One of the areas of government policy and regulation that affects manufacturers such as forgers is export controls on certain defense articles and related components and parts. Over the years, the regulatory regimes governing such exports have grown increasingly complex and confusing, with overlapping jurisdictions and inconsistent applications. U.S. manufacturers and their trade associations, including FIA, have long argued that this complexity has resulted in lost export opportunities for U.S. manufacturers.

A major effort to revise and streamline these regulations started under the Bush Administration and continued under President Obama with the goal of ensuring that items are controlled when appropriate, but only to the level required to ensure U.S. security. FIA has been monitoring this effort and recently provided comments to both the U.S. Department of Commerce and the U. S. Department of State on proposed revisions to regulations governing the export of aircraft and related items.

Under today’s export-control regulatory scheme, aerospace forgings, while rarely “specially designed” for military aircraft, are subject to the International Traffic in Arms Regulations (ITAR) because they appear on the U.S. Munitions List (USML), which is administered by the U.S. Department of State. (“Specially designed” is a “term of art” used in export-control regulations having to do with form, fit and function of the part/component as it relates to the defense item in question.) Other aerospace forgings not subject to ITAR regulations (which at a minimum require costly registrations and licenses) may still be subject to control under the Export Administration Regulations (EAR), which is administered by the U.S. Department of Commerce. Determining whether a forging is subject to export controls, and which controls apply, is a challenging task at best, and the penalties for mistakes can be severe, including loss of export privileges.
In general, the Administration’s proposed revisions to Category VIII of the USML (aircraft and components thereof) are intended to describe more precisely which military aircraft and related defense articles warrant control by the USML; which articles are subject to the EAR; and which articles require little to no export controls consistent with international obligations.

On Dec. 22, 2011, FIA filed comments stating its support for this general approach, under which only those forgings that are “specially designed” for a specific list of U.S.-origin aircraft that have low observable features or characteristics (so-called stealth aircraft designed to avoid detection by radar) should be subject to continued control on the USML. All other forgings “specially designed” for a military aircraft should be subject to the jurisdiction of the U.S. Department of Commerce consistent with the Wassenaar Arrangement Munitions List (WAML), an international agreement supported by the U.S.

Under the WAML, forgings and castings are subject to a control regime that applies to unfinished products only when they are “identifiable by material composition, geometry or function.” FIA argues that is a rare occurrence. Because many forgings used in aircraft production are shipped to the customer in “raw” form, requiring substantial additional machining and manufacturing processes, FIA believes that many aircraft forgings are not “identifiable by material composition, geometry or function” when they are shipped to the customer. Therefore, FIA hopes that when the rules are finalized, most aerospace forgings currently subject to ITAR regulations would be under the jurisdiction of the Department of Commerce’s “dual use” export-control regulations – a significant reduction in regulatory burden and red tape.

As part of the finalization of the proposed rules, all public comments will be reviewed, and the Administration will seek Congressional approval for removal of items from the USML. FIA will continue to monitor this effort to ensure that the concerns of forgers are taken into account.