Export Administration Amendments Act of 1985

Legislation concerning export controls must balance two concerns--promoting commercial prospects and safeguarding national security. The Export Administration Amendments Act that was passed and signed into law by President Reagan on July 12, 1985, does just that.

The Act increases U.S. competitiveness by removing licensing requirements on some exports to COCOM partner countries and shortening the licensing process times both for COCOM destinations and all other areas. (COCOM stands for the Coordinating Committee for Multilateral Export Controls. The COCOM nations are Belgium, Canada, Denmark, France, the Federal Republic of Germany--including West Berlin, Greece, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, Turkey, the United Kingdom, and the United States.)

As President Reagan pointed out when signing the bill, "this new law . . . strikes an acceptable balance between enhancing our commercial interests and protecting our national security interests."

The new law represents a continuation of an export controls program that has been in operation since World War II. Export controls were first invoked to ensure that adequate supplies of commodities were available during the war. Continued shortages after the war and the tense political situation between the United States and U.S.S.R. resulted in a continuation of controls. Under the Export Control Act of 1949, exports to the U.S.S.R. and other communist countries were examined for their military significance. A broad-based, short supply export control program was continued to deal with the post-war worldwide shortage of goods.

This act remained in effect for 20 years. Major revisions occurred with the Export Administration Acts of 1969 and 1979. It was the 1979 Act that was amended by the Export Administration Amendments Act of 1985.

The new legislation contains some 55 revisions or additions to the 1979 law. Of these, 11 were already completed for underway by the time the law was passed. For example, action had already been taken on granting distribution licenses on the basis of reliability and reducing qualifications for multiple transactions through periodic review.

Twenty-four of the changes, including those concerning the decrease in licensing requirements to COCOM trading partners, require major changes in regulations and procedures. The remaining are either being studied for later revision, require long-range implementation, or require action only when the need arises.

Major changes in the Act include:

* Requiring licenses for controlled goods sold to embassies of prescribed countries located in the United States;

* Decontrolling exports of low-level technology goods to COCOM countries;

* Prohibiting imposition of controls on the sole basis an item contains an embedded microprocessor;

* Shortening processing time for licensing by one-third;

* Ensuring contract sanctity when foreign policy controls are implemented.

Other provisions include:

* Requiring negotiations to eliminate foreign availability;

* Revising standards for distribution licenses;

* Adding new objectives for strengthening COCOM;

* Requiring the President to make certain determinations before imposing foreign policy export controls;

* Expanding consultation and reporting requirements when imposing controls and issuing regulations.

In the following paragraphs, key provisions of immediate interest to exporters are discussed.

Licensing Requirements for

COCOM Countries Liberalized

Under the provisions, licensing will no longer be needed for low-level technology commodities going to the 14 other members of COCOM. Once in place, this provision is expected to reduce the Commerce licensing load by 10 to 15 percent a year. Commodities affected are those that appear on the COCOM Control List with "administrative exceptions." Of the 47 commodities with such provisions, the greatest impact is expected to be on computers with its myriad of administrative exceptions.

Implementation of this provision is not simple as entries are highly technical. It will involve revision of Export Administration Regulations (EAR) and implementation of new internal procedures and operating guidelines. Changes in the regulations will be published shortly.

Processing Deadlines Shortened

Under new provisions of the law, overall processing time for exports to non-COCOM countries will be reduced by one-third. If a license does not require review by other agencies, processing time will be cut from 90 to 60 days. If a license does require outside referal, the maximum processing time is reduced from 180 to 120 days (see table above).

Licenses for exports to COCOM countries are required to proceed at an even faster pace. A license to COCOM countries will be valid and effective 15 working days (three weeks) after registration unless the exporter is notified otherwise. Although Commerce can request additional time, the license automatically becomes valid after a total of 30 working days (six weeks) if the applicant is not informed of case denial. Under the statute, Commerce is required to send notification of receipt of the application. This receipt is to include a license number so it can be used as proof to permit export once the deadline passes.

