Latest / Rittener Reflections / 18: Export Controls: Past, Present, and the Path Forward. – Pt. 3 I Can See Clearly Now (Not!)
Transcript
- Jeff (00:00) Welcome back to written reflections and to part three of our series on export controls Which I have called I can see clearly now not You see we've looked back. We've looked around and now we look ahead but Clarity is elusive Will the world split into two economic spheres? Can AI help automate compliance or even classification? Should we revive old licensing models? And what is the key to success in creating some means of predictability in a world of geopolitical uncertainty? Once again, I'm joined by Bruce Jackson, and together we will explore these questions with candor, curiosity, and maybe a little humor. Because in export controls, deja vu isn't just a feeling, it's a forecast. Hi Bruce, welcome back. I don't know about you, but it has been quite a week in the world of trade. But for today, let's start with the big picture. So do you think we're heading toward two economic spheres? China and its allies versus the rest? And if that's the direction we're heading, how should companies prepare for a bifurcated supply chain and conflicting regulatory regimes? Bruce Jackson (01:18) in S. Okay. Yeah, that's a loaded question. And I don't necessarily have the answer on that one. I do think that's the general direction we're headed is very likely ⁓ two spheres to an extent, particularly in certain technology areas. I think that's going to be an area of restriction. not saying that's, I mean, I'm saying for the time being, maybe some years before we know how this is going to actually. Jeff (01:44) Yeah. Bruce Jackson (02:07) gel out and we understand really what the concerns are and because right now I think there's just a general fear concern about where China's headed both in Washington DC and in other capitals and and so ⁓ You know whether that's all justified or not justified or there's some mix of the two we'll have to see I mean it's it's it's but I think for businesses they have to kind of plan to go that route to be able to serve both both markets, both economic spheres, they have to plan for that. And that is a challenge because you're, how do you untwine? I mean, it may not make economic sense to do so in some ways because ⁓ you have scale. And if your scale is then cut in half, I'm just making that up because you don't know if it, but suddenly your scale's reduced. You may not, the model that you've got in the way your supply chain works, the way you sell to your customers may be. may not be anywhere near as efficient as it was with that larger scale that you had when you didn't have to worry about some of these things. But I do think it's a reality. Companies, I think, are starting to deal with it, particularly the larger companies are trying to. ⁓ But they really need to focus on that and make sure that across the organization, as they look at solutions, that the proposed solutions before they implement them, that those get escalated. So the senior leaders can look at that because they're the ones that know what else is going on in the company can say, well, we appreciate that great idea that you've got there, but that's going to run counter to something we're doing over here. And that will complicate it. ⁓ But then that gets people at the table to talk about how to resolve it. And you're right. We do have these conflicting regulatory regimes. In the last episode, you talked about ⁓ China issuing countermeasures and their own export controls to mirror how the US and other countries are controlling exports to China. You've got things that could be in conflict there. ⁓ Then of course, ⁓ we didn't talk about it much last time, but I assume it'll probably come up here. That's just the breakdown of Wasanar ever since Russia invaded Ukraine. Jeff (04:02) Mm-hmm. Mm-hmm. Bruce Jackson (04:25) and Wasn't being the major multilateral control regime and how you're starting to see the offshoots from that into plural lateral controls where a group of countries that maybe have the core technology, say in semiconductors or in aerospace or whatever, can form their own little control regime. And even if it's informal to agree and issue controls that are like parallel controls so that they can kind of have more effectiveness. than they would if they were acting independently. The challenge is that there aren't, that doesn't apply to everything. I mean, you can do it around certain things you have good control over, which I think is what spawned the semiconductor controls out of the US is that US technologies used in design, development, assembly, all those things, the software, the tooling, the manufacturing equipment, all of that, lot of touch software, all the touch points with the. that exists with the US allow the US rules to be effective at some of the in the advanced computing space, advanced semiconductor space. So, but that doesn't necessarily translate to all other industry areas, right? And so it's gonna be harder to do that. Yeah, in other areas. Jeff (05:29) Right. Yeah. Yeah. Yeah. Yeah. Well, as I think about this bifurcated supply chain, and in particular, we talked last time about the new extra-territory roles with China, is it feels like if I go back to often we heard that countries would, to avoid the extra-territory rules, would design out U.S. origin parts, right? Because they didn't want to be caught. All right. So if you got that going on on one side, Bruce Jackson (06:03) Yeah. Yeah. Jeff (06:09) And now of a sudden you got China with their extratory rules. And so people start to design out China content. What you see as you go down the road is you begin to see two very different paths, right? And you may as a business, maybe have two very different business models. You have your product mix that you sell to the Western world that everybody knows it doesn't have China technology in it. And you got things you're selling to China that knows it doesn't have. Bruce Jackson (06:17) Yeah. Jeff (06:36) U.S. or whatever. you can begin to start to see where this may go ⁓ if we continue with this sort of program. Bruce Jackson (06:44) Yeah, I hadn't thought of that particular aspect of it. So that's a good analogy there that you came up with that we could obviously have products that are unique to specific markets. the complexity of the supply chain to support that could be difficult as well. mean, yeah, we had that in the late 90s. You had in early 2000s the effort to create ITAR-free products. because of the complexity of the State Department licensing process, basically in the jurisdictional reach of the ITAR. And we're seeing that in semiconductors as well, although I think it's hard because of the pervasive use of the tooling that is US origin or the software and those things. In other areas, it may be easier to do that, but still, yeah, you're seeing this separation. Is that going to be the longer term reality or not? mean, some of the times the headlines are this world has changed