Export Controls Improvement Act Introduced in U.S. Congress to Strengthen Enforcement, Combat Illicit Transshipments and Improve Electronic Filings

On July 31, 2009, the ​“Export Controls Improvement Act” (H.R. 3515) was introduced in the U.S. House of Representatives and was referred to the House’s Committee on Foreign Affairs. The stated purpose of the bill is to ​“make improvements in the electronic filing of export data, to strengthen enforcement authorities with respect to Export Administration Regulations and for other purposes.”

The bill contains several major provisions, including:

Export Enforcement Enhancement

Permanent Law Enforcement Authorities – Providing the Special Agents in the Bureau of Industry and Security’s (BIS) Office of Export Enforcement (OEE) at the U.S. Department of Commerce with permanent law enforcement authorities that, among other things, allow them to make arrests, conduct searches and seizures and carry firearms.

Expanded Law Enforcement Authorities – Granting OEE Special Agents expanded authority to conduct undercover investigations, forfeitures and investigations in foreign countries.

Requiring Reports Regarding Iran – Requiring that the President report to the Congress regarding all countries that are of concern with respect to transshipment, reexportation or diversion of items that are subject to the Export Administration Regulations (EAR) to an entity owned or controlled by the Government of Iran.

Establishing Destinations of Possible Diversion Concern – Requiring that the Secretary of Commerce, in consultation with others, designate countries that are ​“Destinations of Possible Diversion Concern.” The U.S. will initiate government-to-government activities to strengthen the export controls systems of such countries. Such designations will be based upon a variety of factors, including: the volume of items originating in the U.S. that are transported through the country to end-users whose identities cannot be verified; the inadequacy of the export and reexport controls of the country; and the unwillingness or demonstrated inability of the government of the country to control diversion activities and cooperate with the U.S. in interdiction activities.

Establishing Destinations of Diversion Concern – Requiring the Secretary of Commerce, in consultation with others, to designate countries as ​“Destinations of Diversion Concern.” Such designations will be based upon a variety of factors, including: governments that are directly involved in transshipment, reexportation or diversion of items that originated in the U.S. to end-users whose identities cannot be verified or to entities owned or controlled by the Government of Iran; or a country that has been designated as a Destination of Possible Diversion Concern that has failed to cooperate with U.S. government-to-government activities within a specified period of time, or failed to adequately strengthen their export controls systems.

Additional Licensing Requirements for Destinations of Diversion Concern – Requiring that the Secretary of Commerce report to the Congress regarding items that if transshipped, reexported or diverted to Iran, could contribute to Iran obtaining nuclear, biological or chemical weapons, defense technologies, improvised explosive device (IED) components or other defense items, or support by Iran for acts of international terrorism. The Secretary shall require that a license be obtained to export items on that list to a country designated as a ​“Destination of Diversion Concern.”

Report Regarding Expansion of Diversion Concern System – Requiring that the President submit a report to the Congress identifying countries other than Iran that the President determines may be transshipping, reexporting or diverting items subject to the EAR to another country that is seeking to obtain nuclear, biological or chemical weapons, defense technologies, components for IEDs, or other defense items, or that provide support for acts of international terrorism. The report shall assess whether such countries should also be designated as ​“Destinations of Possible Diversion Concern” and ​“Destinations of Diversion Concern.”

Reports on Transfers of Military Sensitive Technology – Requiring an annual report by the President to the Congress regarding transfers of the most significant categories of U.S. technologies and technical information with potential military applications to countries and entities of concern. The report shall include an assessment by the President of the cumulative impact of U.S. licenses granted for such exports on the military capabilities of such countries and entities, as well as countermeasures that may be necessary to overcome the use of such technologies and technical information.

Improvements in Electronic Filing of Export Data

Establishing an Automated Export System (AES) Registration Program – Allowing the Secretary of Commerce to establish a registration program for agents to file information in the AES on behalf of the principal party in interest, foreign or domestic.

Requiring Periodic Updates to AES – Requiring that the Secretary of Commerce ​“ensure on an ongoing basis that changes in laws and regulations controlling exports from the U.S. are reflected” in AES when those changes are implemented.

Establishing Minimal Operational Features for AES – Requiring that the Secretary of Commerce, in consultation with others, ensure that AES has certain minimal operational features. Among other things, if the data filed with AES associated with the export does not satisfy U.S. export controls requirements, AES will issue a notice to that effect, accompanied by references to the applicable authorities.

What This Means for You

• This bill, which has been introduced early during the 111th Congress, indicates that strengthening U.S. export controls and enforcement is of interest to the legislature. The bill underscores the important role that export controls play in facilitating legitimate trade, while also protecting U.S. national security by combating international terrorism and weapons proliferation.
• The focus on increasing and enhancing U.S. export controls enforcement underscores that it is important for companies to have effective export controls compliance programs. Such programs help ensure that companies do not run afoul of export controls laws and regulations and help companies avoid civil administrative enforcement actions and criminal prosecutions.
• Foreign governments that implement and strengthen their export controls systems will avoid becoming havens for terrorists and weapons proliferators. If the Congress passes the proposed bill, such countries will be in a better position to avoid being designated as ​“Destinations of Potential Diversion Concern” and ​“Destinations of Diversion Concern,” which will have an adverse impact upon their trade with the U.S., and potentially with other countries.