BIS to Change Specially Designed Definition in Response to Comments

September 11, 2012 by Brian Feito|Top News

The Bureau of Industry and Security’s proposed definition of “specially designed” will be revised to avoid new controls on items currently treated as EAR99 items that the State Department has previously determined not to be controlled under the International Traffic in Arms Regulations, said Kevin Wolf, assistant secretary for export administration, at the Regulations and Procedures Technical Advisory Committee Sept. 11. The revision to paragraph (b)(1) of the “release” component of the definition would avoid pulling such items within the scope of the 600 series ECCNs through the .x catchall, Wolf said. Wolf also discussed future BIS priorities at the meeting.

Wolf referred to the package of draft final rules set to be delivered to Congress in the State Department’s first 38(f) notification as the “beast rule.” The package will include the 600 series structure from the July 2011 proposed rule, the November 2011 amendments to the 600 series structure, the aircraft and engines U.S. Munitions List-Commerce Control List transfer rule, various transition topics, and the second attempt at a specially designed definition. BIS has a draft, Wolf said, but is not ready to share it because of a few remaining issues. Eric Hirschhorn, under secretary for industry security, previously said he hopes the first 38(f) notification will be sent by State this fall.

(See ITT’s Online Archives 12061802 for summary of the BIS and State proposed definitions of specially designed. See also ITT’s Online Archives 12090632 for summary of the Sept. 6 meeting of the President’s Export Committee Subcommittee on Export Administration, where Hirschhorn discussed the timetable for the first 38(f) Congressional notification.)

There were good ideas in the comments sent by industry on the proposed definition of specially designed, but a lot of what industry was seeking “would be unenforceable,” Wolf said. The proposed revisions would create so much flexibility, subjectivity, and ambiguity that a prosecutor wouldn’t have been able to bring a case. Nonetheless, the anxiety about grandfathering and past commodity jurisdiction determinations has prompted BIS to rethink parts of its proposed definition, albeit in different ways than suggested in the industry comments.

Other BIS Priorities

Wolf said he has put together a “significant list” of non-USML to CCL transfer priorities through discussions with BIS advisory committees, staff, and other agencies. The most frequent topic has been a revision to the encryption regulations of the Export Administration Regulations to make them more readable and understandable. Currently, the encryption regulations are “impenetrable,” Wolf said.

Also discussed at the meeting was BIS’ progress in harmonizing the EAR and the ITAR. BIS has made progress, said Wolf, particularly in its transition rule, which included exceptions that were previously available for ITAR items but not CCL items. But the larger effort to harmonize definitions will be an “all-consuming exercise,” Wolf said. Because the harmonization would be more of a housekeeping effort than substantive changes to licensing and jurisdiction efforts, it has taken a backseat to the USML-CCL move. BIS will resume its work “when we get some of the crunch that we’re working on out the door,” Wolf said. Progress is slow, because of the need to obtain consensus from other departments. “If one person in that food chain disagrees, it’s dead even if the other 99 percent of the staff agree.”

Wolf also outlined progress on some ultimate objectives of Export Control Reform: a single IT platform, a single licensing agency, a single enforcement unit, and a single control list. BIS will begin an internal move to the Defense Department’s USXPORTS platform in the next month, Wolf said. The use of the single internal IT platform among BIS, DoD, and State could shave a week off of license reviews. While no single licensing agency has been created, Wolf said BIS, State, and DoD are already working together closely to review comments on their proposed rules. Culturally, said Wolf, various agencies are already beginning to see themselves as one export control administration. But whether a single export control bureau actually exists in the future is up to Congress. “We’ll have to see how the election goes,” Wolf said.