forever. And I'm like, I'm always questioning that because people probably said that export controls are going away. People said in July of 1990 and then August 1st happened and Iraq invaded Kuwait. no, they didn't go away, did they? Yeah. Jeff (07:48) Really? Yeah. Yeah. ⁓ Yeah. Yes. Everything changed. Yes, yeah, exactly. Yes. Yes. Bruce Jackson (08:08) So yeah, there can be incidents that happen that trigger us to think certain things, but then they don't really come to reality. It's kind of like, and I don't know, this is probably a horrible analogy, but for some reason when you were describing this, I got thinking about New Coke, when New Coke was launched. I was actually working at the Commerce Department then, and they had a big event outside the Department of Commerce on a big plaza there in front of the Marriott Hotel at 14th and E Street or whatever. Jeff (08:14) Yes. Yeah. Yeah. Yeah. Pennsylvania. ⁓ yeah, yeah, yeah, yeah, yeah, yeah, yeah. Bruce Jackson (08:37) Pennsylvania, Pennsylvania, 14th, 14th, Pennsylvania. And they had a big celebration announcing New Coke and they're giving it away. And does anyone know what New Coke is now? No. But they later came out with Coke Classic, which was the original. And then they took the classic away when they went back. And we forget all of that happened. And that was an effort to make something different and all that. I don't, know, reality is a little bit fungible in this area. And we'll have to see what happens. ⁓ Jeff (08:47) Yeah. Yes, Yeah. Yeah, yeah, yeah. Yeah. Yeah. Yeah. Bruce Jackson (09:06) as we move forward. So I don't, unfortunately, I don't have a lot more to share on that because I think it's still early days, early days. Jeff (09:09) Yeah, yeah, yeah. It's very interesting that you mentioned the summer of 1990 because in the summer of 1990, I was torn, I was out of work and I was torn whether should I, my resume be a supply chain logistics resume or should it be more in my experience? I'd worked for five years in export controls and I thought they were going away. The wall came down, you know, no more, no more, you know. Bruce Jackson (09:22) Mm-hmm. Mm-hmm. Jeff (09:38) Eastern Europe, Russia, and so, but then I found a job in export controls at Intel and the rest is history, but you're right, things do change and you never know ⁓ as you go forward. Bruce Jackson (09:49) Well, as we know, that was kind of the start of the ramp up of sanctions and everything. So sanctions became more important and then the implications of that and also just security issues and those kinds of things too. So yeah. Jeff (09:54) Yeah. Yep. Yeah, yeah, yeah, yeah. So thinking about going back and ⁓ taking some things that we've all benefited from in the past and maybe thinking about how they apply today, let's talk about export licensing. mean, we had the first episode, I think we talked a lot about this, but in the past, BIS, when I first started working in export controls, we had something that was known as a distribution license, which allowed us to... sell to our distributors and they had to have export compliance programs that we audited and trained them and so on so that when they sold it was certain that they were not selling to where they shouldn't. And then we also had a project license. mean, my first job at Intel, my job was to manage that project license. And the project license was for our fab. The only single little fab we had in Jerusalem. Israel and everything that went into that fab had was controlled it was the parts the equipment and I we had a project license so we could just move that because you can't can't be waiting around for a license if a Fabrication facility needs to spare part so we had a project license and that was my job to figure out whatever was shipping over there did qualify for the license and then make sure I applied the license and so on so those were those were tools those were ⁓ Mechanisms that we all use to to manage our business. So I guess the question for you today is you know Should BIS bring back the distribution or the project license or another book license? And would that solve some of today's problems? Bruce Jackson (11:29) I mean, there are times when I think that would work. I mean, these are things I think that should be on the table for sure of discussion. And the same applies to, you know, ⁓ if we think about some of the other mechanisms that the Department of Commerce has used for licensing or enabling freer flow of movement of ⁓ foreign person hires, the consideration of, you know, ⁓ Jeff (11:36) Mm-hmm. Mm-hmm. Bruce Jackson (11:59) having ⁓ entities abroad that have been vetted and then you can deal with them in an easier way. All of these things are things that should be on the table, I think, in terms of how to streamline ⁓ export control. And it's interesting, I do think there should be a process where exporters can be vetted and their programs certified so that they can manage a lot, have more space of freedom. Jeff (12:07) Mm-hmm. Mm-hmm. Bruce Jackson (12:29) ⁓ to carry out transactions and make exports and manage that themselves and be subject to periodic audits ⁓ to ensure that's happening. The concern that I've got is that there are mechanisms out there for licensing, particularly under the State Department for distribution, for different types of licensing mechanisms there. And, you know, lot of our consent agreements involve breakdowns in the management of Jeff (12:37) Mmm. Bruce Jackson (12:57) compliance associated with those licenses. And so the push against that, the governmental push against it is like industry doesn't have the best track record on some of these things. And also consent agreements, the consent agreement ends and you have seen that certain companies where then you see layoffs of all the compliance people they hired to manage the compliance. Jeff (13:10) Mm-hmm. Mm-hmm. Bruce Jackson (13:24) And I assume in the governments, not, they're shaking their heads going, well, this is, it's going to be deja vu all over again or boujade as George Carlin used to, the comedian George Carlin used to say, nothing like this has ever happened before. It actually has, you know? So these things, you see these things happen, but I do think there could be a place for distribution ⁓ or a project license. You get certified parties, regular auditing and checking. And here's the thing. Jeff (13:27) Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (13:53) We have these tools. You got AI tools, the chat bots, you have ⁓ other tools for tracking things and making sure things happen. The greater adoption of those types of technologies could also help. ⁓ But sometimes people look at it, well, the cost of implementing those, well, it's gonna come down over time. So you have to look at the cost of like, you Jeff (14:06) Yeah. Yep. Yep. Yep. Bruce Jackson (14:20) I gotta get this thing over to that country right away. We have a line down and I'm gonna have to wait six months for a license. I might as well shut the factory. It's not gonna