U.S. Department of Commerce

Bureau of Industry and Security

Update 2015 Conference

Interagency Panel

 

IP2015

 

 

Matt Borman:

 

I think that was far and away the most rousing introduction for the panel that I’ve ever seen, so thank you Tongele. He is right though, we really have an even more stellar panel this year than we have had in past years, primarily because we now have kind of a sanctions end of the table to complement our export controls side of the table. But I thought I would give a quick introduction, have a few data points for you and we are going to get right into our speakers and we want to make sure that we allow some time for questions and answers because typically we have more questions for this panel than we have time to answer. So we want to make sure we leave time to answer at least some of them and hopefully give you answers that you can understand. As many of you know, Beth McCormick has been a participant on this panel for many years, she is currently the Director of the Defense Technology Security Administration at the Department of Defense. She is one of now I would say three panel members who have also spent time in the Bureau of Political-Military Affairs, Directorate of Defense Trade Controls, so this is really nice synergy right here. Again Beth will tell you more about what DTSA does, for those of you who don’t know or are not quite familiar. But clearly, DTSA is an integral part of the export controls system, both in terms of what’s controlled, the policies that we apply and then the adjudication of individual transactions, whether they are license application or commodity jurisdictions. So Beth and her team at DTSA are an integral part in that. And then next to her, Brian Nilsson is the newly minted Deputy Assistant Secretary of Defense Trade Controls at the Bureau of Political Military-Affairs at the State Department. I’m sure many of you know, I think Brian is maybe the only person in history who has the trifecta of working at DDTC, the NSC on export controls– he just finished an 8 year stint there, and of course you heard yesterday was integral in the development and implementation of Export Control Reform, the President’s initiative. But of course he had a long career at Commerce before that as operating committee chair, in the Foreign Policy Division, and all sorts of different responsibilities, so it is terrific to have Brian here on the panel. Next to him, Andrew Keller is Deputy Assistant Secretary for the Economic and Business Bureau at the Department of State. He may be a new participant on the panel, but he is certainly not a new participant in the export control process. They, along with the Bureau of International Security and Nonproliferation, , review a lot of the Commerce licenses and of course are integral in the development of and implementation of U.S. sanctions policy, so it is terrific to have Andrew here. Ann Ganzer you know has been here for many of these sessions. She is the Director of the Office of Conventional Arms Threat Reduction in the Bureau of International Security and Nonproliferation at the Department of State and of course they are responsible for all the multilateral regimes, so she in fact is going to lead off after I stop because the multilateral control regimes are the basis of our export control system. And then last but not least, we are pleased to have John Smith, who is the Acting Director of the Office of Foreign Assets Control, Department of the Treasury who will of course talk to you about what OFAC does generally and I think specifically on some of the current programs of interest: Iran, Cuba, and Russia. So we’ve got a great lineup. Just a couple data points for context for what you will hear. In calendar year 2014, there were about 1.6 trillion dollars in exports from the United States. So 1.6 trillion dollars’ worth of exports from the United States. 1.5 trillion of those essentially went No License Required. So you are talking about 100 billion dollars of exports from the United States in calendar year 2014 that had to go under either an individual license or some kind of license exception or exemption. So again that is to give you overall context that the vast majority of trade is certainly not impacted by a license requirement from the export control system. Of that 100 billion that went under license or license exception, roughly 35 billion of that were USML exports, about 16 billion of that were EAR exports, and of those, about 12 billion were crude oil. So you can see on the EAR side the amount of trade that actually goes under a Commerce license, relatively speaking, is pretty small. About 40 billion of that went under license exceptions on our side or license exemptions on the State side. A couple other data points in terms of Commerce licensing. Of course our numbers have been going up dramatically because of the transfer of all of the now 600 series items from the USML to the CCL. So last year at BIS we processed about 37,000 license applications in an average processing time of just under 22 days which is a real testament to the interagency review process. Because remember all of our licenses basically go to Defense and State and a fair amount go to Energy to review in that first 30 day period. 400 of those cases went to the Operating Committee and 16 went to the ACEP. So you can see the vast majority of export license applications to come into Commerce get approved interagency in that first 30 day review period. Two other data points and then we will turn to Ann. Again I think as you heard yesterday, Strategic Trade Authorization exports: since its inception in July of 2011, there has been about 1.2 billion dollars’ worth of exports under the Strategic Trade Authorization license exception. About 20,000 individual transactions and 622 different companies have used STA, so I think that shows you that this is working as we intended. We really wanted to take those easier, less sensitive exports out of the license application process and rely more on the exporters to comply with the terms of STA. The other thing that I think is really interesting and I think Kevin Wolf mentioned this yesterday, even though our licensing load has gone upon to 37,000 and we anticipate it will be up into the 40,000’s next year, the number of CJ’s we have processed has been fairly constant, about 1,000. The number of CCATS, commodity classifications that we have processed, has also been fairly constant, around 6,000 a year. So I think what that shows is that the changes we have made, especially on the USML side, have worked as intended and that they’ve made things much clearer, both from a jurisdictional viewpoint and a classification viewpoint. So we are very pleased that the CJ’s and the CCATS’ have not gone up proportionally as the licenses coming to us have gone up. So with that let me stop and ask Ann to come up and give you an overview of the international architecture for the export control system.

 

Ann Ganzer:

 

Thank you Matt. And I’d like to thank undersecretary Hirschhorn for hosting this year’s event, and inviting me to participate in this discussion. Update is probably my favorite event every year so I’m always glad to be here. So I do thank you for that.

See Update 2015 speeches at:

http://www.bis.doc.gov/index.php/compliance-a-training/export-administration-regulations-training/173-about-bis/newsroom/speeches/speeches-2015/949-director-ann-k-ganzer-remarks-at-the-2015-update-conference

 

Beth McCormick:

 

Good morning everybody. I appreciate the opportunity to be here. Matt, thanks for the kind introduction and Undersecretary Hirschhorn, nice to see you this morning. I was reflecting as I came here, the number of times that I’ve come to these conferences. And I think you need to give, sort of on our badge maybe, a multi-BIS conference pin or something to say how many times we’ve been here. And I do appreciate the fact that I’ve been here in different capacities and I think it is a real strength of us as Matt pointed out that several of us have had the opportunity to work in different agencies. In fact I think that’s one of the reasons that so much of what we’ve been able to do, over the last couple of years, worked so well. I usually say that we actually get along really well which sometimes is interesting when you work with interagency colleagues, but I think the fact that we do and the fact that we are very serious and work collaboratively together is very important. Ann just mentioned that when we think about what we do in the realm of export control, we really do it both from a national security and foreign policy perspective. And obviously having spent almost 4 years at the Department of State, I understand the importance of the notion of the foreign policy aspects. But what I want to do this morning is just share a little bit since I am the only DOD person on the panel. I want to spend a little bit of time this morning just highlighting the role that my agency plays, particularly in the national security aspect of these issues, both focusing on what we do in the interagency process, and then also in the international regimes and things which Ann spoke so eloquently about. So first a little bit about my agency. I am the Director of what’s called the Defense Technology Security Administration. It’s a field activity that reports to the Undersecretary of Defense for Policy, Ms. Christine Wormuth, in the Office of the Secretary Defense. My agency is around 220 individuals, we have individuals that are civilians, military, and contractors. One of the things that I think is most interesting about our agency is the expertise that we have from a technical perspective. I’ve got a real array of scientists and engineers who really understand technologies and the breadth of technologies. In fact I am not allowed to make a joke, ‘it doesn’t take a rocket scientist,’ because I have rocket scientists. So that’s one of the things that we do, and it was interesting when I came back to DTSA, because I’m actually a retread, I was the Director of this agency before and I came back and I am hoping I can do a better job the second go around, I kind of thought about what people think of DTSA, and when people think of DTSA, they have a tendency to think that the primary thing that we do is to basically review export licenses for munitions that are staffed to us by the Department of State, and dual-use items that are passed to us by the Department of Commerce, and that is a lot of what we do, and in fact we review and give a national security perspective on behalf of the Department of Defense, we are basically the entry point and the exit point for the Department of Defense position. We do about 60,000 licenses a year. So you can imagine that takes up a lot of our band width. But we do an awful lot of other things and so let me just touch a little bit on just a couple of other things that we do that I think are important. The first thing is the role that we’ve played in the Export Control Reform Initiative and I know yesterday I believe, there was quite a comprehensive explanation of a lot of the aspects of Export Control Reform, but one of the roles we’ve played, which again I think is a very important one, is really to help with the very comprehensive review that has been done particularly of the U.S. Munitions List. Again those technical experts that I mentioned play a very critical role in helping us to determine what technology should stay under the jurisdiction of the Department of State and what items can move over to the jurisdiction of the Commerce Department. It has been an interesting thing, category by category and of course now, we’ve accomplished, we’ve actually done new, we have new rules and regulations out with 15 of the 21 categories and for those of us who have been in government a long time, we often don’t take time to pat ourselves on the back, that is a pretty significant accomplishment. The one thing we had to do that was real challenging is to try to get the two regulations to be more harmonized if you are familiar, as many in the audience are, about the Commerce regulations. They are very incredibly delimited. Whereas the U.S. Munitions List was not very delimited at all, in fact it had a lot of phrases that said military and intelligence use. Well what is that? So one of the things I think that we’ve played a very fundamental role in is making sure that as we delimited the type of parameters on the U.S. Munitions List, that those were well defined. Have we done it quite right? I think, I think that we’ve done it pretty well. But I have to tell you that the process we use in terms of the collaboration across the interagency and then the input that we’ve gotten from the public comment period as we’ve done each of the proposed rules has been terrific. Another thing that we’ve done, and Ann alluded to it a minute ago, is my agency serves as the program manager for the single integrated information system for the U.S. government, USXports. And again I was very pleased when we discussed within the Export Control Reform system, in the process, the famous four singles as we call them. And I was very pleased that the Defense Department system, USXports, was chosen, something that I was very familiar with in my previous time at DTSA. And I have to say it’s a very good system because it allows us to move the licenses between the agencies and has a very good repository of precedent cases so we can move them quickly. So, at last, I am pleased to say now we have fully gotten Department of State and the Department of Commerce online. And when I say Department of State, it is both for munitions licenses as well now as dual-use and military items. Commerce came online a few weeks ago. We have the Department of Energy online, and now we are finishing up and we will be adding OFAC from the Treasury Department to that process. So I am very pleased with it. It has been a challenging thing, you can imagine in this day and age with IT systems being as challenging as they are to have all the agencies connected. We’ve done a lot in terms of the adjudications of the licenses between the agencies. We have more work to do, and now we will move on with making a single portal for the industry, and utilization of a single form to make it easier for processing for input of our industries. So I think that is all good news. I also just want to note that DTSA plays a very unique role in the various multilateral regimes as well as the sanctions process that some of my colleagues from State and Treasury will discuss in a few moments. We have always played a very major role in things like the Wassenar regime, the development of technical proposals, and we’ve also played a very significant role in support of the technical and licensing aspects of two of the other regimes, in fact, the Missile Technology Control Regime and the Nuclear Suppliers Group. But a few months ago, we were asked if we wanted to take on the policy responsibilities related to the Missile Technology Control Regime and the Nuclear Suppliers Group. And candidly it was a synergy that we could not resist and I was very pleased here recently when one of my senior officials was able to participate in the MTCR plenary in Rotterdam. I also just want to mention that we are very much involved in sanctions policy. Ann mentioned a few minutes ago the various sanctions that we put in place and also the limitations on providing capabilities to the Russians. We played a very significant role in that, obviously, the perspective from the Department of Defense in terms of the type of technologies that the Russians would be wanting to acquire for their military modernization. So we have been very much involved in the development of the specific determinations of what items should not go to the Russians and the dependency they had on the United States as well as other western sources. And we have participated actively in talking with other countries, making sure that they aren’t the weak link, because we are not going to do that. And then finally, also Ann had made mention of the arms trade treaty. Again, my agency has the responsibility for the implementation of that and support of that within the Department of Defense. So that is just a little bit of what we do, and I can tell you that the other role that we play is really the establishment of technology security policy for the Department of Defense and that’s whether items go through the direct commercial sale process, or through the foreign military sales process. The final thing I want to end with today is just another area that we are spending a tremendous amount of time on and I know there are industry officials in the room and it will be a mix of those in classic defense industry and those that also do both defense and commercial activities. And one of the things that we’ve been putting a lot of emphasis on in the Department of Defense and actually working with our colleagues, particularly at the State Department and the Commerce Department is to be doing a lot better in terms of our advocacy for U.S. industry and also making sure that we work with companies to help them understand the kind of exporting they want to do. One of the things obviously that is significantly happening in the defense industry is that as the Department of Defense becomes less of a consumer of those products, the industry themselves are looking at selling more products abroad and I interact with a lot of the companies, both individual companies through industry associations and through things like participation when the CEO’s of companies come in to talk to Defense Department officials about support for DOD programs and I can tell you one thing we are talking about, most of the industry we interact with is talking about having somewhere between 30-40% of what they sell actually going to those international markets. In light of that it’s also very imperative that we start working in advance with industry and in partnership, and also candidly working with other countries who will be the recipient of that technology. So we do a lot of work both through the various multilateral regimes as well as through various bilateral forums that we have in talking to countries about the importance of protecting technology. And not only technology that they receive from the United States, but in many cases, the technology that they are developing indigenously themselves. So for the sake of time and knowing that we always have a very rowdy question and answer session, let me stop at that, so thank you.

