Featured, Features, Online, Uncategorized — October 19, 2014 at 7:26 pm

The Case for Export Control Reform, and What it Means for America

By Brandt Pasco*

A signature national security priority of President Barack Obama’s Administration, and an area that has generated rare broad-based bipartisan support, is export control reform.  At the request of Secretary of Defense Robert Gates, in August 2009 President Obama directed the National Security Council and National Economic Council to jointly review the overall export control system.[1]  Now five years in the making, initial implementation of export control reform went into effect on October 15, 2013 with approximately 100 pages of new rules.[2]  Almost forty more pages of final rules took effect on January 6, 2014[3] with over 170 additional pages of final rules published to date in 2014.[4]  And there is more to come, as a number of additional final rules are scheduled for publication.  Simply put, the system is being fundamentally restructured.  The Department of State calls it “[t]he most significant changes to the U.S. export control system in decades….”[5]  As an author of these reforms, I am often asked why reform was necessary, and what it means for everyday Americans.

As explained by Secretary of Defense Robert Gates, the old system undercut our efforts to control items that were actually critical, impeded our ability to engage with allies in coalition warfare, and made it more difficult to support our troops in the field.[6]  These national security issues were sufficient to justify major reforms.  But they were not the only reason prompting change.  As President Obama explained, “ . . . we launched a comprehensive review of our export controls and determined that we need fundamental reform in all four areas of our current system – in what we control, how we control it, how we enforce those controls, and how we manage our controls.”[7]

Much has been written about the national security implications of export control reform.[8]  But national security issues do not explain the most direct effect these reforms will have on the daily lives of Americans.

As we created our reform proposal, I cannot recall even one discussion advocating export control reform for economic ends.  We were given a blank piece of paper, and our instructions were only to make the system work better.  Had the economic impact been negative, that would have been an unfortunate but entirely acceptable cost of national security.  Happily, however, this is an instance where national security and economic interests are aligned.  If fully implemented, the economic impact will be significantly positive.

To illustrate the impact of the reforms, consider “the Company,” a real corporation, which asked not to be named.  This is a story about how the old system of export controls could kill a business, or an entire industry,[9] without any corresponding benefit to national security.

The Company developed a great new high-tech safety product, a real game changer.  It had prospective customers lined up for 13 million units, with projected revenue of $2 billion over five years.  Just one little detail stood in the way.  The largest customer asked, “[i]s it subject to the ITAR?”  Application of the International Traffic in Arms Regulations (“ITAR”) to a consumer product creates enormous costs, legal liability, and licensing requirements that often doom it in the marketplace.  If the ITAR applied, the customers would balk, the investors would walk, and the Company might fold.  Whether the Company became a freshly minted mid-cap phenomenon, or vanished completely, hinged on the vagaries of Commodity Jurisdiction:  an obscure bureaucratic wrestling match between Federal departments over how technology is regulated.  The largest customer baldly stated, “[t]he ITAR is the kiss of death.”  As such, the answer to the question was a bet-the-company moment.

The Company thought that it was in great shape.  Their $150 safety device had no military uses, and subjecting it to regulations that control main battle tanks and fighter aircraft would make no sense.  The Company was wrong.  An essential bespoke part of the device was determined by the Department of State to be subject to the ITAR.  Thus began years of legal battles.  The Company learned the hard way how Commodity Jurisdiction is at the heart of what was wrong with U.S. export controls.

Commodity Jurisdiction

“Commodity Jurisdiction”[10] is what determines whether a particular item is considered a “defense article”[11] and thus subject to the ITAR. Companies may self-classify their item, and decide for themselves whether the ITAR applies.  As an alternative, a business may file a formal Commodity Jurisdiction determination request with the Department of State.[12]

With self-classification, the company assumes the legal risk of being wrong.  This can result in violations that lead to multi-million dollar fines and imprisonment.  A formal Commodity Jurisdiction determination by the Department of State, on the other hand, is free, legally dispositive, and provides certainty about the applicable controls.  Not surprisingly, given the stakes, many prefer the legal certainty of a formal determination.  Where companies do self-classify, the severe penalties for getting it wrong often cause companies to over-classify to the ITAR, deciding any close call as subject to ITAR control.

