Amber Road would like to thank all of those who attended Export Control Reform Update: Preparing for Transition, which was hosted by American Shipper on Tuesday, April 23. We had an amazing turn out, and the attendees asked some great questions. Unfortunately, we ran out of time and were unable to answer all of them. The presenters were kind enough to provide us with written responses to those questions. Here is a sneak peak:

 

  • Will Temporary Export Licenses exist under ECR such as we currently have with Dept. of State (DSP-73′s)?

ECR will not impact the issuance of temporary export licenses (DSP-73s) by the Directorate of Defense Trade Controls (DDTC).  With respect to the EAR, BIS does not issue temporary export licenses.  Upon the effective date of the initial implementation rule (October 15, 2013), all licenses issued by BIS will have a default validity period of four years, regardless of whether the transaction is a permanent or temporary export.  Please note, however, that certain temporary exports, re-exports and transfers (in-country) may qualify for License Exception TMP (§ 740.9) if all relevant terms and conditions are met in §§ 740.2 and 740.9.

 

  • When the recently published final rule goes ‘active’ in October, will the revised ‘specially designed’ definition be applicable to the old existing USML/ECCN categories?  Or is it only for use on the newly published categories and lists?

Upon the effective date, the definition of “specially designed” will apply to all instances where “specially designed” is used in the Commerce Control List (CCL).  Thus, it will apply regardless of whether the item is a 600 series item or not, and regardless of whether the term is used as a control parameter or a decontrol parameter.  With respect to the USML, the ITAR definition of “specially designed” will apply to USML Categories VIII and XIX upon the effective date.  As subsequent revised USML categories are published in final form and become effective, the term “specially designed” will apply to those additional USML categories as well.

 

Don’t see the question you asked?  Follow this link to see a full list of questions and answers.

 

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The Bureau of Industry and Security (BIS) has recently proposed a new rule regarding the control of military electronic equipment and related items. The rule mandates that the President will no longer determine warrant control under the United States Munitions List (USML), but rather on the Commerce Control List (CCL). This rule is being proposed along with another from the Department of State‘s Directorate of Defense Controls, which would amend the list of articles controlled by USML Category XI.

 

BIS said its intent is that the new Export Control Classification Numbers “not increase the number of destinations to which a license is required, alter the policy under which license application are reviewed or create any apparent instances of an item that is subject to the EAR being covered by more than one ECCN.”

 

BIS has issued a deadline of January 28, 2013 for comments to the proposed rule. Click here to view the full notice from the Federal Register. Check out this article for more information.

 

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President Obama recently signed an executive order, establishing the Interagency Trade Enforcement Center (ITEC) within the U.S. Trade Representative (USTR).  The Obama administration is aimed at doubling exports by the year 2015, and this new agency will help facilitate that goal.
 
According to Ron Kirk, Ambassador of USTR, the ITEC is among the most significant commitment of resources and expertise since the establishment of the USTR. The purpose of the Interagency Trade Enforcement Center will be to coordinate U.S. trade rights under international agreements, monitor unfair trade practices, as well as identify and eliminate foreign trade barriers. These tasks will hopefully curb the production of counterfeit and unsafe goods and improve market access for U.S. exporters. The ITEC will also strengthen trade enforcement of intellectual property laws.
 
Chairman of the House Trade Working Group, Rep. Mike Michaud (D-Maine), said, “Signing this order brings us one more important step closer to the level of trade enforcement we need to counter the predatory practices of countries like China.”
 
Based on the signed executive order, the mission and function of The Interagency Trade Enforcement Center will be to:
 
(a) serve as the primary forum within the Federal Government for USTR and other agencies to coordinate enforcement of U.S. trade rights under international trade agreements and enforcement of domestic trade laws;
 
(b) coordinate among USTR, other agencies with trade related responsibilities, and the U.S. Intelligence Community the exchange of information related to potential violations of international trade agreements by our foreign trade partners; and
 
(c) conduct outreach to U.S. workers, businesses, and other interested persons to foster greater participation in the identification and reduction or elimination of foreign trade barriers and unfair foreign trade practices.
 

