Export Control Reform Act – Headaches to Come for Exporters
The Export Control Reform Act of 2018 (ECRA) was passed in June as part of the John McCain National Defense Authorization Act of 2018, along with other trade and FDI related regulations. While the ECRA has the word reform right in the title, exports and trade professionals hoping for simplified and reformed export controls will have to wait till next year (but likely longer).
The first major component of the ECRA is that it statutorily authorizes BIS to maintain the export controls it has previously enforced under the Export Administration Act (which expired in 1994 but has been reauthorized by executive order each year thereafter, long story and I’m certainly not a constitutional lawyer). This won’t change any export behavior but it is nice that there is an actual statute (again) to govern export controls. The new statute also increases the penalty for a violation to $300,000 per violation. I would like to take a moment to remind exporters or potential exporters that these violations are strict liability, not realizing your military grade rifle scope or specialized HVAC system is export controlled will not be a defense to stiff penalties for failure to comply.
The next major change is the addition of a statement explaining that an export will not negatively impact the US defense industrial base. This will apply to any exporter that is applying for a license to export an item. This will be a new curveball for export professionals as we will have the fun task of figuring out what information BIS wants to prove that and how BIS will want the information presented.
Probably the most terrifying change affecting exporters and the trade industry is Section 1758 which required BIS to identify and control “emerging and foundational technologies.” This vague phrase is not well defined further in the Act but states that these are technologies “essential to the national security of the US” and not already controlled. This is essentially an order for BIS (and other agencies) to create a list of tech that is not yet controlled but should be. I assume the intent here is that it will empower BIS to act quicker as technology changes so as not to inadvertently allow the export of sensitive new techs before controls are in place.
What is concerning to those in the industry is the very vague and even contradictory nature of the wording in this provision. Export professionals know that “Technology” in the export regs refers to information. Things like blueprints, program code, drawings, etc. that are used to build an item. The language used in the act seems to use ‘technologies’ more generally as the public would, as in any new device or invention of a digital nature. Once these items are better defined and BIS develops the list of “emerging and foundational technologies”, the Act required a minimum level of control for any of these exported to a country subject an embargo. Embargo is not further defined so it could apply very widely from minor national security export prohibitions to the few comprehensive embargoes.
In conclusion, the ECRA unfortunately will not reform export controls to the extent that it will make your life as an exporter easier but will keep export professionals busy the next few years. If you are an exporter or considering exporting your product to the world, don’t hesitate to reach out to Reidel Law Firm today to find out about how we can help protect you and your company from inadvertent compliance violations. Reach us by the email button below or by calling us at +1(832)510-3292 to get us on your team for your export project today.