Seeking a Commodity Jurisdiction determination from the Department of State is not without its own legal risks, however.  The Department of State issues more than 1,000 such determinations each year.[13]  In most cases, the item is either clearly enumerated in the text of the U.S. Munitions List (“USML”), or not.  In those cases, the determination is straightforward.  90 percent of Commodity Jurisdiction cases filed fall into this category.  They are routine, get resolved at the staff level, and are issued in about 30 days.

Prior to the reforms going into effect, the remaining ten percent of Commodity Jurisdiction cases could get messy.  Such cases, in the past, involved disagreements among the government reviewers about whether the ITAR should apply.  In these cases, the Commodity Jurisdiction process morphed into a de novo policy review where the government decided how it wanted to control the item going forward, but with retroactive legal implications.  Even though the item might not have been explicitly mentioned in any public law or regulation that unambiguously established control, it might still have been determined to be subject to ITAR control as a matter of government policy. These disputed cases then escalated into an interagency dispute resolution process. Escalated Commodity Jurisdiction determinations could become hopelessly bogged down because of a lack of reliable legal standards.  In some cases, these disputes remained unresolved for years. While the determination was pending, legal uncertainty could wreak havoc on the business caught up in a battle that they likely did not fully understand.

This is what happened to the Company.  Their product was assigned to a paragraph of the USML which lacked any clear textual basis for controlling it.  Commodity Jurisdiction became a trap, creating a legal limbo which could only be resolved by export control reform.

Bad Law and Hard Cases

The Arms Export Control Act of 1976, as amended,[14] which is the statutory basis for the ITAR, provides little guidance about what factors the President should use to determine whether something is a defense article.[15]  Thus, Congress gave the President nearly unfettered authority to put anything defined as a defense article on the USML; this authority has, in turn, been delegated to the Secretary of State.[16]

Lacking any guidance from Congress, the Department of State promulgated its own policy on determining and designating defense articles and services.  To meet the regulatory threshold for control, an item was supposed to have specific design intent for use in a military application.  The old policy, since replaced by the new rules that went into effect in October 2013, established various criteria to determine whether something is a defense article.  But the common gatekeeping requirement was that the item be “specifically designed, developed, configured, adapted, or modified for a military application . . . .”[17] Unless an item met this design intent threshold, it was legally not appropriate for designation as a defense article.

The design intent standard seems intuitive, but is actually problematic. One could reasonably think that products designed for the Pentagon should be subject to military controls. However, to appreciate the problems with export controls that made reform necessary, it is critical to understand why the design intent standard is now, and has always been, wrong.  Famed legal scholar John Chipman Gray once observed, “[i]f hard cases make bad law, bad law makes hard cases.”[18]  This certainly was true in Commodity Jurisdiction.  Most of the problems in export controls came back to the basic fact that the legal standard for determining what a defense article was, was wrong.  While design intent captures many things that deserve military controls, it was problematic because it was simultaneously under-inclusive and over-inclusive; hence, hard cases invariably developed.

On the under-inclusive side, many things that lack military design intent deserve stringent military-type controls because of their lethality. If the applicable standard fails to catch these items, it creates problems.  Either the legal standard is ignored in order to capture these dangerous items, violating the rule of law, or dangerous items may lack adequate controls.

Rather than fixing the design intent problem systematically through formal rulemaking, by promulgating a better standard, historical efforts to fix the failures of the design intent standard have largely been made on an ad hoc basis through Commodity Jurisdiction determinations.  In the aggregate, inconsistent efforts to correct the failures of the design intent standard on a case-by-case basis swung the pendulum excessively the other way, creating an effectively standardless system that was unpredictable and over-inclusive.

To see how the design intent standard is under-inclusive, consider the Plowshare Program.[19]  The Plowshare Program was a Department of Energy effort between 1958 and 1975 to find civilian uses for nuclear explosive devices, i.e. bombs.  Setting aside the question of whether proposals to use nuclear bombs in this way reflected good policy, one can imagine any number of hypothetical civil uses for extremely large explosions.  These uses might range from hydrocarbon extraction to large-scale excavation projects, such as constructing a harbor.  Under a strict reading of the design intent standard, modeling and simulation tools for nuclear detonations in civil applications would – if not otherwise enumerated on the USML – lack the design intent necessary for designation as a defense article.[20]  That is clearly the wrong answer.

