Magazine article National Defense

Tightening Export Controls Require Industry Awareness

Magazine article National Defense

Tightening Export Controls Require Industry Awareness

Article excerpt

U.S. export-control enforcement activities by the Departments of Commerce and State remain on the rise.

By September 2006, Commerce enforcement cases already had surpassed the total number of cases in 2005. While the State Department does not publish similar statistics, the defense industry has noted more vigorous enforcement by that agency; as well.

One reason for this trend is the increased interagency cooperation and information sharing during export enforcement. For example, interagency intelligence reports recently led to the seizure of U.S. electronic components by the Commerce Department and Immigration and Customs Enforcement. The components were supposed to be headed for the United Arab Emirates, but commerce officials determined they were destined, instead, for Iraq, where they were to be used by insurgents in making improvised explosive devices.

Export control agencies also focus on compliance relating to foreign nationals in the U.S. work force. Recently, the Commerce Department proposed that the status of foreigners should be based upon country of birth, rather than nationality, triggering an outcry from U.S. business and academic communities.

Business attacked the burden and cost of the proposal. Academia contended the change would impede research. Commerce has withdrawn this proposal and formed a private-sector advisory committee to review the deemed export policy. At the first meeting of the committee, Co-Chair Robert M. Gates, president of Texas A&M University, charged that the deemed export issue "strikes at the heart of scientific inquiry and economic competitiveness." The problem, Gates told reporters, "has the potential to be a very serious one."

The Defense Department also weighed in on the deemed exports issue. An export of technology or controlled information is deemed to take place when it is released to a foreign national within the United States. The department previously proposed new requirements to prevent unauthorized disclosure of export-controlled information and technology under defense contracts.

Many public comments to this proposal took issue with the department's attempt to craft new export-control requirements, many conflicting with existing regulations. In August, the Pentagon amended the proposal to recognize contractor responsibilities to comply with existing commerce and state regulations. However, the amended proposal also includes new Defense Federal Acquisition Regulations. It also changes existing DFAR requirements for contracts involving export-controlled information or technology and for foreign nationals' access to export-controlled information or technology related to fundamental defense research.

Then comes China. While the long-standing arms embargo against China remains unchanged, in July; Commerce proposed a rule making "dual-use" exports to China--items with both commercial and military or proliferation applications--more difficult. This proposed rule would add 47 commodities, materials, software and technology not currently controlled for exports, if destined for military end-use in China. If adopted, this rule will significantly increase the number of export licenses required for China transactions.

Finally, in March, each export-control violation increased from $11,000 to $50,000. Congress is considering legislation further increasing penalties to $120,000 per violation.

These developments underscore some of the complexities of the existing regulatory landscape and help explain why defense, aerospace and other high-tech exporters are prioritizing their compliance programs. …

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