MK Data Services

Frank Record and Paul Freedenberg

Where do we stand in the reform process and what are the stakes?

Given all the talk about changes in the export control system, you are probably asking yourself "why don't I just wait for the dust to settle in Washington before making any commitments, or spending any time or money, regarding my export control compliance program?"   Why is this time going to be any different from the abortive reform efforts under Presidents Clinton and Bush?

Many company officials complain that they have heard it all before:   promises of reform about changes in the manner in which State and Commerce administer the ITAR and the EAR, which turn out to have little real impact.

Under the previous administration, the underlying reform directive was actually classified and could not be released to the public.  By contrast, the Obama Administration has announced its intentions with speeches and Presidential declarations about the need for export control consolidation, reform, and simplification.  The only thing missing thus far has been measurable changes in the regulations and policies.  We have reached a point where any more talk  that is not followed by visible results could lead company executives to just sit on their hands and postpone any decisions to implement an internal compliance program or to upgrade an existing program.

If the government can't or won't do a better job telling companies where the "risk" is in overseas markets, how are they expected to do on their own? Are some markets more risky than others?

Overlapping and extensive lists of problem entities complied by State, Commerce, Treasury and other agencies are not user-friendly, especially for small and medium-sized companies.  The announced export control proposal outlined by the Administration has pigeonholed countries into specific lists or tiers.  But it is not clear how the export control agencies are going to determine if a particular item or transaction presents more risk than another item to a different country in a different tier.  Reform proposals now being considered in the inter-agency process will have to address this problem and provide clear guidance.

What is the role of Congress in this reform effort?  If Congress fails to take action, will the reform effort slow or even stop?

This time around, the Administration has organized the export control reform process into three distinct phases, with only the third and final phase requiring legislative action. The first phase would create a new regulatory framework.  The second would implement the new export control framework within existing legislative constraints, while the third phase (requiring legislation) would merge agencies, export control lists, and enforcement authorities.  In the end, we could look forward to a brave new world of a consolidated, single export control agency, with a single list, a single application, and a single enforcement authority.  We are years away from such a mega-agency, but companies may yet see real changes in the way that export controls are conducted within the next year.  That is why it is important to stay abreast of each new development in the Obama Administration export control reform effort.

On December 15^th we will be holding a Webinar to review the current status of reform efforts and assess if the Administration "really mean it this time around" and what your company needs to do in the current environment.

Please click here for more information