How are potential terrorist organizations evaluated for inclusion on terrorist watch list? Is it a panel of independents or academics or law enforcement? Does it have political appointee input? Is it classified?
The process by which the State Department decides than an organization is a foreign terrorist organization is described in detail here with a list of all such organizations. There is also a state sponsors of terrorism list that has only three members (Sudan, Syria and Iran).
The key elements of the process are as follows:
Identification The Bureau of Counterterrorism in the State Department (CT) continually monitors the activities of terrorist groups active around the world to identify potential targets for designation. When reviewing potential targets, CT looks not only at the actual terrorist attacks that a group has carried out, but also at whether the group has engaged in planning and preparations for possible future acts of terrorism or retains the capability and intent to carry out such acts.
Designation Once a target is identified, CT prepares a detailed "administrative record," which is a compilation of information, typically including both classified and open sources information, demonstrating that the statutory criteria for designation have been satisfied. If the Secretary of State, in consultation with the Attorney General and the Secretary of the Treasury, decides to make the designation, Congress is notified of the Secretary’s intent to designate the organization and given seven days to review the designation, as the INA requires. Upon the expiration of the seven-day waiting period and in the absence of Congressional action to block the designation, notice of the designation is published in the Federal Register, at which point the designation takes effect. By law an organization designated as an FTO may seek judicial review of the designation in the United States Court of Appeals for the District of Columbia Circuit not later than 30 days after the designation is published in the Federal Register.
Until recently the INA provided that FTOs must be redesignated every 2 years or the designation would lapse. Under the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), however, the redesignation requirement was replaced by certain review and revocation procedures. IRTPA provides that an FTO may file a petition for revocation 2 years after its designation date (or in the case of redesignated FTOs, its most recent redesignation date) or 2 years after the determination date on its most recent petition for revocation. In order to provide a basis for revocation, the petitioning FTO must provide evidence that the circumstances forming the basis for the designation are sufficiently different as to warrant revocation. If no such review has been conducted during a 5 year period with respect to a designation, then the Secretary of State is required to review the designation to determine whether revocation would be appropriate. In addition, the Secretary of State may at any time revoke a designation upon a finding that the circumstances forming the basis for the designation have changed in such a manner as to warrant revocation, or that the national security of the United States warrants a revocation. The same procedural requirements apply to revocations made by the Secretary of State as apply to designations. A designation may be revoked by an Act of Congress, or set aside by a Court order.
Legal Criteria for Designation under Section 219 of the INA as amended
It must be a foreign organization. The organization must engage in terrorist activity, as defined in section 212 (a)(3)(B) of the INA (8 U.S.C. § 1182(a)(3)(B)),* or terrorism, as defined in section 140(d)(2) of the Foreign Relations Authorization Act, Fiscal Years 1988 and 1989 (22 U.S.C. § 2656f(d)(2)),** or retain the capability and intent to engage in terrorist activity or terrorism. The organization’s terrorist activity or terrorism must threaten the security of U.S. nationals or the national security (national defense, foreign relations, or the economic interests) of the United States.
The official who is in charge of this function within the State Department (subject to supervision from the Secretary of State and input from the President's National Security Office, the Secretary of Treasury and the Justice Department) is the Under Secretary for Civilian Security, Democracy, and Human Rights, Sarah B. Sewall, who leads State Department efforts to prevent and counter threats to civilian security and effective governance, such as terrorism, violent extremism, conflict, mass atrocities, and transnational crime. More background is available here.
Countries other than the U.S. have similar lists that overlap with the U.S. one.
U.S. News and World report had a story earlier this year discussing the efforts of Republicans in Congress, led by former Presidential candidate Ted Cruz, to have the Muslim Brotherhood classified as a foreign terrorist organization. Medialine has a story on the same topic a little less than a year ago. The story notes some key aspects of the debate
The terror watch list is a list of individual people believed by any of multiple law enforcement or intelligence agencies to be associated with terrorism or terrorist organizations with virtually no oversight or checks or balances. At least one court has held that this process is invalid because it lacks due process protections for individual put on it. This terrorist watch list is classified and it can be hard to learn if you are on it. Information is provided to airlines and the TSA as people seek to fly, not to individuals on the list.
Terrorist organizations are not put on the watch list. Organizations are designated as such by the State Department using a process similar to that used to adopt federal regulations. This is public information and indeed access to this difficult to find list is necessary to comply with a variety of laws prohibiting material support of terrorism.