To overcome the flaws of the design intent standard, the Department of State has adopted a number of interpretive rules, some with more legal merit than others.  For example, State decided that the term “military application” is broader than actual military use.  Such breadth allows the ITAR to capture applications with both civil and military uses.  Accordingly, even if it were not explicitly enumerated on the USML, we need not question whether modeling tools for a nuclear device that is “specifically designed” for excavating a harbor has the requisite design intent to be ITAR-controlled, because as a policy matter they are sufficiently like those used to make a military nuclear bomb that the answer is obviously “yes.” The same logic was extended to other areas, such as first-responder equipment.  Thus, an infrared “firecam,” used by firemen to see through a smoke-filled room, can be deemed a defense article because it performs an application that is similar to one used by soldiers in urban combat.  The expediency of avoiding potentially dangerous military grade hardware from passing into the wrong hands can form the basis for reasonable policy arguments that this is the correct result, even if a narrow reading of the regulations might have reached a different conclusion.

Similarly, the Department of State sometimes considered the “Immediate Tactical Utility” of an item, which in practice merely meant that it was portable, worked on battery power, or worked with a minimum of fuss.  Elsewhere, it has held that some things are “Inherently Military” without regard to their design intent.  These artifacts of agency interpretation were not well grounded in law.  Even more expansive arguments included “purposes for which military sales by the United States are authorized” and “measures consistent with the Charter of the United Nations,” which surely includes essentially everything except weapons banned under international law and instruments of torture.

Funding streams also played a significant role in Commodity Jurisdiction.  If the item under review, or a similar product, had ever received any funding from the Department of Defense, even if only to evaluate a technology that did not prove useful and was abandoned, that often provided a hook for ITAR control.  But the importance of government funds goes much further than defense contracting.  The State Department has argued that something can be ITAR-controlled merely because it was developed under a contract with an agency of the U.S. Government.[21]

In the ultimate exercise of excessive discretion without limiting principle, the Department of State would at times consider the “Level of Control” on an item.  In this calculus, the fact that an item is subject to few controls (what is called “EAR99”) became the basis for a determination that the ITAR applied.  Agencies sometimes refer to this practice as “Hostage Taking,” where the fact that something is not subject to a rigorous control by another agency (normally the Department of Commerce) could be used as evidence that it is ITAR-controlled.

Absent amending the rules, this lack of strict fidelity to the published standard established in regulations was doubtless seen as a necessary expedient to overcome the terrible results that could flow from slavish adherence to the wrong standard.  Unfortunately, this more flexible policy-based approach lacked a limiting principle, and established precedent that over time tilted the table dramatically toward over-inclusiveness.

There are many examples of how this approach lacks a limiting principle.  Consider the Assistant Secretary of Defense for Health Affairs.  This official oversees one of the largest hospital networks in the world.  Surely the overwhelming majority of items specifically designed for use in a hospital are not defense articles, and have no business being regulated as such.  Or consider the Assistant Secretary of the Army for Civil Works, who as the head of the U.S. Army Corps of Engineers oversees many civilian flood control and water-treatment projects.  Surely the majority of equipment specifically designed for flood control or water-treatment projects is unworthy of military controls.  Many other examples can be found – after all, there is little the Department of Defense does not do.  It collects garbage, serves breakfast, and issues parking tickets.  Indeed, there is virtually nothing in civilian life that does not have a counterpart in the military.  And that, at bottom, was the problem.  To presume that the ITAR authorizes control of everything that has a military application, as that term has been used in agency practice, is to presume the ITAR authorizes control over everything.

While the Department of State has broad latitude to subject anything it chooses to ITAR control, in fairness, the ability to define even the most innocuous items as ITAR-controlled does not mean that discretion has been subject to universal abuse.  Also, by any objective measure, a great many items that fail the design intent standard doubtless do deserve military controls because of their capacity to inflict harm.  The point is that prior to the ongoing reform effort the standards used in practice to determine whether the ITAR applied could be used to control anything, often had little basis in law, and no limiting principles. Consequently, the universe of items controlled by the ITAR was both unknown and unknowable, and the legal environment for controls on technology has been inherently unpredictable.

Over the years, the flaws of the design intent standard, in combination with ad hoc efforts to correct its failings, caused the scope and reach of the ITAR to expand enormously.  Because the Arms Export Control Act states that decisions to designate defense articles are not subject to judicial review,[22] this expansion was only subject to whatever discipline the executive branch chose to impose.  Prior to these reforms, it imposed very little.

