{"id":113136,"date":"2025-02-27T10:38:16","date_gmt":"2025-02-27T10:38:16","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/legal\/long-on-control-short-on-reform\/"},"modified":"2025-02-27T10:38:16","modified_gmt":"2025-02-27T10:38:16","slug":"long-on-control-short-on-reform","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=113136","title":{"rendered":"Long on Control, Short on Reform"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p><span style=\"float: right; margin: 0px 0px 0px 20px;\"><img decoding=\"async\" title=\"John McCain Official Portrait via https:\/\/commons.wikimedia.org\/wiki\/File:John_McCain_official_portrait_2009.jpg [Public Domain - Work of U.S. Government]\" src=\"https:\/\/www.exportlawblog.com\/images\/mccain.jpg\" alt=\"John McCain Official Portrait via https:\/\/commons.wikimedia.org\/wiki\/File:John_McCain_official_portrait_2009.jpg [Public Domain - Work of U.S. Government]\" width=\"170px\" \/><\/span>The <a href=\"https:\/\/www.congress.gov\/bill\/115th-congress\/house-bill\/5515\/text\">John McCain National Defense Authorization Act of 2018<\/a>,\u00c2\u00a0 in addition to passing the Foreign Investment Risk Review Modernization Act of 2018 (\u201cFIRRMA\u201d), which <a href=\"https:\/\/www.exportlawblog.com\/archives\/9245\">reforms<\/a> the CFIUS process, also enacted the Export Control Reform Act of 2018 (\u201cECRA\u201d). That name is, I think, something of a misnomer\u00c2\u00a0given what the ECRA actually does. Perhaps a better name would have been the Export Administration Act Reenactment Act. After Congress in 1994 was unable to renew the Export Administration Act (\u201cEAA\u201d), which was the statutory authority for the parts of the U.S. export control regime covering dual use items and administered by the Commerce Department\u2019s Bureau of Industry and Security (\u201cBIS\u201d), every U.S. President has resurrected the dead statute each year with an executive order under the International Emergency Economic Powers Act. With the passage of ECRA, that is one less executive order that the White House will need to issue each year.<\/p>\n<p>Most of what ECRA does is provide the statutory authority for BIS that it previously had under the EAA and the yearly executive orders, although now with higher penalties for violations, which have been upped to $300,000 per violation. Why, after all, pass a law if you can\u2019t raise the penalties? The only thing in ECRA which might be called a reform in a traditional sense of making life easier for regulated parties is <a href=\"https:\/\/www.congress.gov\/bill\/115th-congress\/house-bill\/5515\/text#toc-H676972CF01FD4929AEBD6272A32A1759\">section 1757<\/a> which says the President may authorize BIS to provide export counseling to exporters. This provision has generated so much excitement among exporters that U.S. exporters were popping bottles of Dom Perignon in celebration. Sorry, just kidding.<\/p>\n<p>Rather than making life easier for exporters, the ECRA contains new controls certain to make\u00c2\u00a0exporters\u2019 lives more difficult.\u00c2\u00a0 (In addition\u00c2\u00a0to\u00c2\u00a0the higher penalties.\u00c2\u00a0 Did I already mention those?) License applications will now have to explain why the export of an item will not have a negative impact on the U.S. defense industrial base. The law also mandates that BIS consider stopping exports of items on the Commerce Control List to countries that are subject to State Department arms embargoes. (Ahem, does anybody think that\u2019s a dog whistle for restricting more exports to China?)<\/p>\n<p>But the biggest change, and potential headache for exporters aside from higher penalties, is <a href=\"https:\/\/www.congress.gov\/bill\/115th-congress\/house-bill\/5515\/text#toc-H354D0B2951CE453DA3268434BECD0636\">section 1758<\/a>, which requires BIS, in cooperation with the Departments of State, Energy and Defense to identify and control \u201cemerging and foundational technologies.\u201d What on earth, you rightly wonder, is an emerging and foundational technology? The act only says that they are technologies that are \u201cessential to the national security of the United States\u201d but not already subject to export controls. Basically, since all export controls are based on national security, the only real definition of an emerging and foundational technology is something that is not already export controlled but should be. Your guess is as good as mine (and Congress\u2019s) as to what these four agencies will decide to control under this new rubric.