Speaker Identification:
KW: Kevin Wolf
KN: Karen H. Nies-Vogel

KW:  We’ll get a group photo before we begin. This is a fish eye lens if anybody’s curious, so I can get everybody in here and get the whole room. Are you ready? No, you’re blinking.
Audience:  (Laughter)
KW:  Here, this is actually a good shot. Let’s get this one here. Cheese!
Audience:  (Laughter)
KW:  Okay. So, thank you, Eric. You’re a great friend, leader, lawyer, public servant. It’s been a thrill to work for you, and also Dan Hill, thank you very much for your leadership and hard work over the years.
I have something from my front porch. Is it…? There we go.
Audience:  (Laughter)
KW:  That’s how nerdy I am. I actually carved that.
Audience:  (Laughter)
KW:  Given the day, I thought it was appropriate for something scary.
Audience:  (Laughter)
KW:  I thought about the EAR, but it was too complex.
Audience:  (Laughter)
KW:  And I thought about carving BIS, but it wouldn’t have frightened anybody. I also thought about DTSA, but the knife wouldn’t have stayed within the lines.
Audience:  (Laughter)
KW:  I called OFAC for advice and left a message….
Audience:  (Laughter) (Applause)
KW:  (Laughs) You know how the joke is going to end. They didn’t call back.
Audience:  (Laughter)
KW:  I thought about ISN, but I couldn’t get 40 countries to agree.
Audience:  (Laughter)
KW:  STA I thought about, but nobody would’ve cared.
Audience:  (Laughter)
KW:  So, I left it with ITAR. The truly scary thing though is I live in Arlington which is the home, as you know, of a lot of public officials and lawyers and, you know, people who when they were in high school played the clarinet…
Audience:  (Laughter)
KW:  …and did student council and did Model U.N. instead of going to gym class, and the scary thing is that their kids actually got the joke.
Audience:  (Laughter)
KW:  One 12 year old wanted to know if the pumpkin applied to FMS or just DSP’s.
Audience:  (Laughter)
KW:  Anyway, so other than…. Why are we here? Take a step back and remember what the purpose of export controls are. It’s the regulatory net over the export, reexport, and transfer of physical items, technology, software, and services to various end-uses, end-users, and destinations for a variety of national security and foreign policy purposes. There. That one sentence describes my entire professional life. I suddenly feel very small.

Audience:  (Laughter)
KW:  But I’m actually kind of serious. Whenever you’re thinking through an export control compliance analysis, just repeat that sentence and go through and diagram whatever the transaction is that you’re dealing with. Ask yourself, “What is the verb? What is the noun? What is the direct object? What is the object of the preposition,” and you answer each of those questions, and you’ll be able to do your compliance analysis. Try it.
Now I realize diagraming sentences is not all that exciting for some because as they say, export control regulations are a lot like tax law but without the sex appeal.
Audience:  (Laughter)
KW:  I also realize when you’re doing that, your family may have no idea what you’re doing. My mother still doesn’t know what I do for a living. “It sounds interesting, dear, but... I’m glad you do what you do. Okay.”
Audience:  (Laughter)
KW:  Anyway, but whatever you’re doing to determine compliance by whatever method, I just wanted to sort of echo Eric’s point of thanking you for being here and thanking you for spending the time and resources, both by your employers or individually, to understand and comply with the rules because unless you do that, the very real national security and foreign policy purposes behind the regs aren’t furthered.
So as with any area of regulation, export controls are inherently complex. You can tell from Eric’s speech and what you’re going to be hearing, the goal of regulatory simplification is a high bar. In the abstract, there are two ways to make the system more simple. You can require a license everywhere, all the time, always, for all listed items to all destinations, or in the extreme in the other way, no licenses required unless individual transactions are notified by the U.S. government. The first, of course, would impose a dramatic and devastating regulatory burden on exports, and the latter, obviously wouldn’t, because of its after-the-fact nature, satisfy the national security and foreign policy objectives. And to add to the complexity, you have the situation, which is inherent in the world, of foreign policy concerns and priorities changing over time. Technologies evolve, newly developed items become more sensitive, other items become more widely available and are less sensitive for those reasons. You have different changes in different issues that evolve regarding specific end-uses and end-users. Small changes in fact patterns can result in completely different outcomes, and also most of the controls that exist in the regulations, particularly on the dual-use side, are a result of negotiations by and among 30 to 40 countries and are a result of compromise, and all of the regulations are there as a result of agreements by and among different agencies with different equities and compromises. So you add that, plus the fact that these regs have been around for decades and complexity is accreted, that’s making it more a system.