The shocking reality of how bad the system had become was shown by our review of ITAR control over “military vehicles,” which was the first category we reviewed as part of the reform effort.  In redrafting controls on military vehicles, we found that an astonishing 74 percent of the items that were licensed under the ITAR did not actually warrant military controls.[23]  The reforms strip these items out of the USML.

To better understand the problem created by Commodity Jurisdiction, it helps to look at the notional universe of ITAR-controlled defense articles graphically.  Figure 1 shows the ideal world, where clearly articulated legal principles are consistently applied to a well-defined list of controlled items.  In this ideal world, the regulations clearly divide between black and white, between what the ITAR controls and what is does not.  Figure 2 shows the notional pre-reform world, where the “ITAR Penumbra” radiates outward from a central region that we expect to be ITAR-controlled, to a gray fringe that probably is not but may be ITAR-controlled.  Scattered throughout the field are specific points, each representing a Commodity Jurisdiction determination that clarified the controls over that space, often in inconsistent ways.

Figure 1 – Ideal ITAR

 

 

 

 

 

 

Figure 2 – The ITAR Penumbra


Industry has complained for years that the process of designating defense articles was arbitrary, capricious, personality-driven, and lacking in technical rigor.  While the courts have not yet sustained a frontal assault on the constitutionality of Commodity Jurisdiction, Judge Easterbrook, of the Seventh Circuit Court of Appeals, described Commodity Jurisdiction as “secret law” and “. . . the sort of tactic usually associated with totalitarian régimes.”[24]

Judge Easterbrook’s critique was important not because it was part of the legally binding holding in the case.  It was not; as mere dicta, no changes to the system were required by Pulungan.  The case was important because it was a damningly accurate description of the problem, and laid down a marker that reform was needed.  Some of us involved in the reform effort, although not all, were concerned that if the system were not restructured, it was at real risk of being struck down by the courts as unconstitutional.  This would have been hugely damaging to national security.  Even without the harms to national security raised by Secretary Gates, the potential constitutional issues made it critical to put the ITAR on better legal footing.  The new regulations that went into effect in October 2013 are intended to eliminate the ugly reality of Figure 2, and establish Figure 1 as the reality going forward.

With the initial implementation of export control reform that went into effect in October 2013, design intent was banished from the ITAR.[25]  Instead of the past practice of establishing controls over broad categories using a “catch-all” such as “aircraft . . . which are specifically designed, modified, or equipped for military purposes,” enormous efforts have gone into clarifying what actually deserves military-type controls.  The result is a rewritten USML that is a “positive list” that provides an actual enumeration of what is controlled, to the extent possible using objective descriptions and performance criteria.  The system will have the flexibility to capture new things, but it will be subject to greater political accountability, oversight, and public rulemaking.[26]

The Future of Export Controls

Export Control Reform will not create nirvana.  Some of our original ideas in the reform proposal had to be set aside for additional work because of problems, which we did not anticipate.  Doubtless additional issues will arise, given the enormous complexity of the system, and the kinks will need to be worked out.  In the long term, the unfolding reforms will strengthen national security and the economy by establishing precisely defined and consistently applied controls on goods and services that raise national security concerns.  While national security was the sole motivating factor behind export control reform, it cannot be denied that providing legal clarity about what is subject to control will also lift a huge burden from industry.

This brings us back to the Company, which was trying to innovate in an environment that punished innovation through unpredictable regulation based upon non-public standards.  Yes, these reforms are intended to maximize national security in ways most of the public will never directly experience, but they will also have a very tangible impact on millions of Americans.

So, what does export control reform mean for everyday Americans?  In a word, “Jobs.”

For everyday Americans, we are already seeing the first fruits ripen.  After some years of delay, export control reform brought the Company clarity that the key part in its product is subject to Department of Commerce jurisdiction.  The Company is now actively moving forward to break ground on a new U.S. manufacturing facility.  “Help Wanted” notices should go out soon.

For the Company and thousands of other similar employers, export control reform will provide legal clarity on the regulatory environment for their products up front.  That reduces risk and creates jobs.  It seems obvious and non-controversial that this is a good thing, but it took a five-year reform effort to make it happen.

____

*Brandt Pasco is an attorney at Kaye Scholer LLP.  He was a member of the National Security Council’s Task Force on Export Control Reform from 2009 – 2011, and is an author of ongoing export control reforms.  Previously he worked on foreign policy and defense-related issues in the Office of the Secretary of Homeland Security, the Office of the Secretary of Defense, the Republican National Committee, and the U.S. Congress.

