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    Addition of an Entity to the Entity List (RIN 0694-AH67) (final rule) 10/30/18 (83 FR 54519)

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  • BIS

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Seminars

March 26-27, 2019 Pittsburgh, PA

Pittsburgh PAMarch 26-27 2019  Pittsburgh, PA

Complying with U.S. Export Controls

The two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods. We will focus on what items and activities are subject to the EAR, steps to take to determine the export licensing requirements for your item, how to determine your export control classification number (ECCN), when you can export or reexport without applying for a license, export clearance procedures and record keeping requirements, and real life examples in applying this information. Presenters will conduct a number of "hands-on" exercises that will prepare you to apply the regulations to your own company's export activities. This program is well suited for those who need a comprehensive understanding of their obligations under the EAR. Technical, policy, and enforcement professionals from BIS, as well as specialists from other agencies such as the Bureau of the Census, will participate.

View Event Details

April 3-4, 2019 Denver, CO

denverApril 3-4, 2019 Denver, CO

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements under these regulations. We will focus on what items and activities are subject to the EAR; steps to take to determine the export licensing requirements for your item; how to determine your export control classification number (ECCN); when you can export or re-export without applying for a license; export clearance procedures and record keeping requirements; Export Management Compliance Program (EMCP) concepts; and real life examples in applying this information. Presenters will conduct a number of "hands-on" exercises that will prepare you to apply the regulations to your own company's export activities. This one of a kind program is well suited for those who need a comprehensive understanding of their obligations under the EAR.
Continuing legal education credit (MCLE) is available, and varies with the length of each seminar, for California and Colorado State Bar members.

View Event Details

April 17-18, 2019 Scottsdale, AZ

Scottsdale AZ 1April 17-18, 2019 Scottsdale, AZ

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods. We will focus on what items and activities are subject to the EAR; steps to take to determine the export licensing requirements for your item; how to determine your export control classification number (ECCN); when you can export or reexport without applying for a license; export clearance procedures and record keeping requirements; Export Management Compliance Program (EMCP) concepts; and real life examples in applying this information. Presenters will conduct a number of "hands-on" exercises that will prepare you to apply the regulations to your own company's export activities. This one-of-a-kind program is well suited for those who need a comprehensive understanding of their obligations under the EAR.

 

Continuing legal education credit (MCLE) is available, and varies with the length of each seminar, for California State Bar members.

 

View Event Details

April 23-24, 2019 Portsmouth, NH

Portsmouth NHApril 23-24, 2019 Portsmouth, NH

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods, and other items subject to the EAR. We will focus on what items and activities are subject to the EAR, how to determine your export control classification number (ECCN), steps to take to determine the export licensing requirements for your item, when you can export or reexport without applying for a license, export clearance procedures, and record keeping requirements.

 

View Event Details

April 30-May 1, 2019 Irvine, CA

irvine caApril 30 - May 1, 2019 Irvine, CA

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods, and other items subject to the EAR. We will focus on what items and activities are subject to the EAR, how to determine your export control classification number (ECCN), steps to take to determine the export licensing requirements for your item, when you can export or reexport without applying for a license, export clearance procedures, and record keeping requirements.

 

View Event Details

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods. We will focus on what items and activities are subject to the EAR; steps to take to determine the export licensing requirements for your item; how to determine your export control classification number (ECCN); when you can export or reexport without applying for a license; export clearance procedures and record keeping requirements; Export Management Compliance Program (EMCP) concepts; and real life examples in applying this information. Presenters will conduct a number of "hands-on" exercises that will prepare you to apply the regulations to your own company's export activities. This one-of-a-kind program is well suited for those who need a comprehensive understanding of their obligations under the EAR.

June 5-6, 2019 Seattle, WA

Seattle WAJune 5-6, 2019 Seattle, WA

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR). The program will cover the information exporters need to know to comply with U.S. export control requirements under these regulations.  We will focus on what items and activities are subject to the EAR; steps to take to determine the export licensing requirements for your item; how to determine your export control classification number (ECCN); when you can export or reexport without applying for a license; export clearance procedures and record keeping requirements; Export Management Compliance Program (EMCP) concepts; and real life examples in applying this information. Presenters will conduct a number of "hands-on” exercises that will prepare you to apply the regulations to your own company’s export activities. This one-of-a-kind program is well suited for those who need a comprehensive understanding of their obligations under the EAR.

Continuing legal education credit (MCLE) is available, and varies with the length of each seminar, for California State Bar members.

 

View Event Details

June 11-12, 2019 Detroit, MI

Detroit5June 11-12, 2019 Detroit, MI

Complying with U.S. Export Controls

This two-day program is led by BIS's professional counseling staff and provides an in-depth examination of the Export Administration Regulations (EAR).  The program will cover the information exporters need to know to comply with U.S. export control requirements on commercial goods, and other items subject to the EAR.  We will focus on what items and activities are subject to the EAR, how to determine your export control classification number (ECCN), steps to take to determine the export licensing requirements for your item, when you can export or reexport without applying for a license, export clearance procedures, and record keeping requirements.

View Event Details

June 13, 2019 Detroit, MI

Detroit5June 13, 2019 Detroit, MI

How to Build an Export Compliance Program

How to Build an Export Compliance Program is a one-day workshop that provides an overview of the steps a company may take to implement an internal Export Compliance Program. Developing and maintaining an export compliance program is highly recommended to ensure that export transactions comply with the EAR, and to prevent export control violations. Agenda topics include guidance on how to establish an Export Compliance Program, strategies to enhance your company’s compliance program, how to avoid common compliance errors, and how to build a solid framework for your company’s compliance program. This program includes small group discussion, hands-on exercises, and compliance peer networking, and provides a written example of an export compliance program as well as the Office of Exporter Services January, 2017 revised Export Compliance Guidelines to assist in developing your compliance program. Recommended prerequisite: Essentials of U.S. Export Controls or Complying with U.S. Export Controls or equivalent experience.

 

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Speaker Identification:
KN: Karen H. Nies-Vogel
AG: Ann Ganzer
MB: Matt Borman
BN: Brian Nilsson
ML: Michael Laychak
JS: John Smith
 
KN:  So our first session today is an interagency panel, and I have the pleasure of introducing all the participants.  First, we have Matt Borman, who is Deputy Assistant Secretary for Export Administration at BIS; we have Brian Nilsson, who is the Deputy Assistant Secretary for Defense Trade Controls at the Department of State; Michael Laychak, who is the Deputy Director of the Defense Trade Security Administration at the Department of Defense; John Smith, who is the acting Director of the Office of Foreign Assets Control at the Department of the Treasury; and Ann Ganzer, who is the Director of the Office of Conventional Arms Threat Reduction at the Department of State.  Thank you very much, and enjoy.  