While this could be a boon for exporters, they should be aware of certain pitfalls accompanying this provision. For example, in cases where prelicense checks are required, more time may be needed. Another problem that exporters may face is assuring that shipments already in the hands of freight forwarders are not made if, for instance, on the 14th day after registration, Commerce determines there is a problem with issuing a license. Implementing this provision will require close coordination between the Customs Service and Commerce. It is likely that Commerce also will establish a COCOM Coordination Desk to ensure that this procedure is properly administered.

Third Country Negotiations

The favorable treatment accorded our COCOM trading partners may be extended to other countries if they meet provisions of Section 5(K) of the Act. This section states that if negotiations with other countries produce agreements on export restrictions comparable to those maintained by COCOM, Commerce shall treat exports to these countries in the same manner as it does exports to members of COCOM.

Foreign Availability Provisions

The 1979 Act required Commerce to review the foreign availability of exports subject to national security controls on a continuing basis and to perform case-by-case reviews of availability in conjunction with the submission of license applications. (Foreign availability refers to products controlled by the Export Administration Act which in fact are available to controlled countries, making U.S. restrictions ineffective.)

Furthermore, the 1979 Act called for staffing a Foreign Availability Program in the Office of Export Administration. Since December 1983, a Foreign Availability Division has been in operation. To conform with the new law, the division will soon be elevated to "Office" status. Under the law, one of the major new responsibilities for the office will be assessing foreign availability when new controls are proposed and determining the effectiveness of such controls.

Anticipating other foreign availability issues that would be addressed in this Act. Commerce issued draft regulations March 15, 1985. These regulations, which will be published in final version this month, complement provisions in the law which place the burden of proof on Commerce rather than the exporter.

According to the Act, Commerce must accept evidence of foreign availability presented by the exporter unless it can prove otherwise. The regulations also provide guidelines on the types of evidence that can be used as proof and require demonstration of availability to the Soviet bloc.

Classification Requests

Another amendment of the Act requires that Commerce answer requires on the commodity classification of an item or a type of technology within ten days of receipt of the request. Previously, the Department of Commerce was not under statutory obligation to answer such requests, but did so as a service to exporters. Steps are being taken to make this service conform to the law.

Foreign Policy Controls

Changes were enacted to tighten requirements when the President imposes, extends, or expands foreign policy controls. The U.S. government will also need to consult with out COCOM partners, and others where appropriate, when imposing such controls.

In the area of contract sanctity, the President will be allowed to break existing contracts only if the strategic interests of the United States are threatened. The intent of this provision is for U.S. exporters to be perceived as reliable suppliers while maintaining Presidential authority to respond in situations where the country's strategic interests are at stake.

Enforcement Provisions Strengthened

In the area of enforcement, the new law grants enhanced enforcement powers to the Department of Commerce and the U.S. Customs Service by providing both agencies with political powers. Customs is charged with conducting investigations overseas, while Commerce maintains its traditional lead in prelicensing checks and post-shipment verification investigations.

The law also provides for import restrictions and forfeiture of property by violators of the Act and increased coordination between the COCOM countries to verify movement of goods and technology.

Overall, the 1985 Act will have considerable impact on the Export Administration. In certain instances, the amount of paperwork will be reduced. However, implementation of other provisions increases Export Administration responsibilities. To meet these new challenges, revisions in regulations and procedures are being undertaken. These steps ensure that the law will be administered as intended and that the policy objectives of the export control program will be met. As one of the objectives in the Act states: "It is the policy of the United States that export trade by United States citizens be given a high priority and not be controlled except when such controls (a) are necessary to further fundamental national security, foreign policy, or short supply objectives, (b) will clearly further such objectives, and (c) are administered consistent with basic standards of due process."

COPYRIGHT 1985 U.S. Government Printing Office
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