 Good morning. Thanks for coming to CSIS. My name is Jim Lewis. We're going to start our event. Our speakers are here. They're just looking for mics, so don't worry about that. Export controls can really make a difference when it comes to national security, but we know from experience that out-of-date export controls can cost billions in exports and thousands in jobs without any security benefit. If you get export controls wrong, if you don't take into account how the international economy has changed, they can actually do some damage. So it's a step forward, a big step forward, that we've seen this export control reform effort come to fruition. The people on the stage and their predecessors have struggled to get export controls right. They've made remarkable progress that we'll hear about today. Here's the format. We will begin with remarks by Caroline Atkinson, Deputy Assistant to the President and Deputy National Security Advisor for Economic Affairs. Caroline has to leave promptly. She'll be followed by this panel chaired by my colleague Stephanie Sanuck. It's Kevin Wolf, Tom Kelly, Brian Nielsen, Hugh Hoffman, and Craig Healy. Stephanie will introduce them. We'll take questions after the panel. I'm not going to read Carol's bio because that would take up about half the session. It's too distinguished to cover. It is available on our website, but she has been special assistant to the President for International Economic Affairs since 2011 and is now the Deputy National Security Advisor for International Economics. Long career, sort of amazing. I don't think we've ever had anyone from the Bank of England speaker before, so thank you very much. With that, let me turn it over to her. Thank you, Caroline. Thanks very much, Jim, and to all of you. And you're not surprised with that Bank of England introduction to him, my accent, although I've spent more than half my life in the U.S., apparently beyond a certain age. You don't change the accent. And I was also born here, but anyway. So I'm delighted to be here to talk about this issue. My colleague, Brian Nielsen, who knows A to Z and every letter in between and all the subcategories will be on the panel and able to take up more of your questions and let you know about his work, which has been tremendous in this effort for my predecessor, Mike Froman, and also for me. And whilst export controls may not be at the forefront of most people's minds, I can report that they certainly appear to be at the forefront of Brian's mind and he makes sure that they are an important issue for the rest of us, including myself. They actually, as you all probably know well, have a far-reaching impact on U.S. businesses, large and small, and it's really important and being made clear to all of us how important it is to modernize this aspect of our control system to make sure that it's both comprehensive and comprehensible. It's the only way that we can make sure that we are engaging in safe trade that helps our men and women overseas, but also, as Jim referred to it, we're not doing things that could actually harm our safety. That means that export controls need to be really carefully calibrated so as to meet defense and non-proliferation objectives without undermining them. That means also that they have to be flexible, threats change, technology changes. We need an export control system that's nimble enough to adjust to these changes and that's why back in 2009, very early on in the first term of President Obama he directed the National Security Council and the National Economic Council to stand up a comprehensive review of our export control system and put forward a set of recommendations, and by the way to start implementing them, to ensure that it's designed to meet our national security and non-proliferation objectives. Now, you might say what's the National Economic Council got to do with it and by the way, I have a dual report to both elements of the White House on economics and that's because our national security requirements in the 21st century cover much more than a broader array of areas than in the past. It's our commercial sector, unlike in much of the 20th century it's not our military that is fueling the development of the next generation of technologies. That was a key finding in the national intelligence estimate that we conducted at the outset of the export control reform process and that was in fact the first national intelligence estimate done on export controls and one that has guided us as we've done the reform. You may have heard this but I want to just repeat the sort of three-part mantra about export control reform and the reason for it. The first is it helps us to focus our resources in this area on the threats that matter most. The work that we've already done on rewriting our export control lists provides the flexibility that I said is needed to prioritize our controls because not all items, not all end users and not all end uses pose the same risks. We need the flexibility to adjust controls, not a wholesale decontrol but the flexibility. Two, export control reform will increase interoperability with our allies. As we've seen in Afghanistan, Iraq, our military operates in a coalition with our allies. We need to be interoperable with those allies if we're to improve their effectiveness and increase and ensure our troops collective security. So we need to be able to work jointly together more effectively on programs that we're developing jointly. Third, export control reform strengthens the U.S. defense industrial base. It reduces incentives for foreign manufacturers to replace U.S. origin content with foreign origin content simply to avoid our export control system. And there are two elements, two reasons that make this last point so important. The first is that we do need people back home making these items so that we maintain the expertise and are able to meet our own future needs in this area. And yes, an element of that is maintaining and expanding U.S. jobs to sustain economic security. But the second is that the trend of replacing U.S. origin content with foreign-made items means that our controls are diminished as others go around them and our visibility in the movement of items is less sensitive ones but still important ones is reduced. So that is a serious unintended consequence of past export of the existing export control system and something that we certainly have in mind during the reforms. Let me just tell you briefly about where we are in the reforms. We've made huge strides in the past year moving from planning to implementation. In the lingo that means that we are now in the second phase of our three phase implementation work plan. We have to finish this second phase before we consider the third and final phase of legislation to consolidate our licensing and enforcement agencies. And we've made some adjustments to the 2010 work plan that first laid this out primarily to add new items to the matrix that we determined needed to be done whilst also focusing our energies first and foremost on the most urgent changes needed. I'm glad to say that we are now approaching the completion of rewriting the munitions list which is the cornerstone of the effort to date. Our first final categories have gone into effect. They went into effect last October for aircraft, gas turbine engines, classified articles and miscellaneous and four more went into effect in January for vessels, military vehicles, auxiliary military equipment and submersibles. These eight categories out of many account for over $75 billion in exports under license which is the bulk. We published another five categories in January that will go into effect in the summer including launch vehicles and missiles, explosives, military training and protective equipment that account for another $5 billion in exports. And the panel will be able to update you on how it's been going since we began and we now have some experience of operating under the new system with the first rules having gone into effect several months ago. These changes mean that over half of the categories, 13 out of 21 in the munitions list have been published in final form and those 13 categories all together account for almost 90% of our export licensing, over $80 billion in actual exports a year or 450,000 jobs in the United States. So what's next up? Our priority in 2014 is to finish the work on the munitions list and our priority categories for rules now are in the queue, are for publication, are satellites, electronics and chemicals and our goal is to have all the remaining proposed and final rules published this year. Now other priorities are to continue the work that has been ongoing but more kind of behind the scenes, capacity building for the multi-agency Export Enforcement Coordination Centre that's already made big inroads into using our export enforcement assets better and building better cases. At the same time we're continuing the transition to a single licensing database which will enhance our ability to provide more timely decisions and importantly more informed ones and as one finds in so many parts of life with new technology there are huge gains to be made from centralising and making a single database but there are also huge complications in getting there. I'm pleased to report that by the spring of this year, quite soon we expect that the Commerce Department will join the system, will be on the system so that the three largest departments involved in this area Defence, State and Commerce will all be on a single platform. Now there's still a lot of work to be done as we complete the munitions list this year. Key priorities are more technical work on the definition and scope of various control issues and the definition of specific categories of what subject to control and what's not. So again as all of you will know better than I and more deeply than I how do we define terms such as public domain, publicly available what's technical, what's technology, what's fundamental research as we're seeking to define what is and is not within the scope of our controls