AG:  Good morning.  It’s an honor to be here today.  I’m always glad to come to Update and see so many familiar faces.  It seems like there’s so many of you I only see when I come to events like this, so it’s good to see you.  I thank Under Secretary Hirschhorn for hosting this event and for inviting me to participate.  Let me start by reiterating what President Barack Obama said in Prague in 2009, when he gave that first major foreign policy speech of his presidency.  Hard to believe it was already eight years ago.  In his remarks, the president stated, clearly and with conviction, America’s commitment to seek the peace and security of a world without nuclear weapons.  For the duration of his administration, he has held firm to this promise to work toward a world free of nuclear weapons.  Underscoring this commitment is a clear understanding of the devastating impact of these weapons and our moral responsibility to act to eliminate them, but the president was also realistic when he said that a world free of nuclear weapons is a marathon effort, not a sprint.  Achieving this goal, he said, would likely take this generation and perhaps the next.  
In the United States, combating proliferation has long been a bipartisan priority, and it has been one of the president’s top priorities since day one.  He has invested an enormous amount of time and energy in addressing the threats we face from nuclear weapons.  At the State Department, the Bureau of International Security and Nonproliferation, where I work, is at the forefront of implementing the president’s nonproliferation policy.  Our overriding goal: to prevent the spread of weapons of mass destruction and their means of delivery as well as the spread of advanced conventional weapons.  This is a challenging goal, and as many of you know, the bad guys – those who assist in the proliferation of weapons of mass destruction and who are engaged in arms smuggling – are constantly looking to take advantage of weaknesses and gaps in our international net.  So you know that we have to work creatively to stay ahead of them, and technology advances so quickly that we are constantly working to make sure that our strengths offset our weaknesses.
Fortunately, we have many tools to help us achieve this.  We help our partners build comprehensive strategic trade control systems.  We negotiate – and then help implement – international treaties and agreements that advance our shared interests.  We interdict the weapons flowing to terrorist groups.  We implement sanctions.  We support and push for action by the four international nonproliferation export control regimes: the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the Missile Technology Control Regime, the Nuclear Suppliers Group, and the Australia Group.  ISN, my bureau, leads the U.S. delegations, which include many of our interagency colleagues here, and our work with them is what I want to update you on today.  
Continuously working with likeminded countries to maintain effective export controls is one of the best ways to fight proliferation.  The bilateral and multilateral diplomacy involved in these efforts is one of the highest priorities we have at the Department of State.  As you know, the regime members use harmonized control lists and share information to frustrate proliferators’ efforts to obtain weapons of mass destruction, missiles and conventional arms and related equipment and technology.  We routinely communicate information to regime members about the status of programs of concern, procurement networks, and the type of items sought by proliferators and foreign supply chains.  Sound export decisions by supplier countries, transshipment companies and the like deny would-be proliferators access to the world’s best sources of technology.  They are forced to resort to elaborate and often covert procurement methods that slow their pace, drive up their costs, and reduce the quality of their acquisitions.  This is why one of the core principles of the president’s Export Control Reform Initiative, which Kevin and I think Eric and others spoke on yesterday, is to honor our commitments to the nonproliferation regimes.  Multilateral standards for export controls support the effectiveness of our own measures here at home.  Proliferation of weapons of mass destruction, missiles, conventional arms and related components and technology is an international problem and therefore requires an international solution.  We alone cannot keep weapons and technologies away from those who would do us harm, and multilateral controls also help level the playing field for U.S. suppliers of strategic good and technologies.  It’s not just you.  It’s not just U.S. industry that has to go through these types of regulations.  Our allies do as well.  Our work with regime partners is a dynamic process that includes discussions of the latest technology advances and changing proliferation trends.  We use these conversations as a framework to refine regime guidelines and their corresponding control lists with the overarching objective of countering proliferation in all of its constantly changing forms.  
Now, just a quick overview of what’s been happening in the regimes since I last spoke to you all last year.  The Wassenaar Arrangement currently has 41 participating countries.  Its purpose is to promote transparency and greater responsibility in international transfers of conventional arms and related dual-use goods and technologies and its control lists underpin our dual-use control system here.  This year, the Wassenaar Arrangement is conducting an assessment, and it does this every four or five years, of its processes and effectiveness, increasing its focus on terrorist access to small arms and balancing the broader benefits of emerging technologies with the potential security risks.  There were 51 proposals for changes to the Wassenaar Control lists agreed by the experts group this year.  They will be sent to the plenary for approval in December.  
The Missile Technology Control Regime seeks to prevent the proliferation of unmanned delivery systems capable of delivering weapons of mass destruction as well as related technology.  The annual MTCR plenary was just held last month in Busan, South Korea.  Some of the key developments from this meeting include the adoption of several changes to the MTCR annex, such as the addition of controls on ultra high temperature ceramic composite materials, aerothermodynamic test facilities (such as arc jet facilities and plasma wind tunnels), and gel propellants, as well as propellant tanks, combustion chambers and nozzles for gel propellants.  Other changes to the MTCR annex were to clarify controls on re-entry vehicles, flow-forming machines, inertial measurement equipment, and software necessary to convert a manned aircraft to an unmanned aerial vehicle.  Finally, the MTCR partners formally welcomed the regime’s newest member, India, which joined the regime this summer.  
Then the Nuclear Suppliers Group.  The NSG, Nuclear Suppliers Group, develops and implements guidelines for the control of nuclear and related dual-use exports.  The Nuclear Suppliers Group consists of most of the largest suppliers of nuclear and related dual-use technology equipment and material.  This year, the Nuclear Suppliers Group discussed the Indian and Pakistani request to open a dialogue on their potential membership in the regime, considered changes to the Procedural Arrangement on outreach, and clarifications on software controls in the Part 1 Guidelines and revisions to the Part 2 Guidelines.  At their plenary meeting in Seoul this summer, they also adopted six new technical changes to the Part 1 and Part 2 lists.  
The Australia Group, next, seeks to harmonize export controls to prevent the proliferation of chemical and biological weapons.  The 2016 Australia Group plenary was held in Paris.  Members agreed to intensify the group’s focus on emerging technologies that can be used for chemical and biological weapons and on impeding chemical and biological terrorism.  Members agreed to continue sharing approaches to challenges posed by intangible technology transfers, proliferators’ procurement of unlisted items, proliferation financing, online procurement, and transshipment.  Members also pledged to continue expanding their outreach to non-member countries in relevant international fora as well as industry and academia to highlight the threat posed by state and non-state actors seeking to acquire the ability to develop chemical and biological weapons.  