So with the Obama administration completely aware of this inherent tension, at the beginning we made the choice, made the policy decision, to reduce the overall regulatory burden as much as possible in order to further those national security and foreign policy objects, and this manifested itself in the reform effort that Eric described. And I just want to repeat something he said: Don’t think of the reform as finished. Just look at those four standards he articulated. I know he said this, but I want to repeat it. And always ask us, always ask the government, use this to judge by the way of what we’ve done whether it’s working. Are we improving interoperability with NATO and other close allies? Are we reducing the incentive to design out and avoid U.S. content services and technology? Are we allowing the government to spend its time focusing its resources on the types of transactions that matter the most? And are we getting to the point where the regulations are more reliable and predictable so that compliance and enforcement, frankly, are more reliable and predictable as well? Can you make confident compliance conclusions based upon law rather than lore? If we’re doing that, great; if we’re not, let us know.
So even though we finished the lion’s share of the category revisions and the other types of ECR changes, all this means is that ECR doesn’t really end. It’s more of a spirit and a process that’s now baked into the system. The agencies will continue to review the U.S. Munitions List to try to identify those items that provide critical military advantage. And even for trade, buying among and between close allies warrants strict controls. They’ll continue to review and adjust the controls that are not clear, and all of this will be done through a transparent, open process of publishing notices of inquiries, asking for advice, thoughts, and opinion, fully utilizing the Technical Advisory Committee process, publishing the rules as proposals, sometimes twice, to give industry its input and suggestions and pointing out errors, and then final rules with a massive amount of education and training for compliance thereafter.
And so the first of these examples that’s going to kick in, I think probably in November, will be the first revision of one of the categories, and that’s the aircraft and engines rules, and you’ll see in that rule what is going to be the standard for all the other rules in that we’ve spotted actual mistakes where we’re going to fix things that after a couple of years of practical application we realize, based on the comments, could be said more clearly, some increases in controls on a specific subset of items that upon reflection are sensitive, also some evolving technologies that need to be described at a higher level. But then on the flip side, as items become more commercially available and upon reflection are less sensitive, warrant, consistent with our regime obligations, reduction in controls.
So, just to go into a couple of other topics, one example that I mentioned as a goal is to allow the government to focus its resources on things that matter most, and all of you know the commodity jurisdiction process: so, determining whether something is or isn’t subject to the jurisdiction of the State Department. And the way it works is you submit the request to State. State, of course, has the lead. It asks for advice from Commerce and the Defense Department, and then those are negotiated, or discussed rather, and resolved, and to the extent that there is a dispute, it’s elevated to the Deputy Assistant Secretary level and then, if necessary, the Assistant Secretary level for review. In the last year prior to the first category kicking in in 2013, there were 23 Deputy Assistant Secretary level CJ meetings from January to August, and in that same period in the last year, only two were needed. That’s a rather dramatic shift, and at the Assistant Secretary level, we haven’t had to get together for actually several years now to resolve a dispute that couldn’t be resolved by either the staff or the DAS level, so whether you like the answer or not on any particular CJ you’re getting, at least we’re spending less time arguing about jurisdictional status and are allowing ourselves to focus more on more important issues about how things should be controlled.
I realize not all the agencies always agree all the time, and it would be weird if we did, because we each have different expertise and equities and backgrounds, and the system is deliberately designed that way in order to – oh, that’s a good phrase – anyway, deliberately designed that way in order to result in a better outcome, and we still have improvements to make to particular entries based on experience. Ahem – XIII(g), and XIII(j)(2). Anyway, but the point of these examples is that we’re making the system more reliable and predictable both for you and for us.
