- Buyers Guide
Overhaul of US Export Control
The Obama Administration has launched a very comprehensive and well thought out game plan to modernize the complex and often confusing United States Export Control System's set of Rules and Regulations. Their plan for Export Control Reform (ECR) -- to make the system work for us as part of our National Security Strategy, not against us -- is indeed a visionary approach for those of us who have been involved in this bureaucratic nightmare of a problem for many years. Their effort is to create an export control system that is responsive to the national security, technology and commercial imperatives of the 21st Century. Their goal here is to also be better able to monitor and enforce controls on technology transfers with real security implications while helping to speed the provision of equipment to allies and partners who fight alongside us in coalition operations.
The Game Has Changed
The cold war is over and so are most of the assumptions that led us to this point in the evolution of Export Control Laws and Regulations. We now have to look at Export Controls in the context of a new reality and recast them to support how we globally engage our enemies and our friends. Today, we now fight in “cyberspace domains at the speed of light.” Our Export Control Systems must be brought up to new standards and be re-evaluated in that context. It should reflect how we deal with our closest allies internationally, both as close friends and as military coalition partners. We must protect the critical technology in the US in the proper fashion from all the bad guys. No argument there, however, our Export Control laws must reflect the world we live in today.
The context for this discussion is clear -- our laws need to keep pace with advancing technology in a globally connected world economy. US Military supremacy depends on our warfighters having a clear technological advantage. Technology is the critical factor that determines support for our National Military Strategy, and most importantly, is the key underpinning used to protect and support our warfighters on the battlefield.
The Players, Playgrounds and Problems
Responsibility for US Technology Export Controls are scattered across four major agencies and several lesser ones. The Department of Commerce’s Bureau of Industry and Security (BIS) is responsible for implementing and enforcing Export Administration regulations that pertain to the export and re-export of “dual use” commercial items.
There are also several lists associated with this effort, The US Munitions List (USML) and the Commerce Control/Critical Commodities List (CCL) as the most prominent ones. The Department of State is technically responsible for approving explicitly military sales. They enforce the International Traffic in Arms Regulations (ITAR) sales, which are governed by the Arms Export Control Act (22 U.S.C. 2778). Items governed by ITAR relate to the United States Munitions List (USML). These two agencies (and how these two lists are used) are the main players involved with regulating American technology and military exports. The DoD, along with Department of Homeland Security (DHS), the US Treasury and other Departments are involved in most of these activities. As you see and may surmise, there are “way too many cooks” in this Export Control kitchen.
How the System Works
The idea behind the existing organizational approach to Export Controls was that various agencies with their different agendas and perspectives would create a system of “checks and balances” that would be more difficult to defeat by those trying to game the system. However, it has not worked out that way, and the associated costs of all these redundant activities are very high and are becoming administratively prohibitive. There were several obvious problems with these arrangements and some that are not so obvious.
The most obvious one involves overlapping jurisdictions. It is not always clear for example where a specific item falls on one of these “lists” or to which agencies should be involved in an Export License application. For example, a company that wants to act ethically may not be clear about where to submit its export license application, or may end up going to one agency to be subsequently told they must now go to a different agency. Yet, no agency has the legal authority (nor will they formally or informally) actually interpret the Export Control laws and regulations for you. You are responsible for any action that you may take, and yes you are criminally liable if you proceed in an illegal fashion. You can see the “Catch 22” of the situation.
It has been reported that some export license applications can be approved by one agency and denied by another. The flip side of this, especially for savvy companies, is an agency can also decide to “shop their applications” picking the regulator they believe is most likely to say yes. The problem of multiple forms to multiple agencies is made worse by long processing times. These departments have limited funds from which to support staff to review applications, and the State Department is reportedly mostly paper based. Commerce is only slightly ahead with an IT system that needs to be updated. The net effect for the industry is potentially long processing times—four to six months is not unusual for an application. In that time frame, it is possible for the American company to find that the foreign bid competition that it was trying to enter is now closed and the order has been placed with a competitor.
Having a System Export License Does Not Equal Having a License for the Sum of Its Parts The next difficulty builds on the others, and is particularly a vexing problem for our microwave industry. The US Export Control system makes more work for itself by requiring approval at the level of individual components”. Yes, at the component level for products for a defense platform or weapons system! Think about how many parts are in a Fighter with all its avionics and associated equipment? In addition, it has radar guided missiles, electronic warfare suites, and RF communication systems among many other systems. It is absurd to control things at that low a component level.
For example, a foreign country was approved to buy an F 16 Fighter Aircraft from Lockheed Martin without having any apparent difficulty obtaining the License, by appropriately filling out all the required export paperwork. Now, according to US Export Control Policy, that does not mean that you as a supplier to that weapons platform or system, are approved to export anything that you supply to it. In addition, you are not authorized under US Export Control Laws to respond even when you are asked to bid parts to that foreign country to help maintain that F-16 Fighter Aircraft. As a supplier, you must apply for a Marketing License BEFORE YOU CAN EVEN TALK WITH A FOREIGN COUNTRY REPRESENTATIVE or you are in violation of the law.