and we're also planning to turn to some harder issues notably an encryption, cloud computing and cyber security and to begin planned changes in both the state and commerce regulations including a comprehensive review of commerce's export administration regulations of which the commerce control list is just a part, I think a relatively small part. So finally I just want to say and again you will know this that from the beginning of this reform effort we have done I believe and certainly want to do all our work in a very transparent and open way and we plan for that to continue. The progress that we've made has been crucially dependent on input from you in industry, from NGOs, from think tanks and our international partners and we will need your continued support and input to help us work through the challenging priorities that are still ahead of us. So thank you very much, I'm really sorry that I have to run out it's a bit of a crazy day as they mostly seem to be and I'm catching a plane this afternoon to Moscow. Thank you for inviting me. I want you to be sort of certain, I was going to say reassured, I hope reassured that export control reform remains a priority for the president and I look forward to working with you as well as with my colleagues with all of you to bring this reform effort to a successful conclusion and thereby bolstering America's national and economic security. Thank you very much. Thank you, Carolyn. No one willingly goes to Moscow in February so we know it's a hardship tour. What I'd like to do now is turn the event over to Stephanie Sanok Kostrow, my colleague here at CSIS who will chair the panel. There will be time for questions at the end and these people certainly will be able to answer almost anything you can think to ask. Stephanie. Thanks, Jim. As he mentioned, I'm a colleague of his here at CSIS. I'm the acting director for Homeland Security and Counterterrorism and I am a senior fellow in the international security program and I have the distinct pleasure of having worked export control issues both in the Department of Defense and on the Hill. We didn't get very far and I'm very curious to hear our panelists' perspectives on how far they have come and where they intend to go. As you can see, we have several panelists. I'm amazed that the federal government allowed their schedules to align. We're going to go in a particular order. I'm first going to introduce Brian Nielsen. He is, as you all know, or if you've been involved in this for any length of time, kind of the guru at the White House for nonproliferation export controls, national security, and he's been leading this export control reform initiative. He's been at the NSC and now the NSS since 2008 and so if you have any questions regarding what's happened over time, I'm sure he's the man to go to. He will be followed by Acting Assistant Secretary of State for Political and Military Affairs Tom Kelly. He is a career member of the Senior Foreign Service and he joined the Bureau of PM in August 2011 right when we were getting into the thick of these things. He oversees overall Bureau operations and directly supervises the Office of Security Negotiations and Agreements, the Office of the Coordinator for Counterpiracy and Maritime Security, and the Office of the Coordinator for the Foreign Policy Advisors Program. He's been in government since 1985. Talk about longevity. He'll be followed by Tony Hoffman, who is a Deputy Director at the Defense Technology Security Administration. He is a member of the Senior Executive Service and he's been in this position for, I believe, two years, Tony. Is that correct? Before he, assuming this position, he has spent quite a bit of time in all parts of the Office of the Secretary of Defense, but he was also the Director of Security Cooperation Reform. So any of our foreign visitors from embassies and elsewhere who have particular questions about foreign assistance and export control on the overlap, I'm sure we can direct your questions to him. Fourth up will be Craig Healy, who is the Director of the Export Enforcement Coordination Center. He was appointed Director on September 12, 2011, and he serves also as a Deputy Assistant Director for the ICE, or the Immigration and Customs Enforcement Counter-Proliferation Investigations Program. And he can tell us a little bit more about enforcement of the ECRI, that aspect of the ECRI. The batting cleanup is the man who lives and breathes this stuff every day, is Kevin Wolf. Secretary Wolf has been the Assistant Secretary of Commerce for Export Administration since February 19, 2010. Prior to joining the Obama Administration, he was a partner in the Office of Brian Cave, LLP, and he spent 17 years with that firm covering most aspects of the law and policy regarding international trade. He's very familiar with all of our three and four-letter acronyms for control, everything from the Export Administration Regulations to ITAR, to sanctions administered under the Office of Foreign Assets Control, and to Boycott, you name it, I think Kevin can field a question on it. So without further ado, I will turn the microphone over to Brian Nielsen. Thank you. And I'm actually going to pass the baton to my colleague Tom, since Carolyn's already given you a little bit of the overview of the White House perspective, and so I am here to help two questions at the end, so with that, I will turn it over to Tom. Okay, thanks, Brian. It's great to be here this morning as Acting Assistant Secretary of State for Political-Military Affairs. I run the Bureau that handles the bulk of the work that's done at the State Department on Export Control Reform. So I just want to say a few words about State Department's perspective on this important Administration initiative. When it comes to implementing Export Control Reform, the Administration is focused on creating an Export Control System that keeps pace with new technologies and supply chain globalization. At the same time, we don't want the process to sacrifice critical national security-informed policy objectives from nonproliferation to supporting human rights. Export Control Reform, as Carolyn has indicated, is going to streamline U.S. government decision-making on strategic exports and create a more transparent and predictable system. What it won't do is alter the primacy of foreign policy in the decision-making process for arms exports. Our foreign military sales program, direct commercial sales authorizations, and all exports of munitions from the United States are still going to be authorized based on a coordinated review of foreign policy risks and rewards that are associated with the transaction. Our newly revised and publicly available conventional arms transfer policy guides this review. It affirms that the United States doesn't simply allow arms to flow from its border in response to global demand. We authorize exports that support U.S. foreign policy and national security objectives. As Dr. Atkinson indicated, we've achieved the first milestones in implementing Export Control Reform over the past several months. In October 2013, the first major revision to the Export Control List went into effect, transferring controls on certain aircraft and gas turbine engines, as well as their parts and components from the control of the Department of State and Department of Commerce. These two categories alone potentially represent more than $20 billion in annual exports. And this January, new controls on military vehicles and ships went into effect. Our allies and partners are responding very positively to these changes and I think see many of their concerns related to security of supply addressed by the Administration's Initiative. And we're finding the U.S. defense export community is also supportive of this initiative. While I have the floor, though, I do want to take this opportunity once again to dispel the myth that Export Control Reform equals decontrol of arms exports. Any item going forward that's no longer controlled by the U.S. Munitions List is now controlled by the Commerce Control List. Our goal at the end of the day is an agile dynamic export control regime that's responsive to today's and tomorrow's national security and foreign policy challenges. These new controls are going to reduce bureaucracy, they're going to accelerate goods to market for close allies and security partners, and they're still going to maintain a very high level of scrutiny over arms exports. Though the full measure of our success remains ahead of us we're very confident that we're on the right track. Thanks a lot. Good morning everybody. I'm Tim Hoffman. I'm the Deputy Director at DITSA. I've had the pleasure of working several perspectives on arms export both from a security assistance point of view, working actually in country in Iraq and then running the Secretary of Defense as a security cooperation reform task force and then a number of other things tied to how we deal with partners and allies around the world. I think I bring a slightly different perspective than perhaps the normal export control person. As we've gone through this whole exercise, it's important to remember this started off, it was initiated by Secretary Gates and this was a, he had really big concerns about how we support our allies and achieve our national security objectives and balance the kind of competing goals that we have set for ourselves in this country. Just remind you there's really three things. We want to protect our war fighting edge of our soldiers, serres, airmen and marines. We want to build partnership capacity and that includes interoperability with our allies and partners who either act in our place or act with us in a number of places around the world. And finally we want to promote the defense industry's health and vigor. All three of them are important and as you might imagine, occasionally they're in tension with each other and so for us, as we have designed these categories and rewritten the controls, it's really been a balancing act between these various and sundry competing goals that we