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Trade Association Provides Recommendations for Next Phase of Export Control Reform Initiative

The Coalition for Security and Competitiveness, an alliance of 18 major industry associations representing small and large manufacturers in every industrial sector in all 50 states, recently wrote to President Obama to reiterate its support for the Export Control Reform initiative and offer recommendations for the next phase of the programme. The 25 March letter to the president praises the inter-agency co-operation and significant progress made to date toward fulfilling the ECR’s goals and outlines short-term priorities for the current administration as well as medium- and long-term objectives that should be tackled in the years ahead. The letter urges the department of State, Commerce and Defense to address the remaining critical issues of the ECR and carefully consider how a future administration can build on this important initiative.

According to the Coalition, the Obama administration should focus on the following five short-term priorities.

Category Changes and Periodic Reviews
The administration should complete the review and reconciliation of the U.S. Munitions List and the Commerce Control List. The relevant inter-agency review and stakeholder discussions have been completed and the departments of State and Commerce should now publish those proposed rules in the Federal Register and move toward finalising the proposed changes. The Coalition welcomes the administration’s announcement that it will review the effectiveness of the USML and CCL changes on an on-going basis and favours the institutionalisation of that process, including by changing federal advisory committee structures as needed to ensure broad technical inputs are received on the scope and application of controls on technologies.

Harmonisation of EAR and ITAR Definitions
The DOC is already working on harmonising a limited number of definitions between the two sets of regulations and the Coalition urges completion of that process.

Transition to Single IT System and Portal
The administration has been attempting to transition the export licencing agencies to a single secure licencing database (USXports) for four years. When that transition is complete, the agencies will be able to administer more effectively the licencing process and ensure that decisions made by the different departments are fully co-ordinated. According to the Coalition, efforts should be expedited to provide a single licencing form and a single application portal, simplify the application process and make it easier to use for exporters, and provide an opportunity for licencing agencies to streamline application review.

New Multi-lateral Controls on Intrusion and Surveillance Items
The Coalition supports the recent announcement of the administration’s plans to seek a renegotiation of a 2013 Wassenaar Arrangement rule on controls for cybersecurity items like intrusion software and network surveillance systems and is ready to work with the departments of State and Commerce as they craft a new proposal. The Coalition believes that the administration should conduct a comprehensive consultation process with representatives from industry and the security community.

Processing Times for Licence Applicants
The departments of State and Commerce should be able to handle day-to-day processing of licence applications in an efficient, timely and effective manner, including the DoD technology review process, to support U.S. economic and national security objectives. More attention should be paid to improve efficient processing even as the U.S. government continues to pursue substantial reform and revision of the export control process.

Medium- and long-term priorities outlined in the letter include the following.

Expedited Procedures for Exports of Defence and Security Technology
The U.S. government should develop and implement a workable comprehensive licencing framework and appropriate licence exemptions to cover technology-sharing with and amongst friends and allies on the government’s priority defence and security programmes, as well as relevant space and homeland security programmes.

Programme Licences for Commercial Technologies
The DOC should pursue a “programme licence” model for technologies controlled on the CCL that encompasses situations where multiple U.S. companies are exporting to a vetted overseas end-user or a single company has multiple export transactions with a vetted overseas end-user.

Intra-Company Transfer Licence Exceptions
The Coalition believes that an ICT licence exception that allows trusted companies to exchange technology freely within their own organisations, provided such technology is protected by internal compliance processes as well as technology and intellectual property controls, would greatly simplify licencing and compliance processes for many U.S. companies. The DOC should therefore pursue a “deemed export” ICT licence exception that leverages the market imperative for U.S. entities to safeguard their intellectual property from unauthorised parties. This licence exception should allow U.S. parties that adopt reasonable, practicable screening and technology control programmes to release technology controlled under the EAR to non-U.S. employees in the United States.

Encryption Controls
The U.S. government should develop simplified and recalibrated encryption controls that only restrict a narrow positive list of encryption-related items. The Coalition notes that there have been a number of adjustments in these controls since they were initially imposed but most of them have not simplified the system and all of them have failed to keep up with the rapid development of encryption technology. Accordingly, the DOC should lead an inter-agency review process of the current encryption controls that leads to recommendations for policy changes.

Co-operation Between Commercial Innovators and the DoD
The State Department should update intellectual property terms and revise ITAR and other export control regulations, including contractual data handling requirements like those related to Unclassified Controlled Technical Information, so that innovative commercial hardware and technology are not inadvertently captured by the ITAR. The Coalition believes that these regulations hinder the ability of commercial companies who export technology worldwide to collaborate effectively with government agency customers.

Public-Private Information-Sharing Programme
An effective information-sharing programme should be developed between the government and individual exporters. Under this programme, the government would provide companies with information on potentially risky end users while companies would provide the government with information on entities seeking to purchase controlled goods or technology.

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