[House Document 107-235]
[From the U.S. Government Publishing Office]



107th Congress, 2d Session - - - - - - - - - - - House Document 107-235 


 
 PERIODIC REPORT ON THE NATIONAL EMERGENCY CAUSED BY THE LAPSE OF THE 
                   EXPORT ADMINISTRATION ACT OF 1979

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

A SIX MONTH PERIODIC REPORT ON THE NATIONAL EMERGENCY DECLARED BY 
  EXECUTIVE ORDER 13222 OF AUGUST 17, 2001 TO DEAL WITH THE THREAT TO THE 
  NATIONAL SECURITY, FOREIGN POLICY, AND ECONOMY OF THE UNITED STATES 
  CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION ACT OF 1979, PURSUANT 
  TO 50 U.S.C. 1641(c) AND 50 U.S.C. 1703(c)




    June 26, 2002.--Message and accompanying papers referred to the 
     Committee on International Relations and ordered to be printed
                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
99-011                    WASHINGTON : 2002

To the Congress of the United States:
    As required by section 204(c) of the International 
Emergency Economic Powers Act (50 U.S.C. 1703(c)) and section 
401(c) of the National Emergencies Act (50 U.S.C. 1641(c)), I 
transmit herewith a 6-month report prepared by my 
Administration, on the national emergency declared by Executive 
Order 13222 of August 17, 2001, to deal with the threat to the 
national security, foreign policy, and economy of the United 
States caused by the lapse of the Export Administration Act of 
1979.

                                                    George W. Bush.
    The White House, June 25, 2002.

Periodic Report on the National Emergency Caused by the Lapse of the 
  Export Administration Act of 1979 for August 19, 2001 to February 19, 
  2002

    On August 17, 2001, in Executive Order 13222, I declared a 
national emergency under the International Emergency Economic 
Powers Act (50 U.S.C. 1701 et seq.) to deal with the threat to 
the national security, foreign policy, and economy of the 
United States caused by the lapse of the Export Administration 
Act of 1979, as amended (EAA) (50 U.S.C. App. 2401 et seq.), 
and the systems of controls maintained under that Act. In that 
order, I continued in effect, to the extent permitted by law, 
the provisions of the EAA, the Export Administrations 
Regulations (EAR) (15 C.F.R. et seq.), and the delegations of 
authority set forth in Executive Order 12002 of July 7, 1977 
(as amended by Executive Order 12755 of March 12, 1991, and 
Executive Order 13026 of November 15, 1996), Executive Order 
12214 of May 2, 1980, Executive Order 12851 of June 11, 1993, 
and Executive Order 12938 of November 14, 1994, as amended.
    I issued Executive Order 13222 pursuant to the authority 
vested in me as President of the Constitution and laws of the 
United States, including, but not limited to, IEEPA. I also 
submitted a report to Congress pursuant to section 204(b) of 
IEEPA (50 U.S.C. 1703(b)). Section 204 of IEEPA requires 
follow-up reports, with respect to actions and changes, to be 
submitted every 6 months. Additionally, section 401(c) of the 
National Emergencies Act (50 U.S.C. 1641(c)) requires that the 
President, within 90 days after the end of each 6-month period 
following a declaration of a national emergency, to report to 
the Congress on the total expenditures directly attributable to 
that declaration. To comply with these requirements, I am 
submitting the following combined activities and expenditures 
report for the 6-month period from August 19, 2001, to February 
19, 2002. Detailed information on export control activities is 
contained in the most recent Export Administration Annual 
Report for Fiscal Year 2001 and the January 2002 Report on 
Foreign Policy Export Controls, required by section 14 and 
section 6(f) of the EAA, respectively, which the Department of 
Commerce continues to submit to Congress under a policy of 
conforming actions under the Executive Order to the provisions 
of the EAA, as appropriate.
    Since the issuance of Executive Order 13222, the Department 
of Commerce has continued to administer and enforce the system 
of export controls, including anti-boycott provisions, 
containedin the EAR. In administering these controls, the 
Department has acted under a policy of conforming actions under 
Executive Order 13222 to the provisions of the EAA, insofar as 
appropriate.
    The expenses incurred by the Federal Government in the 6-
month period from August 19, 2001, to February 19, 2002, that 
are directly attributable to the exercise of authorities 
conferred by the declaration of a national emergency with 
respect to export controls, were largely centered in the 
Department of Commerce's Bureau of Industry and Security (BIS). 
Expenditures by the Department of Commerce for the reporting 
period are anticipated to be $28,648,000, most of which 
represents program operating costs, wage and salary costs for 
federal personnel, and overhead expenses.
    There have been several significant developments in the 
area of export controls since the EAA expired in August 2001:

                      A. MULTILATERAL DEVELOPMENTS

The Wassenaar Arrangement (WA)

