U.S. Export Controls: Is There a New Sheriff in Town?
U.S. exporters should be aware that the gun has gone off and there is a new export controls race
Export controls have existed in some form since the beginning of civilization. Societies have always had a need to protect their security and allocate limited and strategic resources by enacting export control measures. For example, the exporting of crossbows was prohibited in medieval times as they could give rival fiefdoms a significant military advantage, and the export of gunpowder from China was prohibited in 900 A.D. Export controls are greatly influenced by world events and ever-changing political regimes. Ongoing external conflicts, a new U.S. political administration and the use of increasingly sophisticated technology will drive a more granular focus on cross-border trade involving a deeper cooperation among federal agencies.
U.S. Export Controls History
In 1774, the United States' First Continental Congress convened in Philadelphia and the following December declared the importation of British goods to be illegal. Twelve months later the U.S. Congress outlawed the export of goods to Great Britain, thus establishing the first American export controls. Since then, the United States has imposed export controls for a variety of reasons through legislation such as the Embargo Act, Trading with the Enemy Act, the Neutrality Act and the Export Control Act. In reaction to Japan's occupation of parts of Indo-China in 1940, the U.S. Congress passed the Export Control Act, which forbade the exporting of aircraft parts, chemicals and minerals without a license.
The Export Control Act of 1949 gave the U.S. Department of Commerce primary responsibility for administering and enforcing export controls on dual-use items — items that can be used for both commercial and military applications. For the first time, this act defined three reasons for the imposition of export controls: to bolster national security, supplement foreign policy and protect short supply of resources. This act was created to impede the economic and military development of the "Communist Bloc" countries after the Axis powers had been defeated in World War II. Upon the expiration of the Export Control Act, the Export Administration Act (EAA) of 1969 took effect on January 1, 1970.
Global Conflicts Breed Changes to Export Controls
The last 30 years have seen significant changes in U.S. and international export controls. One of the cornerstones of the Reagan foreign policy in the 1980s was to stress multilateral controls against exports to the Communist Bloc, as opposed to the unilateral export control emphasis that had been in place since the Cold War. These multilateral export controls involved cooperation and support of other nations allied with the United States. These multilateral export controls were agreed upon and implemented with European and Asian allies and were considered to be a major factor in the fall of the Soviet Union in 1991. With the Soviet Union no longer in existence, the U.S. government became aware of the potential threat posed by rogue states that endorsed international terrorism — a threat confirmed 10 years later by the Al-Qaeda actions on September 11, 2001.
A major benefit of multilateral export controls is that they provide a united front with multiple countries collectively promulgating export controls to limit exports to end-users who pose a global terrorist threat. Multilateral export control cooperation is sought through several arrangements such as the Wassenaar Arrangement, Nuclear Suppliers Group, the Australia Group and the Missile Technology Control Regime.
Currently, the Export Control Act of 1979 is expired and the International Emergency Powers Act (IEEPA) is being used until a new act is approved by the U.S. Congress and signed by the President. It is too early in the Obama administration to determine what measures the new president will take regarding export controls. The recent global economic downturn and the threat of "unforeseen" terrorist events affect the emphasis and strategy of such controls. These events could well take place in Pakistan, Iran or a "black swan" location — a location hard to predict.
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