For the microwave Industry, it is a non-starter to do any business with a foreign F 16 operator that may ask us to bid for that spare Radar Power Amplifier, or that EW Beamforming network. Or for that matter, even any questions on an RF FET Power transistor. It is controlled at that level, right down to the performance characteristics of the transistor. We are now letting Government regulators into controlling access via the S-Parameter Data! What has the world turned into here? It gets even worse. You are not allowed to transfer parts to another US ally whose F 16s are operating from the same base to support an American led operation. This makes the problem more complex. Bottom Line: as component suppliers, we are not covered by the platform’s OEM export license.
Protectionism and Politics
Export control regulations are even affecting weapons development programs around the world, which is a fact that is of great concern to many American defense firms. The ITAR processes make it difficult for firms like Raytheon, Northrop Grumman, General Dynamics, Boeing and many others to share information around the world with their own international subsidiaries. This inhibits the inclusion of American technology into bids for foreign contracts in foreign countries or to even explore collaboration with foreign firms in allied nations. You can not talk to your own company employees outside the US without first getting a marketing or technical license for the US government to approval your contact. This can shut American firms out of foreign weapons programs at the earliest stages.
What is even more troubling is that many people outside the US have a perception that the US Export policy and regulations are a very high “self-imposed hurdle” to overcome, fueling speculation on motives about the US Government hiding behind “the rules”, and acting very protectionist and partisan in defense of US technology and product dealings. In some instances foreign governments and countries have accused the US of try to stop foreign business competitors, and this activity has actually encouraged these negative perceptions. The current system encourages multinational companies to move research, development and production offshore, "eroding our defense industrial base" as well as "undermining our control regimes."
The Basics of Reform
Fundamental reform needs to be carried out in a half dozen government agencies, where the final set of updated Export Control rules will need 1) to achieve consistency of purpose and direction 2) to have a well thought out strategy on the various technologies and approaches to controls that are realistic, and 3) will put in place specific regulations that will have clear and unambiguous objectives.
The government needs to fix all the conflicts, and put in place crisp guidance to be followed by all. The government’s intent on what technology needs to be protected must be crystal clear. The Export Control Regulations should support those findings. Export controls rules need to be an enabler for National Security, not used as a gatekeeper to hold back on everything. And, once they have vetted these new rules and effectively challenged themselves that they have done it correctly, they will then need to it roll out and plan to implement it.
It now has to stand on its own as an effective US Government policy directive, specifically designed for protecting critical technology for the warfighter. The government must transform this process into a unified business-like methodology. They have to communicate it clearly to the stakeholders -- our citizens, the business and government community and our global allies. Make no bones about this task, it will be arduous, painful and time consuming to upgrade and make common sense of all these disparate agency rules and regulations. Mistakes will be made and lessons will be learned in this effort. The old system is broken, and needs to be upgraded to today’s standards of coalition warfare and global alliances.
Highlights of the Administration's Plans for ECR
Last Spring, Defense Secretary Gates set out the Administration's conclusion that fundamental reform is needed. "If the application of controls on key items and technologies is to have any meaning,” he said, “we need a system that dispenses with 95 percent of ‘easy’ cases and let us concentrate our resources on the remaining five percent. By doing so, we will be better able to monitor and enforce controls on technology transfers with real security implications while helping to speed the provision of equipment to allies and partners who fight alongside us in coalition operations.”
The President, Secretary of Commerce Locke and others discussed how the end result of addressing these critical questions would be a single control list administered by a single licensing agency operating on a single information technology platform and enforced by a single primary export enforcement coordination agency. The structural reforms require congressional action for a single control list and a single IT system. This past December, the Departments of State and Commerce issued proposed regulations to achieve two fundamental reform objectives: controlling items based on transparent technical parameters, which translates in export control parlance to "positive lists" that do not overlap; and separating items by tier, to focus controls on the most sensitive items while allowing for more flexible authorizations for relatively mature technologies that are more widely available.
The Governments plan involves converting the USML and CCL into parallel constructed, three-tiered lists that allow the US Government to focus control on the most sensitive items while establishing cascading controls on more mature and widely available items. The Government would then apply licensing policies associated with the tiers.
The Outcome: Getting it right this time
When the Administration has implemented reforms, their goal will be what they call the three "Es": 1) Greater efficiencies in terms of focusing controls and investigations on those items that are the most significant in terms of providing the United States with a military or intelligence advantage, while facilitating exports to coalition partners in order to improve our interoperability. 2) Increased education to ensure that everyone subject to our regulations knows of their existence and requirements. The effort will also help exporters understand how the changes will affect their compliance responsibilities. The Administration will also be emphasizing the adoption of internal export management and compliance programs. 3) Enhanced enforcement, to ensure that exporters, re-exporters, and end users comply with our regulations and use US-origin items responsibly.
Administration compliance personnel will evaluate exports made under license or license exception to ensure they comply with the Export Regulations. Government agents are increasing their presence domestically and abroad. They will have new export control officers in China and Singapore, and will leverage the resources of the FBI and ICE (Immigration, Customs Enforcement) as participants in the Export Enforcement Coordination Center.
The MWJ August Military Microwaves supplement will provide a comprehensive update on this issue.