The four regimes have been very active, and I anticipate that this pace will not let up in the coming months or even years.  As we all know, we’re in an election year, and it’s a time of uncertainty for many of us.  We won’t know what the future brings until we know who’s at the helm of the next administration, but regardless of the outcome, our teams at the State Department and across the interagency will continue full steam ahead on our nonproliferation priorities and our commitments to our international partners.  Despite much progress made to date, now is not the time for complacency.  We have many challenges ahead, and our commitment to weapons of mass destruction nonproliferation proves that when we hold firm, we can make this world a safer place.  
In this fight, I am thankful to share the trenches with all of you.  Compliance with export controls may seem like a headache at times, and as my colleagues are going to talk about some of the details of it, it can be tricky, but you are our first line of defense.  I cannot state that more emphatically.  We need your vigilance in identifying and stopping suspicious transactions.  Every time that you identify an end user who isn’t who he says he is, you make our job easier.  You stop a bad actor.  If you identify a shipment route that doesn’t make sense, payment terms that set off alarm bells, all of these things make an important contribution to our national and international security.  We want to build and maintain a stronger relationship with industry leaders like you and to raise awareness of our objectives, to help identify suspicious procurements and assist in developing effective internal compliance practices that incorporate checks on end users and end uses of concern.  We are all in this together, and incrementally and together, we are making a difference, so I thank you for all the work you do all year to comply with export control requirements that are not always the easiest to deal with, and I also thank you for your time and attention today.  
[Applause]
MB:  So as I think… can you hear me?  Is the microphone on?
Multiple Speakers:  No.
MB:  All right.  Thank you.  So as I think probably most of you know, virtually all of the entries on the Commerce Control List and the United States Munitions List implement multilateral commitments the U.S. has made to control the export of the items covered by those categories, so Ann, of course, I like to have her start off because she gives us the overview of the architecture for the system that we implement domestically.  Next, Brian will come up and give us an overview of defense trade controls, and then we’ll have Mike follow that.  
BN:  Great.  Well, good morning, everybody.  It’s good to see everybody again on day two.  It’s nice just… Ann was saying it’s always good to see folks in the exporting communities and because I don’t see you, a lot of you during the course of the year, but it’s a good opportunity to see you now, so… and thanks to Commerce for hosting it, as always, and inviting us to participate, so I think the fact that you have all of these agencies together up here as sort of a… is illustrative of all the work that we’ve been doing over the last seven years in really working together as a community to improve how we administer our export control systems, and you know, obviously it’s a work in progress.  I think some of the speakers yesterday had mentioned, we really have taken what is the export control reform initiative and really turned it into a process, where we’re always going to be continually making improvements and changes in how we administer the system to make it easier for you to comply, easier for us to administer and enforce, with the ultimate goals of having an improvement of our national security and foreign policy objectives, so I’d… do we… you do have slides and I see them now.  Let’s see if I can figure out how to advance them.  That’s always the trick here.  Let’s see.  Here we go.
The State Department system for administering our munitions export controls is based on the Arms Export Control Act which I think all of you are aware of, that provides us a statutory underpinning for how we administer the munitions controls.  We actually, as part of export control reform, the president issued revised delegated authorities in 2013 under Executive Order 13637 that helped us update how we administer the system, how Commerce administers its system, and actually also how ATF administers the munitions import controls, as part of the larger effort in making improvements to how we administer the overall system.  The statute, this actually provides a very broad authority, basically for us, for when we consider license applications, we’re looking at the furtherance of world peace or national security and foreign policy interests of the United States, which is very broad guidance.  We have, as you all know, our implementing regulations, or the ITAR.  That is, you know, with the authority delegated to the department, or to the Secretary of State, for us administering the system, it’s further delegated within the State Department to certain functions, either to the Under Secretaries, now currently the acting Under Secretary is Tom Countryman, down to our Assistant Secretaries, currently acting, Tina Kaidanow, and then to the Directorate, myself, in the DDTC, so . . . but we need further guidance, and I think we have, in order to administer the system, and so that brings you to my ability to do the clicker.  There we go.  
The Conventional Arms Transfer Policy.  This actually provides us much more policy guidance.  It’s sort of the in-between space between our legal authority and our regulations.  The Conventional Arms Transfer Policy is something that has been…that each administration has, and we use.  I mean, it had not last been updated since 1995, when President Clinton had issued guidance, and so that provides us with overarching guidance on the goals and criteria that were used in screening license applications.  It is used both for foreign military sales, which is administered by the original Security and Arms Transfer Office within the Bureau of Political and Military Affairs, which is the sister office to us, as well as direct commercial sales. And so for those of you who are coming in for export licenses, the president updated this policy.  It was issued in 2014.  It’s the first time we’ve actually released the policy publically, and so if that provides better granularity for all of you in industry, provides better granularity for our partners and allies as to what the criteria are and the goals are for our… for administering our system.  
Now, Commerce, as you all are well aware, Commerce has further guidance in the form of an Executive Order 12981 that provides more detailed procedures for how the Commerce-administered systems operate, you know, who coordinates and staffs cases and includes a dispute resolution process.  We don’t actually operate under a comparable directive.  We are subject to a similar document from… it’s the National Security Presidential Directive 56, which President Bush issued in January of 2008, but does not provide us sort of a tick-tock of the procedures that we have in processing them or considering license applications.  It merely states that we are required to issue a decision within 60 days.  
So I know you’re not going to be able to actually see this nice little chart, but I think that it’s illustrative of what you would have seen… you would see as part of the Commerce process, and in that we have an administrative process when licenses come into the system, and we do an initial review in one our licensing divisions to determine the adequacy of the application and then look at, based on what it is, the item, and then where it’s proposed to be going is what determines how we staff it.  We staff our cases… for the most part, we staff roughly, basically all of our cases out to the Defense Department, to DTSA, to Mike Laychak’s group, which then coordinates it within DOD.  We also staff it out pretty widely within the State Department, so that’s also a little bit different from the way the Commerce process works, where Commerce is not staffing cases in other bureaus within the Commerce Department.  It certainly can and does consult on occasion with NIST and others but for us, we staff cases to the Democracy, Human Rights and Labor Bureau for human rights review.  We staff it to the regional offices.  We can staff it to some of the other functional bureaus, depending on what it is, including the cyber office.  We could even consult with ISN, so we have a very broad internal process that our licenses go through.  
Depending on how the outcome of that review goes, I mean, we are required to have, you know, basically a… we generally work toward consensus.  We don’t have a dispute resolution process as Commerce has, per the executive order, and so we actually work toward, as best we can, and driving through to consensus.  If we don’t reach consensus, we eventually will do a split recommendation and we will set it up internally within the State Department.  Now, this is something that you’re not seeing and not aware of.  You may know, you probably will know much more granularity if you have a license application at Commerce that’s in the dispute resolution process, you’re going to know that.  You’re going to know if it’s going to the Operating Committee.  You’re going to know if it’s going to the ACEP.  For us,  it’s not quite the same process, and so given the types of issues that we’re looking at, and the reasons for the disputes, you may not always know why a case is on hold, or that it’s going through the dispute resolution process, but it’s not uncommon.  
I will tell you that right now, we have two cases that are sitting with the Deputy Secretary for his consideration.  I shouldn’t say they’re sitting with him.  They are with him for his consideration, and the issues, you know, on one of the cases, it’s an issue where we and DRL, the Democracy, Human Rights and Labor Bureaus are in agreement on what the outcome should be, and then we have a regional office that disagrees and so that’s ultimately gone up to the Deputy Secretary for a decision.  The other one that we have right now, it’s kind of interesting.  We have most of the bureaus within the department in agreement that the license should be denied, and that would include us, it includes DRL, includes the regional bureau, but the dissenting vote or the dissenting bureau is the Diplomatic Security Bureau and also their embassy in the country, and so we actually have put that one up to the Deputy Secretary as well.  So it’s not uncommon, it doesn’t happen every day, but it gives you a little bit of a flavor for the type of work that we do and the type of coordination that happens internally, again looking at the criteria that are outlined in the Conventional Arms Transfer Policy as to how we sort of drive toward decision, and then once we’ve done that, if the case crosses the statutory congressional notification threshold, that starts a whole other process which again, I realize, is not the most… not the most transparent process in the world, but it is clearly mapped out in the statute for those cases that require notification.  We have a… the congressional notification process, there’s a… you’re probably familiar with it, that it’s part of the reforms that we put in place in the early days at ECR.  It used to be somewhat of an unbounded process where we would do an informal notification and wait, and then eventually when we had consensus, concurrence in the applications from our congressional colleagues, we would then do the statutory notification, whether it be the 15 days for certain countries or 30 days for other countries, and so we now have an agreed process that was developed in the early days of ECR, where we do basically a three-tier informal process with, depending on which country it is as to how many days it gets anyway, anywhere from 20 to 40 days for an informal notification to Congress, after which we then do the statutory notification again, 15 days or 30 days., And so again, that takes time that contributes to our ability to get the licenses out, and then ultimately we then issue the licenses.  This past year we did roughly 45,000 licenses, and so only about 150 of those had to go through the congressional notification process, but depending on current events, that all has an influence on the subset of cases and how we’re able to move them.  
This is just some of the agencies.  It just gives you again, it’s a little bit of the flavor for how we staff cases out.  We also will… we will refer to other agencies, depending on what the issue is.  We sometimes will reach out to DHS, sometimes to NASA.  We also in some cases will be part of looking at an issue for a Commerce license, if it comes through ISN, comes through Ann or Pam Durham’s office and comes to RSAT.  There are times that it comes to us as well.  We are also in the process of improving our interagency review process for how we look at certain ATF permanent import license applications, which is again something that we’d been working on that’s part of ECR to make process improvements. I already mentioned that for the cases that we have with our licensing volume dropping almost in half, we generally staff everything out, with the idea being that, you know, we are supposed to be the higher wall around the smaller yard, and so we are left with the most sensitive items.  