have. When they're aligned, that's a great thing. When they're not in aligned, we have to really think through the risks and the opportunities tied to how we weight the consideration of each of the three. One of the things that's really driving us in this regard has been the increasing movement of the commercial sector into technologies, advanced technologies that have been historically the purview of the military. And that's really how the USML grew up separately from the CCL. So what we're seeing here in terms of another balance or another tension is how we balance things that are increasingly dual use. We've gone through this thing we call the bright line exercise, which is to describe clear controls that delineate between what's commerce and what's a state-controlled item. That's not always an easy thing and why is it not an easy thing? Oftentimes it's very hard to draw the line between what's the thing that we care about the most about some of these dual use items and what brings some of these items onto the ITAR side and what brings some of these things to the CCL side. So what's really critical about this and it's really driven us to define what it is, the quintessence of what we're trying to control. And as recently as yesterday and the day before we've had some very honest discussions about what it is, what is it that we're trying to control in certain key industries. And so as you might imagine military electronics and fire control and those sorts of things where the items are, there's an increasing market in the commercial sector for these things and as the military requirements go down there's going to be increasing pressure for us to think about this. So then that drives us to the next issue is as the commercial sector demand for some of these things, say night vision cameras for example, that's driven us to start thinking about is this going to be a permanent control or not? And the answer I think clearly is no, that we really have to think through this export control set of regulations as being a dynamic living product. So what you're going to see I think over time is something that's not unlike what we do with some of the other arms control regimes around the world that we're going to have to revisit these controls because the threshold for military, the threshold between the military and the commercial side is going to raise and we're going to have to rethink what exactly is a military thing over time or whether we want to continue to control some things on the ITAR. This trend will only continue. So this is driving us to move much more technology to the AR in my mind, that's a good thing. And what it's doing to us I think is really important for you all to understand out there is that we're increasingly less concerned about whether something's ITAR or EAR and more concerned about how it's controlled and who it goes to. And so in my mind this is taking us increasingly towards convergence between the two regulations. We're not there yet but what we're really increasingly thinking about is how best to control these things to protect national security interests and at the same time promote industrial health and protect our war fighting edge. So those are the tensions. The good stuff that's happening right now is that I think we're seeing convergence. Three years of working together has caused us to work through controls on both sides of the house, the EAR and the ITAR and those dialogues in terms of defining the bright line has caused us to come to one mind about thinking about what things are ITAR and what things are EAR. That's a very, very healthy thing. I will not tell you that all the arguments have been non-contentious, they have been, but still sharp and steel and I think over time in most of the categories, almost all the categories, we've come to a consensus on where those lines are and that those lines are in good places for now. So that's one of the things that's really important and what that collaboration does for us is builds trust and confidence in each other and what we find is that we're acting I think in my opinion much more holistically than perhaps we were acting in a couple years ago. A specific example of that is collaboration on the items that have moved to the CCL, the so-called 600 series paragraph items. What we're seeing right now that commerce has created a new office that we work very closely with and they have been very generous in seeking our guidance and counsel on commodity classifications. In my view that's been a very healthy relationship again, we don't always agree on everything, but the fact that we're having this dialogue constant back and forth has brought us to closer convergence on what it is we're trying to protect and why. The last thing I'll talk about Caroline Mitchin, the U.S. exports system. We are now working through the commerce side of the house. State is up and running. I think it's running satisfactorily for all parties that are involved in that right now. With relatively few glitches, one of the things that we're going to do with U.S. exports for the commerce side is to address export enforcement. So that's a new feature of this and so that's something that we've had to work through in terms of how the whole system is going to work with that. My understanding is state likes that and it may want to go back and pursue that later on with their own enforcement system as we go to subsequent versions of this. The great thing about U.S. exports is it helps us get a common operating picture of what's going on out in the export view. It forces us to rapidly staff and have rapid decisions on certain kinds of things. So that's very, very important for us as a community to be able to do that much more quickly. When commerce comes online, I think we'll get even better. So where are we? We think once we have commerce online, the next steps will be to build a single portal and a single license application which will make life, I think, we hope easier for the industry out there so that they come in with a single license and then we can help them thread the needle as to where that license goes and how that license passes through the system. So I guess if I were going to use one word on all this collaboration, it's the term convergence. We are actually converging on, I think, a U.S.G. holistic view of things and getting a common picture and a common agreement on how we approach export controls. So in summary, we've come a long way over the last couple of years. We still have a long way to go. There's been lots of cooperation, great collaboration, and that's probably been the most heartening thing for me. My experience in the past has been that the interagency was just another word for gridlock and that's not been the case here. This has been as collaborative in a cooperative group as I've ever worked with. So I think I would agree with Tom. We're undoubtedly on the right path and I'll just leave it at that and I'll be happy to take your comments afterwards. Good morning, everyone. My name is Craig Healy. I'm with the Department of Homeland Security and I'm also the Director of the Export Enforcement Coordination Center. I would just like to echo some of the comments that you've heard from some of our panelists. What we're trying to do is basically trying to bring people together within the enforcement community. It's not just about any one particular agency, it's about how all those agencies can work together for the collective betterment of the U.S. government towards accomplishing our objectives. President Obama issued Executive Order 13558, creating the what we call the E2C2 in November of 2010 as part of the Administration's Export Control Reform Initiative. Officially operational in March 2012, E2C2 is a multi-agency center that has approximately 19 federal agencies representing nine governmental departments. We have the Homeland Security, Commerce, Defense, State, Energy, Justice, Treasury, Office of the Director of National Intelligence and the U.S. Postal Inspection Service. As Dr. Atkinson mentioned earlier, we have been doing our work behind the scenes and what I would like to do this morning is just kind of give you a little bit of a snapshot of some of the things that we've been working on within our community. What we realized is that we needed to establish some metrics to be able to demonstrate that the Interagency Coordination Center was going in the direction that we needed to go. So what we did was we conducted an informal unscientific, these were done by law enforcement so you know it was unscientific, survey relative to the people that we have been working with. Predominantly, since we've received no resources to open this center, we've been working primarily on deconfliction protocols amongst the interagency. And a deconfliction protocol is how can you turn around and make sure that you have a basic amount of transparency so that you'd be able to share and make sure that you can collaborate with your partners if the opportunity presents itself. So what we did was at the end of our first year, we took the total number of deconfliction referrals that we have done for our first year that accounted for 1126 referrals. Of that 1126, 673 or approximately 60% were what we call positive deconfliction referrals. And when I say positive, that doesn't mean necessarily that multiple agencies are working that referral, it just means that when you take that information and you pass it amongst this diverse community, there are other entities who have information which is relevant to your inquiry. So what we did from there was we turned around and said, well, let's try to drill down a little bit more. Of these 673 positive deconflictions, we were able to attribute them to 191 participants. Clearly, some of the participants have submitted multiple deconfliction requests. So we look at that 191 participants, out of those 191 surveys that were sent out, 158 participants responded so we had roughly an 83% response rate, which is positive. What were the takeaways from the survey? When provided with a positive deconfliction