Deadline Rush

The White House is racing against time to implement the first elements of its export control reform initiative before the presidential election this year, which will require the administration to notify Congress of the intended changes, Inside U.S. Trade reports this morning. Further:

Standing in the way is the lack of an agreement with the committees of jurisdiction on how detailed the notifications should be and the considerable substantive work that remains to be done on the required regulations, which also need to be cleared interagency, according to informed sources.

The administration is targeting September for the first notification of changes to export control rules for aircraft and engines, but in light of the current obstacles, that could slip to the lame-duck session of Congress, sources said. This may raise additional obstacles for any notification, particularly if President Obama is not reelected, according to these sources. The administration has been working on the export control reform initiative for about two years after it was announced by then-Secretary of Defense Robert Gates in April 2010.

Under the best of circumstances, sources said the administration would be able to notify the transfer of items in the aircraft and engine categories from the U.S. Munitions List (USML) to the Commerce Control List (CCL) before the election.

Traditionally, such notifications under Section 38(f) of the Arms Export Control Act have been made while Congress is in session, though it is not required by law, sources said. That puts the administration on a tight schedule because there are eight legislative days in September and five in October.

Notification of the aircraft and engine category revisions would only represent a fraction of the technical work that has been done on the overall USML rewrite. A number of categories, such as Category VII covering military vehicles, have been published in proposed form. But seven of the 21 USML categories are still to be published as proposed rules and are still moving through the interagency review process, administration officials have said.

Given that it is unlikely the administration and Congress will reach agreement in the next few weeks on how to present the notifications, the administration will likely face a political decision on whether to force the issue by making them formally without such a consensus, sources said. At this point, the administration has not made any final decisions internally on how to proceed beyond working intensively on the final rules that need to be part of the notification, a senior administration official said this week.

Previously, Undersecretary of Commerce for Industry and Security Eric Hirschhorn implied that the administration would proceed to formal notifications quickly instead of engaging in a long pre-notification dialogue.

But proceeding with a formal notification without at least congressional acquiescence will require the administration to weigh the potential political fallout from such a step. Congressional staff has hinted that this could involve legislation stopping the export control initiative, or denying the administration the funds in the appropriations process to implement the initiative.

At this point, the discussions have largely been with congressional staff, which has demanded more detail in the notifications than the administration has said it can practically provide. Some sources said the staff does not appear to have much political guidance from its principals, but others said the House staff stance reflects the skepticism that House members on both sides of the aisle have displayed to the export control reform initiative.

In response to congressional staff concerns, the administration has scaled back some of the reform provisions in subsequent proposed rules. For example, in a June 19 proposed rule further explaining how items will transition from the USML to the CCL, the administration placed congressional notification requirements on the export of items beyond a certain dollar threshold that are located in a special 600 series of export control classification numbers where former USML items will be placed on the CCL.

Sources said that the administration will ultimately have to develop a strategy for elevating this issue to members of Congress, but they said there has been no decision on such an end game. The administration official said it is premature to talk about how this will be handled "until we've actually come to a final opinion internally on all of this."

Private-sector sources said that legislation to block or hinder the reform effort is highly unlikely given that it would be hard to get an agreement between the chairmen and ranking members of the House and Senate committees of jurisdiction and secure a legislative vehicle to move it in the limited number of days left in the session.

One source noted that in the Senate, Republican critics of the export control initiative have so far failed to find a member willing to champion language in the National Defense Authorization Act (NDAA) that would limit the administration's flexibility in how to notify the transfers from the USML to the CCL. Such language is included in the NDAA version approved by the House earlier this year but the Senate has not yet acted on its version of the bill. It is expected to do so before Congress leaves this year, and by that time, it is possible that export control reform critics will have found a member to offer this language as a floor amendment, one source speculated.

If that language passed before the first notification is submitted, it would further complicate the process, one source said. The House language is unacceptable to the administration because it obligates the administration to provide an "enumeration" of the transferred items to the extent practicable. But another source said the administration could simply claim it has met that requirement with what it has submitted.

In addition to spelling out the category changes, the first congressional notification under Section 38(f) will be accompanied by three final rules. One of them governs the transition of items from the USML to CCL, a second defines items that are "specially designed" for military applications and thereby subject to tighter controls than other items, and a third sets the framework rule that will create the categories for the transferred items on the CCL. All these rules spell out the elements of how these transferred items will be controlled once they leave the USML and are therefore required for the notification.

"We're working aggressively in August to do all that and we still hope, expect and plan to be able to sometime in late summer, early fall, to be able to have all of that ready [as final rules] because that is necessary . . . to attach to the [Section] 38(f) notice" made under the Arms Export Control Act, the official said.

"We are hoping to get all this done in August and September and sometime soon thereafter we'll start talking to Hill staff," the official said. The official implied that a draft final version of these rules will be the basis for initial congressional discussions.

The public comment periods for the "specially designed" rule and the transition rule ended in early August and the incoming comments still need to be considered in developing a final rule.

Some sources familiar with the process say it is impossible to develop the required a final rule and get it cleared interagency in the timetable laid out by the administration official, but others said it may still be possible.

The skeptics note that export control work at the State Department has been lagging since Undersecretary for Arms Control and International Security Ellen Tauscher left her job for health reasons. They said Tauscher had the export control knowledge and the political stature to advance export control reform issues within State and that the same combination does not exist in her successor, Acting Undersecretary Rose Gottemoeller, nor in the Assistant Secretary for Political and Military Affairs Andrew Shapiro and his deputy Beth McCormick.

If the notification process slips into the lame-duck session and President Obama is not re-elected, it is likely that the new administration would take its time to review the work done up to that point and then decide how to proceed. This could take at least a year since export controls are not likely to be a priority issue for the new administration, a private-sector source speculated.