 

Brian Nelson:

 

So hi. I’m Brian Nilsson, I think I know pretty much all of you, in some capacity and from one of my jobs and so it is kind of cool to actually be here and as Matt said to be here is sort of to have to realize I’m sitting in a different chair each time I come because I’ve changed jobs so many times. But seriously, I am enthusiastic to be here, this is the beginning of my 4th week at the Department of State as the Director of Defense Trade Controls. [ . . .]

 

I’ve been enjoying my first 4 weeks. I will tell you I feel a little bit like a kid in a candy store where I’m like sort of responsible for some of the mischief that I’ve made when I was sitting at the NSC. Terrific team of people, I want to say hats off to Tony Dearth who has been acting in the job. As you guys know he is the Director of the Defense Trade Controls licensing office. And so I will tell you that the transition has so far gone seamlessly both for my move from the NSC and State’s acceptance of me, which is terrific. For those of you who don’t know, as I rotated out from NSC, my replacement there is Patricia Peterson. Pat Peterson, many of you may know her from DTSA, so again she is yet another example of how the agencies are basically sort of rotating and partnering which I think is a terrific thing to keep us all in sync. So if you haven’t met Pat, I know she was here yesterday and if you see her please reach out. She assumed sort of the mantle of ECR chair for the White House. So if you haven’t met her, please make an effort to do as you see her. The other issues that I think we could talk about a little bit, Kevin already talked about it quite in detail a little bit yesterday: Export Control Reform, the beat goes on. I think Kevin has given you a pretty robust read out of where we are on the rules. Our Category XII is challenging, and we are looking at doing a second proposed rule. We’ve already gone through the public comments and are starting to review Categories XIV and VIII which went out in proposed. We are also nearing putting out proposed rules for the first re-review of Categories VIII and XIX. Those are the first categories that went final, two weeks and two years ago, and then we are also working through the harmonization rule for the definitions and so we are also getting closer on that as well. So those are key priorities. These have been hard categories: we intentionally left Category XII off until last. That was one of the categories that by design, we agreed to leave it until last. Just because there had been so much difficulty in that category and there was interagency disagreement for a long time and so I think that we have come a long way since, in the last 6 years and are working together as a team in working toward what we need to do for revising these controls. And I think that Kevin also talked about yesterday, about the idea that we are looking into for the potential of writing a common set of regulations. One of the challenges that we’ve got is that – we actually found this while we were developing the licensing policies, the license exception STA – is that the EAR has hundreds of pages, and looking through as we were trying to determine some of the country groups that have basically conveyed from the old regs to the new regs in the mid 90’s, we sort of lost the institutional memory for why some of those groups were there, why those country groups were there. There are still 67 different country groups in those rules and it was going to take us another 6 years just to open those regs to go through to reconcile what should we be doing. And so the idea is that the ITAR, one of the advantages with the ITAR over the EAR, I can say that now I’m from the State department, is that it is a lot shorter. So one of the things we are looking at is that, while we are not quite ready for any phase III legislation, we could look at writing a common set of regulations, we would have to publish in two different titles because we are operating under different authorities where we would actually be able to take the harmonized, the rewritten list and take the key harmonized terms. We are now approaching that point and writing a common set of regulations basically from scratch. Now this is obviously going to be a science project, it is going to be a big deal to be able to do that, and very labor intensive but we think that’s maybe the better approach than having to open up the EAR and going through that other process, we think it would maybe be a better way to go about it. I will tell you that DDTC has taken ownership of doing that, and so we are the ones exploring doing it, and so actually getting somebody in place that would be able to that. So that is a work in progress. Also I will tell you from the DTC perspective that I think that people, a lot of people, don’t realize how DTC is structured, how it relates to the rest of the State Department. We are a large directorate, the largest directorate within the Bureau of Political-Military Affairs, and people don’t realize that it is really basically an agency in and of itself. It is sort of a separate entity within the pol-mil family. And so we have, as part of ECR, there’s been a consolidation and a reorg with the DDTC which was implemented in July of last year. So we’ve actually, there are actually four offices. You’ve got licensing which has now revised and has consolidated some of the licensing divisions and that is under Tony Dearth to reflect the changes in the shift of items from State to Commerce. We have a compliance group which is head by Sue Gainor. We also have a policy shop that is also somewhat of a new invention that used to be, historically used to be, just a regulations branch but we actually have created a policy shop within that and I will come back to why we did that in a minute. And that’s headed by Ed Peartree whom many of you probably know. And then the fourth office is our management directorate, that’s led by Lisa Juarez. So this has a much better structure going forward. So what we are planning on doing now and what we have started doing is that much of ECR has focused on moving things away from DDTC under ECR, in part because of the idea of prioritizing our controls. I use the joke: the way it has historically worked is like Lucy and Ethel on the production line, where licenses are coming in, everything is treated the same, we are processing everything and so it’s overwhelming. And so by prioritizing what we control and keeping the most sensitive items, those that provide the U.S. the critical military intelligences advantage, we would keep those on the Munitions List, and so for the less sensitive military items, we would move them to Commerce, we would allow ourselves the more flexible legal authorities and we would allow things to go without necessarily having them come into that production line process so that we can treat allies like allies and we can focus our resources better. But there hasn’t been a lot of discussion to date about how DDTC is at the core of all of this because we are the ones that control the most sensitive of items. And so I can tell you that there are a number of things that have always been on the work plans for reforms of how we would revise and enhance how DDTC does business but we haven’t quite gotten there yet, simply because of the complexity of writing the list and then moving stuff to the Commerce list and then making any adjustments. We realize that this is the most comprehensive overhaul we’ve ever done, I always say since President Kennedy. Kevin Wolf always corrects me and says it’s Thomas Jefferson. But the issue is that we realize that it’s introduced a lot of complexities that weren’t there before and we are going to work through that to get it right. So I think that the public process, doing the proposed rules, which DDTC never did before, is really the best way we’ve found to do that. I will tell you that just as we are starting now, we are actually sort of doing a comprehensive review internally for how we do business, what is it that we need to be doing and how can we do it better. As Beth has already said, we’ve made the transition to move into USXports, for the processing of licenses. But that’s only one IT system. One of the things I’ve been surprised by is how DDTC still is very much a paper based system: it is amazing to me how much paper is on people’s desks and how much time it takes. The reason why it takes compliance a long time to get to voluntary disclosures is because there is a huge pile of paper on their desk, and so one of the terrific things they already have in play, is that they’ve hired a CIO who is now doing sort of a comprehensive scrub of all of the other systems within DDTC that need to be overhauled, so that we can start transitioning toward a truly electronic process which is going to give us a lot more flexibility and a lot more timeliness in how we do business. But that is sort of just the start of what we are doing. Other things that we are looking at: DDTC historically has not sort of been plugged into the rest of the State Department. It is a bit of a challenge because we are a regulatory agency which is a bit different for the State Department and so I mentioned earlier that in our policy office that we’ve actually created a policy team which is somewhat new and the reason we’ve done that is because we are working toward being more partnered with our other agencies and within the State Department on how policies are being developed. Historically what’s happened is that you may have an incident in a country where decisions are made where we are not going to do this or the sledgehammer approach: we are going to add on the country to 126.1 and then boom we are done. But that is a sledgehammer approach. But the DTC folks are the ones that know what’s going on in the defense trade world because they are the ones doing it. They are the ones seeing the licenses, they are the ones partnering with DTSA as they are looking at applications and providing us technical advice. So by creating a policy shop, we are now in the process of setting up teams. For example Russia. As the Russians are continuing their activities in Ukraine, we’ve created a team in DDTC that didn’t exist before for folks both from the policy perspective and the licensing perspective, and even what they are seeing on compliance, for a Russia team. And so we are actually looking and sort of doing a conference of look, what is it that we do with Russia, what have we seen, and that’s actually not really happened before. And so we should be doing this across the board in everything we do. And that is actually the first step, we actually have a sister agency within the Pol-Mil Bureau: it’s the Regional Security and Arms Transfer Office which handles more of the foreign military sales and they partner -- so they do the FMS cases -- and they partner with a different part of the Defense Department. And so the two office systems haven’t always been in sync and that is particularly true under ECR, where we are allowing a lot of third world transfers of items under ECR for those items with direct commercial sales. But we don’t allow that under the Foreign Military Sales which doesn’t make a lot of sense when you think about allowing again prior concision of controls, allowing the less sensitive items to flow more freely to allies. But if they bought it through government and the government channels then they still have to come in and get an authorization. So that is another project we are looking at. So what we are doing is building teams by country and by issue and then partnering with our sister office in RSAT so we can actually take a much more whole of government approach to how is our defense trade working and what are we seeing, what are the trend lines and stuff for both FMS and through direct commercial sales. So we are just getting started on this but it is a trend in the right direction. I think what it is doing for us is that it is giving our folks an opportunity to participate more at the table in the discussions on technical issues, on licensing and trade issues that we will have more of a policy say, and also it is helping our sister bureaus within the State Department and some of the other departments to have a better feel of what it is that we do, so that we actually are working more of a whole government approach. And then just a number of other things, DDTC is already doing a lot of outreach and training and so we are actually working toward now, we are developing, a strategic outreach plan. Historically what we’ve done is we’ve sort of been in a reactive mode. We will go to things that people invite us to which is terrific, love invitations, love to go places. But we need to look and see where training and the outreach is needed which is not something we’ve historically done. And then one other area we are actually looking at and we sort of already have it in process is one of my surprises in working with DDTC from the outside and now on the inside, when I look at my sister agencies, when I look at BIS and when I look at OFAC and then look at DTSA who supports us, they all have in house counsels. They all have a really robust legal review of what we do, and there is nothing that goes into the community that hasn’t gone through their lawyers, and as much as people make fun of lawyers, we need our lawyers because we are a regulatory agency and that helps us ensure consistency in what we do and so one of the things we are now exploring in State is actually creating our own general counsel’s office inside DDTC. And the reason we are looking into doing that is because the way the State Department is structured, there is a separate bureau, the attorneys. Typically they are hired as rotational attorneys like Foreign Service Officers. So given the technical aspects of what we do, we think that it would be helpful to have subject matter attorneys that actually work in DDTC who belong to the State legal bureau. So we are looking into that now. So we think that would be a significant process improvement, just as one example of how we would be more in line with how BIS and OFAC do their business consistently. So those are a couple of examples. I will close by saying I am happy being at DDTC, I think they are a terrific bunch of people, they are eager to do things, they’re eager to be plugged in more. I think historically what we have seen is they haven’t been as involved at the working level in a lot of what we’ve been doing and so one of the things we are looking at doing is having them more involved. If somebody is working, if we are working on Category VIII, the category licensing folks will then, Tony Schaub will then have a seat at the table. And that isn’t always how we’ve done business and so it is just a cultural change. I think we’re doing a lot of that, they’ve got great terrific ideas, they’ve been terrific with helping me as I find my way around in week 4, I’m still getting lost in the main State Department, I’m finding offices where I am supposed to be so they’ve been terrific and so I would just say hats off to them I think they’ve done terrific jobs, they have done endless work all this time and so I’d just say, work with us, help us as we are helping you. We all have the same goal of making sure the system works as intended. DDTC, there will be a DDTC panel that follows this one that Tony and Sue and Sarah; Sarah Heidema, will be speaking on so I encourage you to come to that. They will be able to answer all of the things that I am not talking about at this point. And with that, I guess I will close, and thanks very much for having me here.