That’s reflected in our licensing processing times.  Our average processing times are now up to 28 days.  Again, under NSPD 56, we’re supposed to do them within 60 days.  Pre-ECR, the last full year before ECR started, we were down to an average processing time of 16 days, but I think that’s flavored in large part by a lot of the easier cases, the sort of the nuts and bolts and screws and parts and components, that type of thing, that we largely moved off of the munitions list.  And so by design, we anticipated that we would end up spending more time on cases as warranted based on their complexity., So those are some of the issues that we grapple with.  I think that, you know, I mentioned that we have two cases right now that are pending with the Deputy Secretary.   When we’re vetting license applications, there’s a lot of considerations… I mean, I think Tony Dearth often says it best,  you know, you have to do the Washington Post test.  If you’re reading the news and seeing what’s going on, that’s your flavor, what’s going on and what you can anticipate for your license applications. So as you may have seen, a good case and study is just yesterday, Senator Cardin’s office spoke with Reuters, this Reuters article that came out late yesterday, basically saying that the senator, who was on our oversight committee and is SFRC and reviews congressional notifications, it indicated that he was opposed to the State Department’s consideration of a license application for 26,000 rifles going to the Philippines.  And I can’t either affirm or deny that I have a license application for 26,000 rifles going to the Philippines, under (c) and the AECA, but I can tell you that his timing is actually helpful for purposes of again using an example today because it does give you a flavor for sort of what’s going on in the world.  I mean, if you’re watching the news and you’re seeing what President Duterte is saying and doing in the Philippines, I think that’s flavored why the senator is saying what he’s saying.  It also gives us reason to carefully look at certain license applications, given what’s happening in the Philippines.  I mean, since Duterte has come to office, you know, he’s taken actions,  there are human rights concerns with regard to how he’s, you know, doing extrajudicial killings.  It’s said that they’ve killed roughly 2600 people thus far, and so, I mean, for those of you who may have licenses for certain categories in the USML pending with us, you can expect that that will flavor what we’re doing as we’re looking at that, and so there are times that we may not be able to give you, you know, specific guidance on exactly why an issue is pending, but I think that that is a good example of, you know, current events that you should anticipate would flavor the process, but it is public in that regard in that you’ll know that there’s something going on with the Philippines based on what you’re seeing.  
We also try to do the best we can in giving you public guidance with regard to updating the regulations.  I mean, we have just put out a new rule, updating 126.1 of the ITAR back at the end of September, where we’re updating what countries are subject to partial or total arms embargoes and providing new guidance.  I mean, Vietnam is probably the best example.  You know, we have incrementally been changing our licensing policy for Vietnam as our overall relations with Vietnam has improved and so I think that’s reflected in our licensing policies.  There’s also a nonpublic process in which we engage on a regular basis where, I mean, we’re actually required by statute to notify Congress if we become aware of an unauthorized transfer for something subject to our jurisdiction or something subject to the AECA, so that could be an FMS case or a DDTC case.  We’re also required to inform Congress promptly if an item that was authorized for export has been used in substantial violation of the terms of the authorization.  So none of that is a public process, and that results in us having robust engagement with the government, with those involved in the allegations, and that’s something that’s not just handled by DDTC.  In many instances, there are instances where the alleged violations or unauthorized retransfer may have been an FMS case and so that’s a different part of the Defense Department.  That’s a different part of the PM bureau or RSAT office, but we’re the ones that do the coordination as far as doing the initial review, and so that also involves not only us and DSCA, it also involves DTSA, when we go to them for a national security assessment, for what the impact of these violations may be or the re-transfers.  It also involves us working with the regional offices within the State Department because they generally take the lead for our foreign policy engagements with those governments, and so that could result in holds, temporary soft holds on certain commodities that we have in the system, I mean, for licenses in the system, as we’re working through this.  Unfortunately, a lot of this is not something that we would be able to tell you, and so I think that it will give you a little bit of a… it gives you a little bit of a flavor for why we have what we have and why certain cases are on hold for a policy review, just to give you a little bit of an example.  And for licensing decisions, I mean, generally we will do the best we can to tell you why we’ve denied a license but in some instances we may not be able to tell you this, the fact that what I’ve just mentioned as far as if we have information of an unauthorized transfer or information about violation of the terms of use that we’ve authorized that may actually influence whether or not we’re going to be able to approve your license, and because of the nature of the occurrence, we may not be able to necessarily tell you.  
You do have the right to come in for appeal.  I mean, that’s not… it doesn’t happen very often, but you know, but you do have the right to do that, just as you do under the Commerce system.  The reason we don’t see very many is that in some instances, because we’re not able to tell you the reason why exactly that we’ve denied it, which limits your ability to come in for an appeal, but if you are coming in for an appeal, we also would… we require that you would have to give us new information, something that we didn’t know or consider as far as part of the original licensing decision and so we would need you to do that but it’s certainly something that we do consider when we receive them, so that gives you a bit of a flavor for how it works with us and gives you hopefully a little more insight on sort of how the internal mechanics work for us, given that it’s not as obvious and not as mapped out as you’re probably used to under the Commerce system, but just wanted you to know that cases are actively considered and there is a robust interagency dialogue with regard to all of our license applications, and then there’s a robust internal State consideration of all license applications and some of them have to go up to very senior leadership for decisions so with that, I will close and I’ll turn it back to Matt, so thank you very much.  
MB:  Good.  Thank you, Brian.
[Applause]
MB:  We’ll now hear from Mike Laychak.  As probably most of you know, the Defense Technology Security Administration is not a regulatory body, they don’t issue licenses, but they’re certainly a central player in the operation of the Commerce export control system as well as the State export control system, both in terms of making recommendations on the license applications but also in terms of what should be controlled and how it should be controlled and they were really a critical player in revising all of the U.S. Munitions List categories as part of Export Control Reform.  Mike’s team did just a tremendous job on that.  So Mike?
ML:  Thank you, Matt, and thank you, again, as the others have said, for inviting me to participate.  I find this conference to be invaluable because not only do I see the usual veterans of the export control issues and the export control wars but also there’s a new crop of individuals who are just getting started in the process, and it’s an opportunity for us, quite honestly, in this forum, to kind of pull the veil back and the curtain back and allow you to see some of the processes to hopefully let you better understand why on earth did the government do what they did, so hopefully I’ll give you a little bit of sense of how the Department of Defense looks at the problem and looks at the issues with regard to export control so that we can get a better idea again of why we do or why the position comes across the way we do.  
This is our mission, the DTSA mission, and quite honestly, you will see it prominently is ringed with regard to national security.  As Brian noted, when there’s a national security review necessary with regard to export transfers, the Department of Defense, and more specifically, my organization, the Defense Technology Security Administration, provides that position back not only to State but also to Commerce, and one of the things that we have within our organization, quite honestly, that’s an invaluable asset, is in a cadre of technical expertise and also policy expertise, but specifically with regard to the technology itself, we have about 50 engineers and scientists who work in the organization, lots of them with advanced degrees, PhDs.  They’ve often come from parts within the department, the services, research institutes, and they provide a tremendous asset to us with regard to the reviews we do on both the dual use and the State side.  I will note as well that we are unique in the interagency in that we do a vast number of both dual use and State Department licenses.  
This gives you a sense of the breadth of the organizations within the department that we touch.  We’re talking regional bureaus from a policy perspective, the services, the expertise across the organization, across the department, we tap into that depending on the circumstances of the license and how it may impact the warfighter.  Again pointing back to our mission statement and the vision, we must ensure that what we have with regard to the technical capabilities of our warfighters is superior, is the best.  It was ironic.  I was talking yesterday with Mary O’Brien, who used to work in the Department of Commerce, but she reminded me of a story back in the early days of the Iraq… back in the ‘90s, 1990s, the early days of the Iraq’s War, she brought to us, they had seized a case of, you know, tiny impellers, and the note on it, or the end use statement on it was for refrigerator parts, and she looked at it and something triggered in her a, you know, “I’ve got to look at this or ask” so she was trying to figure out whether or not there was any military significance or any type of significance, so she sent it to us, and sure enough, we reached out to the Army and other services, and it came back and they said, because we couldn’t find anything associated with this type of a part with a refrigerator unit, so we started, you know, the wheels started turning, engineers doing what engineers do.  They start talking to each other.  Well, it turns out that that impeller actually was identical to a part of a guidance on a missileor  something on a bomb, so we were able to tap into the expertise in the reviewing agencies that are noted up here, in really getting down to the nitty-gritty with regard to what the significance of that particular item was, and that’s what we do over and over again with each, depending on the circumstance of the case.  If there’s some issue that arises, we’re able to tap into this huge cadre within the department to enable us to identify any issues of concern, or from the other perspective as well, confirm either the application, the end use, or the risk, so it’s very helpful to have such a vast array of expertise available.  
With that mission in mind, we really have tried to support a balanced approach.  It reminds me of the speech that Secretary Gates gave at the beginning of ECR.  We, the United States, and the Department of Defense specifically, are not going to fight or confront enemies alone.  We’re going to work with our partners, we’re going to work in coalitions, and in order for us to be able to fight side by side with those other countries, we need to be able to share our technology.  We need to be able to share the capabilities, and this is the balance that we have.  We need to share but we also need to be very aware of the risks of allowing our key crown-jewel technology to go out, so that’s the balancing act that my organization does in trying to achieve, again, the capabilities of the warfighter and make sure that there’s not the huge risk to them, because we are dedicated, and I will say this again, over and over, we are dedicated to making sure that our guys go into a fight and it’s not going to be a fair fight.  We’re going to make sure that they have the best and they have the capabilities, and so in going through the process, and again, with every case that we have, that’s in the back of our minds as we balance the trade.  