response, E2C2 users contacted their interagency points of contact 85% of the time. Upon contacting their interagency point of contact, E2C2 users received information that was relevant to their investigation 72% of the time. And most importantly is this third metric. When an E2C2 user receives relevant information from an interagency point of contact 23% of the time a joint investigation goes forth and soothes. And lastly, 8% of the respondents reported a conflict when they were going to the deconfliction process. So clearly that 92% is happy with the way things are progressing. Now, as I reel this off to you and kind of give you an idea of some of the things that we're working on, I want to be perfectly clear we're a very immature organization. We started our third year in March 2012. We are not in the process of taking over export enforcement. We are simply like other government fusion centers, coordination centers trying to take our community and trying to get our community to better engage, be a little bit more transparent, and try to figure out ways that we can work together. Now as of last week we're still have, as of last week we're up to 500 referrals and we're hovering at a 56% positive deconfliction ratio. So to me that's a proof of concept that when you take people who basically work within a very similar community and you give those people an opportunity to exchange and share information with one another, positive things can result from that. We're a long way from realizing the full objectives of Executive Order 13558. But like the law enforcement community at large, we are all severely strong sometimes by a lack of resources. We all have an opportunity here to figure out how can we partner together to collectively work with our interagency partners and move the export control reform enforcement ball forward. So again I don't have an awful lot to report to you but I wanted to let you know that our partners are extremely engaged behind the scenes. We're seeing some very good opportunities for some joint investigations to come forward. We've had some success stories and we'll continue to push the envelope forward along with our interagency partners. Thank you. So to back clean up and then I'll be available for questions. I think my role is to make this system at the commerce side work. And essentially what we're doing is moving from a control structure around the defense trade side where everything is controlled equally always all the time. There are a few exceptions here and there but essentially when you have control text where all parts or components are controlled the same way and are controlled merely by virtue of being specifically designed and modified for another defense article and they have the same level of control to them that's on one hand very simple. And there's a virtue in that but the downside of it is that it over controls and harms the national security objectives that we were describing so well earlier and conflict with the instructions of Secretary Gates that we described. So inevitably what you have to do is go from that simple system of one sentence that controls everything equally always all the time everywhere and start going through and as Tim described asking ourselves what are the types of items that even for ultimate induced by the governments of our NATO and other close allies a State Department license for on a case by case basis and what are the types of items for those end users and those end uses and those destinations for which a license exception can be available maintaining the controls on the rest of the world and the embargoes at the status quo level. And inevitably when you start moving in that direction to accomplish that broader bigger picture policy goal complexity results and I realize that that is difficult for companies and I realize that it's been difficult for us to draft so our role is to accomplish that objective moving to basically more words that are more tailored but in a way that eventually everyone will understand and that are straight forward. So the general reaction that I'm getting from industry and it's sort of multiple phases you know after they have discovered what we're up to and they get over the initial panic about you know the paradigm shift and how to think about what's controlled where and how and get used to you know another department getting involved in another set of regulations once they work through that eventually from all our experience so far as it's been running for a couple of months it works it becomes efficient they do appreciate it and when there are here's the key point for you all as mentioned earlier this is an incredibly transparent process you know we we're all very smart but occasionally we will miss things or not realize the implications of something and we want to hear about it and when we hear about it when we realize that isn't exactly what we intended or that's what we wrote but someone's reading it in a very different way than we thought we can make adjustments and as you know a sort of a mantra and a spirit that's fed into this system is to be flexible. So you know so long as it accomplishes those broader national security and foreign policy objectives that were described earlier we are trying to make the system more adaptive and I think you will see that through a series of tweaks to the regulations over time and a regular review and an updating of what is a more detailed and complex list of items controlled how. That's the main point what else can I discuss oh it's more than just the categories as well and as was described we're getting close to the next group of categories which are satellites moving commercial essentially commercial satellites and spacecraft back to the commerce department and finishing up the cleanup of the military electronics rule which is part of our transparency objective we went out for yet a second proposed rule asking for industry input on and then we'll finish the remaining categories over the year but it's also moving the two sets of regulations together. You know the whole point of export controls is for government visibility and authorization for certain physical items, technology, software and services to particular end-users, end-users and destinations. So the ITAR and the ER have that same objective with respect to those four types of things and if there's no difference there's no policy reason for having a difference between them then what we're trying to do is to get to similar words and phrases and interpretations and definitions so that exporters don't have to struggle with trying to figure out that the ITAR interprets it one way and the ER interprets it another way. If there is a reason for a difference then we should be transparent about it which we're trying to get to for difference because they will still have a different universe of what they're responsible for and so you will be seeing over the course of 2014 and into 2015 the whole series of other changes to proposed changes, non-list based aspects of the two sets of regulations and that then will lead to the larger convergence and then I'll just sort of end the point with what I consider one of the biggest successes of the effort which is not so much of regulation but it's cultural within the government and each of them has said it but relative to where and I've been doing this for a long time where the agencies were when we started and sure yes we don't always agree on all things all the time but we're trying to see the export control system as an administration system as opposed to a state system or a commerce system or defense having their own view and when we disagree we work it out so that there is a common view of one administration and the same objective because of the convergence of technologies in users and in users ultimately to accomplish the larger foreign policy and national security objectives that were described before so with that very general top level observation that it's working well we're transparent and we'll be adapting and adjusting to new issues as they come up I'll end and leave it open for questions Ok now that I'm properly mic'd up I can join my friends up here I'm a bit bigger than I used to be Thank you all for your presentations and your willingness to be here and talk about this issue now Tim Hoffman's comments about the DOD perspective really did harken back to Secretary Gates's April 2010 speech it's heartening to hear that the viewpoint really hasn't changed and you've made progress towards taking action recognizing rules and moving forward but I go back to sort of what is the purpose of export control reform and we heard a little bit about it today but an estate department fact sheet last year they had said it's three fold really it's one to really focus resources on threats that matter the second is increasing interoperability which you've heard about and the third is strengthening the US industrial base now when you raise ITAR and US industrial base you get a range of reactions from smirking to walking away in a huff you know from a lot of defense companies can you talk a little bit about and I'm going to focus this question on Tom can you talk a little bit about how this process does in fact strengthen the US industrial base and what reactions state department has heard in terms of how this is going over? Sure again the focus of the reform is to try to enable our regulators at the state department to focus on the items that really matter to US qualitative military edge and that so facto means that they're going to be focusing on a smaller universe of items so I think because our process is going to be more transparent about what we really care about and are focusing on in terms of our qualitative military advantage it gives industry much greater transparency and predictability in knowing what they are going to be able to export and what is going to continue to be restricted very closely and we believe that that is going to make it much easier for industry to produce and sell more all over the world and that is going