 

John Smith:

 

Good morning everyone, thanks for having me here. I want to thank the Commerce Department and the Bureau of Industry and Security for hosting this conference and inviting OFAC to attend. I also want to thank all of you for coming and participating. And it may not surprise you, I have a whole host of questions already. Thank you for being so engaged because we learn so much from these interactions with all of you and it really is your compliance and what you do every day that makes our regulations more than just words on paper, they actually implement our sanctions. I’ve been at OFAC for about 8 years, 8 and a half years, and I have been the Acting Director of OFAC for now about 9 months and I can tell you I am learning a lot and I am learning a lot from all of you at the same time. I know that our interactions with you make us more successful, and make our sanctions more successful. I am not going to go into full detail on the remarks today because I know we have a limited amount of time and I want to make sure that we get to your questions but there are a few things I should start out with. The importance of interaction with a private sector remains one of our top priorities. That’s why we come to forums like this one, to engage and hear from all of you. We get about 100,000 phone calls every year to our various compliance and licensing hot lines. Our website got over 2 million hits last year. That’s 2.2 million hits, visitors coming to our website to learn, and we continue to publish what we call FAQ’s or frequently asked questions. To respond to the questions that we get over and over again from the private sector, we’ve published about 450 FAQ’s on various topics over the last few years to make sure that we can be as responsive as we can be to the questions you are asking. But we recognize that our sanctions are sometimes increasingly complex. The Iran and Russia examples come to the front of the line when talking about complexity, and the complexity is there for a reason. Sometimes we can roll out a standard sanctions program, the same type of sanctions program you may see in the past, but sometimes it is more important for us to be able to pinpoint and target certain sectors of an economy or certain actors within that economy and we recognize that in doing so, it may make your jobs slightly tougher in the implementation and the understanding of our sanctions, and for that I apologize. But I think it is important for sanctions to be as effective as possible while minimizing destruction to the private sector and to U.S. and our allied interests. Matt referenced some of our priority programs today. Iran, Cuba, Russia and the Ukraine, and in the interest of time I am going to just talk about Iran today. I have a number of questions on a variety of programs that I want to make sure to hit at the end of the time. We spend a lot of time at OFAC and across the U.S. government working on the Iran program. We believe that sanctions and our tough implementation and enforcement of our Iran sanctions, are what led Iran to the negotiating table and ultimately to the successful negotiation in conclusion of a Joint Comprehensive Plan of Action, or as we bureaucrats like to say, the JCPOA, and you will hear that term from us a lot. Sanctions were among the critical tools in reaching that deal. We will relieve nuclear related secondary sanctions on what is being called implementation day. That is a term you should remember. But implementation day only comes subject to verification by the International Atomic Energy Agency that Iran has taken its agreed steps in respect of its nuclear program. All of our current sanctions however, remain in place until implementation day except for those that we released and we relieved a few years ago under what was called the interim deal, the Joint Plan of Action, the JPOA versus the JCPOPA. The timeline for reaching implementation day is not up to us. I can’t give you a date because it is up to Iran. Iran has to take its agreed steps and the IAEA needs to verify before we will relieve any of our sanctions. So Iran, as we say is not yet open for business. If there’s one thing you remember from OFAC today that should be the line. Our primary embargo will remain even after implementation day. That is the other thing to remember. There has been a lot of confusion about what the JCPOA means, and that is primarily relief from nuclear related secondary sanctions. When we use the term secondary sanctions, what we are referring to are those sanctions that have been placed on the third world country actors that say "if you engage in certain transactions with Iran, you may be cut off from being able to deal with any business with the United States." That is the primary scope of relief that will come under the JCPOA. All of the rest of the U.S. embargo will remain in place with a few limited exceptions, meaning U.S. persons, individuals and entities will largely remain prohibited from dealing with Iran even after implementation day of the JCPOA. There will only be three areas of relief under the JCPOA that will affect U.S. persons. Now that is three areas of relief that is beyond what we have today and I always want to remind people that we do allow exports and other transactions involving permissible areas of trade such as food, medicine, medical products, agricultural commodities, internet and connectivity services, telecommunication services, and those that support our foreign policy and national security goals. But the three areas of relief that you see under the JCPOA for U.S. persons will be as follows. First, a general license for the import of certain food stuffs and carpets from Iran. Second, a general license for subsidiaries from U.S. companies located abroad to engage in transactions with Iran. And third, a specific licensing policy from OFAC for the export of civilian aircraft and parts to Iran. Again, let me apologize for using some bureaucratic terms, and let me explain what they mean. When I say a general license, it is similar to what I think you may be used to from the Commerce Department with a license exception. That means we put in place a regulation that says if you meet certain criteria, you can engage in these activities. So we will have general licenses for the first two of those categories and a separate licensing process meaning you will come to OFAC on the last category, the aircraft parts and aircraft to Iran. Our other sanctions will remain in place even after the JCPOA. That means Iran’s support for terrorism, its destabilizing activities in the region, and its human rights abuses. Many major companies and a few banks will remain on our SDN list and will remain subject to secondary sanctions. And should Iran violate its commitments, we are prepared to quickly snap back the sanctions. What I mean by that is that we will re-impose the sanctions. That does not mean that we will retroactively make sanction able what was a permitted transaction. But what it does mean is that we will prohibit any further engagement under a transaction or contract that was entered into. So we always advise companies, individuals and entities to be aware of snapback and to be ready for it because it may happen. We don’t want to see it, but if Iran violates its commitments, we will quickly snap back those sanctions. And the last thing I will say on the Iran front and the JCPOA is we are committed to providing guidance, even before implementation day. We don’t want that day to come and U.S. companies not to know what the future holds. So we are committing to you to do something that I don’t think we’ve ever done before. We are going to provide detailed guidance including what we call the frequently asked questions and FAQ’s even before that day arrives. So stay tuned, I can’t give you much more details today as a few of the questions I’ll disappoint on in answering. But what I will tell you is that we will provide that guidance prior to implementation day. So with that I will wrap up. Thank you all again for coming today and participating. Thanks to our Commerce colleagues for hosting this and I will be ready to take the host of questions I received already. Thanks so much.

 

Andrew Keller:

 

I’d like to thank Undersecretary Hirschhorn and the Commerce Department for inviting me to be here today. As Matt mentioned, this is the first time that the Bureau of Economic and Business Affairs at the Department of State has been represented on this panel. So I am pleased to be here as the newbie. I think it is fair to say that within the U.S. government, this conference really has the reputation of being one of the most important export focused events of the year so it’s really a pleasure to be here talking to all of you. I think given that I am the last speaker on a long panel and we obviously want to leave time for Q and A, I am going to focus the bulk of my remarks on just giving you a sense of who we are and what we do with regard to the sanctions and export control functions in the Bureau of Economic and Business Affairs at State, or as you refer to it, EB. I hope many of you are familiar with the Counter Threat Finance and Sanctions team at EB. For those of you who are not, let me give you a brief introduction. We are comprised of two offices; the first is the Office of Economic Sanctions Policy and Implementation, or SPI in bureaucratic lingo. The second is the Office of Threat Finance Counter Measures or TFC. And basically what our teams do is we work to develop and implement sanctions and threat finance policies and make sure they are aligned with advancing our foreign policy. I think colloquially many of you who have worked with us may think of us as the State Department’s liaison to OFAC which we are I think to a certain extent, but our relationship is much broader and deeper than that and we of course work very closely with BIS at Commerce as well . As I mentioned, we are embedded in the Bureau of Economic and Business Affairs and that is the component of the State Department that has the lead for engaging with the private sector. So we do an incredible amount of outreach to the private sector. Both here in the United States, and we are also often on the road discussing our sanctions and export policies with foreign governments as well as with the private sector abroad. And we do our best and want to obviously be closely linked up with BIS and OFAC in this aspect of our international outreach as well. And finally I would just say that it is not an accident that we are located within the Bureau of Economic and Business Affairs at State. I think it is really a recognition of the relevance and the importance that the private sector plays with regard to implementation of our sanctions and export policies. As John mentioned, you guys are absolutely critical to making these things work. So I want to recognize that as well and also recognize the burden that it places on all of your shoulders. So thank you for all of the work that you do from a compliance perspective. Now that you know a little bit more about who we are, I’ll also very briefly explain how we fit into the world of export controls and I think maybe the best way to do that is giving you a few illustrative examples. When you submit a license application to OFAC, and hear that it has gone to the State Department for review, we are the office on the receiving end of the referral. We work closely with our counterparts in the regional and other cross cutting functional offices within the State Department to coordinate a State Department position which we then get back to OFAC with our foreign policy guidance. Notably, in the world of humanitarian related exports, our office spearheads the review of TSRA license requests for Sudan and Iran referred to the State Department by OFAC. In the case of BIS as you know, all licenses submitted to BIS go through a standard process of interagency approval. My office leads State’s review of certain categories of exports, including those that are controlled either for crime control or anti-terrorism purposes. And we also shepherd the review of applications for exports to North Korea, Sudan, Iran, and Cuba. I’d say between the referrals that we receive from BIS and from OFAC we probably process in that several thousands of foreign policy guidance requests a year. Similarly on an internal basis within the State Department we work closely with Ann’s team and other colleagues in the Bureau of International Security and Nonproliferation to evaluate more sensitive export license requests to destinations I mentioned earlier: Sudan, Syria, Cuba and North Korea. And I also want to highlight that we take an active and leading role in the development of many of the regulatory changes that are stood up by OFAC and BIS. These can be more targeted measures for example, whether we are talking about the general license for personal communication devices for Iran, or broader cross cutting changes such as those that have been introduced by OFAC and BIS with respect to Cuba in both January and September. Given the time, I will also just say briefly on a more substantive note, that we handle about 20 sanctions programs, economic sanctions programs, on behalf of the Department of State including the big ones that you have heard, heard others talking about: Iran, Cuba and Syria. I will just mention a few things briefly with each of those so you have a sense of our perspective. On Iran I think that John covered it very well, I would just reiterate that there is an incredible amount of work going on in the interagency to prepare for implementation day., We know obviously that the heart of the Iranian deal is that Iran will satisfy certain key nuclear related commitments and in return for that, and once the IAEA verifies that Iran has done so, the United States is committed to providing the sanctionS relief that we signed up to in the deal. Moving again very quickly, for Russia, I will just mention that we still have three baskets of sanctions enforced against Russia, The first are targeted sanctions that OFAC has implemented with regard to certain actors in Ukraine, and certain cronies of President Putin. The second relates to financial restrictions and certain technological and service restrictions in the finance, defense, and energy sectors of Russia. And the third is a prohibition on exports to, imports from and investment in Crimea. And I will just say so that you have a sense of where these things are going, I suspect that many of you in the companies you represent are most interested in the sectoral sanctions targeting the finance, defense and energy sectors. We have linked any rollback of those sanctions to full implementation of the Minsk agreement by the Russians, including restoration of control of the border in Eastern Ukraine to the Ukrainian government. I won’t belabor this but we simply have not seen anywhere near full implementation at this point. So you should not expect any rollback until that happens. In regard to our Crimea set of sanctions, we have made clear that those sanctions will not be lifted while Russia continues to legally occupy Crimea. And then finally I will just mention very briefly, on Cuba. Obviously things have changed dramatically since the President announced a policy shift in December, which chooses engagement over isolation. I would like to commend Matt and his team at BIS and John and his team at OFAC for really doing fantastic work both in January and September to give life, regulatory life to the changes the President announced. And then I would also just add, that in addition to these changes on the regulatory front, as you’ve obviously seen, there have been other very significant developments including the opening, or reopening of embassies, and reestablishment of diplomatic relations, the removal of Cuba from the State Sponsor of Terrorism list, the announcement of a first meeting of a joint Cuba steering committee which will be discussing approaches and creating frameworks for how to tackle a range of issues, from transportation to information and communication technology to human rights, to law enforcement, to claims and so on. So I think it will be a very interesting space to watch. With that I will just say thank you for your time and attention, thank you to the Commerce Department for giving me and the Bureau of Economic and Business Affairs a chance to be on this panel and speak to you, and I look forward to any of your questions. Thank you.

 

Matt Borman:

 

So thanks to all of our panelists. As you can imagine we have quite a few questions here. So what I thought we would do maybe is just start here, John take one, Ann, and just run down the list and we will just keep going as much as we have time for. So John, if you could lead us off please.

 

John Smith:

 

Sure, I’m trying to make sure that I get a cross section across all programs. An easy top one on that is: What are the sanctions on Venezuela? One thing to remember about OFAC sanctions programs is that some of them, sometimes, we have trade restrictions or more comprehensive restrictions on dealing with a whole jurisdiction or government, sometimes in many of our programs, we may only have what we call targeted sanctions where we’ve identified certain individuals and entities that you can’t deal with but you can continue to deal with the government or the jurisdiction. Venezuela is the latter case, the latter category where the only restrictions in the Venezuela sanctions program remain on the specific individuals and entities that have been identified under that program. In fact I think that it is only individuals that we identified under that program, meaning that U.S. persons cannot deal with those named individuals that we have put on our SDN list but you can continue to trade with Venezuela, you can continue to trade with the government. It is only the named individuals that remain off limits.

 

Ann Ganzer:

 

Okay, please describe next steps in the Wassenaar, MTCR, NSG and Australia group to multi-lateralize the ECR list changes. We don’t have to do anything multilaterally. Most countries do not have a bifurcated system like we do where we have the munitions in one agency and the dual-use in another agency. Most have just one agency that administers their licensing across the board and so we view that our Commerce licensing system is robust and meets all the requirements of the regime. So the fact that things are moving from the Munitions List, or from DDTC over to the Commerce Department does not change our posture with regard to the multilateral control regimes. We think that our policies and practices are completely consistent with all of them and we don’t have to change anything.

