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The United States Implements Defence Export Control Reforms

Commentary, 22 January 2014
Defence Management, Defence Policy
Export controls for the US defence industry are being reformed. This is a strategic judgment by the Obama Administration where ‘higher fences around fewer items’ of very advanced technologies are designed to counter threats to the US from advanced states or near-peer competitors such as China.

Export controls for the US defence industry are being reformed. This is a strategic judgment by the Obama Administration where ‘higher fences around fewer items’ of very advanced technologies are designed to counter threats to the US from advanced states or near-peer competitors such as China.

 F-35 JSF Factory

2014 will see the culmination of an executive branch reform process that had begun in 2010: the Export Control Reform (ECR) initiative.  President Obama declared: ‘…these reforms will focus our resources on the threats that matter most, and help us work more effectively with our allies in the field.  They’ll bring transparency and coherence to a field of regulation which has long been lacking both. And by enhancing the competitiveness of our manufacturing and technology sectors, they’ll help us not just increase exports and create jobs, but strengthen our national security as well.’[1]

The reforms have involved revising the categorisation of hundreds of individual defence items, completed systems, and services. Those defence items considered to provide a critical military or intelligence advantage will continue to be controlled by the International Traffic in Arms Regulations (ITAR) and remain on the US Munitions List (USML).  Requests to export items on the USML will always require licenses that undergo interagency review and are processed by the State Department before being sent for Congressional review.   

Those items and services considered less critical to US national security, or that are available from other sources, are being moved over onto the Commerce Control List (CCL) and will be subject to scrutiny and control via their Export Administration Regulations.  Shifting these items over to the CCL potentially means that the time required to obtain licenses will been shortened and more military items on the list will now be eligible for a licence exception to sell to NATO allies and countries that abide by all four international export regimes.

These export control changes reflect (a largely implicit) strategic judgment by the Obama Administration that the threats to the US come from advanced states or near-peer competitors (i.e., China) and that therefore what are required are ‘higher fences around fewer items’ of very advanced technologies.  Central to deciding on the level of control over a defence item is whether it is designated as ‘specially designed’.  If it is, then it is subject to USML controls.

Other motivations for the changes included allies’ requests to buy military goods speedily to use in Afghanistan and Iraq; though the pressure here has obviously waned.  Also important was the desire to help U.S. defence industries, particularly second and third tier suppliers that complained about losing business as foreign defence firms ‘designed out’ US origin parts and technologies that came under ITAR controls.[2] 

Moreover, US industries have been increasingly concerned about the attraction of European products marketed as ‘ITAR-free’. The US government was also concerned about the loss of sales to second and third tier suppliers decreasing US tax revenue and jobs, driving up domestic procurement costs and necessitating the US military to buy from abroad.[3]  This emphasis on the competitiveness of US defense industries is interesting because the ECR seems to have been driven primarily from within the Obama Administration, and reportedly, defence firms got more than they actually asked for![4] 

The ECR has introduced a paradigm shift in the process of export licensing because now the onus is on US defense firms to determine whether their items and materiel are ’specially designed’.. While the Administration has introduced a number of online tools to assist US industry in determining whether a military item belongs on the USML or the CCL, and claims that the definition is clear, [5] there is still real potential for confusion.  Indeed, during the consultation phase of the ECR, a number of US defense firms noted that the definition of ‘specially designed’ was ambiguous.[6]  Given that breaking ITAR rules results in heavy fines for US industry, the ambiguity is a real concern.

Other criticisms of the ECR relate to the loosening of controls over defence items transferred to the CCL.  There are concerns that Congress now has less statutory involvement in arms export decisions as fewer items now fall under the USML, coupled with the fact that the administration’s re-categorisation of the lists has primarily been in terms of military threats to the US, diminishing the ability to use the controls to deny exports to human rights abusers. 

There are also concerns that the ECR means that the US is no longer in step with important multilateral export regimes such as the Wassenaar Arrangement and the Arms Trade Treaty.  The Administration has sought to assuage critics on these points; as yet, to no avail.  Given that the next phase of the reform effort (to combine the USML and CCL into one list) requires Congressional legislation, these concerns need to be effectively addressed.


[4] Comments made by William J. Lowell at a briefing on the U.S. Administration’s new Export Control Rules, held at the Open Society Institute, Washington, DC, October 16, 2013.

[5] Daniel Wasserby et.al., ‘US Export Control Reform Measures Take Effect’, Jane’s Defence Weekly, October 23, 2013, p. 20.

Author

Joanna Spear
Senior Associate Fellow

Dr Spear is a Senior Associate Fellow of RUSI and was previously a Visiting Research Fellow on sabbatical from the George Washington... read more

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