to have very positive ancillary effects on our defense industrial base because they're going to be able to achieve economies of scale and reduce unit costs which will make our industry more competitive globally and ensure that when we need industry when our armed forces and our nation need industry to be able to produce certain lines those production lines will still be open and for that reason we found that defense export community has been very supportive of export control reform initiative. Now one thing that Secretary Gates did mention back in April 2010 and it's no surprise because he was formerly affiliated with the university was the issue of deemed exports. How does this process and maybe I can ask Brian this question how does this process treat deemed exports? Sure happy to talk to that. Our deemed exports are basically our technology controls and so those are actually not being diminished in any way because we are maintaining the controls even as we're moving items as we're moving into items in the related software and technology from the munitions list to the commerce control list they remain subject to the same controls so basically we're maintaining those controls for the purposes of deemed exports. Okay thank you. Now some of you may be aware that just under a month ago the congressional research service released a report an update to a report on the export control system and in their summary they talked about clearly the rationalization of the USML and CCL has been going well and then interim steps have been taken to as it says here to create a single IT system and to establish an export enforcement agency they reported though that not a lot of work has been done on the single licensing agency issue. How would you react to this CRS report? Well on that last topic we've got a lot of work to get done before we sort of bite off that larger institutional transformation effort which is the phase three effort. So as we said during a congressional hearing last year let us get done with doing all that we have on our plate which is a fairly full plate for 2014 before we dive into the much broader topic of achieving it. Is this all work that would need to be done anyway? You need to have sort of a common regulatory structure, a common definitional structure, a common understanding of what should be controlled where and how. So everything that we're doing actually will lead to that but to the extent of taking the next step after we have the regulatory structure in place of accomplishing the phase three objectives there's just not enough manpower to do all those other things at the same time. Well it's interesting that you talked about phase three, some of you mentioned it earlier I'm really curious about the congressional aspect of this because I know a lot of times suggestions from the executive branch may fall on deaf ears or there's a protracted very long discussion between the two branches of government and taking this CRS report they are usually generated by congressional either member or staff interest or what they respond to. So can you talk a little bit about Kevin headway made with Congress. You mentioned there is a cultural change happening and that's also happening on the hill and a new openness to really discuss this kind of thing. But you've got a very, very partisan Congress you've got people who do want to protect everything all the time because they think that's in our national interest versus people who are pro-commerce but also let's build a high fence around a couple of things that we really need to build a fence around. So how are you all working with Congress? This CRS report also mentions perhaps draft legislation in the works that may be sent to Congress. Can you respond to that? Sure it's the same answer as before let us get done first with the structural changes that we're making then we will get to the point of engaging on those other topics. So there's no change on that with respect to working with Congress it's right now it's primarily through the notification process that the State Department is leading. Whenever we come to a new category what we do is we send it up to Congress informally and then through provision of the arms export control act requiring notification and so we've been engaging them at every stage. Before we proposed any of the rules we went up and we briefed the hill completely informally before they became even public as a proposed rule and have been working through and taking into account congressional staff interest in that process continues. So the way that the congressional involvement right now is sort of on each stage of the effort which sort of manifests itself in each of the individual category reviews. I don't know Tom. Tom? Do you have any other? Yeah the decision on whether to transfer an item from US munitions list to the CCL involves a lot of different variables it's a complex decision and that's why we have the kind of methodical consultation process that Kevin just described and we very much want Congress to be a partner in this effort. I will say somebody who's testified on the hill on this issue that's very striking to me the amount of agreement across the aisles on the hill and the importance of this initiative. I think that it's fair to say that there is a very broad support on the hill for what we're trying to achieve in this initiative to improve our national security, help our defense industrial base. That's something that everybody on the hill wants to achieve as well and there can be different perspectives on a particular item but I think that the broad thrust of what we're trying to achieve here has a great deal of support. Thank you for that. Stephanie if I may I'll just add to that that as Kevin has already said in Tom we've really worked closely in a partnership with the hill since the outset of the whole effort and one of the elements that we've done is that we would go up as a team whereas previously I mean state would go up and break the state oversight committees, commerce would go up and break the commerce oversight committees and so what we've been doing is we've actually sort of broadened our outreach by going up as a team so we're including all of the oversight committees for each of the agencies which has been sort of spreading the word on what we're doing on export control reform. We've also partnered with them in making several legislative changes of the class of the last three years which we really needed. We actually we were able to harmonize the criminal penalties to the same standardized maximum. Paradoxically the arms extra control act had the lowest criminal penalties for prison sentences so it was only half that for commerce and for Treasury and so we actually have harmonized that to the same standard and that was done in a collaborative work with the hill and we've also in moving legislation on satellites that was as you know that has a long and somewhat tortured history and so the fact that we were able to work well with the hill and obtain legislation that we can sort of right size our controls and satellites I think is a good example of the good working relations I think that we have with the hill so we planned that going forward and also just keep in mind that for our community we have 11 committees of jurisdiction so it has been challenging but at the same time we have been making an effort to do outreach for all of our oversight committees to keep them fully informed. I think it helped by tackling sort of I'll call them low hanging fruit early on in developing this methodology in this process and doing things like tanks, military vehicles before you get to something like that so that the process was well known and understood and then the expectations were that you would come up as a team and talk to them and at least let them air their concerns if not you know find a useful compromise. The last question I have before I'll open it up to the floor is about the outreach program about publishing and proposed rules feedback that you all have gotten useful perhaps not as useful but certainly the outreach that you've had to the broader community and we've heard what you've done with the hill but I'm curious about engaging with industry as Thomas has talked about but also sort of other interest areas about I mean again there are the full range of people out there everyone who wants to protect everything all the time to people who you know are much more restrictive in their mindset and in terms of what gets control can you talk a little bit about the outreach program and how that will continue but you move through the rest of phase 2 and into phase 3 again knowing that you have a lot on your plate. Well it's a critical part of what we do for a living we have an old office of outreach I hold a weekly conference call every Wednesday at 2.30 I answer whatever question has come in sometimes it may take a week or two but you know we're trying to be open that way and if I can't go and visit everybody at least anybody can dial in have their question asked and answered and then everybody else will hear as well the group the interagency group had given literally several hundred speeches over the course of the year I think this is my 342nd appearance I'm not exaggerating we're actually we're open as much as we can if you have a good idea we will listen to it we're constantly seeking you know input from industry with every one of the rules we've published proposed asking for lots and lots of comment both from the public and from our technical advisory groups and states advisory group several of the categories we went out twice with proposed rule just to get and other aspects of the reg you know this is what we did in response to your comments does it still make sense is it clear does it accomplish the objectives and then we would review all those comments by we I mean all of the agencies we'd meet down at the defense department for literally weeks on end going through every public comment line by line and saying that's very clever we're going to adopt it that's loopy ignore it or