 

Andrew Keller:

 

So I have a question that reads: There seems to be an increasing focus on human rights by our European multilateral partners. How does human rights and democracy development fit in with the U.S.’s export regulations and sanctions policy? I think that is a question that we could talk about for a significant amount of time and in relation to several of our particular programs, we could have a more fruitful discussion if there were time. What I would say here is just that promoting human rights and democracy is a key aspect of our foreign policy and is a particular aspect of several of our sanctions programs that have been both the focus of the Administration’s program and I will just mention from the Hill perspective. I can just list a few: Iran, Venezuela, and Syria, certain of our programs in Africa. Of course with Iran it’s not just human rights there, it’s a range of issues as John mentioned earlier in his remarks. So I will just say again, human rights and democracy are a core, the promotion of those are a core goal and component of our foreign policy and that there is something that we are looking at from a broad perspective at all times but then depending on the particular circumstances in a certain country where sanctions or export controls are relevant, human rights certainly can play a significant role and important factor on a policy basis.

 

Brian Nilsson:

 

Okay, I guess I’m next. I’ve got one question: Our aerospace company, a Fortune 20, received a GJ response on an issue that is precedent setting and undoes much of ECR for us. Will DDTC begin posting GJ’s like BIS does so that all companies are held to the same standards? I will tell you that we had discussions about this previously, about whether or not DDTC would be able to do this. And it’s an initiative that we are looking at again to see for transparency’s sake that we would do that. So I don’t have a good answer for you just yet but I will tell you that it is on the list of things that we are looking at. I also would ask that whoever provided this question, if they maybe would find me and come talk to me afterwards, I would be happy to talk to you a little more about it, so thank you.

 

Beth McCormick:

 

So I have two questions that are kind of related to USXports, one was related to how many agencies were on it, which ones are online, which ones are still to come and what is the estimated time and launch date for a single window for license applications and a related question then related to the license applicant window or portal: what level of computer security is being implemented to protects the information for the portal interface? Let me just say, so right now the agencies we have online again are the Department of Defense, the Department of Commerce, the Department of State, and the Department of Energy, and again we are working now to finalize the inclusion of Treasury, OFAC to that. This whole issue about the thing that we use right now in terms of moving the licenses between the agencies, the backbone of the USXports, rests on our SIPRNet site because we obviously want to include a combination of obviously proprietary information as well as using a variety of intelligence information that we use to make our decisions. It is good to share that information so that all agencies are sharing the same information we have related to end users or any other derogatory information that we have, so that is very important. I can tell you that over the last week or so, my agency has gone through a very rigorous inspection by the Cyber Command: the Cyber Command and Readiness inspection. It was a no-notice thing and I can tell you that all of us in this day and age should be very concerned about cyber security. So I can tell you that I am getting much more IT savvy than I used to be. I can tell you that we will be looking very closely at that kind of interface that will be from industry because obviously you all will be very much interested in protecting your proprietary information and then obviously bringing it into the system where then we will be moving it and utilizing it within a classified environment for U.S. government decision making. That needs to be worked through. I am not a technical expert but I can tell you after surviving this Cyber Command Readiness Inspection I know a lot more about cyber security than I ever did before so I will have a better answer when we start to work through it. And I think to the extent to which industry would like to help us with looking through that I think we will be getting some input from industry about some advice you have about it because obviously it is imperative that both government and industry protect this information.

Matt Borman:

I’ve got one footnote I will add to John’s answer on Venezuela. I’m sure that folks who trade with Venezuela also know that we added Venezuela to our military end user controls in section 744.21 as a complement in essence to the sanctions that John mentioned. I am going to telescope two ECR questions, the first is when are you going to harmonize license exceptions and license exemptions that are in the ITAR and the other is, what is the timing and process for the annual control list reviews for each category under ECR? On the former, harmonizing license exceptions with license exemptions, I think that would be the type of thing that would be tackled by the single regulation we were talking about. So that certainly would be high on the list I think with that task. In terms of reviewing the annual control list, our current plan is to send out notice of inquiries basically 18 months after any particular USML revised category became final, or was published I should say. And so that is why we’ve already done the notices on VIII and XIX as Brian mentioned. So the next ones up in the queue will be the vessels, vehicles, and materials that will be coming up. And we will just keep running through those as long as we can through the end of the Administration with the expectation that that process will continue ideally to the next Administration. I think we’ve probably got time for everybody to do one more each so maybe we will go back to John for another one or consolidation of some maybe.

John Smith:

That sounds great, and maybe I will add a footnote to Matt’s footnote to my remarks and say that I always think it’s important for when we give an answer as OFAC for you to look at the other agencies that may have relevant jurisdiction. We try to clarify that in licenses, that when we answer a license application we speak for OFAC, but it is important sometimes to understand that different U.S. government agencies have different equities and it’s important to recognize those. The next question on Iran is: how does Iran relief on sanctions for only non-U.S. persons benefit America and not handicap U.S. businesses, in particular small businesses that do not have a foreign subsidiary. It seems very unfair to not allow a fair playing field with EU companies that are already in Iran leasing space and having discussions with oil-related projects. I wanted to take this one because it is a question I get all the time. And I probably should just say in a very blunt manner that it is the U.S. government policy to provide a firm message with respect to Iran’s support for terrorism, its human rights abuses and its destabilizing activities in the region. This is not new, we’ve had very tough comprehensive Iran sanctions since 1995 so we’ve been on an un-level playing field for 2 decades, and it’s only recently with some of our secondary sanctions that have been implemented over the past 5 years that we’ve actually reached out to third countries, foreign countries and said to them, if you engage with Iran, we are going to cut you off from the United States. So we have gone to what is the secondary sanctions in that way to give a very tough message but I think the very blunt answer to the question, I think it is not only the Administration policy, it is the Congressional view that the United States should retain its very strong message that we do not condone Iran support of terrorism and other destabilizing activities. And I think that will continue. The fact that some of our allies may remove certain sanctions doesn’t change the U.S. government view, but I should also clarify that the European Union and other partners are continuing some of their sanctions on Iran as well, including terrorism sanctions as well as Syria sanctions. So the fact that we are pulling back some of our secondary sanctions doesn’t mean that our allies won’t continue to retain some of theirs as well and I will also just add that I will be here at the lunch time as well for those questions that I don’t get to, feel free to hit me up at that time. Thanks.

Ann Ganzer:

I’ve got a really interesting one here: how do you envision the role of the multinational corporation and nonproliferation? Other than compliance obligations, do you think multinationals can play a more proactive role in shaping countries and nonproliferation commitments? Such as leveraging supply chain compliance norms, and helping local firms to be aware of compliance responsibility, and then should there be some incentives created for such efforts? I mean first of all, let me say absolutely the multinational is key to this. We think all of you are our first line of defense. You know, you hopefully know your customers, you are the ones that are identifying, gee this payment stream looks funny, gee this shipment route doesn’t make sense, and maybe this isn’t a legitimate export. So absolutely we rely on you. We rely on you to set a good example both here in the United States and abroad. Absolutely supply chain compliance: if your suppliers aren’t compliant with export controls, work with them or go and take your business elsewhere. We absolutely see you like I said, as our first line of defense, as the first line in our nonproliferation efforts and so absolutely. You know you talk about some of the other things here, if you’ve got ideas, whoever had this question, or if others of you have ideas, yes talk to me, we would love to partner with you to try and improve compliance around the world. As to incentives, I don’t know what I can do for you, you know if you’ve got something in mind, let me know but we know when we look at transactions and so as I said before, an awful lot of our business is the same companies doing business with the same companies, working on similar programs and that gives us a lot of confidence that you know what you are doing. The more you bring your concerns to us about, we’ve got this and this client, do you know anything about them? Or would this be possible? The more we have confidence in you, so that does affect everything we do. Knowing that you are compliant and out there trying to stop the proliferators alongside us is just very helpful. And as I said, if somebody here has ideas, I’d be happy to talk to you afterwards.

Andrew Keller:

Just another question about the timing for any potential sanctions relief for Iran under the nuclear deal. As John mentioned, that will occur on what is called implementation day under the deal. That is the day that IAEA will verify that Iran has satisfied all of its key nuclear related commitments. Also, as John mentioned, that the timing of that day is not within the control of the United States, it is within the control of the Iranians and how quickly they move to satisfy those commitments. We would obviously be happy for them to move quickly and efficiently to do that because that is obviously a key part of the deal from our perspective which will result in constraining their paths to a nuclear bomb. So again we don’t have the control over that timing, it will happen when the IAEA verifies that Iran has satisfied its key nuclear steps. I will just say that I don’t have a long answer for this, but I got a very important comment and question that says, "Nice necktie. Have you always been a half Windsor user?" So it is a very complex answer, I will also be here at the lunch and look forward to talking to whoever posed that question. Thank you.

Brian Nilsson

: So I have two questions that are the same question, and so I will do that one next. Any progress in review in Categories I, II, and III of the USML? And what is our timeline? As you know that is firearms, guns and ammunition. I will tell you that the rules are drafted. We’d originally drafted 6 rules: that would be 3 Commerce, 3 State. We’ve merged them into just 2 rules, 1 Commerce, 1 State, but we are not quite ready to move forward with them yet. Our priorities are the harmonization rule, and also getting out another proposed rule for Category XII. These are the only three Categories that have not yet gone out, and of the 21 Categories we’ve proposed rules for 18 of them, so it remains a priority but we are just not quite there yet, so hopefully soon.

Beth McCormick:

So I am glad that John came today because obviously OFAC has a lot more questions than the rest of us have. And so this question I will have to read because if I don’t, I think the answer to the first part of this question would be a no. It says, can you please tell us if one of your goals as Director of DTSA is to improve transparency? And I’d say yes, and if I didn’t say that or if I continued not to read the question, then I would probably be accused of being disingenuous. So it says, some of us in the semiconductor industry discovered that DTSA will not approve license applications for the exports of MMICs if the devices are used for military radars and non-U.S. countries. If this is DOD DTSA policy, (and that is underlined) I suggest you publish it so that exporters do not waste valuable time applying for applications or submitting license applications. So this is a good example of where I think the process that we have utilized so far as part of export control reform has its positives but also probably has its limitations, and that is, obviously, my agency does bring a national security perspective to the issues that we talk about. And sometimes that involves very sensitive information. And so we try to, and the regulations we put out try to be clearer about particular technologies and why particular technologies need to stay on the ITAR and why we can move others. I think we’ve done a pretty good job in things but the military electronics industry area is probably one of the more complex ones and we alluded to Category XII. I have to tell you, Category XI is one of the areas where I think we all collectively, despite having gone through two proposed rules of that before we put out the final, recognized there is more clarity that we need to do and I can assure you that the issue that this particular question has raised is seized right now with the discussions between State, Commerce, and Defense.

Matt Borman

: Okay and the last question we will deal with, and I have the same offer for everyone that questions we didn’t get to, you can buttonhole us, I think most of us will be here at least through lunch. I am going to telescope two questions related to Wassenaar, one is related to Wassenaar proposals and the other is related to Wassenaar implementation and harmonization. The first question is essentially, what is the review process for agreement of new Wassenaar rules, and the rest of the question which I don’t need to read is one specific reference to the cyber security proposed rule that we put out earlier in the year. The review process typically is, we will solicit from our Technical Advisory Committees, ideas for proposals for Wassenaar. We at Commerce will look at them and then discuss them with State and Defense, and then in addition to that Defense typically comes up with proposals and we have an interagency process that Ann mentioned. Typically, it is the end of each calendar year and the beginning of next calendar year to go forward to Wassenaar with proposals typically in February or March. And of course we try as much as we can, especially if it is an additional control or new control to assess what the impact on industry will be. And generally speaking, I think we get very good information about that from our advisory committees as well as our internal sources on that. The reason of course we did the cyber security part of the Wassenaar 2013 agreement in proposed form was exactly to solicit more comments and we, as Kevin said yesterday, we got that in spades and we appreciate that. But we do generally think we have a good process in making sure we know what the impact on industry additional controls would be. The flip question in essence is harmonizing application or interpretation of Wassenaar controls with other Wassenaar members. The specific example asked in this case is an unusual one, because it says, for example, in the U.S. chemical protection suits are EAR99 but in Germany they are still 1A004. The more typical question Is normally reversed which is we typically are accused of applying Wassenaar controls more extensively than Wassenaar members, but in both cases, if there is an issue, we try to reach out to the relevant Wassenaar members and have bilateral or multilateral discussions with them because we really do want to have harmonized, not only harmonized implementation. Not only harmonized control lists of course that is the purpose of Wassenaar, but harmonized application of those. And it looks like Ann would like to add a little bit to that.

Ann Ganzer:

Just one comment I wanted to make. We are not the only country that makes proposals in Wassenaar. In fact the cyber proposal was made by another Wassenaar member. There are 41 members they can all put proposals in the hopper. The process map described for U.S. proposals is pretty much the same when other countries submit their proposals. We get these February-March of each year, there is a date certain by which Wassenaar tells us proposals have to be submitted and when we receive them from other countries then we do send them to the other agencies and we do send them through the TACs. I just wanted to clarify that we ae not the only ones who make proposals, in fact the cyber rule was not our proposal, it was us reacting to another country’s proposal. But it did go through the process Matt described.

Matt Borman:

Good, thank you Ann. We apologize that we haven’t had time to get through all of the questions, but as I said feel free to try and buttonhole us between now and lunch time and thank you all for your attention and thank the panelists for joining us.