work. So, yeah. ⁓ Jeff (14:26) Yeah, yeah, exactly. Yeah. Well, that's, that's, that's how that hasn't that's happened before. think there's been that sorts of things happen. I know for sure. You know, it's interesting when we think about export licensing and BIS is challenged because on one hand right now, we're seeing a lot of regulations and we're seeing a lot of, you know, presumption of denial. In other words, BIS doesn't want to approve these things. Okay. But we're also seeing that BIS is Bruce Jackson (14:34) Yes. Yeah. Yeah. Yeah. Jeff (14:55) putting these rules in place because they want more to come to them so they actually can see it. Right? So they can actually know what's happening and decide whether they want to approve that or not. as the requirement for us to come in for export licenses grows, they have to have a more agile system. We can't be using the same system we used in the 1990s. Right? And so I guess the question is, you know, what... you know, if we were to design a new licensing system, what would that look like and who should do that? I mean, you mentioned AI as a possibility, but it just feels like there's some help needed there, maybe. Bruce Jackson (15:29) Yeah, I mean, I do think there needs to be improvement in the tools that we use and the way in which we apply for licenses and how licenses are approved in the scope in which they're there. I mean, I do think as you were commenting there, I started thinking about deemed export licenses and the challenge there to license foreign persons because you're to have a foreign person working for you. They have a certain work scope when they're hired. Jeff (15:37) Mm-hmm. Yeah. Bruce Jackson (15:55) But then what do you do when that job changes or they change, Jeff (15:55) Yeah. Yeah. Yeah. Bruce Jackson (15:58) how are you managing that process? The other thing too is, mean, we'd like the government to relax some of those rules and trust the companies to manage it. But there is a reality too. mean, private companies only have so much information about the foreign person population that they're hiring, whereas the governmental entities and their intelligence community, Jeff (16:22) Yeah. Bruce Jackson (16:23) has greater access. You may think, well, gosh, we're just hiring, we're hiring this one engineer to work in this one department. And he's from this one country that maybe is of a little bit of a concern, but let's just say it's not an embargo country. think he's going to work here. That shouldn't be an issue, right? Well, you don't know that that particular country is orchestrating people at other key companies. there are people in the intelligence community trying to look at patterns. Jeff (16:31) Mm-hmm. Bruce Jackson (16:51) Right? And they're saying that's a pattern. You don't have access to that information. You don't know. So you do need the government involved in some of this. But there needs to be greater transparency and predictability so you can plan for it. And there ought to be greater linkages between the various parts of the federal government that manage that, whether it is licensing of foreign persons, foreign national. I use foreign person because that's what should be in the regs. People throw around the term foreign national like Jeff (16:52) Yes. Yes. Bruce Jackson (17:20) that irritates me when that happens. anyway, I'll try to stay off that soapbox. But foreign persons, the management of that versus the flow of goods and technologies, I do think there's probably greater freedom there because you have your factory, ⁓ you can vet the people that come in and there can be audits and all of that. And maybe we do leverage ⁓ web-based applications if they can be robust with security and all of that. Jeff (17:26) Yeah. Yeah. Yeah. Yeah. Bruce Jackson (17:49) Things are moving in that direction, I think, but there is a cost, right? There's gotta be a willing to invest in it to help manage it. But I agree that the presumption of denial and not having predictability on when a license is going to be approved. I I know companies that have had licenses pending at commerce for years. So it's like, it's not just the Commerce Department and the State Department as well, where you have... You submit a request for a commodity jurisdiction and it may take years to get it out of there. And that tells you something. It raises serious concerns in many cases. Big questions that haven't been answered and getting the answers could be hard. There's no question. But this is hard for business because it's not predictable. That predictability is very helpful if we know what's going to take. Jeff (18:21) Yeah. Yes. Okay. Yes. Yeah, no, I couldn't agree more. The predictability is a key requirement, I think, for business, and business works better when it's predictable. You know, as we think about the future, you know, this topic in this session is really about how do we go forward, what's the path forward? And one of the things that everyone is talking about, it's in every conversation, is AI, right? And I have had personally three or maybe four individuals Contact me in the last six months who are working on a startup novel idea of how they're gonna take AI and know, improve, know compliance or approve, know what we do and so it's it's out there and everybody's mine and I guess let's just talk a little bit about AI and Question I would have for you is can AI truly help with export classification I've seen samples of where HTS I've seen some pretty robust Bruce Jackson (19:19) Mm-hmm. Okay. Jeff (19:38) work on that very accurate. ECCN is a different animal and so I'm wondering is this something we can do with AI or are we just chasing a mirage? Bruce Jackson (19:48) ⁓ I mean, I think there's certainly use for tools like that. think, I mean, when I'm thinking about, we're to use AI for export classification. Okay, I'm going to ask where, okay, where is the model? Where is it operating and all that? Because if you're sharing information about a product or model and you don't know how it's classified and that model is in, I'll just say India or someplace like that. And you go, the classification is US munitions list category block. Jeff (20:12) Yeah. Bruce Jackson (20:18) Okay, you just did that with a model in India. Okay, you have a violation on your hands. You shared technology. You know, it's kind of like outsourcing classification. Also, I mean, yeah, just outsourcing classification. You have to know where the people are that are working on that and who's accessing it, right? And even if it's an AI model, what are the inputs to that model? Is it, I'm not gonna say it can't work longer term, but you've gotta have a human element involved there. And this also brings up my, thing too, having hired a lot of trade, trade people through the years and also worked with a lot of trade professionals through the years. I view, and I'll get on my soapbox here, I am a bit of, you you have to know how to classify from an export control. You have to know how to classify. That is bedrock. I