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Defense Industry Hopeful Trump Will Pick Up Obama's Legacy of Export Control Reform

January 20, 2017 (Photo Credit: Portuguese Air Force)
WASHINGTON — As US President Donald Trump takes office on Jan. 20, the defense industry will be looking for him to build on one of the Obama administration’s wonkiest accomplishments: the quiet but sweeping overhaul of the many regulations that control weapons exports.

The goal of the administration’s export control reform effort was to simplify the US Munitions List (USML) — which enumerates the defense articles that are controlled by the State Department under the International Traffic in Arms Regulations (ITAR) — by moving items to Commerce Department control, resulting in less paperwork and a faster approval process.

As of 2016, all USML categories, with the exceptions of firearms, ammunition and artillery, have gone through the reform process, and the State Department has started its second review of the list.

For the defense aviation industry, the impact has been dramatic. State Department licenses for items classified by the USML as “aircraft and related items” have downsized by about two thirds, said Rob Hart, who works at the State Department’s Office of Defense Trade Policy, which implements the initiative.

“The administration was very clear to try to lessen, or even eliminate if possible, the burden on supplier companies that were having to try to navigate ITAR-level restrictions on essentially commercial technology, simply because of definitions,” said Remy Nathan, Aerospace Industries Association’s vice president of international affairs.

For example, lumping all technology on a military aircraft onto the USML sometimes made it less attractive for foreign nations to buy replacement parts from US manufacturers, especially for components that had commercial or foreign substitutes. 

“You would see the license, and the value would be a few bucks. It would cost them more to get the license than it does to actually [buy the product],” Hart said.

The effort, which began in 2009, required collaboration between officials at the State, Defense and Commerce departments, as well as input from Congress and industry. The first two sections of the USML to undergo revisions were aircraft and gas turbine engines.

“We went from this generic language for military applications that kind of captured everything and treated everything the same way to articulating the end items, the systems, the parts and components that we actually care about,” Hart said.

The most sophisticated, advanced and classified aircraft — like the B-21 and B-2 bombers and F-35 Joint Strike Fighter— and all of their related systems and components remain completely controlled under ITAR. But older and commercial-derived aircraft saw many parts and systems move to the Commerce Control List (CCL).

On an F-16, for example, the State Department still facilitates sales of the aircraft itself, its engines, mission systems, computers, radar and other critical equipment. But most items related to spare parts — everything from the wings and fuselage to hydraulic hoses and cockpit knobs — as well as products common in commercial aerospace, such as aircrew safety equipment, are now licensed under the simpler CCL process.

Some sales further benefit from the Commerce Department’s newly introduced Strategic Trade Authorization, which allows the US to export a controlled item to 36 close allies and partners without needing a license for every transaction, Hart said.

Although there is still work to be done, the reform initiatives have been beneficial, especially at the supplier level, Nathan said. But those same companies were also put under the most stress as they implemented changes to their product management and IT systems to differentiate between ITAR-controlled products and those under the CCL.

“They had to figure out the new system. The old system was easy to understand, but you ended up with over-control. The new system is more of a challenge to understand, but once you understand it once, you’re good,” he said.

Large companies or companies that already do commercial sales, such as Boeing, had an easier time adjusting. Kathryn Greaney,  Boeing’s vice president of global trade controls, told Defense News that the firm was poised to address changes in the export control regime because of its experience dealing with both State and Commerce controls.

“While there was clearly some careful work done to make the transition, we feel it’s gone smoothly. We continue to work with the US government, when needed, to clarify any questions that come up, and that process has worked very well,” she said. Meanwhile, “the resulting changes to the regulations have seen increased efficiency in the export of certain parts and components to customers in friendly and allied countries.”

The Future of Export Control

Real estate mogul Donald Trump ascended to the presidency in part because of his background in business and promises to bring jobs and economic growth to the country. Now that the Trump administration has taken control of the White House, advocacy groups like the Aerospace Industries Association want to see the new president do even more to enable sales of military aircraft.

“There is certainly room to advance the incoming administration’s agenda by tacking this otherwise highly technical seeming issue,” Nathan said. “I think that they’ll find that continued action on it is going to offer significant job creation in the US. The US aerospace and defense industry consistently generates the largest manufacturing trade surplus, and we’re capable of doing more provided that the technology controls are appropriate.”

For weapons programs that are developed with significant international buy-in, like the F-35, it may make sense for the State Department to move away from approving each and every transaction, Nathan said. Instead, the department could issue a “program license” that would draw an overarching regulatory framework and allow certain countries a license exemption, much like the Strategic Trade Authorization.

The department could also consider other license exemptions for items like repair or replacement parts still on the USML, or for articles that will be used in support of US government activities, he said.
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