TESTIMONY BEFORE HOUSE FOREIGN AFFAIRS COMMITTEE ON EXPORT CONTROL REFORM

FROM: U.S. DEPARTMENT OF STATE
Export Control Reform: The Agenda Ahead

Testimony
Thomas Kelly
Acting Assistant Secretary, Bureau of Political-Military Affairs
Statement Before the House Foreign Affairs Committee Hearing on Export Control Reform
Washington, DC
April 24, 2013

I thank the Chairman for his introduction, and would ask that my written remarks be entered into the record.

Chairman Royce, Congressman Sherman, Committee Members: it has been two years since the Committee last met to hear testimony on the President’s Export Control Reform Initiative. A lot of work has been done in the intervening period. I would like to start by thanking thw Committee on behalf of the State Department for its bipartisan support throughout the process.

As the pace of technological advance accelerates, and as technological capability spreads around the world, the need to update our Export Controls is increasingly urgent. We are no longer in an era in which a handful of countries hold the keys to the most sensitive technologies, as was the case during the Cold War. Today, a whole range of nations have advanced technological capability.

At the same time, because of the diffusion of technology, many U.S. companies must collaborate with foreign partners to develop, produce and sustain leading-edge military hardware and technology. Their survival depends on it.

But because our current export controls are confusing, time-consuming, and – many would say-- overreaching, our allies increasingly seek to ‘design out’ US parts and services, thus avoiding our export controls and the end-use monitoring that comes with them in favor of indigenous design. This threatens the viability of our defense industrial base, especially in these austere times.

Our current system has another problem. It can prevent our allies in theatre from getting the equipment and technology they need to fight effectively alongside our troops in the field.

This system has its basis in the 1960s, and has not undergone significant update since the early 1990s. It is cumbersome, complex and incorrectly controls too many items as though they were "crown jewel" technologies.

What that has meant is that an inordinate amount of agencies’ resources – both in terms of licensing and compliance activities – has been expended on nuts and bolts as well as our REAL "crown jewel" technologies.

In November 2009, President Obama directed a White House task force to identify how to modernize our export control system so that it will address the current threats we face, as well as account for the technology and economic landscape of the 21st century.

His direction was grounded in national security, with the goal of putting up ‘higher fences’ around the items that deserve the greatest protection, while permitting items of lesser sensitivity to be exported more readily when appropriate.

To address the problems the task force identified, they recommended reforms in four key areas: licensing policies and procedures; control lists; information technology; and export enforcement.

The President accepted the recommendations, and since early 2010, agencies have been working hard to implement them.

Much of agencies’ efforts have centered on revising the U.S. Munitions List and the Commerce Control List. This reform will draw a "bright line" between the two lists using common terms and control parameters. This will help our exporters determine far more easily which list their products are on. The reform will ensure that those items of greatest concern to us from a national security and foreign policy perspective will remain on the USML, and thus be subject to the most stringent licensing requirements, while items of less sensitivity will be moved to the CCL.

I want to emphasize a key point: items moving to the CCL are going to remain controlled. They are not being "decontrolled", but in specific circumstances, they will be eligible for export under Commerce’s more flexible licensing mechanisms.

I am confident that the revised lists will permit State to continue to perform its national security and foreign policy mandates in export licensing.

I will also note that we are making tremendous progress in the effort to rewrite the categories. We have published twelve rebuilt USML categories in the Federal Register for public comment. The proposed rules for the seven remaining categories have been drafted and are either undergoing or awaiting interagency review so that we can then publish them for public comment.

On April 16, the Departments of State and Commerce published companion rules that implement the revised USML Categories VIII (Aircraft) and XIX (Engines). This is the first pair in a series of final rules that put in place the rebuilt export control lists. Our goal is to publish the revised USML in its entirety on a rolling basis throughout this year.

In the last phase of our reform effort, we will need legislation to bring the initiative to its logical conclusion by creating a single licensing agency. The Administration has not yet determined when to approach this effort, but we will fully engage our oversight Committees and know that we can count on your support when we do.

On that note, one final point I want to make is that this has not only been an interagency process, but a cross-government process. Over the course of the last three years, we have had the opportunity to work closely with this Committee, and with many others across the Congress, on both the broader strategic questions of national security, and the finer technical details of our proposals. Our work together shows what we can achieve together. I am grateful for your bipartisan support for this initiative and look forward to continuing to work closely with you on the remainder of the reform effort.

With that, I want to thank you for inviting me to testify. I now would like to turn the floor over to Commerce Assistant Secretary Kevin Wolf.