Five Things Small Businesses Should Know About Export Control Reform

Small businesses are growing at unprecedented rates. They employ about half – 55 million – of the nation’s private workforce and account for 99.7% percent of all employers in the U.S. Through exporting, they have the opportunity to grow even more: two-thirds of the world’s purchasing power is in foreign countries. In a 2013 survey of 500 small business owners, the National Small Business Association (NSBA) found that 63% of participants who did not already export said that they would be interested in doing so, but cited lack of information on exporting as an obstacle for small businesses.

In 2009, President Obama launched the Export Control Reform (ECR) initiative, a significant effort aimed at enhancing our national and economic security through reform of the export control system—a system that had not been comprehensively updated in decades. The Commerce Department’s Bureau of Industry and Security (BIS) administers export controls for commercial and some military commodities and technologies. Now, the President’s ECR initiative is transferring tens of thousands of less sensitive military items from the State Department’s jurisdiction to the more flexible Commerce regulations. Most are parts and components; many are manufactured by small businesses. Moving these items to Commerce benefits small businesses because BIS’s regulations allow for more nuanced distinctions among technologies, destinations, and end users than the State Department’s regulations.

Here are five things small businesses should know about ECR:

1. Who is affected?ECR affects second and third tier small and medium suppliers in the defense industry. These sectors include aerospace, military vehicles, marine vessels, space, satellites, and electronics.
2. ECR eases the financial burden:Currently, exporters subject to the State Department’s International Traffic in Arms Regulations (ITAR) pay $250 per license to the State Department, even to export an item that sells for $200. In addition, all manufacturers and exporters have to pay a minimum registration fee of $2,250 per year, even if they don’t export. Commerce, however, is prohibited by statute from charging licensing and registration fees. For an estimated 60% of former State Department registrants whose products are moving to the Commerce Department then, there are no annual registration requirements or associated fees. This directly affects the bottom line.
3. More flexible regulations:License Exception Strategic Trade Authorization (STA) establishes a license-free zone covering the first export transaction for many parts and components that have been transferred to Commerce. STA provides small businesses with an opportunity to ship license-free to 36 countries, so long as certain safeguards are observed.
4. How can ECR help you? ECR helps small businesses by increasing the security of supply from small companies that are the second and third tier suppliers, facilitating timely and reliable supplier relationships between U.S. exporters and their foreign customer base, and enhancing their long-term health and competitiveness.
5. Resources:BIS recognizes that this transition requires considerable outreach and education to affected industries. This is why we work with non-profit educational groups representing small defense exporters, conduct weekly ECR conference calls open industries and companies, and have added interactive tools to our website to help U.S. companies comply with the new regulations under the ECR initiative. In addition, we provide free counseling via phone (Washington DC: 202-482-4811; BIS Western Regional Office: 949-660-0144 and 408-998-8806). We host 30 seminars and events annually, and the BIS website also has a variety of online tools and resources in our Exporter Portal.