 

 

U.S. Department of Commerce

Bureau of Industry and Security

Update 2015 Conference

Rose Gottemoeller

Keynote Speaker

 

RG2015

 

Thank you very much Eric. Wow, this is quite a crowd, I heard it was a sellout crowd. I kind of feel like I’m at a rock concert or something. But this is really, really cool. And thank you so much to the Commerce Department for the invitation today. For our part, in the State Department, I wanted to start out saying it right up front: we will work to finish President Obama’s Export Control Reform Initiative. That is our goal for the remainder of this administration. We also need to work with all of you to improve our ability to advocate for U.S. industry around the world. And that is also a very important goal. I would like to address both of these issues in my remarks this afternoon. First on export control reform, as well known in Washington, change within a bureaucracy can be hard. The success we have seen in implementing the President’s Export Control Reform Initiative over the past 5 years is a testament to tremendous efforts among a number of agencies and Eric has mentioned them already: the Departments of State, Commerce, Defense, the National Security Council and other partner agencies. Further, American industry has made invaluable contributions by reviewing and commenting on the new rules and I am impressed when I hear how many comments come in. I know that you are definitely doing your work to help us move this important initiative forward. Thank you for all that you have done to support this effort over the last few years. With your support, we have published in final form, rules revising 15 of the 21 U.S. Munitions List (USML) categories and our staffs are working to review the remaining USML categories in 2016. We anticipate that you will soon see another proposed rule guarding controls on night vision items and certain censors and lasers. Based on the detailed public comments, again, that many of you have seen and many of you have provided. Our attention will then turn to remaining USML categories. As Eric Hirschhorn has already noted, our thorough USML review and review of general reforms is not a onetime effort. The President challenged us to create a process to regularly review both lists, recognizing that our national security concerns will evolve as will the technologies that we control. It will be important to bear this in mind as we move forward and we will continue to do everything we can to ensure that this process is an evolving one. We began to re-review the revised USML categories earlier this year after requesting comments on 2 categories, aircraft and aircraft engines. We are continuing this process with four more categories currently open for public comment. In addition, ECR is creating more symmetry in the language of the ITAR and the EAR with the goal of ensuring compliance and comprehension for the increasing number of companies that work with both sets of regulations. I believe this effort is most evident in the proposed rule on many fundamental definitions in both sets of regulations. We want this rule to help align, where appropriate, the definitions of export and other foundational definitions within these regulations. Our efforts are also aimed at modernizing our system to be more responsive to modern business practices such as the private sector’s increasing reliance on cloud computing, on using the cloud in its operations to conduct business. We want to revise our policies and practices to better align with the realities of the private sector’s operational environment in other words, and at the same time ensure that our national security and foreign policy interests are met through appropriate controls. In addition, the State Department is reorganizing its licensing staff to better serve you. Our compliance office is increasing outreach to you as an international industry to implement the ECR goal of higher walls around fewer items. And I am very pleased to announce that we recently hired Mr. Brian Nilsson as the Deputy Assistant Secretary of State for Defense Trade Controls. Brian’s sitting right here -- I know you’ve already heard from him in the course of this conference. As you know, people like Brian, they are the actual rock stars of Export Control Reform. I wanted to take a moment right now, in addition to calling out Brian, to call out a couple of individuals who have also been important to this effort: they are also sitting right here. That’s Mike Laychak and Beth McCormick from the Department of Defense, sitting right here, very glad to see them today, and Jasmeetee Seehra from OMB who is also sitting right here. They are as I said rock stars – some would say unsung heroes – at this effort so would you please give them a quick round of applause. Thank you. At the beginning of October, the entire State Department began adjudicating both USML and Department of Commerce licenses on the common IT system, USXports. This is already helping to expedite the licensing process. As we complete the list of changes, we will continue our practices to support the spirit of ECR. Whether it is better aligning our FMS/DCS processes or modernizing the ITAR exemptions, we are committed to maintaining a more effective and efficient export control system. We will continue to work toward a system that is better able to respond to urgent acquisition needs of our allies, foster co-development of defense technology in a way that supports U.S. industry as well as our foreign partners, and also support the nation security and foreign policy interests of the United States. Now let me turn to the defense trade advocacy. Picking up on that thread, I want to talk about American leadership in the context of today’s security environment and how government and industry can better work together, particularly in the arena of defense trade advocacy. There are two fundamental facts in today’s geostrategic environment that drive our leadership. The first is that the world’s greatest challenges do not affect any one nation anymore. These are all transnational matters. Terrorism, climate change, communicable diseases – they don’t respect national boundaries so we really have to have policies that are not confined to national boundaries. We are, as the saying goes, all in this matter together. Second, no single nation can solve these problems alone The United States can lead efforts to combat the challenges we face but without cooperation of other countries, other partners, it wouldn’t be enough. We need to collaborate with our partners to solve problems in a durable and lasting way. Defense trade is an important way to accomplish that goal: whether we are building the capabilities of the Israeli defense forces or the Iraqi security forces; whether we are empowering our partners in South America or Southeast Asia. To this end, cooperation between government and industry is critical. The United States government benefits from the American brand that you help to build overseas. American companies create the most innovative and effective solutions to today’s global challenges and the world knows it. You have all made American products the gold standard for the defense industry. As Secretary Carter, my boss, said recently, "The world wants what America makes." That advantage is a key to pressing forward on our national security interest. Likewise, American industry benefits from having U.S. leadership that is trusted, strong, clear and coherent around the world. We each have a stake in the other’s success. When we decide that security cooperation with a foreign partner will further our national security, it is in our interest to work in a speedy, organized and collaborative way to advocate for American interests which includes American industry. We face serious challenges in today’s defense trade market, I don’t need to tell this room that. With budget constraints here at home many businesses are looking to the increasingly competitive international marketplace. We realize that other governments can be more aggressive and often are more aggressive and often have fewer restrictions and scruples about what they are willing to sell and to whom. While the United States will never trade profits for principles, we’re making adjustments to enhance our competitiveness. We realize that our licensing system is imperfect. We know that sometimes the waits are too long or the process is too opaque. That is exactly why we are implementing Export Control Reform. We are adapting to the 21st century, focusing our efforts on a narrower set of items that really matter, and providing greater clarity and transparency to you in industry. Of course, Export Control Reform is just one part of the puzzle so we must also focus on refining other tools at our disposal. A lot of them are process related and I want to speak a moment on behalf of process. I think that in this case we can really take some important steps to help increase communication between us and move this entire agenda forward. So we are looking at three actions to improve our defense trade advocacy. Many of you may be aware of these but I wanted to mention them today to assure you that these efforts are being worked on at all levels, within our government and across government-industry lines. First, when we in government work together, we are much more effective and powerful. I was very happy to hear Eric make mention of that in his speech this afternoon. It is extraordinarily important. There are many players in the security cooperation enterprise and we do a lot to coordinate inside the government. But there have been instances, specific sales, when our different agencies have not always synchronized our actions to support such sales. That’s why we have built a single group, the Defense Advocacy Group. This group will identify areas that require heightened communication and extra advocacy work, permitting a tailored, unified and coordinated approach within the government from start to finish. Second, we have created an international trade show working group to better coordinate our meetings, deliver consistent messages and identify areas that we want to target. Although there is more work to be done in this area and no two shows are ever the same, I hope that some of you have seen some progress on this from this front in the recent period. Third, to be more transparent and responsive to industry, we launched a senior level quarterly outreach forum, and when I first heard about this forum, I thought that’s a great idea! And when it was reported back to me how the early ones went, I thought, great this sounds like it is moving in the right direction. I hope that you feel the same way. As our partners, you should be able to ask about our objectives and get a reasonable steer on the types of sales the USG would support without going from agency to agency to get answer. As I mentioned a couple of meetings have taken place: we launched this effort in July with a panel of senior speakers from the Department of Commerce, State, and Defense. We also had a similar panel last month and the next event will occur in January of 2016. I want to emphasize that these panels are about having a two-way conversation that is productive for everybody who is concerned. If you have something you want to talk about, please let us know. And there are opportunities, with people like Brian Nilsson here during this conference, to start shaping that agenda for January even as this conference is going on. Again I realize that government forming internal working groups may not seem like a very innovative idea but I do think in this case that it is important. I ensure you that increased communication and coordination within government will better serve our national interests and the interests of everyone in this room, of U.S. industry. Codifying this coordination will help ensure that our communication and collaboration on matters of interest to you does not occur on an ad hoc basis, but rather as the result of a concerted and deliberative process. Of course our efforts will only succeed if we have that third element in hand, the interaction and feedback from you. I hope that you take us up on these offers, to meet, to coordinate, to communicate, and we look forward really truly to working with you. So once again thank you very much for the opportunity to speak to you all today. We are launching into an exciting year, 2016, as we move up the trajectory to finish our Export Control Reform and look forward to working with you throughout this year to get the job done. So thank you very much for your attention, and again to the Department of Commerce. I really, really appreciate the opportunity to speak to this impressive group today., Again, I do feel a little bit like I’m at a rock concert but you can turn the music back on now. I guess I will put it that way. So thank you very, very much.

U.S. Department of Commerce

Bureau of Industry and Security

Update 2015 Conference

Remarks of

Eric L. Hirschhorn

Under Secretary for Industry and Security

November 2, 2015

 

EH2015

 

 

