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The Peninsula

Korea: Unsung Beneficiary of Export Control Reform

Published February 19, 2015
Category: South Korea

By KEI President & CEO Donald Manzullo

Just a few weeks ago, two sub-agencies within the U.S. Department of Commerce released two important statistics that have gone relatively unnoticed even by keen observers of Korea.  First, through the Foreign Trade Division at the U.S. Census Bureau, U.S. exports of merchandise goods to South Korea hit a record level of $44.5 billion in 2014.  Second, through the Bureau of Industry and Security (BIS), South Korea thus far has ranked third out of all nations in the world that benefited from the Obama Administration’s export control reform (ECR) initiative.  While the ECR was not designed to benefit one country or to boost U.S. exports, it does represent a positive by-product of the ECR effort that was a long time in the making.

One of the first Congressional hearings I attended back in 1993 was a primer on the need for export control reform.  The last time the Export Administration Act (EAA) was changed by Congress was back in 1979 during the height of the Cold War.  Right before our eyes, a witness assembled a “supercomputer” in less than two minutes on the hearing table by adding a more memory (RAM) to a hard-drive that exceeded the maximum computing power export threshold at the time.  Then the witness put the machine in a shipping package no bigger than a laptop that could be sent anywhere around the world.  From that moment on, I became a strong advocate of restoring rationality to America’s export control regime to reform licensing for products readily available around the world in order to free up precious government resources to concentrate on tracking true cutting-edge dual-use technologies (products that are of commercial nature but may have military applications) that could be used to threaten our national security.

I joined many bipartisan efforts over the years to reform the U.S. export control system, from a comprehensive overhaul to a narrowly-targeted careful rewrite of certain regulations.  In one instance, I spent nearly two years to change just two sentences in the Export Administration Regulations (EAR) that now enables aerospace parts and components used on civilian airliners to be exported without need for a prior-license approval from the U.S. government for each sale.

This Administration has modeled the ECR effort in that small example and greatly expanded it to cover many more high-technology dual-use products are that made elsewhere around the world.  The ECR also treats our allies as true partners by not requiring a license for every spare part to repair a piece of U.S. military equipment these nations had previously purchased.  Before the ECR initiative, there were incidents when fighter aircraft or other pieces of military equipment from our coalition partners were inoperable in Afghanistan and Iraq because the U.S. licensing process took so long to ship spare parts needed for maintenance.

At the time when the ECR was launched, no one exactly knew which nation would benefit most.  However, now after the first 14 months of the reform effort (from October 15, 2013, through December 31, 2014), the results show that South Korea ranked third in all approved licenses by the BIS with 577 approved licenses in a newly created category of products called the “600-series” (defense articles) and “9×515 items” (spacecraft) valued at $1.4 billion.  These goods no longer need to have the strict controls as mandated by the U.S. munition list (USML) that governs the overseas sales of military-related items because these items are commercially available around the world and were not specially designed for a U.S. national security application.  The goods in the 600-series and 9×515 items are also eligible for the Strategic Trade Authorization (STA) license exception.  Most parts and components are automatically eligible for a STA license exception to STA-eligible allied and friendly countries like South Korea, including foreign-made (non-U.S.) products that contain U.S. components.  In fact, the Republic of Korea (ROK) is ranked by BIS as among the top two nations in the use of the new STA license exception.

While the Obama Administration’s ECR effort cannot take all the credit for the record high U.S. exports to Korea, treating our friends and allies as trusted partners has gone a long way towards repairing the old image of the United States as an unreliable supplier.  This produces follow-on results as it opens up more opportunities for U.S. sales abroad, including parts and components of larger products made overseas.  No longer will foreign companies openly advertise that their products are void of any U.S. parts as a selling point for overseas customers to avoid having to comply with U.S. export control laws.  As a result, early results show that Korea has emerged as one of the top beneficiaries of the Administration’s focus on reforming our nation’s outdated export control regulations and provides another demonstration of the value and importance of the U.S.-ROK alliance.

KEI President & CEO Donald Manzullo served in the U.S. House of Representatives from 1993-2013 and chaired the Foreign Affairs Subcommittee on Asia and the Pacific. The views expressed here are the author’s alone.

Photo from U.S. Pacific Command’s photostream on flickr Creative Commons.

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