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State sends proposed export reforms to Congress

Feb. 5, 2013 - 07:16PM   |  

Following through on a promise to reform the United States’ policies limiting the export of items related to the defense industry, the State Department sent a pair of changes to Congress last week.

The agency notified Congress that it would be redefining category 8 of the U.S. Munitions List (USML), and introducing a new category. Category 8 specifies limitations on the export of aircraft and related items, while category 19 would spell out limits related to gas turbines.

The notification begins a period of review by Congress that is followed by a 180-day transition period, after which the reforms would take full effect. If Congress does not take action to halt the process, the changes will become law.

The State Department declined to comment due to the ongoing nature of the discussions with Congress.

A source with knowledge of the final language sent to Congress said that the modifications are “very similar” to what had been outlined in versions listed in the Federal Register soliciting public comment.

The proposed changes to category 8 that were published in November 2011 were intended to help make the division between commercial products and military products clearer, according to the justification included with the proposal.

“The most significant aspect of this more positive, but not yet tiered, proposed USML category is that it does not contain controls on all generic parts, components, accessories, and attachments that are specifically designed or modified for a defense article, regardless of their significance to maintaining a military advantage for the United States,” it said. “Rather, it contains, with one principal exception, a positive list of specific types of parts, components, accessories, and attachments that continue to warrant control on the USML.”

The proposal for the establishment of category 19, published in December 2011, includes gas turbines that were previously part of category 8, as well as other categories.

The category changes will be part of a long list that will be rewritten, with notification of revisions sent to Congress in related groups.

In a January interview, Andrew Shapiro, Assistant Secretary of State, Political and Military Affairs, outlined the agency’s reform plan.

“This is being done on a rolling basis,” he said. “You’re not going to see it all at once. So this year, you’ll see final rules published which will be moving items from the USML to the CCL [Commerce Control List].

“And the first category, aircraft and military vehicles parts and components, those could be thousands of items that you see moving from the USML to the CCL. That will have a real impact on defense manufacturers this year. Obviously, we’ve got a few steps that we have to go through.”

An industry source familiar with the response to the modifications said that Congress is not likely to intervene, given its approval of changes to the rules governing commercial satellite exports that were made in the 2013 National Defense Authorization Act.

“After what happened with commercial satellites, there seems to be momentum in congress for export reform,” the source said.

The State Department has spent the last several years working on export control reform, briefing Congress more than 100 times, according to one source.

The process of reform has long been viewed with skepticism from industry due to repeated promises and lack of action, but reform appears to be gaining momentum. Rep. Adam Smith, D-Wash., said that there is a new recognition of the need for reform in Congress.

“We were significantly harming, not only U.S. industry, but our national security,” Smith said. “The only thing that’s changed is the obviousness of the argument. It’s become apparent that we’re not in the same world that we were in in the ’60s and ’70 s.”

Smith, the ranking democrat on the House Armed Services Committee, said that because of the global marketplace, companies need to be able to compete overseas to stay in business.

“When we were first putting together the export control regime, the notion was that we have to protect everything that we possibly can, that there’s no downside to it basically,” he said. “People evolved into understanding that that’s not the guarantee that you think it is, things are being built all over the world.”

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