W. James McNerney, Jr., PEC Chair, Chairman, President and CEO, The Boeing Company: recommendations for furthering the Export Control Reform Initiative

In a letter to President Obama, the President’s Export Council offered several recommendations for furthering the Export Control Reform Initiative. The PEC said all of these recommendations aim to achieve increased compliance by an informed and educated public as a result of a streamlined regulatory network. However, the Council also cautioned that none of these actions will be achieved with “the proper continuity of political support,” including continued collaboration between the Obama administration and key congressional oversight committees, or sufficient personnel and other resources.

Complete USML/CCL Review. The ongoing effort to transfer items from the U.S. Munitions List to the Commerce Control List “is a complex and challenging process but one that could have the most dramatic impact on reforming the system,” the PEC said. “From industry’s perspective, this migration represents a fundamental change to the way that export controls are understood and practiced, and would enhance U.S. national security interests by serving the goal of a ‘smaller yard with higher fences.’” The PEC urged the administration to set a firm goal of notifying the preponderance of USML categories to Congress no later than March 31,2012.

Single IT System. The PEC is encouraging the administration to focus its near-term efforts on establishing a single information technology system to administer export controls, to include a common license application process that includes the departments of Commerce, State and Defense. While there appears to be a “clear pathway” toward this goal among these departments, the letter said, “a more focused, interagency effort could be dedicated to this goal with a specific, measurable timetable for completion identified and agreed upon by all the relevant agencies.”

Trusted Exporter Program. The Obama administration should explore alternative mechanisms to authorize exports that require a license today, the PEC said. One possibility would be a Trusted Exporter Program, perhaps modeled on the Customs-Trade Partnership Against Terrorism program for imports. A TEP would (a) provide incentives for exporters to invest in their compliance programs in exchange for an easier path to exports for their products and technologies, (b) allow the U.S. government to prioritize scarce resources on higher risk transactions with an audit mechanism in place to ensure participants’ compliance, and (c) be “ideally suited” to deal with deemed export issues.

Regulatory Clarity. “The overly complex nature of the existing regulations across the multiple agencies that have jurisdiction over various types of exports” has created a situation in which “the time, energy and resources that companies (particularly SMEs) must dedicate to determine whether a license is required far exceeds the resources expended in the application process itself,” the PEC said. “This lack of clarity also exacerbates the complexity of the compliance burden both for the enforcing regulatory agencies as well as for exporters.” The PEC called on the administration to continue to provide clear guidelines to regulatory drafters and propose a clear vision for how regulations should be streamlined, including the harmonization and/or clarification of key definitions in the existing regulations.

Outreach and Education. The PEC emphasized that the successful implementation of export control reform “will depend heavily on a successful educational campaign.” For example, the continued development of the Bureau of Industry and Security Web site as a portal for online training and one-stop location for export control information “will be critical.” The letter also recommended a well-organized outreach campaign to provide interested stakeholders, including key government agencies such as U.S. Customs and Border Protection, with the immediate support and accurate information required to update internal processes and controls to implement and comply with the new regulations.