mean, I don't care what role you're in. I mean, if you come in and you're at a senior level, for whatever reason, end up, learn to classify if you haven't learned it then. You need to know how to do that. Jeff (21:10) Yeah. Yeah. Bruce Jackson (21:17) And the best way to do that is, you know, do it and read it and perform it and then train on it and educate on it and get exposed to different issues there because that's just a bedrock requirement. The classification is the passport to your product moving or your technology moving across borders around the world and understanding how that's determined is crucial. You don't have to be an engineer to know how generally how to classify how the process works. Jeff (21:33) Yes. Yeah. Yeah. Yeah. Bruce Jackson (21:46) and what the inputs are and how to ask the questions. And obviously you need to have engineering and technical experts to help you, but I'm an advocate for that. And I do think, again, I think there's use for AI tools there to help, but as one of our professional colleagues out there has posted about AI tools, now some of them hallucinate and the reliability, I mean, I think there has to be some auditing of that, some checking of it. And it does help if you have smart, Jeff (22:10) Yes. Bruce Jackson (22:15) part numbering schemes, right? That can really help. But, you know, I know from experience that I've interviewed, I can recall doing this for a software client that I had, a software ⁓ client in the oil and gas arena 20 years ago. And I interviewed five engineers and the first four said there was no cryptographic functionality at all in the solution. And the fifth engineer said, yeah, there is. And the other four looked at him and went, what? They didn't know. And they're all working on the same product. Jeff (22:17) Yeah, yeah, yeah. Yeah. Yeah. Bruce Jackson (22:45) So I don't know if this is bad communication, but will the AI tools find that? I mean, this was actual interviews of engineers and talking through the process to flesh this out. And encryption is just one example. And there could be other things that trigger an issue and functionality and key feature sets. And of course, too, you have to know where information is being pulled from, what's the basis you're making in that arena. Jeff (22:51) ⁓ Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah. Yeah. Bruce Jackson (23:13) It can certainly, I think, help, again, if you have smart part numbering and rigor around the terminology used for how product is classified and categorized within the company and then the nomenclature used for identifying that. Jeff (23:28) Yeah, yeah, yeah. Well, I think, you know, it's a really interesting thing to contemplate. I've always kind of divided classification into two parts. I call one ECCN determination. And this is what you've just described, having the sense to look at that rule and do the work to figure out what really is the class scheme. You may have to work with an engineer to get some help with it, but it's determining the right classification. And then where I think most of the work and most of the opportunity is what I call ECCN assignment, where you assign that ECCN that's already been determined to the right products. And I think that's probably where originally you might be able to really get some help with AI is to cut all that manual. We got, you know, a handful of people, that's what they spend their day assigning ECCNs to in the system. Bruce Jackson (24:13) from tools, yes. Jeff (24:23) right, to make sure it's attached to the right item or it's, you know, make sure that the shipment has the right ECT on the paperwork and et cetera, et And so I kind of feel like maybe there's opportunities there, but I would never want to take away, you know, unless we can definitely confirm that it is a hundred percent accurate, you still need a human being looking at that. And like you said, I understand. So I'm with you on that. agree with that. Bruce Jackson (24:48) But I agree that there can be tools out there that can help backstop the human being as well. I I can recall as a consultant doing assessments of companies, I come in, I'd say, ⁓ this was after the first EAR rewrite in the 90s. And this was those early 2000s, I come into a company and the ECCN for a product was 6599G. Jeff (24:51) Yeah. Yes. Yes. Yeah, yeah. Yes. Bruce Jackson (25:13) and they put in under license exception or license authority GDES. And I said, well, why are you using these numbers in this terminology here? So, well, we put that in there because then the thing just goes through. The transaction just goes through. I mean, or Frank, that's how he always did it. So I'm just doing it because that, you know, Frank's no longer here anymore. ⁓ So, yeah, I think there are... Jeff (25:18) Yeah. Yeah. Yeah, exactly. Yep. Yep. ⁓ Yeah. Mm-hmm. Bruce Jackson (25:43) You know, yeah, the tools can help to a degree, but you do have to have people with knowledge who understand the requirements. But the assignment you'd have to have, if you're using it for assignment of the ECN, you have to have some guardrails there. So you can't just throw something in so something will go out, right? Yeah, yeah. Jeff (25:48) Yep. Yep. Yeah. Yeah. Yeah. Exactly. Exactly. Yeah. I think there's a lot of opportunity. It's a it'll be an interesting to see how this all plays out and who's actually going to be able to figure out the best way to use all this. But definitely there's opportunity. Now, one of the things I've heard heard over and over and yesterday I was at a conference and this came up and I wanted to get your thoughts on this. So what one of the concerns that many export compliance practitioners have is that the AI is going to take away my job. So there's a reluctance to really work with it. So I'm just wondering, what do you say to those folks that think that? Bruce Jackson (26:37) Yeah, we certainly can. I sympathize that, yes, there are certain roles, certain activities within trade compliance that could be automated or that AI could ⁓ minimize the number of people you have to have involved in that process. So what does that tell you? Learn more stuff. Learn more things. Get more experience. Get out of the silo. And that is one challenge. Jeff (26:56) Mm-hmm. Bruce Jackson (27:05) particularly, that's why I think if you're in a career, particularly if you're early in your career, work for a smaller company, because you're going to get exposed to lots of different issues. And even if you're trade-compliant, you're probably going have to pack a few boxes, you're going to learn logistics. You're probably going to get pulled into some other things. You're probably going to be a visitor escort. You're going to be doing lots of other things in your role, and you'll get a broader base. When you, once you get into a larger corporate environment, Jeff (27:19) Yeah. Yeah. Yep. Bruce Jackson (27:34) you may find yourself kind of siloed in, all I do is technical assistance agreements under the ITAR, or all I do are deemed export licenses. And