    The Wassenaar Arrangement is a multilateral regime 
currently consisting of 33 member countries. Its purpose is to 
contribute to regional and international security and stability 
by promoting transparency and greater responsibility in 
international transfers of conventional arms and dual-use goods 
and technologies.
    In October 2001, a Wassenaar General Working Group Meeting 
discussed the increase in general information exchange 
regarding regions and projects of concern, specific information 
exchange on dual-use goods and technologies, and the scope of 
dual-use notifications. In light of the events of September 11, 
2001, the United States introduced a proposal to ensure that 
Wassenaar's focus included combating terrorism; this proposal 
was subsequently approved. Discussions also centered around 
U.S. proposals for expanded reporting of conventional arms 
transfers, strengthening dual-use notification procedures by 
establishing a denial consultation procedure, and 
implementation of catch-all controls.
    In November 2001 and February 2002, WA Expert Group 
meetings reviewed Wassenaar controls on conventional arms and 
dual-use goods and technologies. The proposals discussed at the 
November meeting were in the areas of electronics, computers, 
telecommunications, encryption, andmachine tools. Proposals 
discussed at the February 2002 meeting focused on electronics, 
computers, machine tools, sensors and lasers, navigation and avionics, 
the definition of ``specially designed,'' and Wassenaar's munitions 
list. Discussions also were held to seek agreement to relax controls on 
microprocessors and computers in light of rapid technological advances 
and controllability factors. The majority of Wassenaar members 
advocated a complete decontrol of general purpose microprocessors and a 
drastic liberalization of computer controls. However, members could not 
come to consensus on these issues. With a few notable exceptions, there 
was little agreement on changes to the dual-use and munitions control 
lists. Further discussions in these areas will resume during the April 
2002 list review.
    In December 2001, a special Expert Group meeting--to 
discuss controls on general purpose microprocessors and 
computers, and the annual Plenary meeting were held. Members 
underlined the importance of strengthening export controls and 
reaffirmed their commitment to maintain responsible national 
policies in the licensing of exports of arms and sensitive 
dual-use items. The Plenary approved the U.S. proposal to add 
prevention of the acquisition of conventional arms and dual-use 
goods and technologies by terrorist groups as a focus of the 
regime. The Plenary approved a revised statement of 
understanding on intangible transfers of technology and 
software, agreed to subject two additional sub-categories of 
military items to mandatory arms export reporting, and agreed 
to a number of control list amendments. The Plenary also agreed 
to continue the study of options for increasing the efficiency 
of export controls, including a catch-all mechanism and a 
denial consultation procedure. These measures will be discussed 
during the May 2002 General Working Group Meeting.
    The United States also continues to participate in 
submissions of export data made by regime members. Wassenaar 
members make dual-use data submissions on a semi-annual basis 
in April and October.

The Missile Technology Control Regime (MTCR)

    The MTCR is an informal multilateral nonproliferation 
regime of 33 countries that have agreed to coordinate their 
national export controls for the prevention of missile 
proliferation. Each member, under its own laws and practices, 
adheres to the export licensing policy reflectedin the MTCR 
Guidelines for items found on the MTCR Equipment and Technology Annex.
    The United States participated in the annual MTCR Plenary 
held in Ottawa, Canada on September 24-28, 2001. At the 
Plenary, the MTCR Partners shared information about activities 
and programs of missile proliferation concern, agreed that the 
risk of proliferation of WMD and their means of delivery 
remained a major concern for global and regional security, and 
considered additional steps they can take, individually and 
collectively, to prevent the proliferation of delivery systems 
for weapons of mass destruction. To this end, the Partners held 
a special meeting for enforcement officers to foster greater 
cooperation in stopping and impeding specific shipments of 
missile proliferation concern. They also reaffirmed the 
important role played by export controls and the need to 
strengthen them further and implement them vigorously. The 
Partners also discussed ways to promote outreach to non-members 
on key controls and the need to strengthen them further and 
implement them vigorously in addition to key issues such as the 
global missile threat, missile related export controls and 
transshipment.