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The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently released a new set of best practices that are aimed at helping exporters, re-exporters and freight forwarders guard against the diversion of dual use items shipped to a transshipment hub.  While transshipments are a growing part of international trade and offer many benefits, they can be used illegally to either disguise the final destination or divert trade to unauthorized end users.

The new set of best practices encourages exporters to maintain strong internal compliance strategies, conduct focused outreach, and continuously raise awareness of export control regulations and obligations.

The following is a summary of the best practices published by BIS:

  • Companies should pay attention to the Red Flag Indicators on the BIS website.
  • Companies should seek to utilize Trade Facilitators that administer sound export management and compliance practices.
  • Companies should “know” their foreign customers – by obtaining detailed information to measure the risk of diversion.
  • Companies should avoid routed transactions when exporting and facilitating the movement of dual-use items.
  • When the Destination Control Statement (DCS) is required, companies should provide the appropriate Export Control Classification Number (ECCN) and the final destination where the item(s) are intended to be used.
  • Companies should provide the ECCN or the EAR99 classification to freight forwards, and should report this information in AES.
  • Companies should use information technology to the maximum extent feasible to augment “know your customer” and other due-diligence measures.

For more detailed information, please read the full article.
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President Obama’s videotaped remarks will be delivered to the Department of Commerce tomorrow, during their annual export control conference.  He will outline the foundation of our new export control system, “including what we control, how we control it, how we enforce those controls and how we manage our controls.”  The goal in reforming our current system is to strengthen national security by focusing on controlling the most critical products and technologies.
  
The current export control system is entirely too complicated.  According to this GovNews article, last year’s inter-agency review of the system resulted in the following observations:

• The current system operates under two different control lists with fundamentally different approaches to defining controlled products, administered by two different departments. This has caused significant ambiguity, confusion and jurisdictional disputes, delaying clear license determinations for months and, in some cases, years.
 
• There are three different primary licensing agencies, each applying their own policies. None sees the others’ licenses, and each operates under unique procedures and definitions, leading to gaps in the system and disparate licensing requirements for nearly identical products.
 
• A multitude of agencies with overlapping and duplicative authorities currently enforce our export controls, creating redundancies and jeopardizing each other’s cases.
 
• All these agencies operate on a number of separate information technology (IT) systems, none of which is accessible to other licensing or enforcement agencies or easily compatible with the other systems, resulting in the U.S. Government not having the capability of knowing what it has approved for export and, more significantly, what it has denied.

 
Under President Obama’s plan, agencies will define new criteria to determine what items need to be controlled.  The criteria will be used to revise lists of munitions and dual use items.  The goal of the revisions is to make sure the lists meet the following criteria:

• are “tiered” to distinguish the types of items that should be subject to stricter or more permissive levels of control for different destinations, end-uses, and end-users
 
• create a “bright line” between the two current control lists to clarify jurisdictional determinations and reduce government and industry uncertainty about whether particular items are subject to the control of the State Department or the Commerce Department
 
• are structurally aligned so that they potentially can be combined into a single list of controlled items.

  
Once a controlled item is assigned to a tier, a corresponding license will be applied.  Restructuring control lists and harmonized licensing policies based on tier will revolutionize our export control system.  This means export enforcement will have to be stepped up.  It is said that “the President will…sign an executive order establishing an Export Enforcement Coordination Center that will coordinate and strengthen the U.S. Government’s enforcement efforts – and eliminate gaps and duplication – across all relevant departments and agencies.”
 
This article goes into detail about the proposed revisions and is definitely worth a read.  The President’s plan sounds great in theory – I guess we’ll soon see how it plays out in reality.

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American Shipper is reporting that a private security contractor, Xe Services (formerly known as Blackwater), has been fined $42 million for violating arms export control laws.  The State Department contends that the company committed 288 violations of the International Traffic in Arms Regulations (ITAR), including the “unauthorized export of defense items and provision of defense services to foreign-end users in multiple countries from 2003 to 2009.”  While no sensitive technologies were involved, the items do require a license before they can be exported.  Interestingly enough, many of the violations occurred while Xe was under contract to provide services to the State and Defense departments, as well as other U.S. government agencies.
 