because from the company's perspective, they may view that as, it's short-sighted, but they may view that as most efficient. This person knows how to do it, we're just gonna have them do it. We'll find someone to back them up when they're on vacation, but they'll just do that for the rest of their lives. Jeff (27:42) Yeah. Yeah. Yeah. Bruce Jackson (28:00) And most Jeff (28:01) Yeah. Bruce Jackson (28:01) of us, that's one of the reasons I often heard from people they didn't want to learn classification because they didn't want to be stuck doing it for decades. Well, you're right. You shouldn't be stuck doing it. But you should know how to do it. And then you should open yourself up to doing other things. broad, to the answer to your question is get broad experience, learn other things, because that is going to really help add longevity to your career and your ability to really enjoy. Jeff (28:09) Yeah, yeah, yeah, yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (28:27) the field of trade compliance. when I say enjoy, I have enjoyed it. So it's been great. Yeah, I love it. Jeff (28:31) Yes. Yeah. Yeah, no, that's good advice. Yesterday, one of the best things I heard from one of the speakers on the panel on this topic of AI and potentially taking your job away was that the importance of us who are in compliance to really embrace the AI and start playing with it, using it, looking for ways that you can leverage it to make things more efficient and maybe even more accurate and so on. And the quote the person said was that rather than worrying whether AI is going to take your job, you should be worrying, worried that the person who knows how to use AI is going to take your job. And I thought that was a really, really good way of looking at it. So don't, don't just blind yourself from it. All that. I don't want to use that because it's going to use it, find ways to use the technology to really improve and make it, make the operations more efficient and more accurate as best you can. So yeah. Yeah. Bruce Jackson (29:10) Yeah, that's right. I mean... I mean, I'm already using it. mean, I use it a lot of times the hardest thing to do is come up with that first draft, that rough draft of something, right? And so you can use these chat bots, ask a question, get a rough draft and you can go, well, that's, it was hallucinating there, take that out. You gotta be smart. You don't just accept it. You have to do some, but it can help you get the mental juices going here, you know, and that's useful. Jeff (29:31) Yes. Yes. Yeah. Yeah. Yeah. Yeah. Yeah. Yes. Yes. Yeah. Yeah, yeah, yeah, yeah. Yeah, my hope, my dream one day, I've had this for decades, is that one day, one day we will completely remove the paper and maybe AI will get us there. We can actually get everything digitized and get rid of the paper and eye off and say the fingers that make mistakes. ⁓ Bruce Jackson (30:06) Well, AI can be, I can see there, obviously you got to be concerned a little bit with privacy issues. have to, you we've got the GDPR in Europe and you've got similar privacy rules in California and other countries are coming up with this. But, you know, things that happen in the corporate world, you know, there are tools out there to help you find things. go, dang it, I know I answered a question just like this a year ago, two years ago. AI can help you find that quickly. Jeff (30:13) Yeah, yeah, yeah, yeah, Yeah, Yes, Bruce Jackson (30:34) You know, it Jeff (30:34) yes. Bruce Jackson (30:35) already can do that. It also could be helpful for auditing. You know, if you suddenly have to look at like, OK, so and so did this. What are we doing with that country? You can help you identify whether you're whether you're doing things in certain countries and whether you have a concern there. so there are there are it's a power. You can do more, you know, with with with fewer resources. That doesn't mean you can't. You still need resources. But but it can't but it can't help. It can't help. Jeff (30:42) Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Yeah, yeah, yeah. Yes, absolutely, yeah. Yeah, right, exactly, yeah. It can help, yeah, absolutely. All right, let's kind of shift to the latter part of our discussion here about export compliance professionals ⁓ kind of operating in our world today. So, you the world today, as we've talked over the last few hours, Bruce, is... Bruce Jackson (31:04) workload. Jeff (31:20) is a lot like the world you and I started in. It's a lot of similarities, right? And so one of the things we both have said in multiple ways is, you know, one of the keys to success is being able to create some level of predictability, right? And we're living in a world of just incredible uncertainty. And I've even named this year the year of uncertainty has been my name of it, you know, and we're living in this world. as you think about compliance professionals, you know, what advice Bruce Jackson (31:23) Yeah. Mm-hmm. Jeff (31:49) Do you have, in the midst of this uncertainty, for professionals, should they wait for things to get settled down and be more certain, or should they? What should they do to kind of navigate that? Bruce Jackson (32:03) Well, I say educate yourself, stay educated, track what's going on in the world. ⁓ Join trade associations if you can, if not be active in them. Trade groups, apply to join some of the advisory committees at the Commerce Department. We always need more members on those. Both you and I sit on one, so we know that. New blood and don't be intimidated by the others that are on that. You belong there as much as everyone else. Your voice deserves to be heard. Jeff (32:05) Mm-hmm. Mm-hmm. Mm-hmm. Yes. Yes. Bruce Jackson (32:31) And we need more small and medium sized companies involved in those fora. And that same thing applies in other trade groups as well. But keeping yourself educated and up to speed. We obviously have had a few, there are some compliance certification programs out there. ⁓ Whether you should do one of those or not, do your homework, do the research to see whether it can really add benefit to you and to your career or not. Jeff (32:41) Mm-hmm. Mm-hmm. Mm. Mm-hmm. Yeah. Yeah. Yeah. Bruce Jackson (33:02) I think it really kind of depends on those, whether they can really, but that is something I would do. And I feel like be straightforward with the leadership in your companies about what the risks are, but don't be, I mean, we don't want to be crying wolf. We don't want to be a chicken little running around saying the sky is falling when it's really not. You have to look and put what you're doing in perspective. Jeff (33:05) Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Yeah. Yeah. Yeah. Bruce Jackson (33:29) for the business? is the risk for that business? And as long as you bring up the issues, I think that can be helpful. I mean, but you talked about the uncertainty, particularly around controls in some of these areas, what we're gonna do. You have to manage that. Another thing, something that I've been