Speaker Identification:
EH: Eric Hirschhorn  

EH:  Well thank you, Dan, and good morning, everybody. I have one bit of bad news for you, Dan. I actually did your evaluation last week.
Audience:  (Laughter)
EH:  So you’re too late, but I do appreciate those kind words.
I also want to thank Karen Nies-Vogel, Rebecca Joyce, and our entire BIS team, as well as the many people from elsewhere in BIS and U.S. government colleagues who’ve worked on and contributed so much to this conference.
After listening to that fabulous rendition of the Star-Spangled Banner this morning, I decided that I have a gift that I’m going to give to everyone in the room, which is that I’m not going to sing.
Audience:  (Laughter)
EH:  I’d like to start by introducing our BIS management team. I’ll ask each of you to stand when I call your name, but please, audience, hold your applause until I’ve finished.
We have Assistant Secretaries David Mills, Kevin Wolf, Deputy Under Secretary Dan Hill, whom you’ve already heard from, our new Chief of Staff Aparna Paladugu – I don’t know if she’s here yet. She’s actually working out something else I have to do between now and noon. Deputy Assistant Secretaries Matt Borman and Rich Majauskas, our Chief Financial Officer and Director of Administration Carol Rose, Director of Congressional and Public Affairs Brett Hewitt, and our Chief Information Officer, whom you’ve already met, Roger Clark.
Audience:  (Applause)
EH:  I’d also like to thank all our colleagues from other departments and from the Congress who were involved in export controls, and of course my own colleagues at BIS for all their hard work and success on the President’s Export Control Reform initiative. It is an honor to work with each of you.
Six years ago at this conference, the President outlined his plan to fundamentally reform the U.S. export control system. Many said that the plans were too ambitious to succeed. Previous administrations had tried with at most only moderate success. I am happy to report that thanks to the hard work and support of many talented public servants and the support of the public and the regulated community, we have succeeded.
I know we’ve described the primary purpose of the effort many times, but let me briefly repeat it so that you all have a concise statement of both the vision to guide our future efforts and the standard you can apply to assess our own efforts in retrospect:
To enhance our national security and foreign policy objectives, the export control system needed to be reformed and needs to be regularly revisited and revised in the future in order to strengthen our military interoperability with NATO and other close allies, reduce the regulatory burdens on joint development and production among those countries by reducing incentives to design out or avoid U.S. content, to focus our government’s own limited resources on the end-users, end-uses, and items of the greatest concern, and finally, improve the reliability and predictability of the regulations so that your exports and our enforcement can also be reliable and predictable.  
All the accomplishments of the past seven years in pursuit of this vision have set the stage for the ultimate goal, one we have not reached but one that will be reached, which is the eventual creation of a single export control system with a single set of regulations administered by a single agency. When that is accomplished, the regulatory friction and burden caused by the need for export controls will be at their lowest possible levels.
Revising the control lists and the attendant regulatory structure was a massive effort not only for many dedicated government officials, but for industry as well. In order to be transparent and to have the benefit of industries’ expertise regarding our reform ideas, the Departments of Commerce and State, working closely with the Department of Defense and other agencies, published ideas for change as proposed rules over the course of the last five years. We’ve received more than 600 public comments on those proposals. Many of the suggestions were adopted and made for better final rules, and we thank you again, all of you, who took the time to comment. You really did make it better. I hope you all recognize that.
As you know, we’ve gradually been moving less-sensitive military items and commercial space-related items to the jurisdiction of the Commerce Department from that of the State Department. This movement has been a centerpiece of our reform effort. Most of the items that moved as well as most of the dual-use items that Commerce already controlled are now eligible for export to NATO and other close allies without a license under the conditions of license exception Strategic Trade Authorization (STA). Many other license exceptions that are part of the Export Administration Regulations are now available for former U.S. Munitions List items; for example, exports directly to the governments of those countries, exports of replacement parts, limited-value shipments, and temporary exports.
We understand that learning the parameters of these new exceptions and the new framework is complicated and time-consuming, but we are confident that once exporters and reexporters understand the scope of the exceptions and the new rules in general, their overall regulatory burden will be reduced significantly. Again, if we are wrong, and as I like to say, the government isn’t always right, at least not the first time, you need to let us know so that we can continue to improve the utility of our regulations.
Even for trade that requires a BIS license, the regulatory burdens under the EAR are significantly less than those in the International Traffic in Arms Regulations. The EAR have de minimis provisions, for example, that allow more non-U.S. companies to focus on price and quality in making purchasing decisions rather than concentrate on avoiding U.S. content, services, or technology for fear of entanglement in our regulatory requirements. The movement of items from the ITAR to the EAR should greatly improve the ability of U.S. companies to collaborate with non-U.S. companies in allied countries on research projects and joint development which in turn enhances our collective security.
The improvements of the reform effort go far beyond the availability of de minimis provisions. The EAR do not have import licensing requirements, for example, so non-U.S. companies dealing with items that have moved to the EAR no longer need worry about notifying the U.S. vendor when a component is shipped back to the U.S. for repair. The EAR also don’t regulate defense services or brokering, thus reducing a significant compliance burden for many, many companies. We do regulate the export, re-export, and transfer of commodities, technologies, and software, but not most other acts pertaining to such items.
Our licenses and license exceptions are less burdensome than the Technical Assistance Agreements and Manufacturing License Agreements required by the ITAR, and for reexports of items subject to the EAR, non-U.S. companies can use the same electronic licensing system, SNAP-R, as U.S. companies.
We’ve made BIS licenses more flexible so that they can be used to authorize trade by and among multiple parties. Also, if you have a transaction involving EAR items that will be used with or in ITAR items, you have the flexibility to get a single license from the State Department rather than one from us and then another from State.
Further, the State Department’s ITAR require a purchase order in order to apply for each license, but Commerce does not. This means that your applications to BIS can cover multiple purchase orders over longer periods, ordinarily four years, which in turn reduces the total number of applications that you have to file. As a result of such flexibilities, applicants now have more incentives and opportunities to work with licensing officers to meet the needs of what sometimes are quite complex fact patterns. One company, for example, had more than 1200 separate licenses to authorize its activity on a particular program. After thinking through the common denominators for these controlled activities, we were able to work with that company to rewrite the authorizations and conditions so that the entire program is now covered by just four omnibus licenses.