The Nuclear Suppliers Group (NSG)

    The NSG, composed of 39 countries and the European 
Commission as a permanent observer, is an informal group of 
nations concerned with the proliferation of nuclear weapons.
    The NSG has established guidelines to assist member nations 
in administering national nuclear export control programs. 
Controls are focused on certain categories of goods: nuclear 
material, equipment and technology unique to the nuclear 
industry, and so-called nuclear dual-use items that have both 
nuclear and non-nuclear applications.
    At the annual NSG Plenary held in May 2001, members agreed 
that the two segments of the NSG organization devoted to dual-
use (Commerce Department) and ``trigger list'' (Nuclear 
Regulatory Commission for components, and Department of Energy 
for technology and services) items would be combined into one 
administrative unit. To reflect this new structure, members 
agreed to establish a new Consultative Group (CG) that will 
meet twice a year to review the guidelines, control lists, and 
overall activities of the NSG. The first meeting of the CG, 
which replaces the NSGDual Use Regime, the Information Sharing 
Working Group, and the Transparency Working Group, occurred in Vienna, 
Austria, on November 29, 2001. It was also agreed that the NSG would 
consider having an intensified dialogue with non-NPT parties.
    At this first CG meeting, it was agreed to limit the number 
of items caught by a control on linear displacement measurement 
devices through the addition of a technical note of explanation 
in the NSG Guidelines. This clarification will limit the 
control to those more sophisticated items that are directly 
useful in the creation of weapons of mass destruction. 
Agreement also was reached to hold the first Export Enforcement 
Experts meeting at the 2002 NSG Plenary to be held in Prague, 
the Czech Republic in May 2002; to review the NSG Guidelines 
for ways to address the nuclear terrorism threat; and to hold 
the 2003 NSG Plenary in South Korea.

The Australia Group (AG)

    The AG is an informal multilateral nonproliferation regime 
that seeks to impede the proliferation of chemical and 
biological weapons through the harmonization of export 
controls, an exchange of information on global proliferation 
activities, and outreach to nonmembers. The 33-member countries 
meet annually and communicate intersessionally to review and 
refine the list of controlled chemicals, biological agents, and 
related equipment and technology.
    At the October 2001 AG Plenary Session, the Group 
reaffirmed the members' continued collective belief in the AG's 
viability, importance and compatibility with the Chemical 
Weapons Convention (CWC) and Biological Weapons Convention 
(BWC). Responding to the terrorist events of September 11, AG 
participants also agreed that strengthening the regime to 
better counter CBW proliferation and CBW terrorism should be a 
priority. Participants agreed to several proposals aimed at 
plugging loopholes in current AG export controls; they also 
agreed that export controls, regional nonproliferation and 
countering CBW terrorism will be the main focus of the Group 
for the foreseeable future. Members also continued to agree 
that full adherence to the CWC and Biological Weapons 
Convention (BWC) by all governments will be a key to achieving 
a permanent global ban on chemical and biological weapons, and 
that all states adhering to theseConventions must take steps to 
ensure that their national activities support these goals. The Group 
welcomed Bulgaria as its newest member and reaffirmed its commitment to 
continue its active outreach program of briefings for non-AG countries, 
and to promote regional consultations on export controls and 
nonproliferation to further awareness and understanding of national 
policies in these areas.
    At a February 2002 intercessional meeting, an understanding 
was reached on two Department of Commerce proposals that would 
create export controls on biotechnology, and change the 
criteria for controls on chemical process valves. Three other 
Commerce proposals that would expand controls on shipments of 
dual-use chemicals, biological agents, and related equipment to 
include items useful in terrorist activities were favorably 
considered. These proposals were considered in detail at a 
Technical Experts Meeting in March 2002. AG export controls 
currently focus on items that can support militarily 
significant, state-run programs. The United States is seeking 
to augment AG controls with measures directed at commodities 
and technology that can be used to support terrorist 
activities.

The Chemical Weapons Convention (CWC)

    The CWC is an international arms control and 
nonproliferation treaty that bans chemical weapons and monitors 
the legitimate production, processing, consumption, export, and 
import of certain toxic chemicals and precursors that could 
contribute to the development of weapons of mass destruction. 
Certain export control provisions of the Convention are 
reflected in the EAR.

             B. ENCRYPTION/HIGH PERFORMANCE COMPUTER POLICY

Encryption

    To conform with Wassenaar changes, the Administration 
conducted a review of encryption policy to revise relevant 
provisions of the EAR. The Bureau of Industry and Security 
(BIS) also examined its encryption classification and licensing 
process to update these processes within the proposed policy 
revisions. As part of this policy and process review, BIS 
worked with industry representatives, technical advisory 
committees, and interagency groups to balance security and 
economic concerns. The Regulations and Procedures Technical 
Advisory Committee (RPTAC) heldmeetings on September 11 and 
December 4, 2001, to seek input from industry.
    United States encryption export control policy continues to 
rest on a three-prong foundation: technical reviews of 
encryption products prior to export; post-export reporting 
requirements; and license reviews of certain exports of strong 
encryption to foreign government end-users. The proposed 
changes to encryption policy continue to support these 
foundations and align U.S. policy with multilateral policy 
agreed to at Wassenaar.
    The charter fulfillment of the President's Export Council 
Subcommittee on Encryption (PECSENC) also occurred during the 
reporting period. Since the PECSENC's inception on May 16, 
1997, it worked to support the growth of electronic commerce 
and protect public safety and national security interests. In 
two meetings in 2001, the PECSENC reviewed the national 
security and business implications of post-export reporting 
requirements and provided to BIS a set of recommendations for 
possible changes and updates. The PECSENC's charter expired on 
September 30, 2001.