doing a lot lately, which is because we're seeing with all these new laws around government contract, particularly the United States or the connected vehicle rule, et cetera, is I see certain companies trying to push their compliance responsibilities down the supply chain to their suppliers. So if you make a widget and the widgets multi-purpose and you can use it in lots of different things, you shouldn't be, and you're not a government contractor, for example, you shouldn't be obligated to make some certification to a customer that your product complies with that government contracting law or regulation requirements. Jeff (34:12) Yeah. Yeah. Right. Bruce Jackson (34:28) That's their job. That is not yours. And you can give them the information they need to make their judgment. Perfectly acceptable question for a customer to ask this. But not, mean, I'm not, I don't want to sign up for a whole bunch of liability. And that is because it also creates a lot of work for compliance professionals if you're constantly replying. So the other thing you can do is come up with standard statements that address the vast majority of the customer requests. Jeff (34:48) Right, right, yeah. Yeah. Bruce Jackson (34:56) so you can get the answers out there to the customers and that way avoid, or if it's suppliers that are coming into you asking questions, you could do the same thing with them and reduce your workload and you're having to respond to these things. The other thing is it gets you to consistency because if people are answering these questions differently, or even if you are answering each one individually, you could be answering them differently. And if that paperwork finds its way in front of a regulator, they could be looking. Jeff (35:04) Yeah. Yeah. Yeah. Mm-hmm. Yeah, yeah, Bruce Jackson (35:24) Like, why are you answering it differently? I mean, it creates questions, right? And then it brings your compliance into question as well. So Jeff (35:25) yeah, yeah, yeah, yeah, yeah, yeah. Bruce Jackson (35:33) things like that. Be smarter. You're not obliged to sign every cert that a supplier or customer gives you. You need to look at whether you're subject to that particular regulation or not, whether your business is something that's directly impacted by it and that you have the knowledge to make those certifications. So that is another. Jeff (35:37) Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (35:53) admonition I would give to ⁓ Jeff (35:53) Yeah. Yeah. Yeah. Bruce Jackson (35:57) folks out there. Be confident in your knowledge of how the rules apply to you. And I will tell you from personal experience that most of the time you give a standard statement or you tell them, but we'll give you this information, they go away. And I don't mean that disrespectful. I know what they're doing. They're trying to just make sure they have a compliance program. They're just trying, yeah, I get it. We all get it. But stand up for your rights, you know? Jeff (35:59) Yeah. Yeah. Yeah, yeah, yeah, yeah, yeah, yeah, yeah. Final N. Yeah, yeah, yeah, yeah, yeah, yep. So Bruce, you've used before this term space of freedom. And how does that mean? ⁓ Can you define that? What does that mean for an enterprise? And how do you do it? Bruce Jackson (36:25) Yeah. Yeah, so it's going to vary depending on every entity. But it's a concept I formulated decades ago. And it really, you think about a series of either circles or boxes. And ⁓ the outermost box, so just think if you had a box in the end, another box inside that, another box inside that. But the outermost box is the most kind of Jeff (36:53) Yeah. Yeah. Bruce Jackson (36:58) relaxed restrictions, the countries where you operate, where you have the least impediments from a trade perspective. And then the next box inside of that is one that's other countries, maybe a shorter list of countries where they have some restrictions, we got to be a little careful. And then the box in the middle is the most restricted one, right? And for obviously, for US companies, it's going to be the USA, and that could limit your space of freedom. Other countries have more freedom than you do. Jeff (37:17) Yeah Yeah. Bruce Jackson (37:26) but then that also introduces greater risk that the left hand does something the right hand is gonna pay for. Because you may remember decades ago, people talked about think globally, act locally, right? You probably heard that expression before. So you're in a given country and you're telling everybody there, we're local, we're an American company, we're, but maybe you're not headquartered in the US, maybe you actually headquartered somewhere else. Jeff (37:38) Yes. Bruce Jackson (37:52) And so you've been very successful at saying you're an American company and everyone, including regulators, are treating you as an American company, Waving the flag and everything, you're an American company. But then halfway around the world, you do something that an American company wouldn't be allowed to, but you can because you're not really US headquartered company to have the freedom. So that's a situation where the right hand maybe has done something the left hand is going to pay for. Comes back to that analogy. ⁓ Jeff (38:02) Yeah. Yeah. All right. Mm-hmm. Yeah, right. Bruce Jackson (38:22) you need to be able to balance that realizing in some cases we can allow that to go forward. In other cases, we're to have to pull it back. And yeah, maybe technically by the law, we're allowed to do it. But given how we have our culture, how we are selling our business to our customers, maybe we shouldn't do it. And that can lead to friction because you're going to say no to a business that maybe a business leader says, why can't we do it? It's all perfectly legal. We can do this. Jeff (38:48) Yeah. Yeah. Yeah. Bruce Jackson (38:51) And it may not even involve the US. It could be a business you're doing in a country that has not so good relationships with, Israel, or vice versa. And suddenly, it's, so it's not even anything that has an access to the US at all, but it creates potential friction between those other two countries, which of course creates friction for you. And you have to find a space of freedom, a path to, what can we do and what we cannot do? ⁓ So that's Jeff (39:01) Yeah. Yep. All right. Right, right. Bruce Jackson (39:20) Space and freedom is about figuring out where you can safely operate. And sometimes it's going to change. Jeff (39:25) Yeah, right, right, right. Well, I think that's a great concept and it also kind of leads into this, we've talked a lot about this, but how do you actually turn the space of freedom or these opportunities into the strategic value for a company? Because I think trade has oftentimes been seen as an organization that's just gonna make sure we don't get into trouble, right? No surprises we talked about. But how do we take a compliance program, a trade group, and actually turn it into a strategic lever for the company? Any thoughts on that? Bruce Jackson (40:01) Right. Well, it's