Thank you Dan for those kind remarks. They do remind me of a line a friend of mine once used explaining the difference between a testimonial and a eulogy. With a testimonial, there is at least one person in the room who believes it. Thanks also to Karen Nies-Vogel, Rebecca Joyce, and our BIS outreach team, as well as the many BIS and U.S. government colleagues who have contributed so much to making this conference a success. I’d also like to thank our BIS management team, and our colleagues from the other departments and from the Congress who are involved in export controls and for their important work on the export control reform initiative. It is indeed an honor to work with all of you. Thanks also to the foreign governments who have sent representatives to this conference. It is important that we are able to work with you as well. Finally I’d like to thank Brian Nilsson who is a BIS employee of 21 years who worked tirelessly at the National Security Council for the last 7 years as Director of Export Controls and Nonproliferation. Brian recently has left both BIS and the NSC to move to the State Department where he is serving as Deputy Assistant Secretary for Defense Trade Controls at the State Department. Today I’d like to take a few minutes to outline the success we have achieved over the past 6 years in revising our regulations and processes to establish a control system that is responsive to today’s national security challenges. The success of ECR, Expert Control Reform, represents a successful blending of several critical elements. In 2009, President Obama made ECR a priority. The active support and commitment of former Secretaries Gary Lock, Bob Gates, and Hilary Clinton, the strong support of our current Secretary of Commerce, Penny Pritzker and the level of commitment and cooperation among the export control agencies is unprecedented in my nearly 40 years of experience in this field. An essential element of our success has been the commitment of the exporting community, including many of you in this room, and engaging in a very beneficial, mutually beneficial dialog. We’ve made a number of significant improvements to the Export Administration Regulations in recent years, but the review of the U.S. Munitions List and corresponding changes in the Commerce Control List represent the keystone of the reform effort. We’ve changed the U.S. Munitions List from a list based on open ended subjective design intent standards to one based almost entirely on objective technical or other parameters. This means that an item will be on the U.S. Munitions List only if determined by technical experts, and we rely very heavily on the military services for this, to confer a critical military or intelligence advantage on the United States. If an item is not listed on the U.S. Munitions List, it is not subject to the International Traffic in Arms Regulations. The USML review has removed casual controls for many thousands of unspecified parts and components. We’ve transferred many, many militarily less sensitive items to the licensing jurisdiction of the Department of Commerce. We’ve published final rules on 15 of the 21 categories of the USML and the CCL. All 15 are now effective. A key benefit of the regulatory reform process has been the recognition by all involved that reform does not have a finish line. Our March 2015 notice of inquiry on aircraft and gas turban engines, and a similar October 9th notice about military vehicles and vessels realize that technology does not stand still and that development and production are not the exclusive province of the United States. We and the State Department anticipate issuing similar notices of inquiry for the other revised categories once they’ve been in effect for approximately 18-24 months. More work remains to be done to complete the remaining USML categories and to harmonize the definitions of common terms used in both the EAR and the ITAR. Assistant Secretary Kevin Wolf will be discussing these issues shortly in greater detail. License exception Strategic Trade Authorization, STA, was an important step in the administration’s effort to streamline the licensing and exporting process. STA as most of you know streamlines exports to 36 close allies and friends. Since July 2011, exporters have used STA for well over a billion dollars, that’s with a B, worth of exports. Exporters also continue to make use of other exceptions, such as those allowing for replacement parts, shipments to government end users, temporary exports, and limited value shipments. This action, in turn, has enhanced national security, by expanding military interoperability with our allies and reducing regulatory burdens on joint development and trade with those countries. Allowing the easier cases to be eligible for STA or other license exceptions also reduces the burden on U.S. exporters. We understand that getting a company to the point where STA is more efficient than the old system takes time and resources. Compliance systems must be revised, items reclassified, foreign partners educated, and old habits changed. But we believe that once such initial tasks have been completed, ECR works as intended. We are confident that the exceptions, which are already being used a great deal, will be used even more when exporters and their customers become used to them and make the requisite changes to their internal systems. BIS works hard to insure that we have an informed regulated community. In Fiscal Year 2015, which ended a few weeks ago, we conduced more than 50 outreach events that reached well over 5, 000 people. The bureau’s educational services to the exporting community include online interactive tools, webinars and training seminars, and exporter counselling. Assistant Secretary Wolf conducts a weekly export control call-in where he answers questions on proposed ECR rules and other aspects of the reform effort. These sessions are two way. They increase our understanding of industry concerns and of instances where our regulations could be clearer. We hope they are equally useful to those who phone in. Assistant Secretary Wolf and his colleagues also have conducted outreach to foreign governments and companies that receive controlled items to insure that they understand the opportunities and the obligations of the new system. BIS is committed to conducting as much outreach and industry training as our resources will permit. I hope there is somebody from the Appropriations Committee in the audience. We will continue to target activities that benefit small and medium sizes companies, particularly defense exporters, many of whom are new to the Export Administration Regulations. The benefits of our reforms cannot be realized unless you, the regulated community, understand and comply with them. On October 5th, the Departments of Defense, Commerce, State and Energy completed installing an interagency referral module on the Defense Department’s USXports IT platform. As directed by the President, all 4 agencies now are reviewing and providing their positions on Commerce license applications on a single platform. The next step will be to seek input from industry as we begin to develop requirements for a single portal with a single license application form. Now those of you who recall Secretary Gates’ speech from April 2010 will recall that he talked about not only a smaller yard, in terms of what’s controlled and how it’s controlled but also higher fences around the smaller yard. Export enforcement is critical to our national security. It helps ensure that our technical superiority is not employed against us on the battle field. It also helps ensure a level playing field so that companies who play by the rules are not disadvantaged by those who would profit from willful or ignorant disregard of those rules. Over the past five years we have leveraged our resources through increased interagency coordination. We work with other agencies through the export enforcement coordination center to increase collaboration and the efficient use of all of our agency resources. At the front end of the process, consideration of license applications, our Information Triage Unit facilitates the review of foreign parties to proposed export transactions. During Fiscal Year 2015, again just ended, about 1/3 of our licensed denials involved information emanating from the examination that we undertake at the ITU. At BIS, the synergy created by Export Enforcement agents, working with their Export Administration licensing and regulatory counterparts is unique within the U.S. government. This expertise and teamwork enables a timely focus on issues ranging from complex enforcement cases to the administration of sanctions. Export Enforcement is developing new administrative enforcement guidelines to improve transparency and predictability as well as to bring our enforcement approach more into alignment with that of the Office of Foreign Assets Control. Tomorrow, Assistant Secretary David Mills will preview these important proposed revisions. I’d also like to repeat my long standing message that our enforcement efforts seek to focus on truly bad actors, not those who have decent compliance programs and a decent compliance culture, make a mistake and then work with us to remedy the situation. The exporting community has made extensive investments in reclassifying its products, modifying IT systems and training employees in the new process and the changes to the U.S. Munitions List, the Commerce Control List, and the corresponding sets of regulations. I’d like to take one more minute to share with you some of the quantitative and qualitative measurements of the return on your hard work. ECR can perhaps be best understood by viewing the countries of the world in three main groups. The first is the 36 NATO and other close allies that are eligible to receive military items subject to the EAR under license exception STA. Your benefits include timely exports to key defense allies, enhanced U.S. and partner country affordability throughout the product life cycle, the absence of unanticipated license conditions, and a reduction in licensing burdens. BIS‘s Munitions Control Division which licenses 600 series items and reviews STA transactions processed more than 13,00 licenses during Fiscal Year 2015. And remember three years ago the entire bureau processed only 21,000 licenses, so this is a big jump for us. We believe that for you, the exporters, the benefits substantially exceed the hard work and investment that you’re making to adjust to the new system. The second group of countries, the other end of the spectrum, are those subject to arms embargos. ECR will make no change in the long standing U.S. policy to deny sales, including sales of military items transferred to the CCL, to this group of nations. The third group, by far the largest, includes the rest of the world, as to which ECR provides worldwide market opportunities and eligibility for de minimis treatment. The one size fits all ITAR controls contain no de minimis exclusion which means that even a small amount of U.S. content incorporated into a foreign end product subjects that product to U.S. reexport controls. Export control reform changes enhance the defense industrial base by reducing incentives for foreign companies to make their products ITAR free.

Let me step outside of ECR for just a couple more minutes and give you some updates on country policy. First Cuba. Last December the President announced a new course in our relations with Cuba. A course that would engage and empower the Cuban people. These steps build upon actions taken since 2009 that have been aimed at supporting the ability of the Cuban people to gain greater control over their own lives and determine their country’s future. In January, the Commerce and Treasury Departments took coordinated actions that included changes to licensing policy and license exceptions in the EAR that are consistent with these goals. On July 22nd, BIS published a second rule, implementing the Secretary of State’s rescission of Cuba’s designation as a state sponsor of terrorism. Most recently, BIS published a third rule on September 21st that amended the terms of existing license exceptions available for Cuba, increased the number of license exceptions available for Cuba, and created a revised licensing policy in the EAR. Last most Secretary Pritzker visited Cuba to participate in the inaugural U.S.-Cuba regulatory dialog which will facilitate implementation of President Obama’s Cuba policy and associated regulatory changes. Deputy Assistant Secretary Matt Borman who accompanied the Secretary and is participating in the dialog will update you on this during his panel tomorrow. BIS and the Office of Foreign Assets Control have implemented a number of sanctions to deter Russian conduct that violates international norms. Specifically, we seek to convince Russia to desist from its territorial claims against Crimea, cease its interference in Ukraine and, importantly and I think too often overlooked, refrain from misconduct elsewhere. Our sanctions cover exports to the defense and energy sectors as well as transactions with specified foreign persons who have been placed on our Entity List. Most recently we issued a final rule on August 7th adding a Russian oil and gas field, the Yuzhno-Kirinskoye field, (I never took Russian, I’m sorry) to the Entity List. Exports to this field are restricted because they present an unacceptable risk of use in producing oil in a Russian deep water location. BIS is coordinating with our international partners to identify items of strategic concern and is working hard to minimize damage to allies and friends. But we are prepared to impose additional sanctions if circumstances so require. The future of sanctions is dependent on President Putin’s willingness to comply with the Minsk II packages of agreements to alleviate the ongoing war in the Donbas region of Ukraine and to respect Ukraine’s territorial integrity.

On July 14th, the P5+1 countries and Iran agreed on a Joint Comprehensive Plan of Action to ensure than Iran’s nuclear program will be exclusively peaceful. Building on key parameters that were announced by the same group in April 2015, the joint comprehensive plan, I haven’t got the acronym down yet, JCPOA will provide Iran with phased sanctions relief upon verification that Iran has implemented key nuclear commitments. Currently all of Commerce’s controls pertaining to Iran remain in place. The Office of Foreign Assets Control licenses the export or reexport of items that are subject both to our regulations and OFAC’s Iranian Transactions and Sanctions Regulations. When implementation day is reached, which would be probably early next year, most U.S. sanctions will remain in place. This is because they largely are directed not at Iran’s nuclear activities, but at its continued sponsorship of terrorism and ballistic missile development.

I’m about to go to China for the annual meeting of the Joint Commission on Commerce and Trade and I can tell you that we remain committed to facilitating trade with China, of commercial items including high technology items for civilian end uses and civilian end users. It is and continues to be U.S. policy however, not to support exports of military items to China, exports of many types of items for Chinese military end uses or end users, or exports that may be diverted to proliferation or military related end uses.

These then are some of the national and economical security benefits we’ve achieved by working together to make export control reform a reality. Our partnership and dialog with the exporting community have been dispensable to creating more reliable and predictable rules that in turn enable U.S. companies to be more reliable and predictable suppliers. This enhances our national security, which of course includes economic security.

Please take advantage of this conference. Ask questions and challenge us. Follow all of the conference coverage on Twitter, on our account at bisgov, no dot, and under the hashtag, I guess its #bisupdateconf. Thank you all for attending and thank you all for your attention.

I am now going to take a few minutes to introduce our next speaker, Kevin Wolf, who as our Assistant Secretary for Export Administration has been a prime mover of the reform effort. His energy, intelligence, collegiality, and least in his view, even his humor have driven and nurtured this effort. Nothing in the official catalog, and it is extensive, of his responsibilities begins to illustrate the way in which he served as a spark plug of expert control reform. Like Secretary Pritzker from whom you are going to hear at lunch time, he is full of energy and always committed to getting the job done. It is an enormous pleasure to have Kevin at BIS and to hear from him this morning. Please welcome Assistant Secretary Kevin Wolf.

U.S. Department of Commerce

Bureau of Industry and Security

Update 2015 Conference -- Washington, D.C.

Remarks of Kevin J. Wolf

Assistant Secretary of Commerce for Export Administration

November 2, 2015

 

KW2015

 

Before I begin, I want to get a group photo. Last year I had a lens, this year a brought a fish eye so I can get all of you in. Sorry, so say cheese everybody, say cheese. Karen mentioned the game last night which I stayed up way too late watching. I grew up in Missouri as a Cardinals fan so congratulations to the Royals on their first legitimate World Series win. A lot of people here remember 1985, okay that’s good! So, thank you Eric. It is still an honor to serve with you, you are a terrific leader, public servant and good friend, and better yet, you are making a difference. Thanks to the attendees, export controls don’t exist just to make half of your lives more difficult and the other half of your lives full of billable hours. They exist for serious national security and foreign policy reasons and unless people understand them then they can’t be complied with. Unless people commit the resources and the time to complying with them, then the objectives aren’t met, so you’re all here for the greater good, thank you. Some of you have asked in the hallways, how my current job now, going on 6 years compares to my previous life. It is true that the longer I’m here, the shorter my patience gets, but I am still committed every day to the purpose of the objectives that I just described and to make the system as least burdensome as possible. We are not there by any means, but its’ far better than it was when David, Eric and I arrived. And as Eric described, we’ve set up a structure that allows I believe over time, for constant refinement and improvement which is a key element to the new system. In any event where I get frustrated, I think about the reasons I started and that keeps me going. And also my office is only three stories up, so I’d only break a few legs if I were to jump. Anyway, I will brag about my terrific staff, my deputy and office directors in a little bit, but since this is an update conference let me get straight to some updates on some key things that Eric and Dan didn’t touch on.

So on the definitions rule, we are nearly done with very good quality internal drafts of the rules. Thank you also for the public comments that you sent in, particularly the ones that didn’t contain any profanity. This rule, the objective of this rule is to continue the process of harmonizing the EAR and the ITAR and to reduce regulatory burdens that exist merely by the differences between the two sets of regs. And as described, to the extent that there needs to be a reason for the difference between the two sets of regs, that is explained and laid out more clearly. The rule also take into account mod cons such as the internet, and Cloud storage. Because it’s not yet in final, the lawyers won’t allow me to tell you exactly what we are going to do, what comments we’ve accepted or rejected, but trust me I think most commenters, the thoughtful ones, will be relatively pleased with what we are going to come out with. We don’t have a due date yet, it will probably be at best at the end of the year, more likely just after the first of the year given the need for usual interagency clearance, but the substance of it is essentially done. We are nearly finished with a second proposed rule, on USML Category XII pertaining to night vision item sensors, lasers and gyros and things like that and then the corresponding Commerce equivalent. When we published the proposed rule we asked for candid and frank comments and we got them. So actually that was part of the plan, so that’s not a failure that’s actually a success. They’ve actually helped us, and this was also always part of the plan to make what would be a much better second proposed rule. Again I don’t have an exact date of when it will come out as a second proposed rule, but it will be soon. Sometime in the neighborhood of the definitions for those two are the first two rules in our queue. As Eric also mentioned, we are about ready to publish a proposed rule to update our slightly more than two-year-old aircraft and engines rules, both on the Commerce side and on the State side. And this is part of the effort with industry participation to make sure that the rules control exactly that which warrants control in the clearest way possible and are going to be regularly updated and refined. Because technology, and threats, and industry understanding, and industry misunderstanding evolved and the regulations need to evolve alongside of that as well. And it is appropriate that aircraft and engines are the first category since they are by far the biggest customers we deal with. As Eric I think mentioned, we have out now a notice of inquiry asking for comments on the next group of rules that we published involving vehicles and ships and materials and military and intelligence encryption and submersibles and the materials which includes armor. The due date is December 8th, so if you are in any of those effected industries, please send us in your thoughts, and then what we do is we take your ideas and then the ones that we’ve developed internally, and that will then translate into a proposed rule revising USML Category VI, VII, XIII, and XX and then the corresponding Commerce book ends. We received relatively few comments on the toxins and biologics rules that we published amending Category XIV, and, this is unrelated but in the same rule, the directed energy weapons rule. Again I don’t have a due date on that one but it will be after the topics that I just mentioned. This was a very difficult rule intellectually to work through. Not only the nature of the items, but it also involved a lot of parts of the U.S. government that have expertise and equity on the topic but aren’t normally involved in the export control system. And again, Eric mentioned that we know the transition from the USML to the CCL is painful for some. And in the short term it takes a lot of work and commitment, but I just wanted to also point out that all of this retraining and effort has really done a terrific job of ferreting out a lot of bad habits, even under rules that didn’t change that had crept into the system over the years. And whatever complaints, whatever difficulties, whatever hardships that you have in going through these, think about, as part of the transition effort, think about all of the burdens that no longer exist with respect to the items and related technologies and software that have transitioned over – no more brokering issues, no more defense services, no more registration, no more registration fees, no more fees for submitting a license application, that de minimis rule that’s really quite significant that Eric mentioned for non-embargoed countries, a much less burdensome direct product rule in the EAR than exists in the ITAR and as a condition of agreements, one page licensing forms for technology rather than complex MLA’s and TAA’s, no more need for permission just for the act of marketing or production overseas or calculation or reporting thereafter, simpler congressional notification requirements, no more having to deal with complex in furtherance of concepts, no purchase order requirements, which really allows for better business planning and thinking over time, over a 4-year period, about what a simple, a much more simple licensing system can be for you. And then of course all of the various license exceptions that Eric mentioned: STA, GOV for government shipments and RPL. And yes I know I’m going to talk a lot about, over the next couple of days, the complaints that you all have or your foreign companies have with respect to STA but it still puzzles me why folks would complain about signing a certification with respect to exactly the same information that would be required for the foreign party to give the U.S. party for the submission of an application anyway. Again we will talk about it, but that one still puzzles me. This is probably one of the situations where although we are responsive and friendly, I’m just going to say "Yeah, tough, suck it up."