On another topic, I know that there are a lot of non-U.S. companies here. The EAR apply extraterritorially. Our rules, our law follow the items wherever they go that are subject to the EAR, and we realize that our reexport rules are not laid out as clearly as perhaps they could be. I mean, over the decades, the rules have largely been written from the perspective of the exporter, the person shipping from the United States, and there are several topics that I know we need to think through and work through over the next year: second incorporation, direct product, the de minimis rules in particular cases. And in order to help us spot these and other that are reexport-specific topics, we’ve created a reexport working group within the Technical Advisory Committee structure of those participants who have thoughts and experiences with reexports to provide us with advice and thoughts about how to improve the EAR with respect to the structure and the content and the organization of reexport controls.
In the meantime, I think we’ve made a lot of improvements within the EAR that should be of assistance to non-U.S. parties and thus enhance overall compliance. So for example, on the destination control statement rule that becomes effective on November 15, there will be a requirement to identify if there are satellites under 9A515 or 600 series items being shipped, so this should help reduce some confusion regarding classification status of such items, tangible items, by non-U.S. parties. This, by the way, is yet another example of the ongoing effort, the regular effort, to harmonize to the extent possible the definitions and the structure and the content of the EAR and the ITAR to reduce regulatory burden. On November 15, the destination control statement words, accomplishing exactly the same objectives, will be identical whether it’s an ITAR, EAR, or a mixed shipment.
And also in the definitions rule, as Eric mentioned, we have put into the regulations new deemed reexport standards; that is, when a particular release of technology outside the U.S. to a foreign national doesn’t count as a deemed export and when it does. This is something very important, and this is yet another example, by the way, of our effort to harmonize with the ITAR because basically we just lifted an idea that the State Department did back in 2010.
Also part of the definitions rule that became effective on September 1, we’ve laid out new rules for when an export does not occur with respect to the taking, sending, or storing of technology if certain conditions are met such as encryption and not stored on servers in certain countries, which will be of assistance.
And in the new 750.7, which is a revised section that became effective on September 1, there’s now a requirement of the applicants to tell the foreign parties the end-users, consignees, et cetera, about what the scope of the license is, so this should go a long way to eliminating doubt and confusion among the parties as to the limitations and requirements.
We also in that section made it clear as we have been doing over the last couple of years with license conditions that what a license authorizes is that which is stated in the license and that which is sought, and this is all part of a broader effort to reduce the proliferation of unnecessary license conditions that largely serve to confuse everybody, and we’ve gotten it down to the point in section 750.7. The new one, the revised one, says very clearly that a license authorizes that which was requested minus whatever is identified as a condition. We’ve removed requirements such as the International Import Certificate because we found that those were not largely useful or necessary. All of these things are going toward making it easier for non-U.S. parties to be able to comply with our regulations.
I’m going to be speaking at length Wednesday and answering particular questions, but this is my chance really to brag about my terrific staff at BIS and Export Administration and to tell you a little bit about some of their accomplishments. And there are five offices.
So in no particular order, the Nonproliferation and Treaty Compliance Office is led by Alex Lopes. I don’t see Alex. He’s around here somewhere. Anyway, he and his staff always have done a terrific job of handling the exports of items on the list that are controlled by the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime. They’ve also supported a number of significant nonproliferation initiatives with partner countries, and notably, the Export Control Cooperation initiative with India.  India’s aligning its export controls with those of the multilateral Export Control Regimes resulted in India’s successful accession to the MTCR and current consideration for membership of the Nuclear Suppliers Group. This year, India held its first National Export Control Update Conference due in large part to these efforts.
The office also contributed a significant amount of effort to the interagency work to revise the biological and toxin controls, category XIV, and the bookends on the Commerce regulations. And its Office of Foreign Policy, or the Foreign Policy Division, was really busy with all issues pertaining to Cuba and Iran. We’re going to get into the details on those over the course of the conference, but this is the office that planned and coordinated and executed the effort including over 90 Cuba-related outreach events that provided essential information regarding the administration’s effort, particularly, of course, the Commerce side. The office has worked closely with the other agencies responsible for Iran policy in working out issues related to the export of aircraft and aircraft parts in connection with the U.S. plan pursuant to the Joint Comprehensive Plan of Action.