<\/p>\n<p>Once the list of these new export controlled items is in force, then the ECRA requires as a minimum level of control that export of this technology to a \u201ccountry subject to an embargo, including an arms embargo, imposed by the United States\u201d would require a license. (Hello, China!) Embargo is not defined, so it\u2019s not clear if a license would be required for these technologies with respect to a country to which the United States prohibited only a few types of goods or arms. A more significant issue is how this requirement, which applies to any \u201ccountry\u201d subject to an embargo would affect exports of emerging technologies to the Crimean territory, which is subject to a comprehensive embargo. This provision would impose the license requirement on either Russia or Ukraine depending on which country is considered to own Crimea and whether an embargo of a territory of a country means that the country\u00c2\u00a0is subject to an embargo.<\/p>\n<p>The last thing to note about section 1758 is that the license requirement would not apply to what the Senate version referred to as \u201cordinary business transactions.\u201d In the legislation as passed, these ordinary business transactions are described, for example, as<\/p>\n<blockquote>\n<p>The sale or license of a finished item and the provision of associated technology if the United States person that is a party to the transaction generally makes the finished item and associated technology available to its customers, distributors, or resellers.<\/p>\n<\/blockquote>\n<p>For those used to the EAR\u2019s treatment of technology this provision seems odd and unnecessary. \u201cAssociated technology\u201d generally made available to customers would be \u201cpublished,\u201d as defined in <a href=\"https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=a6be4c4db12ac0e6b51708333e247aae&amp;mc=true&amp;node=se15.2.734_17&amp;rgn=div8\">section 734.7<\/a> of the EAR, and thus not subject to the EAR or any license requirement, making this exception completely unnecessary. I suspect that the ECRA, which never defines \u201ctechnology,\u201d is using the term in a loose sense that would cover physical goods in addition to information. In any event, count on these exceptions\u00c2\u00a0to cause much confusion when the list of emerging and foundational technologies finally appears.<\/p>\n<p>Oh, and did I mention the higher penalties?<\/p>\n<p>\t\t\t\t<span style=\"font-size:0.8em;\"><plusone size=\"small\" count=\"false\" href=\"https:\/\/www.exportlawblog.com\/archives\/9247\"><\/plusone> <img decoding=\"async\" src=\"https:\/\/www.exportlawblog.com\/images\/permalink.gif\" alt=\"\" \/><a href=\"https:\/\/www.exportlawblog.com\/archives\/9247\" rel=\"bookmark\">Permalink<\/a>  <\/span><\/p>\n<div><a class=\"addthis_button\" href=\"http:\/\/www.addthis.com\/bookmark.php?v=250&amp;username=clifburns\" addthis:url=\"https%3A%2F%2Fwww.exportlawblog.com%2Farchives%2F9247\" addthis:title=\"The+Export+Control+Reform+Act%3A+Long+on+Control%2C+Short+on+Reform\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/s7.addthis.com\/static\/btn\/v2\/lg-share-en.gif\" width=\"125\" height=\"16\" alt=\"Bookmark and Share\" style=\"border:0\" \/><\/a><\/div>\n<p><!-- AddThis Button END --><br \/>\n<br \/>\nCopyright \u00a9 2018 Clif Burns. All Rights Reserved. <br \/>\n<i>(No republication, syndication or use permitted without my consent.)<\/i>\n\t\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The John McCain National Defense Authorization Act of 2018,\u00c2\u00a0 in addition to passing the Foreign Investment Risk Review Modernization Act of 2018 (\u201cFIRRMA\u201d), which reforms the CFIUS process, also enacted the Export Control Reform Act of 2018 (\u201cECRA\u201d). That name is, I think, something of a misnomer\u00c2\u00a0given what the ECRA actually does. Perhaps a better [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":113138,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[2408,241,13460,296],"dealstore":[],"offerexpiration":[],"class_list":["post-113136","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","tag-control","tag-long","tag-reform","tag-short"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Long on Control, Short on Reform - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=113136\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Long on Control, Short on Reform - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"The John McCain National Defense Authorization Act of 2018,\u00c2\u00a0 in addition to passing the Foreign Investment Risk Review Modernization Act of 2018 (\u201cFIRRMA\u201d), which reforms the CFIUS process, also enacted the Export Control Reform Act of 2018 (\u201cECRA\u201d). 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