International Trade Law News

Published by Jacobson Burton Kelley PLLC

The Interagency Panel Plenary Session was chaired by Matt Borman, Deputy Assistant Secretary for Export Administration. Mr. Borman opened by noting that on the licensing side, BIS processed 19,270 licenses in 2007, of which 16,539 were approved, 172 were denied and e 2,000 were returned without action (RWAd). The average license processing time is currently 33 days.

With respect to license reviews, he noted that reviews are conducted by three interagency working groups, chaired by the State Department, on a weekly basis. Any interagency disagreements on the outcome of licenses are referred to the Operating Committee (OC), chaired by BIS. The OC reviewed 147 cases in 2007, representing less than 1% of all license applications. Of the 147, 25 went to to the ACIEP for final review. None have gone to Secretarial level, which is the last step in the license review process.

The next speaker was Ambassador Donald H. Mahley, the State Department’s Deputy Assistant Secretary for Threat Reduction, Export Controls and Negotiations. Ambassador Mahley indicated that State is working closely with BIS on the VEU program, including pre-screening and validation. The agencies are encouraging companies in China and India to inquire with the U.S. Government about what they need to do to become a VEU. In other news, Mr. Mahley discussed the need to tighten the deemed exports process, to ensure that technology is not transferred to undesirable end-users.

With respect to other initiatives, Ambassador Mahley mentioned that the Global Initiative to Combat Nuclear Terrorism (GI) is a new program which entails a government partnership with private sector. The goal is to develop a preemptively approach to ensuring safeguards. The Container Security Initiative and Megaports are also useful plans for tightening overall security of exports. The Security Proliferation Initiative, while not an export control program, is an active interdiction program that seeks the assistance of nations to actively interdict and interrupt shipment, ensuring they reach their intended destination. There have been recent successes in weakening the attempts by proliferators.

Michael Laychack, Chief of the Dual Use License Division of the Defense Technology Security Administration (DTSA), followed with a discussion on DTSA’s role in export controls and licensing.

Next, Adam M. Scheinman, Assistant Deputy Administrator for Nonproliferation and International Security at the Energy Department, noted that Energy’s export licensing budget is only $7 million, or about one-half of 1% of his office’s budget. With respect to other noticeable trends, Scheinman indicated that in 1987 DoE reviewed 10,000 dual-use license applications, while in 2007 DoE reviewed 20,000 license applications. In 1987, computers were the top reviewed item, while in 2007 computers were not even within the top 20. In 1987, the U.S. had zero international partnerships, while in in 2007 the U.S. has 30 programs with partnering countries. The nuclear industry has also accelerated its pace, with 30 applications for nuclear reactors pending in the U.S.

The final speaker on the panel was Frank Ruggiero, who has served since June 2007 as Deputy Assistant Secretary for Political-Military Affairs at the State Department, overseeing the Directorate of Defense Trade Controls (DDTC). DDTC's primary function is to license the export of munitions products. DDTC reviews 72,000 licenses per year. About one-third are sent to the Defense Department for review while the Department of State adjudicates two-thirds on its own (primarily those concerning foreign policy issues). State also interacts with BIS on commodity jurisdiction issues.

Meanwhile, he noted that U.S. treaties with the UK and Australian have been signed and now await Senate review and approval. Internally, DDTC will soon issue a policy change in the next couple of weeks that will provide that certain nationals from NATO and other friendly countries will not have to be called out in non-disclosure agreements.

Before taking questions from the audience, Deputy Assistant Secretary Borman first asked the speakers several questions. He asked Ambassador Mahley about proliferation trends. Ambassador Mahley noted increasing tendency within the chemical industry to obtain the underlying elements of proliferation technology. Another trend is the pervasiveness of certain technologies, making the need for multilateral agreements more imperative.

Next, DTSA was asked about the most sensitive technologies. DTSA, of course, mentioned night vision as a technology that would give the enemy a major advantage. Other technologies going into microelectronics has the long term potential to impact weapons systems.

Energy noted that India and China are the two most important countries to that agency at this time.

State noted that the treaties with the U.K. and Australia will decrease licensing requirements. The treaties are structured in a way similar to the VEU program in order to permits a defined universe of products to a defined universe of end-users.

The first question from the floor related to the potential issues associated with CJ issues under the proposed changes to the DFARs. DTSA noted that the process was in its initial phase and that there will have to be significant training and education with this process.

The second question related to CJ determinations and the best approach that industry should take in obtaining a CJ. Matt Borman noted that exporters can come in for a commodity classification and if it may be subject to the ITAR it will be referred to DDTC. Mr. Borman noted that 350 CJs were jointly made by BIS and DDTC.

In response to an audience question, DDTC said it is trying to implement an online process for companies to register and renew their registrations. Although he did not indicate a specific date, Mr. Ruggiero said that the system would be available sooner, rather than later.

Next, an audience member asked the panelists about standardizing terminology in the ITAR and EAR, noting that the definitions in the regulations are inconsistent. The panelists acknowledged the problem, but said that such changes are best handled by the technical advisory committees, such as RPTAC and DTAG.