Another part of BIS’s mission that we don’t talk a lot about, but it’s within this office, is ensuring industry compliance with the Chemical Weapons Convention implementing the Additional Protocol to the U.S.-International Atomic Energy Agency Safeguards Agreement and achieving the goals of the Biological Weapons Convention. So for example, last year, the group processed 838 declarations and reports covering the activities of 532 U.S. chemical facilities and trading companies. We hosted 21 inspections of U.S. chemical facilities by the Organization for the Prohibition of Chemical Weapons including one involving sampling and analysis  and three involving the sequential inspections of facilities in close proximity to one another, and BIS has processed over 18,000 of these CWC declarations and reports in the past years.
So on the Additional Protocol, we’re responsible for collecting declarations on nuclear-related activities from U.S. industry, the Nuclear Regulatory Commission, and the Department of Energy, and we recently dedicated funding to develop an Additional Protocol reporting system which will manage the burden better for both industry and the government to submit, manage, and vet reports.
Our Office of National Security and Technology Transfer Controls is led by Eileen Albanese. Is Eileen here? I can’t see with the lights. Anyway, in addition to all the day-to-day licensing, of course, this is the office that primarily handles issues and implementation and negotiation for our Wassenaar Arrangement which is the lion’s share of the source for our dual-use controls. It has done a massive amount of work in most of the categories involving the USML to CCL revisions and has provided technical expertise to all those negotiations. In particular, most recently, it is folks within this office who did a great job working through the very complex issues involving revisions to USML Category XII and the Commerce bookends dealing with… it’s largely known at night-vision items, but it’s also gyros, lasers, fire control devices. That’s a very complex topic that we will be speaking about in great detail during the morning Wednesday session. This is also the office that has taken the lead on renegotiating and working through the complex issues involving the Cyber-Intrusion Rule which has gotten so much public attention, and terrific thanks and credit to them for that and all the other work they do.
Our Office of Strategic Industries and Economic Security, or SIES, is led by Michael Vaccaro. It’s our newest office, or it’s the most revised office rather, and they’ve done a great job in processing over 14,000 600-series licenses just so far in 2016, and overall, they’ve processed more than 35,000 600-series licenses. They continue to support a lot of the outreach and training efforts both domestically and abroad with respect to the reform effort, doing site visits with respect to STA compliance, and unrelated or slightly differently, they continue to work with the Department of Defense and other agencies on the Defense Priorities and Allocations System regulations, and they also report to  Congress on the annual impact of offsets. Leveraging, and this is a significant amount of their time as well, leveraging this industrial technical expertise, they’re our principal coordinator for the Commerce Department, or rather the BIS, role with the Committee on Foreign Investment in the United States, and although I don’t get into CFIUS discussions, let me just say that they do an amazing amount of really good work in that area and provide a lot of value to the overall system.
Our Office of Exporter Services, which puts on this terrific conference and others like it of course, is led by Karen, and her staff has done a great job with this and all the other things that they do. I want to call out in particular its Regulatory Policy Division which is largely the topic around which… Their work is what we’re going to be speaking about most of the three days, which are the regulations, because literally everything that goes into the Federal Register is written and goes through this office, and special thanks to Hillary Hess for leading that office. I also want to call out Bill Arvin, one of our uber reg writers who is retiring after 42 years of government service, so if you see him, give him your thanks.
Eric gave you a few statistics on the activities, but as an example of how important education and outreach is to BIS, I think he said but I don’t recall anyway, we’ve answered almost 40,000 phone calls and e-mails through the help desk, have organized 92 ECR outreach events with nearly 10,000 participants, 21 domestic conferences in 12 states and participated in 15 others, participated in 13 AES compliance seminars, Eric mentioned the web hits at about 34,000 on our various online decision tree tools which are very popular, and also creating a series of webinars. Eric and Karen both mentioned the weekly conference call where I answer whatever questions that come in. I think we’ve done 217 of them, and I’ve lost track of the number of questions, but I’m sure there’s a number, but I want to thank Tim Mooney and Stephen Hall for shepherding those. Tim is largely working with Bill, the drafter of many of the draft answers.