Anyway, although the U.S. government’s implementation of the Wassenaar cyber intrusion rule isn’t really part of the reform effort, it is none the less a rule that has by far gotten the most attention out of any of our rules. So let me just give you an update and a status on that one. So the background of the rule is, normally we publish a couple months after agreeing in the regimes to whatever the controls were in the previous year generally, and the cyber intrusion rule which we are going to describe in more detail the next couple of day was agreed to in December of 2013, but unlike all other Wassenaar rules, as we begin to look into it more, we were uncertain that it would really have the very small scope and the small impact that was originally promised in terms of the objective of the rule. So in order not to be wrong, in order to not unnecessarily or inadvertently impose significant harm on the very critical cyber defense research industry and ecosystem, we decided to pull that rule out of our implementation of that year’s Wassenaar, and ask for comment. And just like with Category XII, we asked for candid and frank comments and boy did we get them. So the status is that we are still reviewing all of those comments. And when I say we, I mean not just regular export control agencies, but all the other parts of the U.S. government that have expertise and equity in the topic, cyber defensive research in particular. The only thing I can commit to you about the rule is that we won’t be going to a final rule on that topic as the next step. What the next step is, I don’t know yet because we are still working through the comments, we still have some other industry participation events to deal with and, again as I said, we still want to make sure that we get the input and expertise of all of the parts of the U.S. government, and we won’t proceed unless those in that ecosystem are comfortable with what we are doing.

So let me talk about some of the less discussed aspects of what we’ve been doing the last couple of years. We always speak a lot about the USML Category revisions, that’s great, it’s the core part of the reform effort, it’s a very easy metric to show progress, the number of categories. But there is a lot of really less sexy stuff that goes on to make the regulations better and less burdensome in order to accomplish the objectives of the regulations. We’ve done some pretty good revisions and updates in liberalizations of pretty much all of the license exceptions: TMP, RPL, GOV, and TSU. We’ve adjusted the validity periods for a license, and a practice within our licensing offices to make licenses a lot more tailorable and flexible given the fact that transactions are just not simply shipments of an item in a box from party A, to party B, to party C. We revised our support document requirements, which were heretofore one of the most convoluted part of the EAR. Specifically, we removed the requirement to obtain an International Import Certificate or Delivery Verification as well as the requirement to obtain a Statement of Ultimate Consignee, except for 600 series Major Defense Equipment, which is a very very small fraction of our total volume. So compare this to what existed when we started. Under the ITAR, the DSP-83 is the equivalent of that and it wasn’t required even when these items were on the ITAR, for the items that became Commerce controlled, because it only applied to significant military equipment. So oddly enough, you had a situation where the ITAR was less burdensome than the EAR in this legacy area. So we have dramatically reduced that burden that goes along with the process and the progress of license applications. And we estimate that for exporters on average it reduces 2,000 hours a year of regulatory burden. And on the back end of the licensing process, we substantially revised our license conditions practice and this has been manifested in what some of you have heard us refer to as the boilerplate that is at the beginning of each of our licenses. It had radically reduced the total amount of words and the total number of conditions that were routinely going into licenses, particularly those that did nothing more than restate obligations or prohibitions that were already in the regulations. And this has allowed for much more clear, much more consistent conditions, and again a lot fewer of them to reduce confusion. If, however, you, particularly for 600 series and satellite items, are receiving licensing conditions that are more burdensome than used to be the case when the items were ITAR controlled and all other things are equal, complain, don’t just stew about it. I mean, there are a lot of new people in the system both at the Defense and State and at the Commerce Departments, and we may not have had a particular history with your company or your past practices, and you know Mike Vaccaro is the head of the Defense Control Division, you should feel free to call him, anytime, day or night, his home number is 70..

So we also eliminated the Special Comprehensive License. This was a license structure that was very complicated, had a lot of conditions, and a lot of limitations, and a lot of words in the regulations and can all now be done far more simply under the practices that we’ve adopted for just regular ordinary licenses with a lot fewer words, a lot less paper, with literally an unlimited number of end users or other parties to the transaction all being within the scope of the same authorization. So we simply removed that and another thing that we are thinking about, that we are working on, is to expand the concept of the VEU program to effectively operate as a program authorization in those circumstances where you have multiple shippers, multiple exporters to one or a small number of recipients. We don’t have anything yet in writing on this, it’s an idea that we are working on with a few test bunny applications and probably at next year’s Update we will have some actual examples but I think that this is going to be a very clever way of reducing overall burden for the situations that are routinely approved with multiple exporters and the small number of recipients.

We are still working through the comments you all sent in on the harmonized Destination Control Statement idea that State and Commerce published., We realize that the current requirements have created a lot of confusion and unnecessary burden because they had the same objective with the groups of words, but the ITAR and the EAR were different for the same purpose. And as Eric mentioned, now that we have a common internal IT system, we are renewing the work that we started a few years ago to create a single export license form, one that would be common between BIS and DDTC, that one would apply to through a single internet based portal. It’s an IT project: a lot more work is needed on that and we are really going to need the help of industry on that to make sure it works and it is consistent with your current practices. I will give you, I’m going to wait until next year’s Update to go through a list of all the things that we also have on our list that we might not be able to get done.

I will be going into more detail on these rules at other sessions and others of our staff will in the next couple of days. But one of the purposes of a keynote speech, one of them, is to lay out sort of the big theme in a big idea. So I am going to lay out one now, which I think is really going to be in the end a terrific idea. And that is the creation of a common set of regulations between the ITAR and the EAR and basically rewrite, from the ground up, the ITAR and the EAR so that the words are common. This is not something that can be done, completed during the Obama administration. But it is something on which we can do a substantial amount of work and have it so that we can hand it off to whoever is in charge under the next administration. But take a step back and think, what is the purpose of export controls? Export controls are a semipermeable regulatory net that control the export, reexport and transfer of physical items, "thingies" as I call them, commodities in the legal term, software services and technology to certain end users, end uses and destinations for various foreign policy and national security reasons, and the EAR and the ITAR do exactly that. However, they have evolved over the decades in completely different structures. They have different terms, different phrases, different ways of prescribing their prohibitions, license application requirements, appeals procedures, record keeping requirements, penalty and disclosure policies, license exceptions and exemptions. The forms are different and although we are working on, as I just described, trying to harmonize them in the terms, the structures are all completely different, and so this is, I’m not just saying that the controls between the ITAR and the EAR need to be exactly the same, that’s not my point. It’s just that they are both a language that achieves the same objectives, except that one is Latin and one is Greek. And for most of their Cold War regulatory lives, this difference didn’t really matter. Those who were in the military world were funded in one way, and were one group of companies and people with one type of business, and those that were in the commercial and dual-use world were a different group. But with the end of the Cold War, and the evolving nature of COTS technologies and items for military applications, and intermingling of technology, and in fact in many areas where commercial development leads, the difference between the two sets of regs as such, creates an unnecessary regulatory burden. And so in order to ensure compliance with applicable U.S. laws, both U.S. and non-U.S. companies have to get used to and understand two very differently structured sets of regulations. And also as a result of decades of individual decisions that at the time made sense vertically, there has been created all sorts of cul-de-sacs, and variations between the two sets of regs that has not really made for an internally horizontally coherent structure of U.S. export controls. So this is really describing what the ultimate objective for phase III of the reform effort is: the creation of a single agency with a single set of regulations. It’s also part of the phase II effort which is to harmonize where possible the regulations. But it is also consistent by the way with an Executive Order that after the reform effort began, the President issued: Executive Order 13563 improving regulation and regulatory review, and he said he wrote, "A regulatory system must protect public health, welfare, safety and our environment while promoting economic growth, innovation, competitiveness and job creation. It must be based on the best available science and must allow for public participation and an open exchange of ideas. It must promote predictability and reduce uncertainty." And then it goes on to describe how to have regulations be the least burdensome possible. So the point of the grand idea of a common set of regulations is that there is no legal or policy reason to wait until phase III. There is no reason to wait to create a common set of regulations, the current statutory authorities for our regulations, IEEPA and the Arms Export Control Act, are sufficiently flexible for substantial revision to both sets of regs. So from the ground up, they wouldn’t be common. There would still be Title 22 and there would still be Title 15 but they would use the same words, the same structures, the same approach. Now of course they would identify the groups of items and the licensing policies for things that were subject to the Arms Export Control Act and those that there not but otherwise they would be a common set of words and one could look to either 22 or 15 and be able to know what the words are. It would be a radical reduction or an opportunity to radically reduce the total number of words in the export control regulations. It would take advantage of the last several years of thinking on a policy matter that we’ve been describing as part of the reform effort, and it would of course then ultimately enhance the objectives of the controls – of understanding, compliance, and enforcement. And if the phase III ever comes to be, then it would be all the work that would need to have been done anyway to create a single set of regulations, and if phase III never comes to be, if no law comes into being that would allow that, then we have achieved exactly the same benefits and opportunities and the purposes of phase III by creating two common sets of regulations between CFR 22 and CFR 30. So you know, this would need to be again a 0 based effort. If somebody can’t describe a reason why an existing control, it gets tossed. Saying that’s the way we’ve always done it would be an unacceptable answer for anything for which there are old ways of doing it. Like instead of saying DSP-5 and BIS-748P, it would be export license application. A plain English description of what the application is...I had no idea that was funny. Anyway, but apparently I struck a nerve with that one. So of course this idea would still be constrained by the relevant statutes and the Arms Export Control Act and the broader policy purposes for the controls but it would basically be, the core instruction with every sentence and everything that the regulations contain is, what is the simplest, most clear way of describing what warrants control and why. It also would need to be something that would be understandable not only to U.S. companies but also to non-U.S. companies. The current regulations are not really written in such a way, taking into account, the significant export regulations that exist outside the regs. They of course would be consistent with our regime obligations. They wouldn’t be worded exactly the same way because we would need to implement perhaps in a more granular way. The numbering structures would align so that one could sort of see across both sets of controls what the words are, and it will be consistent with the structure of the various multilateral regimes. They would be, as I’ve described, internally consistent on key phrases and ideas. So it is largely an organizing effort, I mean a dramatic and substantial organization and rationalization effort and not meant to materially change the underlying policies. However it cannot be captive to simply doing it the way we’ve always done it because there will need to be small changes around the edges otherwise you end up with some of the things that happened with the very good rewrite in 1996 where it said absolutely no changes and you lock in for example outdated concepts that don’t make sense, you know like country group A:1, and for years it was just the list of the old COCOM countries and didn’t really for the last however many years reflect the countries that warranted A:1 treatment, the Wassenaar member group countries. We’ve since the fixed that by the way. So the drafter is also not the decision maker, the judgement and the ultimate decision still rests with each of the individual agencies through the regular interagency clearing process. But when drafting they need to take into account and keep in mind that the flaw in most regulatory structures including the export control regulations historically that require interagency clearance is that they are the lowest common denominator of what the relevant agencies and attorneys can agree to and so, as almost anything written by committee, it gets unnecessarily complex and layered with internal inconsistency. So this effort, for it to succeed, will need to be aware of that going in. Now I understand that export controls are inherently complex. You have as I described in previous years this fundamental tension between over control and a tailored set of regulations that are by definition more complex. So in this effort we need to take into account and be able to exercise the judgement about when to have a simple, broader scope of regulations that perhaps over controls when a tailored set may be more appropriate, and a good example of that is USML Category VIII (h) (1) which is a broader catch-all phrase which was done in a simpler over-controlled way for the sake of simplicity, and then XI (a) which is a much more tailored, specific set of controls. Anyway so I will just sort of tidy up this thought, and also a general rule is that if the same thought could be written with fewer words, then it should be written with fewer words. That’s just an idea, we are not going to be able to complete of course during this administration, but you all are Uber users of the export control system so I wanted to toss it out to you. Something to think about over time. Feel free to send in ideas as this idea develops within the U.S. government.