So how do we look at these cases?  This is a… you know, the technical review, and I don’t just mean from a technology perspective or from an engineering perspective, but across the board with regard to the policies, with regard to where it’s going to, who’s it going to, and this is really… keep these ideas and these questions in mind, for those of you new to putting in licenses.  From a Department of Defense perspective, this is what we’re trying to answer.  This is what we’re trying to identify in the license to assess the risk, to assess the capabilities.  You know, what is the item?  Provide us with… the more ambiguity you have, the more we have, you know, going back to that impeller case, what else can it be used for?  What is the risk?  What’s associated with this, with this transfer?  Again, we balance where it’s going to, who is it being provided to, is it within policy or is it a capability that we share on a normal day-to-day basis or is it something that we really need to focus on and restrict, so these are the questions that we try and review and eliminate the risk that we associated with some of the transfers, or at least mitigate it, not necessarily eliminate it, so I’m just going to give you three examples of case analysis that we’ve done.
The first one’s fairly simple.  It’s where the vast majority of cases that the department reviews fall into, and I have stats to prove it as well, that we do approve licenses at the Department of Defense, but this is where the stated end use, the license comes in.  There’s lots of information with regard to the technology matching, no derogatory information on the end user, end use at business activity supports the stated end use, risk of diversion to a program of concern is very low.  This is, again, the vast majority of cases that we see will fall into this level of category, where it could be either approved straight out, or it could be approved with certain conditions that help mitigate some of the risk.  
When we go through the process and we identify there is a risk of diversion to programs, that lends us to… and this is where, again, the vast majority of cases go through and they’re expedited and then we have a low timeline.  This is where, quite honestly, where the delay kicks in.  If there’s something about the case that piques a concern or identifies a certain technology that is going to an end user in a region or a country where it could be diverted, that begins the process of us going through and seeing how we can mitigate that risk, how we can identify certain conditions, certain provisos, that allow us to allow the trade to… or the transfer to happen, but also helps us to minimize the risk, and oftentimes these type of cases, if they’re particularly squirrely, they will be escalated from the Department of Commerce perspective up to the Operating Committee, where again, we have very senior folks who are very, very familiar with the process, the rules, the regulations, the intelligence.  They begin the process of going through it and identifying what the veracity of whether it’s DOD, State or Energy, whoever’s denying the case, they begin the process of analyzing that, and if it is such a case that we find very, very, very… an issue of concern, we, the other agencies, and also the Department of Commerce can obviously escalate it to much higher Assistant Secretary level, the ACEP, but oftentimes, and we’re very, very proud of this fact, oftentimes we’re able to come up with the type of provisos or the types of conditions that allow us to mitigate the risk, minimize the impact of the transfer, or constrain it enough so that there is no way for possible diversion to occur.  That allows us to say “yes, we can approve it” and allow the transfer to happen, so it really is whittling it down to a case that is approvable, because we want to reach “yes.”
Then you have the other side, where you have a high risk of diversion, that’s really sensitive technology, and these are the key cases, and quite honestly, these are the ones that often go to the ACEP, if there is no way for us to really try and mitigate the concerns, we will take these, and these are, I’m happy to say, are very, very few, but they are critical ones, and oftentimes, even if they’re not necessarily what would appear to be critical-type technology, you know, low level or… not low level but integrated circuits or semiconductors or something of that nature, but it provides insight or provides a capability or the technical data related to that that raises a level of concern, we’re able to discuss that and go back and forth and debate the risks at the higher levels, and that’s the cases… those are the type of cases where a denial oftentimes comes out, and you know, getting back to the impeller case, oftentimes we’re able to identify areas where we need additional information.  We either go back to the company or we go back to try and do end use checks or pre-license checks, and also reach out to the intelligence community to provide information related to the transfer that helps us determine the veracity of the diversion risk.  
That’s a very short and concise kind of review of how we go about looking at cases.  I’m more than happy to answer any questions as we… both on the panel and afterwards, if anybody has any questions, but I think, if I can leave you with any key thoughts about the department, is we look at everything from a national security perspective.  We’re looking at what the technology, how that technology transfer could impact our warfighters, and that’s key to the way we think about the process and how we go through the analysis of the process.  If I could just take an opportunity to kind of just tout the number of cases that the department reviews through DTSA and also to show that, yes, we do approve and approve the vast… with conditions, the vast majority of those cases.  I will say the… I did not catch this before it went out, but the two numbers are not identical, from the munitions and dual use perspective.  Actually, for the first time in almost 20 years, the number of dual use licenses that the Department of Defense reviewed was actually higher than the munitions license cases.  We had about 20… the number under the munitions is correct.  I would say the number for the dual use is probably around 30 to 35,000, so ECR has achieved a shift in the lowering of the number of cases.  We endeavor to continue to use and work with the Department of State and the Department of Commerce to identify ways of expediting cases with past precedents, with technology that we are giving to countries or end uses that we have no concerns about, to expedite those cases and to provide the licensing agencies with authority to go without having to staff them to the Department of Defense, and it really is an effort to achieve the balance of Secretary Gates with regard to working with the system to help our allies and partners and also to really look at and closely observe and identify those tech transfers that are of high risk, so… and I think I’ve got one more slide.  Yes, I do.  