Our Office of Technology Evaluation co-leads with the State Department and Interagency Working Group right now to create the single licensing system. We’re calling it STARS, Single Trade Application and Reporting System, which is in full swing. This group stood up a landing page on the export.gov webpage to direct new exporters to the appropriate agency for licensing information. They’re close to completing the data elements for the single licensing system, and then this will all manifest itself in a series of proposed rules that are published through the regular OMB data collection authority process for your comment. They also of course continue to be a really terrific source of data on all of the regulatory and policy issues that we administer, such as the Russia sanctions, Cuba issues, and the reform effort. Also in support of the Secretary’s goal of data in her strategic plan, they stood up a data portal on the BIS website, and visitors to that site can get a very good sense of the volume, quantity, and type of U.S. exports and related transactions. They work very closely with Customs and Border Protection on export clearance issues, primarily the automated export system, and our group, that really punches above its weight, played a major role in initiating the BIS license decrementation process in July of this year where exporters now receive from AES the balance of license values for every export shipped after July. It also continues to work through and clean up unnecessary requirements in AES such as removing NLR type C32 which was very confusing.
Another part of OTE of course surveys and assesses particular sectors affecting the defense industrial base because it has unique authorization to survey companies. It’s in the middle of assessments on industries of textile, footwear, apparel, semiconductors, the C-17 aircraft supply chain, rocket propulsion, and U.S.-printed circuit boards, so it’s a very active survey group, and that data is useful for policymakers around the government.
There are two offices that report to the Office of the Assistant Secretary: the Operating Committee, which is representatives of State, Commerce, Energy, and Defense to resolve disputes on licenses, and I want to thank Susan Kramer and new Chair Mi Yong Kim for terrific work in handling what are by definition all the hard cases. Last year, they had 329 cases before them, and of those, 36 were escalated to the Assistant Secretary-led Advisory Committee on Export Policy, which I chair, and where we as a group make a decision about whether to approve, deny, or condition. Something I’m particularly proud about in that group is that almost all those decisions have been unanimous in terms of whether to approve, deny, or condition, which shows that there is a right answer in most cases. The other office that reports is the End-User Review Committee which is now chaired by Joe Cristofaro. It handles Entity List actions. Some data on that: we published nine Federal Register rules that added about 200 entities and removed about 20 others based on requests. Eighty-one of those entities were added pursuant to continued maintenance of Russia-related sanctions, and another four were added with respect to their involvement in an elaborate scheme to divert, or rather avoid, U.S. export controls for sanctioned countries.
And then the last but not least, in my front office, I want to call out and give particular thanks to those who keep the Office of the Assistant Secretary running, obviously Deputy Assistant Secretary Matt Borman for whom EA would collapse if he were not there, Petrina Chase and Grace, my assistants, Kathleen Barfield, who’s right there, Steve Emme, and Bob Rarog, and this is a really fun, terrific, well-functioning, intelligent group of public servants, and for them and for all the other staff within EA and the rest of the government, I just want to echo the President who reminds us that our nation’s progress has long been fueled by efforts of selfless citizens who come together in service to their fellow Americans with the goal of making the country better, and it’s these civil servants who pour everything that they have into what they do, and they are the difference, and they are what keeps democracy running.
So with that note of thanks, I want you to have fun, enjoy the conference. Thank you for being here, and take care. Cheers.
Audience:  (Applause)
KW:  Oh, right. Yeah, so, by the way, we’re on to you.
Audience:  (Laughter)
KW:  Trust me. I know what you’re thinking. I was there for 17 years. I know what’s going on. I just wanted to leave you with: I’m on to everything that you’re thinking right now. So with that… and it’s actually a nice segue into what David Mills and EE are going to do, so… alright. Thank you.
KN:  So that concludes our opening plenary, and we will move on to… I believe there’s a break next, and then for the first round of breakout sessions. Thank you.
Audience:  (Applause)

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