Interagency Panel

 

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.