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Export Control Forecast
Date: 12/16/2008

Export Control Forecast

Export control issues are rarely on a new Administration’s front burner, and this time will not be an exception.  Although there are a number of issues looming, progress on them will probably wait for the arrival and confirmation of relevant officials at Commerce and State, and those are rarely in the first tier of appointees.  At State, look for Bob Einhorn, who was Assistant Secretary in the Clinton Administration, to play an important role in nonproliferation policy, which is where the export control function is housed.  Bob’s main focus is nonproliferation, and export controls will likely be viewed as more of a management issue to be assigned to someone else.  Career officials there have made some progress in the past two years in improving efficiency and responsiveness, and a good outcome would be if they are simply permitted to continue their progress.

There are no rumors yet for BIS positions, but look for people who understand the business position and global supply chains but are not directly connected with affected companies. 

On issues, much of NFTC’s short term effort is devoted to making sure that outgoing officials don’t do anything to make the situation worse.  The major pending issue, on which we are hoping the clock will run out, is a final regulation on deemed exports.   The report of the Deemed Export Advisory Committee aroused a great deal of opposition in the private sector.  In essence, it proposed a trade off – a narrower range of items/technologies for which a deemed export license would be required and a broader security review of individuals.  There is widespread skepticism that the former will ever occur, and the latter is tantamount to security clearance vetting for a potentially large number of people.  There is no guarantee that the incoming Administration will take a better approach, but it is hard to imagine it will be worse.

Another relatively new problem is efforts by the Justice Department to inject itself into the licensing process and obtain a “seat at the table.”  This would essentially be giving law enforcement officials a policy role, which is precisely what has led to our visa policy problems in the current Administration.  Once again, we’re hoping time runs out on this idea, and the new people won’t be interested in it.

Other pending issues include finishing the intra-company transfer license regulation, which has been roundly panned by business so far, and yet another attempt to create a process for resolving commodity jurisdiction disputes, also the subject of interagency battles, to the surprise of no one.

If these issues are not finished by January 20, it will probably be some time before they are taken up and worked out in the new administration.

Legislatively, we do not see rapid movement, despite the growing realization in Congress that the EAA is badly out of date.  Even so, the same problem of sharp ideological differences that has prevented action on bills over the past twenty years persists, and we do not see enthusiasm on the part of committee leaders for moving aggressively in this area.  The House Foreign Affairs Committee will give priority to the State Department authorization and the Foreign Assistance authorization.  Cong. Sherman and Manzullo will probably try to move their bill again, but they will first need to have a dialogue with the new administration about it and then will need to persuade Chairman Berman that it is relatively benign.

On the Senate side, there does not appear to be great enthusiasm for moving an EAA bill, except that the 2008 Iran sanctions bill, which contained Sen. Dodd’s title on shipments to countries of diversion concern, did not pass at the end of the 110th Congress, which could prompt him to try to move that title on its own or in conjunction with another Iran package.  (We expect the Committee to consult closely with the incoming administration before acting on Iran sanctions.)  The business community reaction to that title – not the rest of the bill – was fairly benign, in large part due to the bill’s careful drafting.  The danger, of course, is not so much in the text but what might be added to it along the way.  Many of the senators who so vigorously opposed EAA reform in the past, like Senators Helms, Thurmond, and Thompson, are no longer there, which may marginally increase the chances of something happening, but a number of strong and articulate opponents, like Senators Kyl and McCain, remain to guarantee that any bill’s path would not be smooth in the Senate.

One issue for the business community will be whether it wants to develop draft legislation to hold in reserve in case either the Obama Administration or Congress decides to move this year.  That will be a topic of further discussion amongst our members.