Six Ways Small Businesses Benefit from Export Control Reform

Earlier this month, the Bureau of Industry and Security’s (BIS) Assistant Secretary Kevin J. Wolf represented the Commerce Department at a House Small Business Committee hearing. Assistant Secretary Wolf testified on the benefits of the Administration’s Export Control Reform Initiative, a comprehensive update of the export control system, to America’s small businesses. BIS administers export controls, which protect the national and economic security interests of the United States by ensuring that the most sensitive goods and technologies stay out of the most dangerous hands.

In 2009, BIS and its partner agencies throughout government undertook the most fundamental reform of the export control system since World War II. This effort, the Export Control Reform Initiative, has streamlined and modernized the rules pertaining to the export of military and some commercial goods and technologies. It has involved moving hundreds of thousands of less sensitive military items, primarily parts and components predominantly manufactured by small businesses, and related technologies from State Department regulations to the more flexible Commerce Department regulations.

Companies continue to learn and adapt to the changes from the initiative. Small businesses in particular have found the changes to be particularly beneficial, as the reform effort has eliminated many regulatory burdens.

Here are six ways small businesses benefit from Export Control Reform:

1. There are no registration requirements with the Commerce Department. This eliminates the expense of paying to register and the burden and expense of preparing and submitting annual registration forms or fees.
2. There are no fees for submitting license applications. For small companies exporting products with low margins, this is a significant advantage.
3. There are no requirements to get permission merely to manufacture or to market abroad. The Commerce regulations, of course, still control the flow of goods, technology, and software, but with far shorter and simpler forms than the State Department’s regulations. Most Commerce authorizations also have significantly fewer conditions and regulatory burden requirements than do State’s agreements.
4. There is no requirement to have a purchase order for each license application. This means that an exporter can resolve its licensing obligations before knowing whether it has a sale, which saves time. It also dramatically reduces the total number of applications and licenses needed over the duration of a regular relationship with a foreign customer that will involve multiple purchase orders.
5. Except in situations involving military and satellite items destined to countries subject to embargoes, the Commerce rules generally do not have a “see through” rule if the U.S. content is less than 25 percent. This is the rule that means that an item is always subject to U.S. jurisdiction even when incorporated into foreign-made items or uncontrolled items. This change bolsters the health and competitiveness of the U.S. industrial base by reducing the incentive for foreign customers to avoid U.S. parts and components.
6. Most importantly, the Commerce regulations have multiple license exceptions that do not exist in the State regulations. In most cases, these exceptions allow exporters to ship their products to allied and other non-embargoed countries with more ease. There is no need to apply to the government for a license, assuming the parties are willing to maintain records and other conditions to help ensure compliance.  

For all these reasons and others, ECR helps small businesses, particularly defense exporters, by increasing the security of supply from small companies that are the second and third tier suppliers in the defense industry. ECR also facilitates timely and reliable supplier relationships between U.S. exporters and their foreign customer base. To this end, businesses large and small continue to benefit from the successes of the ECR Initiative.

For more information, please visit the BIS website at www.bis.doc.gov or follow us on Twitter @BISgov.