So we can see that we’re quite honestly on the… this is for six months in the year, we’re looking to have about the same number of cases that go through the system from the regulatory authorities for a Department of Defense review, so with that, I’d like to thank you again for an opportunity to kind of look and talk about the department, how we work with the other agencies in reviewing export cases, and I look forward to any questions you may have.  Thank you.  
[Applause]
MB:  Thank you, Mike, and one of the things I think that’s interesting when you look at Mike’s statistics and Brian’s is before ECR, DDTC was processing close to 85,000 licenses, I think, and we at BIS were in the neighborhood of the low 20,000s, 22, 23,000, so if you put those two together, that’s a little bit more than 100,000 licenses between the two agencies, obviously not counting OFAC’s licenses, which in a sense are different… they’re license applications but they’re a different animal because for both the Commerce licenses and the State licenses, the fundamental review is “what is the technology, who’s getting it, and what do we think the risk is of it going somewhere other than we would authorize it to go, whereas sanctions, it’s a little more they’re applying the sanctions policy, so the technology, I think, is not as significant, but you’ll hear a little bit more from John on that, after I speak.  
Last year, we processed at Commerce over 35,000 license applications, so of course that reflects now the dramatic movement of items from the USML to the CCL under export control reform.  So if you add the 35,000 to the roughly 45,000, you can see the overall licensing numbers between State and Commerce are now significantly lower than they were before ECR, and of course we, in our system, we have license exceptions that are available for the 600 series items and the satellite items under the 500 series, and of course that was the whole point of export control reform is to spend less time looking at the lower-risk transactions to our allies to achieve the goals of export control reform, which are interoperability, more opportunities for the U.S. Defense Industrial Base, and both the government and industry spending less time on the lower-risk transactions and therefore more time on the higher-risk transactions, so the increase in DDTC’s license processing time reflects that, as Brian said.  They’re now looking at the harder cases, so their average processing time goes up.  The easier cases are now in the Commerce system.
What I thought I would do is effectively pick up on where Brian and Mike left off, which is do a quick walkthrough of a license application that we had in our system that initially was likely to be denied, but because of the escalatory review process, we are able to have ultimately interagency concurrence to approve.  In the sense this is an outlier case, because out of the roughly 35,000-plus licenses we processed last year, roughly 300 of them went to the Operating Committee, and from there, only about 30 or so went to the Advisory Committee on Export Policy, which is the next level of review, the Assistant Secretary level, so you can see the vast majority of cases that come into our system and go to… certainly they all go… virtually all go to State and Defense, and a lot of them also go to Energy, they’re approved in the first 30-day review period, and our average processing time last year was about 24 days for all those 35,000-plus licenses, so really only a fraction even goes to the Operating Committee, which is the level if agencies disagree on whether to approve or deny a license.  Once the Operating Committee chair makes a decision, then only a fraction of those go up to the next level, and as you heard, I think Kevin mentioned yesterday, virtually all of those get decided either to approve or deny by a consensus of the four agencies, Commerce, Defense, State, Energy, at the Advisory Committee for Export Policy.  As you can imagine, under the Executive Order, license applications can go to the cabinet level, and even from the cabinet level to the president, but as you can imagine, we don’t have export license applications that go to the cabinet level, let alone the president.  We really try to come to decisions before those levels.  
Anyway, the case I want to talk a little bit about, you see, we try to come up with a catchy title here, “Salvaging a License Application or Lessons in Complete Applications.”  This was a… oops, I think I went one too fast.  Nope.  Okay.  This was a license application that came in to the Commerce system for a party in China, and as you can imagine, probably the single biggest chunk of license applications that there may be initial denial recommendations on is China.  It’s a big commercial market, but we also have significant concerns from a national security viewpoint as well as a foreign policy viewpoint with items going to China for certain parties or certain end uses or end users, so on the license application, the company, the U.S. applicant put down, a particular Chinese company as the ultimate consignee, and then a different party as the actual end user, which is not unusual, so in the initial interagency review, again, under our system, a license comes in under the Executive Order.  We have nine days at Commerce to review it and determine is a license needed or not, and if it’s needed, is the application complete?  
We typically get those out to the other agencies if a license is needed within about two to three days, so and we always put it out with the Commerce position, which actually reflects not only the licensing position but the enforcement position, because in our system, Export Enforcement acts almost as an internal review agency, so if they have a flag on a transaction, then we don’t send it out as a Commerce recommendation of approval unless we’ve resolved that issue internally with our Enforcement colleagues, but anyway, on the initial review, State came in with the recommendation to deny, Defense also came in with the recommendation to deny.  This case did not go to Energy because it was a Wassenaar controlled item, a remotely operated undersea vehicle which is a Wassenaar control, so Energy doesn’t see those in the first go-round, so under the Executive Order 12981 that Brian mentioned, any time there’s a license application where agencies put in different initial recommendations, it automatically goes to the Operating Committee, which is chaired by Commerce and staffed by more senior level career officials from DOD, State and Energy.  
This application, by the way came in in March of 2015, so it took a little longer than usual to get to the Operating Committee, so the fundamental issue was derogatory information, classified information, about the ultimate consignee that was on the license application, and because this is a remotely operated vehicle, there are significant national security concerns with that type of equipment being used for purposes other than the stated purpose, for salvage operations or undersea oil exploration, those kinds of things, so at the Operating Committee, there’s actually a meeting.  The agency reps all discuss the case and then the Operating Committee chair makes a decision.  The chair is not bound by the views of the agencies but certainly takes them into account, but it’s not a vote.  The Operating Committee chair under the Executive Order just makes a decision and issues the licensing decision, so internally then the process is over we, under our regulations, send an Intent to Deny letter to the applicant, saying we’re telling you we’re intending to deny your application but you have 20 days to come back and provide additional information, so that happened in July of ’15.  
The applicant in this case submitted a fairly detailed rebuttal to the Intent to Deny letter, and in this case, it had new information on the end user, the vessel that the remotely operated vehicle was going to be stationed on, what the role of the ultimate consignee was, and that there was also foreign availability for comparable ROVs, and in this Commerce system, for dual-use items, which this was, foreign availability is a significant factor because one of the things the agencies all are cognizant of is if we deny a license application and a foreign competitor can just go in and fill that order, we have to take that into account when we’re looking at whether to approve or deny, so what was really critical here was the basis for denial was negative information on the ultimate consignee.  It turned out that the U.S. applicant was able to demonstrate in this review process that the ultimate consignee was actually only the sales agent for the applicant.  By a contract, the ultimate consignee had already legally… would legally transfer title of the ROV to the end user, so they were not going to take physical possession, which was the critical factor, because we were concerned about the ultimate consignee using it for a purpose other than what we would authorize it to be used for, so this process of gathering the information, having the other agencies consider it, and then think about whether it changed their position on the case, you can see, took place over a couple of months.  
We discussed the new information with the other agencies.  We even had the applicant come in and talk with the other agencies.  This doesn’t happen often, but certainly an option if you have a license application that’s in the denial process, you can certainly request to come in and have a meeting with all the agencies at the Operating Committee to explain your transaction in detail in person, and then at the end of the day, when the Operating Committee looked at it again, they all agreed that it should be approved with condition, and the condition really was to prohibit the ultimate consignee from taking title or possession of the ROV, which was part of the transaction anyway, so it wasn’t actually an additional limitation in terms of the transaction, but it’s a license condition, of course, the applicant has to, and the other parties have to comply with it.  Otherwise, they’re in violation of the license condition.  So in September the license was actually approved, so the morals of the story, I guess, are two.  
One is even when there’s initially a view that an application should be denied, there is a process to bring more information to the table and get the agencies to reconsider their positions, which is exactly what happened here.  The other is that you really want to think through how the information you put on the license application… Mike mentioned this in his remarks as well, if you don’t tell us for sure, for example, that the ultimate consignee is not going to take title, and it turns out there’s derogatory information on the ultimate consignee, that leads to a denial recommendation, so this company could have saved itself probably several months and I don’t know how many hundreds or thousands of dollars in staff time pursuing this had they put that, made that clear in the application upfront, and I know it’s not possible for you as the applicants to think of every single thing we in the government might be looking at, but they’re always pretty standard.  You know, who are the parties, what are they actually doing in the transaction, and the likelihood that the item will be used for a legitimate civilian end use in China, for example, versus a military end use.  
So with that, we’ve just got, of course, at the end, the definitions of, in this case, ultimate consignee and intermediate consignee, but I think I will stop at that point.  I want to have… John will come up and do a quick OFAC overview and then we’ll take questions for the whole panel and we’ve already got quite a few of them, so thank you.
[Applause]
JS:  Good morning.  Thanks to Matt and to Eric and to the Commerce Department for hosting this event, and thank you to all of you for coming.  It really is important, I think, when the government and the private sector get together.  When you hear from us and when we hear from you, I think it helps us make our job go better and I think it does the same for all of you.  I think with some of the best practices that we’ve heard so far, I’m going to add a few to the list so that you can hear from us on ways that we can streamline, and I certainly want to hear from you.  I’ve already got a few questions that I’ll be happy to answer on that front.  It’s really been an unprecedented year for us in the sanctions realm.  I think when we come to an export controls and policy conference, as Matt indicated, OFAC is a little bit different of a player at the table.  We deal with sanctions.  We deal with economic sanctions.  We deal with areas where traditionally, if we get a license application, you’re looking at something where we have already said “no, that is prohibited under our sanctions program” and you’re looking for us to make an exception to the sanctions that we have, so we’re in a little bit different of a place when it comes to the way we look at license applications and the way that we process them.  
It’s been an incredible year because in my 10 years at OFAC, I think there’s been more that’s happened in the world of national security and foreign policy in this last year, when you look at the implementation of the Iran deal, the easing of the Cuba sanctions, the ending of the Burma program, plus the tightening in a number of other countries including North Korea and a number of other countries across the globe, this has been an incredible year, and our license applications have responded accordingly.  It’s been surprising to me perhaps over the years to find that no matter what we do, we seem to increase the license applications that we get.  If we issue additional general licenses, authorizations in the Cuba program, as we ease the sanctions, we have received more license applications under the program.  When we tighten sanctions in other programs, we have also received more license applications in the programs, so whatever we do, we seem to be more popular with the exporting community in terms of the license applications we receive.  
In fact, about last year we received about 10,000 license applications, many for complex, very complex transactions.  The numbers may pale in comparison with some of the sister agencies that we’re dealing with here, but we look at it in a different circumstance.  Often we are dealing with not a single product or set of products that there may be guidance about the product, but we may be looking at a very complex transaction where a product may be part of that very complex transaction that ultimately involves a government that is under sanctions, so that may be a complicated interagency process and a complicated OFAC process to get through it, but we’re doing what we can to best resolve these license applications as quickly as we can.  We have issued a tremendous number of what we call general licenses, the OFAC equivalent of the BIS license exception that basically says you can, if you meet the criteria, our regulations say that you can conduct the activity without coming to OFAC first, so we’ve issued a number of general licenses where we can to make sure that where we don’t have a particular concern, and where we can impose conditions as a general matter, we can put that out as a regulatory change without causing you to have to come into OFAC with a specific license application.  
We’ve also been doing fair numbers… fair increases in our numbers in what we call our frequently asked questions, FAQs on our website.  We’ve put out hundreds and hundreds and hundreds of those over the course of the past years so that if you have a particular question for OFAC, you may not have to call in to us or write in to us.  You may already have that on our general license and our license application portal on our OFAC website so that you can get your questions answered without coming in.  We try to be fair in the way that we process our license applications.  Absent compelling circumstances, we treat them on a first-in, first-out basis, and also when we get guidance to one company, we treat similarly situated applicants in the same manner.  It is a complicated process where the stakes are high, involving sensitive sanctions programs.  You can bet on the Iran portfolio, the North Korea portfolio, even the Cuba portfolio, we’re being watched by Congress, the industry, the public.  I think the Washington Post Test is one that we all, I think, think about when we look at sensitive license applications to make sure not so much that the media would be satisfied but what we do makes common sense and seems to make common sense not only to the public, to the industry, to all outside observers looking at our programs.  