____

[1] Statement of the Press Secretary, The White House (Aug. 13, 2009) available at http://www.whitehouse.gov/the_press_office/Statement-of-the-Press-Secretary/; Presidential Study Directive No. 8, Export Control Reform (Dec. 21, 2009) (on file with the National Security Council).

[2] Revisions to the Export Administration Regulations: Initial Implementation of Export Control Reform, 78 Fed. Reg. 22,660-740 (final rule Apr. 16, 2013) (codified at 15 C.F.R. pts 730, 732, 734, 736, 738, 740, 742, 743, 744, 746, 748, 750, 756, 758, 762, 764, 770, 772, and 774); Amendment to the International Traffic in Arms Regulations:  Initial Implementation of Export Control Reform, 78 Fed. Reg. 22,740–59 (final rule Apr. 16, 2013) (codified at 22 C.F.R. pts. 120, 121, and 123).

[3] Revisions to the Export Administration Regulations:  Military Vehicles; Vessels of War; Submersible Vessels; Oceanographic Equipment; Related Items; and Auxiliary and Miscellaneous Items That the President Determines No Longer Warrant Control Under the United States Munitions List, 78 Fed. Reg. 40,892–919 (final rule Jul. 8, 2013) (codified at 15 C.F.R. pts. 740, 742, 770, 772 and 774); Amendment to the International Traffic in Arms Regulations:  Continued Implementation of Export Control Reform, 78 Fed. Reg. 40,922–33 (final rule Jul. 8, 2013) (codified at 22 C.F.R. pts. 120, 121, 123, 124, and 125).

[4] Revisions to the Export Administration Regulations:  Military Vehicles; Vessels of War; Submersible Vessels, Oceanographic Equipment; Related Items; and Auxiliary and Miscellaneous Items That the President Determines No Longer Warrant Control Under the United States Munitions List, 79 Fed. Reg. 22-26 (final rule Jan. 2, 2013) (codified at 15 C.F.R. pts. 740, 742, 744, 770, 772 and 774); Amendment to the International Traffic in Arms Regulations:  Continued Implementation of Export Control Reform, 79 Fed. Reg. 26-34 (final rule Jan. 2, 2014) (codified at 22 C.F.R. pts. 121, 123, 124, and 125); Amendment to the International Traffic in Arms Regulations:  Third Rule Implementing Export Control Reform, 79 Fed. Reg. 34-47 (final rule Jan. 2, 2014) (codified at 22 C.F.R. pts. 121, 123, 124, and 125); Control of Military Training Equipment, Energetic Materials, Personal Protective Equipment, Shelters, Articles Related to Launch Vehicles, Missiles, Rockets, Military Explosives, and Related Items, 79 Fed. Reg. 264-295 (final rule Jan. 2, 2014) (codified at 15 C.F.R. pts. 740 and 774); Amendment to the International Traffic in Arms Regulations:  Revision of U.S. Munitions List Category XV, 79 Fed. Reg. 27,180-189 (final rule May 13, 2014) (codified at 22 C.F.R. pts. 120, 121, and 124); Revisions to the Export Administration Regulations: Control of Spacecraft Systems and Related Items the President Determines No Longer Warrant Control Under the United States Munitions List, 79 Fed. Reg. 27,418-443 (final rule May 13, 2014) (15 C.F.R. pts. 732, 734, 736, 740, 742, 744, 748, 758, 772, 774); Corrections and Clarifications to the Export Administration Regulations, Conforming Changes to the EAR Based on Amendments to the International Traffic in Arms Regulations, 79 Fed. Reg. 32,612-632 (final rule Jun. 5, 2014) (15 C.F.R. pts. 736, 738, 740, 742, 744, 746, 748, 750, 758, 762, 772 and 744); Amendments to the International Traffic in Arms Regulations:  United States Munitions List Category XI (Military Electronics), and Other Changes, 79 Fed. Reg. 37,536-545 (final rule Jul. 1, 2014) (22 C.F.R. pt. 121); Revisions to the Export Administration Regulations (EAR):  Control of Military Electronic Equipment and Other Items the President Determines No Longer Warrant Control Under the United States Munitions List (USML), 79 Fed. Reg. 37,551-575 (final rule Jul. 1, 2014) (15 C.F.R. pt. 774).

