Three Regs Still Imprisoned by Regulatory Moratorium

The Bush administration has yet to lift the Jan. 20 regulatory moratorium imposed by White House Chief of Staff Andrew Card - a mandate that prevents approval of any regulatory change without the signature of a Bush political appointee. Administration officials have not declared when the moratorium will be lifted, and prospects for a clearing-out of regulations in the Bureau of Export Administration (BXA) appear slim. Although the administration has declared its intent to place Washington attorney Kenneth Juster in BXA’s under secretary slot, Juster isn’t expected to be confirmed by the Senate until April, at the earliest.As a result, all BXA regulations must receive the personal attention of Commerce Secretary Donald Evans, a man whose routine schedule leaves little time for scrubbing provisions of the latest license exception.

According to BXA officials, three pending regulations are now awaiting Evans’ approval:

1) A regulation to institute an agreement of the multilateral Wassenaar Arrangement lifting controls on microprocessors;
2) A regulation adding Brazil, Latvia, and the Ukraine to the list of members of the Nuclear Suppliers Group; and
3) A regulation on “Chinese entities”; officials did not say whether the rule would impose restrictions on new entities or remove such restrictions.

Pending Regulations

BXA is working on a number of regulations that will appear in the Federal Register in the coming months. The following is a partial inventory of those regulations:

1) Wassenaar regulations. In addition to the rule on microprocessors referenced above, BXA is processing two other Wassenaar-related regulations, one to promulgate a computer decontrol, and the other to make “conforming changes” in various categories of the Commerce Control List (CCL).
2) De minimis exemption for software. This controversial regulation, which BXA debated for months with the Defense Department, has reportedly finished its interagency tour and is now under review with BXA’s lawyers.
3) Electronic submission mandates. BXA is processing a rule that will require exporters to file their license applications and commodity classification requests electronically. The rule is now under BXA review and should be ready for publication in a few weeks.
4) Russian entities. The bureau is processing a regulation that will remove two Russian companies from the entities list.
5) Definition harmonization. BXA’s chief counsel is poring over a regulation that will harmonize definitions in the Export Administration Regulations (EAR) with those of the Wassenaar Arrangement.
6) Chemical controls. BXA is in the early stages of writing a regulation that will institute more changes in the regulations that dictate licensing requirements for chemical mixtures. “It’s a slight liberalization,” said Kirsten Mortimer, a BXA regulations official.

“Deemed” Backlog Nearly Eliminated

Back in December, BXA officials were reporting a 165-case backlog for export license applications stemming from the “deemed” export regulation, which controls transfers of certain technology to foreign nationals at U.S. plants. The backlog, said BXA officials, resulted from the refusal of the CIA’s Nonproliferation Center (NPC) to provide intelligence on foreign nationals named in pending license applications.

After the backlog prompted a sub-Cabinet-level crisis among export control agencies, NPC relented, agreeing to review the cases and run checks on the foreign nationals. As a result, says BXA official Chuck Guernieri, the backlog has dwindled to just 18 cases.

With the central crisis in the deemed export world defused, BXA officials can channel their energies toward refining what is now known as the “Deemed Export License” (DEL), a sort of bulk authorization that promises to streamline the deemed control. Under this mechanism, companies will submit the specs of technology that they plan to transfer to foreign nationals; subsequently, they may send BXA lists of the foreign nationals who will have access to the technology.

Guernieri said that in recent weeks, the system has turned up some “procedural glitches”; for instance, companies are supposed to receive an “acknowledgment letter” after they submit a list of names of foreign nationals to be licensed. The acknowledgment letter informs the company that if it doesn’t hear back from BXA within 30 days, it may assume that the foreign nationals meet the government’s requirements. Guernieri noted recently that the system, which is under pilot testing by three companies chosen by BXA, was not spitting out the letters.

Guernieri hopes to work out kinks like this one and get the system ready for mass consumption in the spring.

By Erik Wemple, Editor, The Export Practitioner