again, it's about getting leadership to support the notion that trade, that compliance actually brings value that there is. Jeff (40:12) Yeah, but how do you do that? How do you demonstrate? Bruce Jackson (40:16) Well, yeah, well, so you by bringing up the questions, being the ones who bring up the questions that raise these issues. So when, when you've been able to sell in certain markets a product line for many years with no issues, and suddenly you're going to change the technical platform that will make it impossible to sell that product line anymore in that country or larger market, you need to raise that, right? So that Jeff (40:28) Mm-hmm. Mm-hmm. Right. Right. Yep. Bruce Jackson (40:44) The business goes in eyes wide open and decide, we'll continue the old product line as well, or, okay, we're willing to forgo that market. That's the strategic value you're bringing. Because the last thing you want is for them to make that commitment and then realize they can't sell there anymore and be pissed, upset, that no one told them that they couldn't do that anymore. And so that is really it, is getting that. Jeff (41:02) Yeah, yep, yeah. Bruce Jackson (41:09) that avenue setting up an advisory committee, getting plugged into the senior leaders so they understand some of these issues. And of course, there are of course, a lot of leaderships are very enlightened already on this, right? But you have to help raise it. Also, there's a lot of noise out there, right? Take the tariffs issue, not trade controls necessary, but tariffs. A lot of noise out there about what's gonna happen and all the impacts Jeff (41:23) Yeah, yep, yep. Yeah. Yeah. Bruce Jackson (41:39) And a lot of that is just noise. You got to wait until you actually see the rules to do it. So some of what you're doing as a compliance professional, simply reminding everybody, wait till we see the actual rules. It's a lot of noise. None of that may come to fruition. Why run around and make all kinds of changes anticipating something that may never happen? Jeff (41:47) Mm-hmm. Mm-hmm. Bruce Jackson (42:02) So sometimes you do have to wait. Sometimes you do preemptive. The affiliates rule is a good example. We didn't know what it gonna look like with the scope. We could anticipate generally. So we know what kind to think about, but until it actually happens, you don't really know exactly what you're gonna need to do. So, yeah. Jeff (42:11) Yeah. Yeah. Yeah. Yeah. Yeah, I think that's a great ⁓ way to look at it, Bruce. There's this real need, if you're going to provide strategic value, there's a need to be proactive, right? You're the first ones that have thought about this. You're the ones that have already anticipated what's coming and you're informed people. So there's that proactive. But then there's also a danger of being too proactive, like you said. So you see something and immediately you jump into solution space before you've truly understood the issue. Bruce Jackson (42:27) Okay. Yeah. Jeff (42:44) Understood the path of where it's going and some of the implications So I think there's a balancing of if you want to be a strategic, you know arm of the company You've got it. You've got to be credible. You've got to be on top of things quickly and you've got to be able to provide solutions Right the alternatives things that I've I have always found it's always been a struggle on the natural tendency of a compliance organization is to say What we can't do And I had to really work with my team to change it around to say, let's think about what we can do. Okay, they put this company on the entity list. Okay, what could we do to still carry on that business? Is there something we could do? And before they came out with the foreign direct product rule, there was opportunity. But I think it's changing the mindset to get the compliance professionals to think less about what we can't do and more about what could we do. Bruce Jackson (43:32) Yeah. Jeff (43:42) Maybe we can't do this unless we get an export license. Okay, then let's put all our effort, let's go figure out how to craft an export license or how to have a discussion with the BIS to help them understand what exactly we're trying to do. And maybe just maybe we might get that license, which then allows us to carry on. So I just think that's a mindset change that is important for. Bruce Jackson (44:02) It is. mean, the phrase I use is we don't want to be the department of no N-O. We want to be the department of no K-N-O-W. That we have knowledge, we can help share, and we can help ⁓ you make informed decisions. But being plugged in at the strategic level is important too, because I would look at the business and say, okay, what's our margin on that business? Do we have a big enough margin to make it worthwhile to... Jeff (44:07) No, yes. Yes, yes, yes. Mm-hmm. Bruce Jackson (44:30) to wait for that license to get approved? What is triggering the license requirement? What are the longer term implications of dealing with this party? What other things are we trying to do around the world that even if we had a license to do this activity could trigger ⁓ some conflict? Because I think there's a lot of increasing coordination, plural adelaily I'll say, with different governments in reviewing big transactions and reviewing things that Jeff (44:52) Yeah, yeah, yeah, yeah. Yeah. Bruce Jackson (45:00) we need to be, it's unfortunate that, you know, I feel for the sales guy who is just selling the one market that suddenly becomes very restricted and very difficult to operate in, right? And they don't necessarily wanna hear that this has big implications for the whole concern. But that, you know, that is the challenge, I think, for compliance professionals is to raise these issues, yeah. Jeff (45:11) Yeah. Yeah. Yeah. Yeah, yeah, yeah, yeah, yeah. Yeah, yeah, yeah, sure. Yeah, and just kind of finally, one last topic here before we wrap this up. I think one of the things that we're all struggling with is the acceleration of change. I mean, it's almost daily news cycle. ⁓ Regulations almost pop up weekly, usually on a Friday. ⁓ You know. I have listened yesterday at this conference hours that I heard over and over how organizations and individuals are struggling to keep up, just to keep up. And there doesn't seem to be really any end in sight. I mean, it just feels like this is kind of our life. So as we think about that sort of environment that we're operating in, do you have any advice to the trade community on how to survive or perhaps even thrive in such a world? Bruce Jackson (45:57) Yeah. Yeah. Yeah, I mean, ⁓ when I think about all the rules that are issued and everything, a lot of times, I freely admit, I'll wait a couple of days. I mean, I'll look at it quickly to see if there's something in there. But oftentimes, I'll wait because the law firms and consultants are going to publish white papers and summaries of these things. And the better ones are not just the marketing speak. They actually have foundational analysis and highlight things you