the fact that you asked the questions suggested that you didn't understand what we wrote so we needed to edit it and so it's not just outreach for the sake of outreach it's outreach and we're actually listening and taking it into effect because you know we're clever and good but we can't possibly anticipate every possible circumstance that's why we want to hear about it so it's a core element I think in terms of numbers I think we doubled even with a smaller budget we doubled the number of people that we reached we at commerce last year 17,000 individuals just with our public outreach efforts which was you know more than the previous year and that's going to we're going to try to increase that this year it might be useful just to give you a feel for the kinds of public comments we get for category 11 which military electronics I think we got nearly 80 pages of commerce for both the itar and the EAR 80 pages 12 font single space comments as you might imagine we didn't actually that's just the summary the 80 pages was the summary so we we spent I think no fewer than four or five sessions full day eight hour sessions that did say in Alexandria from about 8 30 in the morning till 5 5 30 at night going through those comments so we take everyone to heart individually we look at them they get a round the horn there's usually about 20 30 people in the room having a discussion it can be pretty rigorous and pretty tiring sometimes intellectually tiring but it's but I think what I'm trying to say here is we're trying to show the audience that we really do look at these things hard and give them due consideration second thing that we do that I would also like to mention is we also bring in industry and help us actually figure out what it is the control should be and help us write the control I'm thinking of an issue yesterday it was it was Boston or it wasn't was our control regulations but it we do similar kinds of things where we actually were on the telephone call with industry trying to figure out what the quintessence of the thing that we were trying to control was and then through a group collaborative effort we worked through what that control ought to be such that industry was satisfied that we weren't overreaching and they could live with what we had and we had something we thought control what we wanted and for the AP lawyers in the audience is referring to our technical advisory committees which are back approved so great well thank you all for answering my questions we have about 25 minutes I'm going to try to end at 11.30 and I ask your forgiveness and patience with that we're actually going to take two questions at a time if you could raise your hand if I call on you introduce yourself and your affiliation if you have one and please ask a question if there if you can I appreciate that and then we have mic runners in the back so I'll call on this lady up front first followed by this gentleman in the second row did you point to Yuda? we want the web to capture it. I'm a from inside US trade wanted to follow up on Mr. Hoffman's point on the single license application Mr. Wilson and Ms. Wolfe is there in the agency consensus on that and what's the timeline what's the status of that effort and is that something that can be done administratively and then a question to Mr. Wolfe also in follow up can you elaborate a little bit on how commerce will address export enforcement in the context of getting on to US exports. Okay and the second question from this gentleman would you mind there you go thank you Jim Berger Washington trade daily just a brief question do you have any timelines on when the satellites and military electronics will be published? let's take the second question first because it's simple right? Soon our whole schedule was blown up last year as a result of the furloughs and the sequestration so everything we said last year it was shot and I can go into the reasons for the collateral impacts were far greater than the 16 days because as Tim said we get 30 people in a room and having them all clear their schedules it's difficult when you know they're being furloughed or when the government has shut down so excuse me they like my answer they like my answer the next one so I mean we're finished with the public review of the public comments on both 15 and 11 we're going to be starting as soon as we can the congressional notification process I don't have exact dates I'm not going to give you exact dates but those are the first two in our queue above all other categories so you know we're talking about the spring and early summer for each of the categories on 15 and 11 that's satellites and military electronics and satellites will be first I mean it's ahead of electronics and then electronics will fall out yeah I think Tim wanted to start answering the first question on the single agency I mean the single law form so much like phase 3 work US exports is working in phases 2 and job number one right now the wolf closest to the door is to get commerce up and running on their system and commerce has additional requirements over and above those that state has so my guess is this going to take us anywhere from 60 to 90 days to get commerce where they need to be so that we can do all our indian testing and then get them brought up online then in the meantime as we get toward the end of that we have to define requirements for what that portal looks like and what the license is going to be so do we have consensus on that yet no we have not started the work but if the work proceeds like it has with developing conferences and state system in the past we will sit down in the room we'll develop the requirements we'll come to a consensus on what those requirements look like and what's entailed that will require us to do a cost analysis and a work analysis as we do that and my sense is that's not terribly difficult but there's not complete agreement on that point of view and that work probably will not begin probably until the summer maybe early fall and then the issue is can we in today's austere budget environment can we find money to do that work we think we can we certainly have the support of the secretary of defense on this and he's been willing to we've been able to get money for this kind of work in the past but that's all before us at this stage of the game so to sum up we want to get a portal we want to make it easier for industry we want to make this as transparent as easy as we possibly can first job as I've learned in planning is to figure out what the problem is and what the requirements are before you start you know start getting metal and cutting things the requirements for the single in order to do the coding for the system you have to understand what it is the processes and what it is you're trying to do and to understand how we're going to work both with the state and the commerce systems as we work through the IT system and that's different than how we've done business in the past so all that process has to be laid out and we define the requirements around those processes and then we lay out the work and the money tied to that and on your question on us exports and export enforcement what you're referring to is just a way in which to allow for the single database to work through our enforcement structure that's all it was it was just another part of the commerce department with access visibility which is no different institutionally than what we do now in terms of having an enforcement clearance of applications but just working them into what their enforcement issues into the IT structure so it's an all IT comment with us as well homelands green shirt and then followed by the woman sitting right in front of her Good morning, I'm Charlotte from the Center for International Trade and Security, two hopefully very quick questions first the question about the correlation between the new conventional arms transfer policy and how that would work practically with the lists will the new office at commerce in particular work with the 600 series in that aspect use the policy that way. The second question might be a little bit trickier and I'm just curious to see how the message of the reform or the consequences of the reform will be lifted into an international context in particular with regards to the VASNA arrangement because in the globalized supply chain you have a lot of international partners that will look at the lists that have inspired the US lists or vice versa and they will be still stuck in an old way of controlling things so will there be a new push into the VASNA and the likes of them for reform there thank you. I heard someone arguing for a phase four here and then the woman actually the woman behind Hi, I'm Laura Lumpy at the Open Society Foundations and the Open Society Policy Center. Thanks so much for putting this on. I had a question Jones Day reported in September 2013 that one of the inadvertent consequences of the shifting of items from the USML to the CCL was that the prohibition on procurement from Chinese companies was being gutted effectively every time more commodities are transferred over to commerce so I wondered how you were going to deal with that as they put it in their brief ECR will promote the transfer of production and loss of jobs to China in particular as defense suppliers will be free to procure numerous Chinese manufactured goods that had previously been prohibited by section 1211 of the NDA of 2006 and more generally I wondered if you could speak to how labor and small contractors small subcontractors are viewing these changes and how they're being factored into the process. I'm going to turn to our State Department colleague to answer the first set of questions on the conventional arms transfer policy and the message of reform and taking the US as a kind of standard bearer and helping an international dialogue. Thanks. First of all with respect to how the CAP policy is going to work in the items that we're moving over to CCL we're already putting in place a system working in partnership with commerce and various bureaus in