[5] Office of the Spokesperson, “Export Control Reform:  First Final Rules Go Into Effect,” U.S. Department of State (Oct. 15, 2011), available at http://www.state.gov/r/pa/prs/ps/2013/10/215428.htm.

[6] Remarks as delivered by Secretary of Defense Robert M. Gates (April 20, 2010), available at:  http://www.defense.gov/speeches/speech.aspx?speechid=1453.

[7] Videotaped Remarks to the Department of Commerce Annual Update Conference on Export Controls and Policy, Daily Comp. Pres. Doc. (Aug. 30, 2010).

[8] See also, Chapter 11 – Prosecutions for Violations of U.S. Export Controls, Deskbook on Internal Investigations, Corporate Compliance, and White Collar Issues 11-1 (Practicing L. Inst. 11th Release, Oct. 2013) (discussing various national security related export compliance issues); Brandt Pasco, New Export Controls on Satellites Bring New Compliance Challenges, SatMagazine Oct. 2014 (discussing security measures added to the Export Administration Regulations related to the satellite and space launch industries); Brandt Pasco, 从美国进口技术合规分析, 国际市场(An analysis on U.S. Export Control Policy, World Market) Issue 3, 2014 (discussing heightened export compliance requirements and the implications for Chinese companies); and Brandt Pasco, Immigration and Export Control Reform, Int’l L. News, Summer 2011 (discussing additional compliance measures related to deemed exports and non-immigrant work permits).

[9] See also, Richard Van Atta, et al., Inst. for Defense Analysis, Export Controls and the U.S. Defense Industrial Base – Revised (2008) (describing the impact of export controls on various U.S. industries).

[10] Commodity Jurisdiction is an interagency decision making process governed by 22 C.F.R. §§ 120.3 and 120.4.  Non-public guidance on the Commodity Jurisdiction adjudication process was established by the National Security Council, pursuant to National Security Presidential Directive (“NSPD”) 56, on Defense Trade Reform.  NSPD 56 directed certain changes to the Commodity Jurisdiction process, and in some respects is the origin of the current reform effort, which was significantly expanded upon by the Obama Administration.

[11] 22 C.F.R. § 120.6 (2013).

[12] Commodity Jurisdiction determination requests are filed as a Form DS-4076.

[13] Since 2010, the Department of State has posted the results of Commodity Jurisdiction determination requests on its website, available at:  http://www.pmddtc.state.gov/commodity_jurisdiction/determination.html.

[14] Pub.L. 94–329, tit. II, 90 Stat. 729 (codified at 22 U.S.C. ch. 39).

[15] The Arms Export Control Act authorizes control of “defense articles,” but does not define the term.

[16] Ex. Ord. 11,958 (Jan. 18, 1977).

[17] 22 C.F.R. § 120.3 (2012).  This standard has been replaced, effective October 15, 2013.

[18] Gray, John Chipman, The Nature and Sources of the Law. Columbia University Press, 1909. p. 263.

[19] See, https://www.osti.gov/opennet/reports/plowshar.pdf.

[20] To be clear, such tools are controlled on the U.S. Munitions List under Cat. XVI(b).  The point here is that such tools would lack a basis for designation as defense articles under a plain language reading of the old version of 22 C.F.R. § 120.3.

[21] Block 11 of the Form DS-4076 requires applicants to indicate whether the item covered by a Commodity Jurisdiction determination request was developed using funding from any U.S. Government agency.

[22] 22 U.S.C. § 2778(h) (2013).

[23] White House Press Release, President Obama Announces First Steps Toward Implementation of New U.S. Export Control System, Dec. 9, 2010.

[24] United States v. Pulungan, 569 F.3d 326, 328 (7th Cir. 2009).

[25] The reforms adopt the term “Specially Designed” (22 C.F.R. § 120.41), a term used by the Missile Technology Control Regime and the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies.  Unlike the old term “Specifically Designed,” which had global application across the full range of ITAR-controlled items and services, Specially Designed only has application where the term is used within a specific control within the U.S. Munitions List or the Commerce Control List.  As such, it is significantly limited in its application.  Additionally, Specially Designed is a more precisely defined term than the more open-ended Specifically Designed.

[26] Supra notes 3, 4, and 5.  More information about Export Control Reform is available at http://www.export.gov/ecr/

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