The State Department has said that $12 million of the civil penalty will be suspended if the company corrects internal compliance procedures.  Xe will not be banned from future government work or denied any license applications because the company has taken the necessary steps to identify and resolve compliance problems, including:

  • Replacing senior management
  • Establishing an Independent Export Compliance Committee to oversee remedial compliance efforts
  • Improving ITAR compliance procedures
  • Providing ITAR training to employees
  • Conducting a targeted ITAR audit to confirm the effectiveness of its compliance measures

They are very lucky.  If this had been handled as a criminal matter, the company would have been barred from future government contracts, just as the supply chain management company Agility has been.  They are suspended from future U.S. government contracts until their criminal fraud case has been resolved.
 
The New York Times reported that Xe Services committed a range of violations, from illegally exporting weapons to Afghanistan, to making unauthorized proposals to train troops in Sudan, to providing Taiwanese police officers with sniper training.  The company also shipped automatic weapons (and other military equipment) to its personnel in Iraq and Afghanistan.  Xe is said to have covered its tracks by hiding their actions in some cases – going so far as to ship weapons inside containers of dog food.  Who thought that one up?

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US Export Controls

Two typographical errors that appeared in a rule published on June 4 have been corrected.  One error is in the License Requirements section of Export Control Classification Number 2B001, and the other is in the Technical Note on Adjusted Peak Performance (“APP”) found at the end of Category 4 on the Commerce Control List.  The following ECN category is affected: 02.

 

US Anti Dumping and Countervailing Duties

Changes have been made to many products across the Tariff.  The Import Controls affected by this update are Anti Dumping and Countervailing Duties.

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US Export Controls Update

The Bureau of Industry and Security (BIS) maintains the Commerce Control List (CCL), which identifies items subject to Department of Commerce export controls.  The Export Administration Regulations (EAR) has been revised to implement changes made to the Wassenaar Arrangement’s List of Dual Use Goods and Technologies (Wassenaar List).  This list is maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies (Wassenaar Arrangement, or WA).  The arrangement advocates implementation of effective export controls on strategic items with the objective of improving regional and international security and stability.  To harmonize with the changes to the Wassenaar List, this rule revises the EAR by amending certain entries that are controlled for national security reasons in Categories 1, 2, 3, 4, 5 Part I (telecommunications), 5 Part II (information security), 6, 7, 8, and 9.  New entries to the CCL have been added, reporting requirements have been revised, and EAR definitions have been added and amended.  The following categories are affected: 1, 2, 3, 4, 5, 6, 7, 8, and 9.

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ARGENTINA

New import certificate requirements have been established for certain products.  The following HTS chapters are affected: 28, 48, 51, 52, 54, 55, 60, 61, 62, 65, 84, and 87. 

 

BRAZIL

The Tariff Rate Quota has been updated.  The following chapters are affected: 15, 29, 53, and 72.

 

COSTA RICA

The Tariff Rate Quota available for the second half of 2009 has been updated.  This quota applies to the Dominican Republic, United States, Canada, Panama, Chile, and WTO member countries.  Several products are affected, as well as the following HTS chapters: 02, 04, 07, 10, 11, 12, 15, 16, 17, 20, 21, 22, and 23.

 

US

The Export Administration Regulations (EAR) have been amended to reflect changes to the Missile Technology Control Regime (MTCR) Annex.  These changes were accepted by MTCR member countries at the November 2008 Plenary in Canberra, Australia.  This rule also clarifies certain EAR controls to properly reflect the intent of changes to items that were accepted by MTCR members at past Plenary meetings.  The following ECN categories are affected: 1, 2, 6, and 7.

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Regulatory Update

11 November 2009

The UK has updated its export controls, revoking OGEL Computers.  The flags for OGEL LVS, OGEL Turkey, and OGEL Hong Kong have also been updated.  The following categories are affected: 1, 3, 4, 5, 6, and 9.

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