Complying with the Export Control requirements associated with the program is now much easier for all involved, and at the same time, reviewing and authorizing the transactions has become less burdensome for the government.
We’ve also clarified important terms and definitions to make the system easier to use and understand. One important change affecting non-U.S. companies was to clarify the scope of technology releases, including deemed reexports. Such changes are part of our effort to harmonize to the extent possible the EAR and the ITAR to reduce regulatory burdens that are caused solely by the structural and definitional differences between the two sets of rules.
As for the numbers, we’ve seen great changes to how U.S. companies export less-sensitive defense items and commercial spacecraft items. Since October 2013, when the first two USML categories rewrites became effective, the Department of State has seen a 57-percent reduction in licensing volume, and this includes a 67-percent reduction for the largest categories of licenses by volumes, principally parts and components for military aircraft and military gas turbine engines, as well as an 81-percent reduction in licenses for commercial space-related items. Such data reflect not only the reduction in actual licenses, but also in regulatory burdens that exist under the ITAR but not the EAR.
At BIS, we’ve received more than 37,000 license applications for items that have moved from the ITAR to the EAR. Our average processing time for these since October 2013 is about 17 days, which is in line with the average processing time at State when such items were subject to the ITAR. Of course, the processing time for items now exportable under license exceptions is zero. U.S. exporters have made almost 250,000 shipments of transitioned items valued at more than $15 billion under BIS authorizations, so you can see this has not been an academic exercise.
We’ve also worked hard to create tools and provide training opportunities so that exporters and re-exporters can better understand and comply with the regulations. For example, we’ve created online decision tree tools that allow exporters to apply the order of review, definition of specially designed, License Exception STA, and the de minimis and direct product rules to their transactions. These tools request answers to a series of questions to apply applicable concepts to the specific facts of your transactions. In 2015, these tools received more than 33,000 hits, and their use continues to grow.  
We’ve conducted extensive outreach in the United States and abroad. We estimate that our outreach programs have resulted in over 86,000 interactions. We’ve conducted 227 different events for industry, including the weekly teleconferences on Export Control Reform topics that Assistant Secretary Wolf hosts, as well as the seminars that we hold throughout the country and overseas and the webinars that we produce. Since beginning the weekly teleconferences, we’ve offered more than 200 sessions heard by more than 15,000 listeners in the United States and elsewhere.
Turning to enforcement, when I started at BIS, I characterized my agenda with three words: efficiency, education, and enforcement. As I’ve said repeatedly, without strong enforcement, those who expend energy and resources to comply with our rules are put at a disadvantage vis-à-vis those who flout or are unaware of those rules. At my first Update Conference as Under Secretary in 2010, I described Assistant Secretary for Enforcement, David Mills, as the skunk at the picnic.
Audience:  (Laughter)
EH:  None would dispute that over the intervening years, he has lived up to that name.
Audience:  (Laughter)
EH:  While the President’s Export Control Reform initiative has proceeded full-steam ahead, David and his able staff of special agents and analysts have aggressively pursued a robust but even-handed enforcement agenda. Their work guards against diversion risk and ensures appropriate consequences for those who violate our controls including culpable individuals as well as entities. The accomplishments and successes of BIS enforcement over the last seven years will be described more fully tomorrow by David and his team, but they have left no doubt that enforcement of the controls on items transferred from the U.S. Munitions List to the Commerce  Control List is in good hands.
Of course, the other federal law enforcement agencies responsible for policing exports continue to be involved in the enforcement of 600 and 500 series transfers as well as dual-use exports, but BIS enforcement adds further value because it is the only federal law enforcement agency whose sole focus is the enforcement of export controls and whose enforcement staff, agents, and analysts are entirely dedicated to that purpose.
Administration, licensing, and enforcement are most efficiently and successfully performed when housed under the same roof. From determining the proper classification of an item to convincing a U.S. Attorney that a prosecution of its illegal diversion is in the national security interests of the United States, our agents, analysts, and licensing officers work together seamlessly to carry out our unique mission.
These are some of the unique national and economic security benefits we have achieved by working together, government and industry, to make Export Control Reform a reality. Our partnership and dialogue with the exporting community has been indispensable to creating clear and predictable rules that increase national security and at the same time allow you to reap the benefits of reform. I know that this very positive dynamic will continue and increase in the future. Please take advantage of this conference, ask questions, challenge us, and thank you all for attending.
Audience:  (Applause)
EH:  Let me now take a moment to introduce our next speaker who is Kevin Wolf, our Assistant Secretary for Export Administration. Kevin has been a prime mover of the reform effort. His efforts, dedication, and energy have driven and nurtured this effort. We could not have done it, indeed we could not even have begun it, without his participation and without his leadership. He’s a distinguished graduate of the University of Missouri and the University of Minnesota, and he spent many years working on export control and embargo matters in private law practice before we lured him into the Obama administration. It’s an honor and a pleasure to have him at BIS and to hear from him this morning. Please welcome Assistant Secretary Kevin Wolf.
Audience:  (Applause)

   
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