Since we’re focusing on the licensing process, I’m going to follow up with a little bit of a case study for the OFAC process just to give you a little bit of detail on how we handle a typical license application.  It’s difficult when I try to use a word like “typical” because it seems like these days there are no typical license applications that we get, but I’m going to try to give my best example.  For the Cuba program, when we had an easing of sanctions and the president announced a new policy change in December 2014, there was immense interest in, I think, from the private sector, in perhaps pushing the boundaries of what we had already authorized to see if U.S. national security and foreign policy would ease our sanctions programs even further, and I think some applicants were in some ways ahead of the curve in coming in to us with applications.  
In January of 2015, OFAC received a request, multiple requests, to establish passenger ferry service between the United States and Cuba.  It won’t surprise you that we got a number of those applications, a number of those companies were beginning to talk to U.S. officials, the services hadn’t been authorized yet by OFAC, but people thought this might fall within the president’s policy, and so we looked at the application, went back to the requester and said “okay, this is kind of the first of its kind under the new policy and we’re going to need additional information.”  The requester was relatively speedy and got additional information for us in mid-March of 2015, and at that point, when we considered the application complete, we referred it over to the State Department for foreign policy guidance.  Now that is the typical OFAC maneuver that we would have in the licensing process.  If it is not clear foreign policy guidance under a sanctions program, we would refer any applications that we get to the State Department for foreign policy guidance, so the State Department looked at the application and raised a number of additional questions that it needed to know from the foreign policy perspective, and we went back to the requester and the requester came back just a few weeks later, so in mid-March, late March, we had a complete application from both the OFAC perspective and the State Department perspective.  We got foreign policy guidance from the State Department on April 18th with a recommendation to approve the license application, which was historic, because before then the applications would have been denied without a referral because that was the policy of the U.S. government at the time.  
Because that application required coordination with a number of agencies, not only State but Homeland Security, Commerce and other agencies, we were coordinating across the board as that license application came through, and we issued this specific license on May 5th of 2015.  The end of that story is that for us, specific licenses don’t answer the question.  If we are beginning to issue the same specific license to numerous companies and there seems to be no distinction or we can put out the conditions in a regulatory authorization, as I said, we’ll do that, and we included that in our next round of regulatory changes in September of 2015, so we amended our regulations at that time to authorize carrier services by vessel between the United States and Cuba under certain conditions, so we no longer had to issue the specific licenses.  
That is a little bit of the process that OFAC would go through in a typical case.  I’ll give one other example, not going through the whole application process, but there also may be different hurdles that license applicants would have to go through in coming into OFAC.  For example, you may have read about certain civil aviation applications that OFAC has received in the Iran context, and licenses that we may have issued.  Those licenses often will require not only the typical referral to the State Department for receipt of foreign policy guidance but the State Department also may have to issue a notification to the Congress pursuant to certain statutes that said the Congress shall be notified and have a certain waiting period before certain technology is approved for export involving Iran and other jurisdictions that have been of concern to the Congress.  So for example, that’s an additional step that would have to occur in the Iran program.  
Going through that case study, going through, I think, what Matt and others have said, I think there are a few best practices that I would identify that we in the U.S. government are trying to implement to make sure that life is a little bit easier for you, and frankly, life’s a little bit easier for us as we process license applications.  The first is that we will issue a general license where we can.  Again, I think that’s the Commerce equivalent of what they call their license exception, but if we see the same type of license application, and we don’t need to see the circumstances, we don’t need to see anything on a case-by-case basis, then we’re going to try to issue a general authorization where we can.  That’s not going to be possible in every circumstance because many of these cases may be very factually dependent.  The facts and circumstances of a certain type of transaction, who it’s going to, the type of entity maybe, what we need to actually see in the license application itself, so we may not be able to do a general license, but where we can, we’ll try.  
The second best practice involves the foreign policy guidance.  When we refer something over to the State Department for foreign policy guidance, we indicate to State that we will plan to treat similar applications in a similar manner.  Now the State Department may still say “we need to see any further applications” because they may also want to see the organizations, the individuals or entities that are involved, and that may be what makes a distinction between the processing of one application versus the other, but we try to make it clear that we’re going to treat similar applications in an identical manner.  Again, the applications may differ just based on the individual or the entity that’s involved, and I think something that may be less noticeable but was apparent, I think, in our last round of regulatory changes, is we try not to duplicate efforts as much as possible.  I think we’ve been working very much with BIS in terms of not duplicating our jurisdiction and I think our last round of Cuba regulatory changes demonstrated that we were trying to say where we don’t have to duplicate jurisdiction.  You can just go to BIS.  You don’t need to come to OFAC on a specific license application, and we keep looking at programs to say “are there additional areas where we can refine?”
Since I gave you some of the best practices that we’re working on, and since Matt opened the door and gave you some of his, I think I’m going to give you a few additional ones from the OFAC perspective.  I think some of those are duplicates of what Matt said, but I think it’s helpful for us, and Matt and Brian and others, I think, gave some of these.  I think some of these are helpful, the way we look at applications, and sometimes inside the agency, when we hear frustrations from you, it’s hard not for us to be able to go back and say “if you had satisfied some of the best practices that I’m giving you, we wouldn’t have the delay that you’re looking at,” but first, all of these are going to sound basic, and I think on all of these you’re going to say “of course,” but you would be surprised at the number of applications, even from sophisticated applicants, sophisticated companies, that we get that do not satisfy these best practices.  
The first is, we’d say, research the sanctions program in question.  Many of your companies may be used to dealing with, in the export control arena, you may be experts in the type of product that may be going, but you need to become an expert in the sanctions program that is involved to make sure that you are satisfying the concerns and that you are reading the signals that we have provided in our guidance, our guidelines, our regulations, and our frequently asked questions.  So that’s a simple way of saying “do your homework, please.”  It helps us.  Please reference the particular regulations that you see that are involved because sometimes we will get an application that says “we want to do the following,” and it won’t indicate from the company’s perspective why that might be of concern, and so the application may be vague enough that we have to go back and say “please tell us how this relates to an OFAC sanctions program.”  It would surprise you the number of times we have to go back.  We would say provide comprehensive background, give the details.  I think this was Matt’s point about having the company save itself.  There are a number of times that we’ll get an application that might sound horrifying from the OFAC perspective that indicates that a company wants to do a certain type of activity that would just seem to be out of bounds from the sanctions perspective, and then we finally, with a supplemental application, get an “aha” moment where we say “okay, now we understand why we would be licensing this application,” so we’d say be clear in what you want.  
I would also say be persuasive.  Sometimes we get a very fact… facts and circumstances.  Somebody just sets out a fact pattern.  I would also say advocate.  Tell us why that we should be granting a license application for a sanctions program where we have generally said “this country is off limits, this country is out of bounds, we’re not allowing transactions for this country.”  Generally, the successful applications are saying “this is why we think this is in the U.S. national security and foreign policy interest as evidenced by some of the other changes that OFAC, State and other agencies have made,” so we would say make sure that you are very clear in what your position is and advocate, and I think the last but not least is please make sure that you give us legible supporting documents and try to do it once, and I got a laugh from the audience, and we always get a little bit of laughter for that, and then we’re always surprised when an application will come around and we’ll say “we just can’t read this, the supporting documents, the shipping bills, whatever were included with it, we just can’t read it,” so whatever you can do to make our lives a little bit easier would be helpful.  
I think I’d end on the best practices for us, and with a plug for using our electronic system.  We are in the Treasury Department, and that is governed by the Treasury Department and even the Secret Service regulations because we’re part of the White House Complex, so snail mail does not get to us very quickly.  So if you are still sending us your applications in writing, that’s great, but you’re going to be a few weeks behind those that use our electronic platform, that goes instantly into the licensing officers’ queue and we’re able to begin work on it right away.  So it may take a little bit of adjustment.  I doubt… I’m guessing that probably 90% of you use that electronic platform, but for those 10% that don’t, this is a way to speed up your license application process by at least a few weeks.  So I think I’ll end there, since we’ve already gotten some questions, and I’ve been told by Matt I should answer mine when we are back down on the panel, but I’m going to end with again a thank you, thank you, thank you to all of you.  Really, we do depend on you for sanctions compliance.  Our regulations and our rules would just be words on paper without the vigilant efforts by all of you with the compliance work you do and all of the other enforcement work you do as you come in to us, so thank you very much.
[Applause]
MB:  Thank you, John.  As you’ve probably seen, we are getting tranches of questions up here, so I’m going to make a couple of thoughts, suggestions procedurally.  I know the break is supposed to be at 10.  Why don’t we say we’ll go in this session till 10:10?  What I would like to do is Mike, maybe start with a couple questions you have, then Brian, Ann, then come back to John, and then the questions that I have, I think we’ll do a session on Wednesday, when we have kind of the open forum, and I’ll address the Commerce questions then, because that’s my opportunity to come back.  I also may see John, if we don’t get through the OFAC questions, which I don’t think we will, maybe we can get somebody from John, from your team, to come back on Wednesday and answer some of those.  We have kind of an open forum session Wednesday afternoon.  
JS:  I’ll also mention that we have a few of our licensing chiefs that are going to be here later in the day, I think, today.
MB:  Oh good.  Okay.  
JS:  So the folks who really know the details are two, Assistant Director for Licensing and our Deputy Assistant Director are both appearing here later today.  
MB:  So why don’t you triage your questions kind of with some that they maybe will answer. So Mike, do you want to go ahead and take yours first, please?
ML:  Okay.  Thanks, Matt.  I have three questions just real quick.  “There’s talk in industry that DTSA is trying to undo aspects of ECR and pull certain items back into the ITAR.  How true is this?”  No, but we are using the process that currently is in place to try and identify technologies, and actually call them out, that should be identified or may very well be identified on the ITAR, but were missed during the first review, and the example of that is some of the production technology related to the F-35, the Joint Strike Fighter.  In the beginning of the process, as we went through, and this is true for a vast majority, or all the categories, is we’re going to have to go back and we’re going to have to adjust just to make sure that nothing’s either slipping through or something that we missed may very well have to come back, but we’re going to use the process that was developed under ECR where we get together as an interagency, we identify the impacts of moving a technology back to the ITAR, what it will… is it just solely for military use, and this is what came out in Category VIII with regard to the production technology on JSF, is it solely used on the JSF and then therefore should be in a munitions or an ITAR-related item, or is it something that is also related to commercial work, so the process is now, and we’ve gone through the initial review, or the additional review of VIII and XIX and putting that out, and that’s where I see the process actually benefiting both you and Defense, because… and the interagency, because there’s going to be that initial government review and then there’s also going to be the review of the industry to allow them to review any changes to the regulations, and that process has worked tremendously well for us throughout ECR, and I think that it will continue to work and we will continue to push and use that process as we make adjustments.  
Next question was “in a past license review, a licensing officer went TDY for 30 days.  DTSA would not agree to a face-to-face meeting to discuss technology review.  Review period was excessive, very frustrating.”  I agree.  If you can’t get ahold of your licensing officer, elevate it to the team leader.  If you can’t get ahold of the team leader, elevate it to the division chief.  If you can’t get ahold of the division chief, elevate it to the director of licensing.  If you can’t get ahold of him, call me.  We should not be not picking up the phone.  Our job is to review these cases and review it in such a way that we expedite it and we get the proper answer back to you and the form.  We encourage companies to come in and discuss face-to-face any issues that they may have.  We may very well ask for a white paper, and additional details on why it is you want to come in.  There may very well be a discussion amongst us as to whether or not we really need to adjust it or it’s just something that we need to go through the process, but if you’re not getting any communication from my folks, I want to know about it, and that’s not the way we do business at DTSA.  

