRule 4 – Effective 6/27/14 & 11/10/14 XVINuclearRule 3 – Effective 7/1/13 XVIIClassified ArticlesRule 1 - Effective 10/15/13 XIXGas Turbine EnginesRule 1 - Effective 10/15/13 XXSubmersible VesselsRule 2 - Effective 1/6/14 XXIArticles Not EnumeratedRule 1 - Effective 10/15/13 10

Bulk of RWAs Non-ECR Related

The Start of a Good Thing In August 2009, President Obama directed U.S. export control system agencies to conduct a broad-based review of export controls to identify additional ways to enhance U.S. national security. The NSC and NEC were directed to jointly review the existing controls, structure, and policy and recommend a way forward. 12

The Approved Plan In 2010, the President approved a plan that envisions: –A Single Licensing Agency to receive and adjudicate licenses currently processed by State, Treasury, and Commerce –A Single Control List, tiered based on sensitivity of the commodity –A Single IT system for submission, review, and adjudication of licenses –A Single Export Enforcement Coordination Agency To be implemented in 3 phases: –I: Immediate improvements, create the framework –II: Implement the new framework within existing structures/authorities –III: Complete transition: Merge and consolidate 13

Control List Updates Current control lists have parallel constructs 14 DOSDOC The LawArms Export Control Act (AECA) - Section 38 Export Administration Act of 1979* Governing Regulation International Traffic in Arms Regulations (ITAR) Export Administration Regulations (EAR) Embedded Control List U.S. Munitions List (USML)Commerce Control List (CCL) Major List Component Category (I – XXI)Export Control Classification Number (ECCN) Series *Expired in POTUS extends authority each year via the International Emergency Economic Powers Act and Executive Order