need to focus on. So being able to use tools like that to help Jeff (46:31) Yeah, yeah, yeah. Bruce Jackson (46:44) minimize. again, having ways to track, mean, AI tools can help in that regard. I mean, you can, you can ask an AI tool to list all the federal registered notices the last six months ⁓ in from these agencies, it can produce that in seconds for you. And then you can go through it and highlight the ones that are important, put it in a PowerPoint, or some other method to communicate to leadership, say, look at all these issues. And also, you could also, if you're smart, you could do it in tax. Jeff (46:55) Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (47:14) and you can do it in some other key areas where federal regulation is issued and put that together and say, I think there's an argument here, even if you won't justify me getting a whole head count, we can get a head count for the three areas that this impacts. So that's a third of a head count for each function. And they can be responsible for tracking all this and helping us ⁓ focus on the key ones. So there are ways if you're be collaborative with other functions to leverage the things you need to get your job done. Jeff (47:17) Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yep, absolutely. Yeah, I would probably say on that question a couple of things. One is this idea of being proactive. I think the more proactive you are, the more you can anticipate these changes. So they don't hit you the side of the head like, didn't see that coming, right? And then the second one I think is, I think this idea of patience and you've raised this now, I always use the word percolate. Sometimes things need to percolate and we tell them we want to solve immediately and address them immediately and put this in place. And sometimes, Bruce Jackson (47:49) Yeah, right. Yeah. Yeah. Yeah, that's right. Jeff (48:10) Maybe we let things percolate for a little bit. And I think people are beginning to see that, that things are changing so fast that if you just wait a little bit, it may be different tomorrow. What you were worried about might go away because something else happened. So I think this is this idea of just being patient. Bruce Jackson (48:25) Well, so let's take the affiliates rule as an example, because everyone's probably freaking out about that, right? If you already know who the entities on the entity list are, because you're screening against them, you already know you're not dealing with them. Let's assume you're not dealing with the end of those parties. And now we've identified a whole few thousand more, however many it is, of affiliates to those parties. Would you normally sell to them anyway? I mean, would you normally be transacting in that path? Jeff (48:27) Yeah, yeah, yeah, yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (48:54) anyway, given how you just think about how your products are delivered to customers. Now, there may be those, as I said, those who have sell things through the web, who don't have that kind of a really structured supply chain or in service area or, you know, do software things, software service, those kind of where they might have made more exposure because they could be selling to anybody anywhere anytime. ⁓ But look at what your risk is and try to figure out whether that fits. So percolating, letting it, you know, Jeff (48:55) Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (49:24) Ruminate for a while is and look at how people talk to your colleagues do how are they dealing with it? Find out how people in other other companies so building your network using tools like LinkedIn and other tools out there getting involved in trade associations ⁓ If your local community has a World Trade Group or whatever that does newsletters or has meetings join that those usually low cost and and you can collect information that way too, so Yeah, I think don't panic Jeff (49:28) Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Bruce Jackson (49:54) Stay curious. Jeff (49:55) Don't panic. That's a good one. And I think, you know, based on what I saw yesterday, think, you know, gather together with your colleagues, with your peers and with others that are involved in this, because I think there's strength in numbers. And I think sometimes just being able to talk things through and hear what other person is going through can be helpful as well. So don't don't isolate, you know, engage with others, like you said, in trade associations, conferences, ways that you can kind of just have those those opportunities to to see that you're not alone. Bruce Jackson (49:57) Yeah. Jeff (50:22) that we're all going through this together. ⁓ And I think at the end of the day, we will survive and I hope that we will thrive. I think this is no better time. There's no better time to be a trade professional than now. I mean, you couldn't ask for a better time. There's just so many challenges, interesting problems to solve and ⁓ unique situations that are changing and we can really add value and we can be an important part of where our companies are going. So I want to encourage our listeners, know, embrace it, embrace it, enjoy it. Bruce Jackson (50:23) No, no. Absolutely, there's just there's lots of Jeff (50:52) ⁓ Live it because it is a time and ⁓ we want to make the most of it. So with that Bruce We're gonna have to stop I could go on and on with this so much fun. It's just great And I really want to thank you for taking so much of your time To help our listeners understand, you know these controls, know the past the present and the way forward and I just really appreciate you your insights and all the things that you've experienced and how you're able to kind of communicate those so thank you so much for for joining. Yeah Bruce Jackson (51:01) Yeah, it's okay. It was fun. You're welcome. It was a pleasure. I hope people find some value in what we had to say today. So, and the last two sessions also. All right. Jeff (51:23) I hope so too. Yes, yes. Okay, so let me go ahead and wrap it up for our listeners. You know, if there's one takeaway from this series, ⁓ I believe it's that export controls are never static. ⁓ You know, they really reflect the world we live in, the world that we're trying to shape. For compliance professionals, the path forward requires historical grounding, strategic agility, and a willingness to really ask the hard questions. When I testified before the Senate, I was asked not about just about rules, but about responsibility, about how companies manage risk, how leaders make decisions, and how we stay accountable in a world that is constantly shifting. That's the heart of export controls. It's not just about classification or licensing. It's about foresight, ethics, and the courage to do the difficult things. Thanks for joining me and Bruce on this journey. I hope it's helped. I hope you can see the landscape more clearly. and even if the path ahead remains complex. So thank you so much for listening and we will be talking again real soon.