So let me switch from big picture ideas, to Export Administration. It is a terrific group of very smart and talented people. I am every day proud to work with them. They daily handle a massive number of very complex regulatory issues and policy issues and legal issues. The system is working. Albeit with the occasional hiccups which I am sure I will hear about, but that’s okay, we are here to fix them. The interagency referral system is working, the IT system is working, morale is good, but we are busier than ever as Eric mentioned. In percentage terms we’ve had a 68% increase in the volume of licensing activity in EA from this time to last year. What’s interesting about that is that the aggregate number of classification requests – this is a little surprising – other requests have stayed about the same. And what’s even more interesting and pleasant on a purely subjective basis, because you can’t quantify something like this, the number of disputes within the government and between industry and government with respect to topics that are the subject of classification requests is dramatically down. We haven’t had to have an Assistant Secretary-level meeting in almost two years to resolve – what used to be a monthly occurrence – to resolve disputes among the agencies on jurisdictional and classification issues. So whatever you think of "specially designed", and there are still more issues to work through, the data show it is radically reducing the number of disputes by and among and between companies in the industry. Yes there are always individual circumstances, Tim Moony and I and others will have a session on this to work through fact patterns, but it is working. By the way, please if you could stop so many as I call them ‘comfort letter requests,’ where what is clearly the case is that something either is on the CCL or not on the CCL. We will of course process them but if you are able to make a self-determination, please do so for your sake and for ours.

With respect to each of our offices: Exporter Services – Karen of course you met earlier and she is doing a terrific job at leading Exporter Services. Let me give you a couple of additional data points for what they are doing for the greater good. So the outreach programs in the aggregate have resulted in over a hundred thousand interactions with U.S. and foreign persons. They’ve conducted 350 events in total, including the weekly teleconferences, the Technical Advisory Committees, and as Eric described, they are focused largely on small and medium sized enterprises.

Since beginning the weekly teleconferences we’ve had a hundred and seventy one of them, and that have been heard, at least by those who have called in, by over 13,000 people. I don’t know how many, we just count each call-in as one, we don’t know how many people may be listening in on the same phone, so it’s probably even a little bit greater. We average 8 questions and answers per call for a total of 983 questions we’ve answered on those weekly calls. And as described, I will be doing an open version of that on Wednesday.

Cuba has been a major focus of our outreach efforts. We’ve conducted 17 events to describe the changes and then over the course of the rest of 2015 and 2016 there is a long list of other export control seminars and sessions that are going to be taking place around the country often in coordination with our friends at the Bureau of the Census and the Department of the Treasury. Up on our website soon will be an updated list of all the various sessions throughout the country over the course of this year and next. Don’t forget about our interactive tools that we’ve developed as part of the reform effort. We’ve got the CCL order of review, the specially designed on how to use license exception STA online decision try tools, just for the last year there were over 33,000 hits. We are about ready to roll out a de minimis licensing tool, I mean a decision tree tool, and we suspect that will be quite popular. Our call centers both in the Western Regional Office and here in DC have answered over 33,000 additional phone calls from you all about the regulations and the status of licenses and how you apply, etc. We’ve held 33 Technical Advisory Committee meetings. As you know we host 7 TACs as well as the PECSEA, all representative of industry and government participation to give us advice and to react to the various rules. This year we’ve added over 6,700 users to our SNAP-R system, now we have over 36,000 users of our licensing system.

Another office, SIES, Strategic Industries and Economic Security, is mentioned for a dramatic increase in the number of licenses that we’re handling and they are doing it quite well. They also are quite active in outreach and training on the defense trade side. They also handle our internal work with respect to the Committee on Foreign Investment in the United States and work closely with the Departments of Homeland Security and Defense on the DPAS regs in support of national defense programs. So thank you to Michael Vaccaro, if he hasn’t left already because of my home number reference that I made, but anyway he is doing a great job at leading that office.

OTE, the Office of Technology Evaluation, continues to provide data analytics to inform policy decisions with respect to, well, data, such as the Russian sanctions and the Cuba policy, and has been studying, on a really daily and monthly basis, trends with respect to the export control reform efforts so we don’t delude ourselves in what we are doing, that we actually have data in terms of who’s using what, and what’s going where, when. And in order to support the Secretary’s goal of data in her strategic plan, OTE has stood up a data portal on our website and will be demonstrating that in a room over there. They continue to work with CBP on export clearance issues including the Automated Export System and the Destination Control Statement and routed export rules in the post-departure filing process. They’ve partnered with the Export Management Compliance Division to educate exporters who inadvertently report AES transactions that are potentially noncompliant. They were instrumental in publishing the July 15thrule that sets out the policies and procedures for conducting surveys to obtain information to preform industry studies, to assess the health and effectiveness as various industries as a part of our industrial based work to support the national defense. They published a short report to better understand small businesses and the challenges facing these organizations in the U.S. space industry and they continue to work on a variety of assessments including one involving carbon fiber composite reports in June, and the printed circuit board industrial survey assessment. Thanks to Gerry Horner for his terrific work in leading that group.

Our office of National Security and Technology Transfer group is ably lead by Eileen doing a terrific job with a wide variety of topics. This office is the point for our Wassenaar work and they are doing a terrific job. Just to give you an example, for this year, 23 out of 24 of its proposals were accepted. And this work is really quite critical to ensuring that our dual-use controls are properly calibrated and updated. This office is also the point with respect to the fast moving and very complex issues involving the Russia sanctions. It is also doing its best to do what it can do be creative in terms of making us more user friendly, in the encryption rules and the license exceptions. Little known is that it is also the part of our office, our bureau that takes the lead with respect to handling issues involving crude oil exports. And it’s also the office that is responsible for the new controls on commercial satellites and spacecraft that have moved over from the State Department. And that is a really terrific ECR success story. The data and the anecdotes that we hear from industry about sales that otherwise wouldn’t have occurred and the reduction of burden and the efficiency of the licensing process on the commercial satellite and spacecraft related activities is really, really terrific.

The Office of Nonproliferation and Treaty Compliance is well led by Alex who is doing a great job there, Alex Lopes, and you know he shepherds our Nuclear Supplier’s Group, Missile Technology Control Regime, and Australia Group regime efforts. Those are of course really quite critical to the reason export controls exist, to stem proliferation with respect of these items. They are doing a lot of work these days to expand their membership and to expand compliance norms and nonproliferation norms around the world and always looking for ways in which those objectives can be handled more simply. The office’s Treaty Compliance Division continues to play a leading role in ensuring the U.S. meets it obligations under the Chemical Weapons Convention. In the past year, for example, it collected 771 declaration reports from 548 facilities and trading companies, and took part in the OCPW inspection of 16 chemical plant sites, successfully demonstrating our compliance with those obligations. The successful destruction by a U.S. company of precursor chemicals retrieved from the Syrian chemical weapons program and verification of this destruction by the OPCW was a signature success due in large part to help from this group. And our Foreign Policy Division in this office has played a prominent role in developing and working through our policies regarding Iran and Cuba that Eric described.

So let me just finish up there, I want to give special thanks to my deputy director, Matt Borman, who is the best leader in all of BIS, the rock of EA. Kathleen, Steve, Bob and Darryl in my front office for making things run so efficiently and for handling not just the process but the substance of multiple issues. You are very good at what you do and make EA and BIS proud. Thanks to Mi-Young Kim and Eric Longnecker for shepherding our Operating Committee, trying to resolve interagency disputes on license determinations, trust me is not easy. Eric finished after a long stance and Mi-Young has taken over and they’ve both done a terrific job. Thanks to Joe Cristoforo who is doing a terrific job at shepherding our End User Review Committee and the VEU program and then also special thanks of course to our Counsel and OCC for always providing really quality, practical, useful legal advice and our friends down the hall in Export Enforcement where we work hand in glove on all issues. So anyway, thanks for being here, enjoy the conference, do well, learn, give advice, find that elusive 6th export control joke, export, learn the regs, export some more, and comply. So thank you very much.

U.S. Department of Commerce

Bureau of Industry and Security

Update 2015 Conference

Opening Plenary Session

Karen H. Nies-Vogel

 

WO2015

 

 

On behalf of the Department of Commerce, the Bureau of Industry and Security, welcome to the annual update on export controls and policy. I am Karen Nies-Vogel, I am the director of the Office of Exporter Services and I want to tell you a little bit about the highlights of the conference and then quickly go over some housekeeping items with you. This year’s highlights include, our keynote speaker at lunch today. We are very honored to welcome the Secretary of Commerce, the honorable Penny Pritzker. Now tomorrow, tomorrow’s lunch, our speaker is Rose Gottemoeller the Undersecretary of State for Arms Control and International Security. Once again this year, a team of BIS’s IT Specialists is available to demonstrate questions about BIS’s electronical licensing system, SNAP-R, also our web-based interactive tools. The IT team can also assist you to register your company to use SNAP-R if that’s something that you need assistance with. The IT team is located in the Cardozo Room on the terrace level and they will be available until 5:00 today, until 6:30 tomorrow, until 3:30 on Wednesday. On Wednesday, Assistant Secretary Wolf will hold morning and afternoon sessions to take comments and answer questions about the ongoing implementation of export control reform. These sessions will take the same format as his popular Wednesday afternoon teleconferences and we hope that you will be able to attend and to ask questions. If you are not able to attend, there will be an open teleconference line which will be in "listen only mode", just as it usually is for his weekly teleconference. If you have not done so already, please review the emergency information on page 13 of you program book. The Hilton’s emergency number is 60 which you can dial from any house phone and if you are staying in the hotel, we suggest that you review the emergency procedures information that is provided in your room. Please remember that your name badges must be worn at all times during the conference and should be visible to conference staff. Your badge serves as your entrance to all events. If you are not wearing your badge or if it is not visible, conference staff may stop you and ask to see it. Materials for all of the panel sessions are loaded on the computers in the internet café, which is located in the DuPont Room on the terrace level. You can download these materials onto the USB drive you’ve been given, or you can print them out. There is paper available for printing. There are a variety of sessions available to all of you over the next several days, many of them will be offered more than once. Seating for all of the sessions is available on a first come first serve basis. If seating capacity for any one session is reached, we will have to close the session. Standing in the back of the room is not allowed due to fire regulations and safety concerns. If you have a special dietary requirement and you checked the box related to that requirement when you registered for the conference, and you have not picked up your ticket for those special meals, please do so at the registration desks. The opening plenary today, the interagency plenary tomorrow, and our luncheon keynote speakers will be videotaped and those video tapes will be posted on the BIS website along with transcripts after the conference. Please be sure to stop by the exhibitors’ booths on the terrace level in the Columbia Hall. The exhibitors also invite everyone to a reception tomorrow evening from 5-6:30 pm. The reception will be in Columbia Hall, and it’s a great opportunity to visit with the 33 government and private sector exhibitors that we have joining us this year. We understand that many of you may have business that you need to attend to during the conference however we hope out of consideration for other attendees, that you will turn your electronic devices either off, or to the vibrate mode. If you need Wi-Fi access it is provided in the hotel lobby and hotel staff can assist you with logging on if you need that. Your evaluations are very very important to us: please take the time to complete the individual session evaluations as well as the sheet for the overall conference. And finally, if you need assistance or you have questions, please ask me, any other member of the conference staff, or any of the many many BIS employees who are helping to facilitate the conference. We will do our very best to help you. It is now my pleasure to introduce BIS’s Deputy Undersecretary, Daniel Hill. As the bureau senior career official, Deputy Undersecretary Hill manages BIS’s daily activities and advises Undersecretary Hirschhorn on a broad range of policy and management issues. Prior to his appointment as Deputy Undersecretary, Mr. Hill was the director of BIS’s Office of Strategic Industries and Economic Security, where he implemented and managed programs to ensure that the U.S. defense industrial base has the capacity and the capability to meet current and future national security, economic security, and homeland security requirements. Among other duties, Mr. Hill was a representative to the Committee on Foreign Investment in the United States and the interagency working group on offsets. He was a member of the government coordinating council for the defense industrial base, and represented the United States government as a member of the Industrial Planning Committee at NATO. Prior to his 10 years at BIS, Mr. Hill was the assistant administrator for technology at the Small Business Administration. In addition to directing the SBA’s Small Business Innovation and Research and Small Business Technology Transfer programs, he was a member of the White House National Science and Technology Council, and chair of the small business working group of the United States innovation partnership. He was also a member of the National Science Foundation’s advisory board and served on the President’s council of Y2K conversion. Ladies and gentlemen, Deputy Undersecretary Daniel Hill.

 

   
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