the State Department to make sure that the CAP policy is applied to all of these items. The way it works specifically is that commerce department will send the applications that it gets through the 600 series to a point of contact in the State Department is actually not in my bureau it's in a sister bureau the bureau of international security and non-proliferation and that is kind of the single point of contact at the State which then takes a look at the applications and looks at kind of the various parameters that other bureaus in the State Department with an interest in specific countries or specific policies and if it hits one of those flags then the case is sent to that bureau for comment. One of the bureaus is my bureau the political military bureau but other bureaus in the State Department that are involved in that are DRL which does human rights as well as the regional bureaus in the State Department which have a particular interest for example in regional security matters or country specific concerns. So we already have in place the system and I'm happy to tell all of you that for the categories that already have been transferred or for the items that have all been transferred to the commerce department we're already kind of up and running and implementing that system. So again for all the items whether they're covered under the USML or the CCL the CAP policy which was just updated and announced by the White House last month and is available in a fact sheet for everybody on the web is still going to be kind of our north star in how we and how we oversee this process. On the boss in our question remember we're not removing from military controls anything that's on the boss in our munitions list basically all we've done laterally is to split up between the State Department and the Commerce Department within the scope of the boss in our munitions list. The boss in our munitions list still uses those broad catchall phrases all parts and components especially designed for military items. That's it that was the scope on the parts components controls. So we're not allowing for the unlicensed export of anything that would be on the boss in our munitions list outside the boss in our members. So in that sense that's why we haven't done anything inconsistent with our commitments in that regard. And with respect to dual use items we're still going through the annual review of the boss in our list where all these things occur multilaterally. But what has happened in terms of going through and spending all this time thinking about what warrants the most significant controls that is actually sort of fed into our expertise on recommendations that we make to boss in our absolutely but we're not actually changing the scope of controls outside the boss in our arrangement for anything that today is within the scope of the boss in our munitions list. I think that answered your question. If I could just for those on the web. The question really is about how it's controlled and not necessarily what Mr. Wolf recently just said but how it's done and I think your comment that you are feeding that into the boss in our recommendations process. It's part of it. It's part of the technical analysis that feeds into our recommendations to boss in our yes. But in terms of the larger defense trade exercise we've deliberately kept it so that between the USML and the 600 series that's essentially the scope of what's on the boss in our munitions. So you're not unilaterally we're not unilaterally. Precisely. And the second set of questions was really about the China prohibitions found in the fiscal year 2006 and DAA. And I'll address that and Laura that's a very good question so I appreciate your asking it. For everyone's context there's a prohibition in the National Defense Authorization Act from fiscal year 2006 that prohibits DOD's procurement system from procuring any item that would be comparable to items that we control in the US munitions list from being procured from China from Chinese sources. And so the question that Laura's asked that has been raised is that because we're moving the lessons into military items to the commerce list in the 600 series does that take them now available for the DOD procurement system? And the answer to that is no. The reason being this is because we've actually harmonized the licensing policies for the total and partial arms embargoes that state has in the ITAR in 126.1. We have harmonized our licensing policies for the 600 series in the commerce list to adopt those exact same prohibitions. And in fact we've actually tightened it so as a result of moving over we've actually made more items subject to that prohibition than was previously subject. And that's because we've taken the items that are in the ECC and expert control classification numbers that end in 018. Those are the military items both military end items like the Humvees and certain like train aircraft and military aircraft that moved back in the early 1990s by President Bush. We've consolidated all of those and put those inside the 600 series as well. So those are now coming subject to those for the first time. So administratively we would like legislation that's the neatest and cleanest thing to fix the statute. We've been in discussions with the Hill about that since the prohibition basically is maintained by policy. But the neatest and cleanest thing would be to actually amend that section that provisioned in the NDAA from 2006. And so we're working to do that so just to provide better clarity and transparency to industry. And on your small company question the small companies they were some of the biggest advocates of the change and some of the companies that are the most afraid of the change. When for example we went out and were asking for what the effective date should be you know a lot of small companies response was all of my products are moving off of the USML. I won't have to deal with registration fees or licensing fees or MLAs or TAAs and all of my trade is with the NATO countries anyway this is terrific can you make it happen yesterday. And that was a very common small company reaction to the topics that we proposed. Another common small company reaction is oh my god I don't have the resources to think through all the changes. My entire compliance program was just changing the name and the date of a license application and sending it into state and that's all I knew how to do. And we get that we understood that and we realized that it is going to be difficult for those companies but as I said earlier and that's why we're with the outreach effort really trying to focus to the extent resources for MET on those small companies to get them more comfortable with the new system. So far with those that have gotten over the hump of understanding the paradigm shift it works very well and in fact a lot of the changes are directed at making things for this type of regular supply chain trade for smaller companies a lot more efficient but I do acknowledge that there's going to be a significant transition difficulty for them to work through. I'm sorry. Anything else Tom? The next two questions will be the woman in front of our open society friend and then this gentleman up here to my left. Hi I'm Adrey Ashelal Lisa with Reuters and I wanted to ask you about a question. When we talk to folks in the defense industry what they frequently talk about is the sort of angst around ITAR-free satellites and I know you're addressing that now but what they often hear is that they're concerned that the missile technology control regime is going to in effect result in a similar type of situation on man vehicles and I wonder if each of you could just address that and how to what extent the... I know you're talking here about process but I'm kind of more interested in this policy piece behind it and just to piggyback on the previous question about Chinese parts you know Frank Kendall has had to issue a series of waivers for these tiny dumb parts as they were described to me. They don't have a chip, they can't be programmed, there can't be a sleeper cell thing that mysteriously found its way under the F-35 but nonetheless it's in violation of law it has to be waived and given what you're seeing about the global supply chain I'm just wondering if you can address those sort of parts and whether you think the law needs to be changed to exempt dumb parts in your country. Well there's parts of parents too so don't know. Yeah and then the second question up here. Thank you. Peter Lichtenbaum with Covington and Berlin and thanks to all of you for the attention that this issue is getting and the hard work that you and your staff put in. Couple questions both of which are I think for Secretary Kelly but Secretary Wolfe made care to comment as well. One following up on Anne Charlotte's question about Vassnar as Secretary Wolfe has commented previously the Vassnar obligations that the United States has limits the United States ability to move items off the global use list because we are internationally committed to maintaining those controls yet it doesn't seem as Anne Charlotte suggested that there's been a really significant focus to try to reform the Vassnar lists and other regime lists that the U.S. is bound by. Yes we participate in these in the regular list review exercises that Vassnar will make proposals but the work which is led by your sister bureau ISN seems like it could benefit from a more focused high level strategic approach that would really say look these are this is what the U.S. thinks these regimes ought to be covering and taking into account the evolution of technology since those lists were created so I appreciate your comments on whether state would lead that kind of broad strategic level review of the regime coverage and secondly when Secretary Gates rolled out the export control initiative he spoke rather eloquently about the fact that if we've licensed a platform we shouldn't be requiring hundreds or even thousands of licenses for parts that go along with that platform yet arguably for many