“The most frequent cause of delays in processing licenses at DDTC have been the DTSA DOD review.  Often applicants are told that DOD DTSA is understaffed, particularly your technology directorate.  When will DTSA obtain the staffing levels necessary to more efficiently process the high volume of licensing?”  Darn right!  You know, call your congressman.  Tell them DTSA needs more engineers.  The Department of Defense is in the throes of sequestration.  I don’t foresee us getting… in fact, we’re supposed to reduce by four additional personnel in the FY.  It’s the nature of the business.  We have more work to do and not enough people to do it, so I appreciate the note, but we will endeavor to again try and work as quickly and expeditiously as possible, but I don’t foresee us getting an increase in personnel anytime soon.  
BN:  Okay.  Thanks, Mike.  I’ve got two questions, actually three questions.  First one.  “Please give what information you can on what is happening with cases related to Thailand and then same with Peru.”  Thailand, you know, we have sort of a tightened export policy as a result of the coup that happened in Thailand in 2014.  I can tell you that more recently there has been a policy review ongoing that has resulted in some cases being temporarily held.  We are working through that and so I think that we’ll see some movement with regard to some of the held cases in the near term, so that’s sort of… we’re sort of in a little bit of a state of flux right now, but it’ll be coming nearer to the end.  With Peru, we had… this is actually a good question and gives a good example.  Peru passed a law that where they would do… they would shoot down civilian aircraft or small civilian aircraft, and under U.S. law and under U.S. policy, we don’t support such a policy, and some governments have opted to do that with regard to the smugglers, with regard to drug trafficking, but again, under the U.S. law and policy, we don’t support anything that would support that activity.  It’s my understanding that Peru is in the… either already has or is in the process of considering changing its domestic law, in which case that would result in us changing our licensing policies, so that is the status on Peru, and then the other question.  “Please comment on the status of revisions to USML Categories I, II and III.  Is there a proposed rule in the works?”  Yes.  I mean, we… you know, these categories were… we did initial drafting in 2012.  They were six different rules, three State, three Commerce.  We have updated those rules and merged them into two rules.  There’s simply one rule, one State rule for the three categories, one rule for the Commerce Department.  We still are in the final throes of completing the other categories, and so we’re then simply awaiting policy guidance for what we’re going to do with these last rules, and then I also wonder if I can plug what I have, Mike, sorry Mike, is that DDTC has a breakout session next, it’s one of the breakout sessions, so if you have more questions for us, feel free to come to the next session, so… and with that, I will pass it to Ann.
AG:  Thank you.  The first question I have, really, I think, is kind of shared between Brian and I, so I will start with it.  It’s “with the elimination of economic sanctions against Burma, is there a timetable or a plan to release or eliminate the arms embargo against Burma?”  The president ended the economic and financial sanctions and the prohibitions in the Burmese Sanctions Regulations are no longer in effect.  However, this is still a complicated situation.  We’re still working through it, so no.  No timetables.  No further proposed changes at this time.  
BN:  Nothing more to add.  I mean, as Ann hit it right on the head.
AG:  Great.  Okay.  It’s always nice when we’re synced up.  And then the other one I have is, “is your office requesting the regimes to harmonize with the U.S. catch-and-release process?”  The simple answer there is “no.”  What the regimes do is they establish common control lists, common, you know, practices, but they leave the actual implementation, the how-to, to the member or participating states.  Now, we did bring Kevin Wolf to the Wassenaar Arrangement and had him do a presentation on how catch-and-release works.  A lot of the countries were very interested and asked all kinds of good questions, so you may see some version of catch-and-release coming out in some of those countries.  I just don’t know right now, but we would not propose it to the regimes because that’s not really the role of the regimes, but we have, as I said, brought Kevin, who is perhaps the best person to explain how it works to others, and had him lay it all out for them, so we may or may not see other countries adopt it.  
MB:  Good.  Thanks, Ann.  I know John has a whole stack of questions down there.  Maybe, John, what you could do is take at least a few of them that are more general and then OFAC. and then the ones that are country specific, they’re actually doing the same breakout session twice, the foreign policy controls, both at 10:30 and at 1:30, and then I think maybe the country specific we could answer there, because that’s where your folks are going to be, right?  
JS:  That sounds great.  All the Iran questions, and there are a number on the civil aviation front, I’m going to tell you that you have… we’re going to have the head of our Iran Licensing and Civil Aviation Licensing, Jeanette Miller, is going to be at the breakout session, so I’m going to sic you all on Jeanette to ask all of those detailed questions.  She is the best person, I think, to answer those.  I’m going to give you the general ones, a couple of the general ones first.  “Of the three agencies, OFAC is the least transparent.  Applications are filed and we get an automated pending status for months.  We don’t know who the licensing officer is, calls and emails go unanswered or nonresponsive on basic issues.  Why?  Why can’t you work more closely and actively with industry?”  I think that’s a good question because we do get a number of questions about “why can’t we call in to licensing officers and talk to them more often, and why can’t industry help find us a solution?”  Well, I would love if industry could help us find a solution, but let me tell you the problem as I see it.  Each one of our licensing officers, we have a few dozen of them, has a couple hundred license applications on their desk, in various stages of processing, and we have had occasions where licensing officers spend most of their day on the phone responding to questions about where the license applications are.  People want to come in and meet with the licensing officers to talk about the processing of the case, and so what we’ve tried to do is set up a system where we have a licensing hotline, call center, where you can call in and have someone on our administrative team tell you where it shows in the system, but I’ve been trying to preserve my licensing officers’ time for actual processing of the license applications.  We do have some situations where some companies will call in every single day because one of their bosses has told them to find out, check in with OFAC every day, and so we have people on the phone every day saying “nothing new from yesterday, nothing new from yesterday,” and so that is why we have a licensing call center that is trying to shield some of the licensing officers’ time.  Now, that isn’t to say that there aren’t better ways that we could communicate.  We are trying to communicate by putting more on the web, more in FAQs, but I would welcome, if the industry has additional suggestions on how we can do this, how we can be more available but at the same time handle our limited resources by handling the license applications, I would welcome any feedback you’d have on that process.  
We have another general one on “almost all EOs are not clarified by OFAC rules.  This results in ambiguous notice to foreign firms.  What can you do as the OFAC leader to clarify EOs and the president’s delegations?”  I would say a note, with every Executive Order, we try to go out at the same time with frequently asked questions, FAQs about the Executive Orders.  Generally, we have regulations that will go out within a month or a couple months of what we call skeletal regulations of the programs.  We’re trying to get better, so some of our older Executive Orders, this didn’t take place.  Now with an Executive Order, you generally have a whole series of documents that go with that Executive Order, where we try to provide more clarification and we try to work with all the agencies at the table, where it’s relevant, to make sure that we’re providing some of those answers.  
“Recommendations on how the public can support OFAC efforts to increase staffing or are there ways to expedite turnaround on submissions to OFAC?”  I’ll probably say the same thing.  We don’t see a lot of additional resources coming our way, but sanctions have become increasingly popular.  Every year, there is more than a handful of Executive Orders.  There’s new proposals for legislation almost every month in Congress, and so every year we have several additional statutes that we’re implementing, many of those with reporting requirements, many of those with other processes that have to be built in on the same set of resources and same set of people that have been handling our license applications.  I will tell you our numbers in terms of applications for licenses have doubled in the course of the past few years, but our resources haven’t, and so we’re trying to do what we can to be lean and mean and respond as quickly as possible, but I think we’re doing as best we can in the limited circumstances we have.  
I’ve tried to do some of the general ones.  I have about 15 others sitting in front of me, so I’m happy to come back, but many of those are the specific Iran ones that I think we can push off till later.
MB:  Yes, so I would suggest the folks that put in questions that are country specific come to one of the two breakout sessions.  John and I will chat sort of offline if there’s another group that might lend itself to being answered on the Wednesday sort of open forum.  John, we can talk about whether you have anybody available in your lean-and-mean operation to come over and do that.  Let me do a couple of quick general ones for BIS, and as I said, the rest of them, we will definitely have time devoted on Wednesday to get into the more detailed ones, but a couple of the general ones.  
“Is export control reform expected to continue in the next presidential administration, and what changes might we see?”  I can certainly say that as career folks here, when the next team comes in, we will brief them on export control reform, and certainly, I believe my recommendation will be that we continue.  As you already have heard, we really tried to establish the precedent of once we’ve gone through one round of revisions of the USML and the Commerce bookends, that roughly every two years we want to keep that process going, and we’ve already started that with USML Categories VIII and XIX.  We’ve got NOIs out that have already gone out on some of the other categories, but at the end of the day, it’ll be up to the new political team that comes in to decide do they want to continue export control reform and/or do something else.  
This is a related question.  “Now that most of the USML has been reviewed, will a review of the CCL categories be done?  There are many items that are now old technology while new technology has not been addressed.”  That’s a good question.  We do have a process that we go through every year with the four multilateral export control regimes where the three agencies here, Commerce, State and Defense, look at U.S. proposals.  These are mostly for Wassenaar but they also include the nonproliferation regimes, that we, the U.S. government, go to the regimes with those proposals to change.  Generally speaking, those are to raise control levels, so effectively decontrol some level of technology, but in some cases they are to impose new controls.  We typically, I think, Ann, have 20 to 25 U.S. proposals to Wassenaar, and you know, a handful to the NSG, the MTCR, and the Australia Group, but then remember other countries come in with their own proposals, so there’s a real bandwidth issue because for Wassenaar to look at, you know, 40 to 60 technical… 80, more like 80, Ann says… technical list changes every year, that’s a big work task, and so to do something beyond that would be challenging, so I would encourage folks to continue to work through our Technical Advisory Committees to come up with proposals… suggestions for our proposals to change the sort of legacy dual-use CCL controls.  Ann, I don’t know if you had anything you wanted to add to that.  
AG:  No, I just double-checked, the number I was given was that Wassenaar approved 51 list changes this year in the exports group.  It still has to go through the plenary, so they aren’t final, so they are constantly changing.  Matt is totally right.  If you think something should no longer be on the list or warrants a change, work through the Technical Advisory Committees or the agencies here because we do send forward a good number of proposals every year, but as I said, Wassenaar… the numbers have just been growing and growing because technology advances rapidly.  I think this year… I threw out the number of 80, it seems to me, it was almost… it was 84, 85 proposals that we considered this year.  That’s a lot of work, because not only ginning up our proposals but examining other countries’ proposals, so it’s a fulltime job, but if you’ve got things that don’t warrant control or warrant changes to the control, that’s where to plug it in.  
MB:  So I’ll take one more question, and then let everybody go on to the break.  “Will the temporary general license for ZTE Corporation in China be extended?  How do you determine a temporary license is granted to an entity?”  I think the Federal Register notice on placing ZTE on the Entity List and then the subsequent temporary general licenses is quite clear.  It’s really dependent on ZTE’s cooperation with the U.S. government in its activities, reviewing ZTE’s activities, and so whether the temporary general license will be extended yet again really depends on that, and that decision will be made in the coming weeks since the current temporary general license expires at the end of November.  How do we determine a temporary license is granted to an entity?  It really depends on the entity and the facts of the situation.  As I’m sure you know, there is an appeal process for parties that are on the Entity List that every year a handful of companies avail themselves of, and that’s typically to get off the list, but that could also include a request for a temporary waiver, and as you can imagine, it’s a fairly high bar for a company to demonstrate that they’ll address the circumstances that got them placed on the Entity List in the first place. With that, I think we’re just a little bit past 10 after, so I would suggest we’ll go ahead and take your break now, but again, for the rest of the Commerce questions, we’ll have a session Wednesday and we’ll let you know if OFAC is able to have somebody come over to deal with some of the OFAC questions.  Thank you.
[Applause]

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