platforms that's still the case even after export control reform because while much has moved to commerce there are many parts for platforms that remain on the ITAR and ought to remain on the ITAR and so the question is will state consider reform of how it licenses not what's covered on the ITAR but how it licenses what is on the ITAR so that we don't have this situation that Secretary Gates expressed is concerned about where we have in many cases hundreds or even thousands of licenses for important international programs which end up costing the taxpayer and industry. Thank you. Depending on how quickly we can answer these questions we have time for one more but I just leave that with our panel. The first question was on satellites so I'll do that one and we'll give it the rest of the MTCR the missile technology control regime the way we've implemented the regs is that all these exceptions that we're talking about don't apply there's a carve out for all MTCR items no license exception STA for example for NATO and the reason for that is there's a statutory prohibition on the use of exceptions for those types of exports for those items and as you mentioned your comment was with respect to commercial space flight for which the same prohibitions apply so as you'll see eventually we're going to say yes this is a topic worthy of discussion but it's going to be one of those things that over time requires a much bigger discussion than just the administration it's going to involve a need to involve Congress as well but so for now everything that we're doing we're trying to update the MTCR references on the USMOL in fact making them more specific and identifying which ones are actually MT controlled we're doing the same thing and updating them on the commerce controllers but in terms of change of licensing policy that hasn't really been part of our effort given the statutory issues so yes it needs to be discussed no it's not something we're changing now there how's that excellent it's all true too has a side benefit there Tim did you want to talk about Chinese done parts right now parts tied to the JSF the F-35 are all captured swept up by ITAR what we had an issue here was a company farming out work to a subsidiary perhaps not according to the licensing processes by Hoyle given what the restricted license for whatever reason it got farmed out to a company in China that manufactured these parts we discovered this after the fact and so immediately we identified that we talked to the company in question they have moved their operations understanding this back into the United States so they become compliant again and the issue here in my mind is not so much an ECR issue because we're still dealing with the old form of the regulations this is a licensing issue and making sure that you're staying under the constraints of the license that was issued to you and making sure that everybody understands when you pass work through a company what it's for making it such that when you make it you're not in violation of the ITAR so what we did is we made an exception for these parts and they were able to use at such time we had to because we were going to shut down production of the J-35 literally so Secretary Kendall made a decision to go ahead and use those parts after everybody decided they were not going to be problematic and then at such time when they had production lined up just nothing in the United States then we would begin replacing those parts so that's kind of the history of this the larger issue here of course is parts and components and the truth be known category A for several aircraft the parts and components are swept up with the aircraft involved in J-35 are most advanced aircraft in the world we're very much concerned about parts and components being manufactured anywhere other than what we agreed on with our partners in this project actually Tim do you also want to talk our second question had to do a little bit with components that are going to remain on ITAR and going back to what Secretary Gates said in his initial talk in April 2010 about making sure that there's a holistic approach so making it easier on one component to get a license versus others that are necessary for that component to function can you talk a little bit about that or is that something maybe Tom might want to talk about well I'll be I'll give it a stab and then I'll turn it over to Tom and Kevin if you want to chime in I'm not sure I really fully understand the question but as I understand the question we are trying increasingly from a defense point of view is when a license comes through and we've approved an aircraft generally speaking our concurrences are our review of those licenses take much less time and we pass those things back into state to help expedite those licenses we have what we call a triage process because we see about 60,000 licenses a year between commerce and state commerce those kinds of licenses typically go very quickly because there's a precedent in one of the end item has been okay number two is we understand who it's going to and what the part is and so generally speaking because there's a precedent in place they move very quickly from a defense point of view so we're trying not to be the so-called toad in the road on this one right now so that's kind of how we play in this role right now. So let me follow up on the ITAR components question first I mean first of all I think we've got a very good track record and trying to get away from a focus on components and focusing on kind of a system focus and especially on what really matters for US defense and believe me I mean we at the State Department the Political Military Bureau we have no motivation to like keep control of you know hundreds of thousands of different military components because we just don't have the staff to like control and review every single thing we want to make sure that our staff is focused on the items and systems that are most important in making sure that the US military continues to have a military edge and that's what we want to focus on. That said the fact that our North Star is going to be making sure that we preserve US qualitative military advantage and that is kind of the fundamental factor in making a determination whether something stays on the US ML or not if we feel that a specific component has an effect on that edge on that advantage then we're going to keep it on the list but believe me we're very motivated to try to streamline these lists as much as possible and you know if your firm is interested in particular items then we'd be very happy to hear your perspective on it. On Wassonara I'm not going to speak in great detail right now so we can get one more question. Let me just say first of all this whole export control reform process taking place under the conventional arms transfer policy we look at a lot of different factors in that one of which obviously are our multilateral obligations including our obligations and arms control non-proliferation agreements including Wassonara. We're working very closely with our sister bureau of ISN to make sure that export control reform is consistent with our multilateral obligations but you know we're trying to strike the right balance but it's kind of a multivariate analysis and it's very complex and we'll continue to talk to them and other people are interested in those issues to make sure that we get it right. Unfortunately we have run out of time so... How about one more Stephanie? We've got a CSIS alumni in the back. Well then I can't stay in the way of that. If you could wait for a microphone real quick. Thanks. My name is Tamora I work at the New America Foundation's Open Technology Institute and I have a question with regards to the changes that were announced through Wassonara in December and new controls relating to intrusion software and surveillance technology and in addition to that the section 940 of the NDAA requesting the president to develop recommendations on the control of the proliferation of cyber weapons. How will the two processes move forward and how do they relate to the export control reform process? Thank you. On the Wassonara issue as we do with all agreements that the U.S. agreed to at Wassonara we will be implementing in the export administration regulations at some point when we finish the clearance. The only issue is if we need to do any sort of interpretational notes or something like that to make what was agreed to in Wassonara more clear. So I'll just leave it at that. We will be implementing that which we agreed to at Wassonara as soon as we get the Wassonara 2013 regulation probably sometime this spring out. And regarding the NDAA requirement for a presidential sort of determination, not determination, I can't remember what the language was particularly but it was a report on potential for cyber weapons. It requires the president to establish an interagency process to review, to determine what should be controlled and then it's reported to that process. So we actually already have an internal interagency process going to look at that. And actually we had already been stood up as part of considering the Wassonara proposals. So we have that in train already and so to be able to meet we will be do use, to try to use upon but we'll be able to fulfill the reporting requirement for the work we've already been doing to date as part of the Wassonara review. Well it's been my pleasure to host this panel, to moderate this panel but I will turn the floor over to my colleague Jim for any closing remarks or to ask for applause from the audience. What I want to remember from negotiating the Wassonara list is to remember to say mit schlag whenever I ordered coffee. And I'm glad to hear it's gotten better since then because it sure wasn't good when I was doing it. But this has been a great panel. The fact that you've all stayed and that Stephanie's done a good job is really a tribute to both the expertise on the floor there and to your interest in the subject. I wish we had more time. Please join me in thanking the panel.