High performance computer and microprocessor controls

    Export controls on high performance computer (HPCs) and 
microprocessor were further revised between August 20, 2001, 
and February 19, 2002. On January 2, 2002, the Administration 
announced its decision to update controls for HPCs and 
microprocessors by raising the HPC control threshold on 
Computer Tier 3 countries from 85,000 to 190,000 Millions of 
Theoretical Operations per Second (MTOPS) and increasing 
microprocessor control levels from 6,500 to 12,000 MTOPS. The 
Administration also will move Latvia from Computer Tier 3 to 
Computer Tier 1.
    As of February 19, 2002, the Administration also had 
implemented one revision to Category 4 of the Commerce Control 
List (CCL) and the License Exception for computer exports to 
conform to Wassenaar changes that removed national security 
controls on expert system software as described by Export 
Commodity Control Number 4D003.b.
    The Administration continues to seek private sector input 
on HPC and microprocessor controls through regular discussions 
with industry groups, such as the Information Security 
Technical Advisory Committee (ISTAC). The ISTAC is comprised of 
leading industry experts and has worked with BIS to find 
alternative measurement tools for controls on HPCs and microprocessors.

             C. BILATERAL COOPERATION/TECHNICAL ASSISTANCE

    As part of the Administration's continuing effort to 
encourage other countries to strengthen their export control 
systems, the Department of Commerce and other agencies 
conducted with a wide range of discussions with a number of 
countries.

The Middle East

    A transshipment initiative in the Middle East included a 
delegation to the United Arab Emirates in October 2001. United 
States officials made presentations on various aspects of 
export controls as part of this initiative.

Eastern Europe

    In September 2001, the United States participated in the 
Third Annual International Conference on Export Controls, which 
was held in the United Kingdom, and co-hosted by the United 
States and the United Kingdom. Thirty European countries 
participated in the conference, which considered the status of 
international export control programs, assessed programs geared 
toward improving the export control systems of the nations of 
the former Soviet Union, and developed recommendations to 
improve the international export control system.

Nonproliferation and Export Control International Cooperation Program

    From August 20, 2001, through February 19, 2002, 
interagency representatives participated in 23 technical 
exchanges on export controls. The exchanges included the 
``Symposium for International Export Control officials'' in 
Washington, DC and the Third Drafting Workshop for the central 
Asia and Caucasus region Draft Regional Transit Agreement. 
These exchange sought to familiarize participating governments 
with the elements of an export control system consistent with 
international standards, and to assist these governments to 
develop and strengthen their own export control systems.

Firearms convention

    The Inter-American Convention Against the Illicit 
Manufacturing of and Trafficking in Firearms, Ammunition, 
Explosives, and Other Related Materials (Firearms Convention) 
is a treaty that Organization of American States (OAS) member 
countries signed to control the flow of firearms. The 
Convention was signed in 1998 but awaits ratification by a 
number of OAS member countries, including the United States. 
The Convention requires OAS member states to establish a 
program to issue authorizations for the import and export of 
firearms. Although BIS has implemented most of the Convention 
requirements related to the export of firearms, the United 
States has not executed those pertaining to transit and 
explosives. An interagency working group was continuing its 
work on this issue at the end of the reporting period.

              D. REGULATORY ACTIONS: PUBLISHED AND PENDING

Wassenaar Arrangement

    On January 3, 2002, BIS published a final rule revising 
certain entries controlled for national security reasons in 
Categories 1, 2, 3, 5 Part I (Telecommunications), 6, 7, and 9 
of the CCL to conform with changes in the Wassenaar Control 
List agreed to in December of 2000.

Entity list

    On December 21, 2001, BIS published a rule amending the EAR 
to remove two Russian Entities from the Entity List found at 
Supplement 4 to part 744 of the EAR. The State Department 
determined on November 17, 2000, that it was in the foreign 
policy and national security interests of the United States to 
remove nonproliferation measures on these two entities.

Missile technology

    On December 20, 2001, BIS issued an Advance Notice of 
Proposed Rulemaking to review the existing license exemption 
contained within the EAR for the export of missile technology 
(MT)-controlled items to Canada. This action was recommended by 
the Government Accounting Office (GAO) in a report entitled: 
``Export Controls: Regulatory Change Needed to Comply with 
Missile Technology Licensing Requirements'' (GAO-01-530). BIS 
sought comments on howremoving the existing licensing exemption 
for MT-controlled exports to Canada would affect industry and more 
specifically the exporting community. Comments were due by February 19, 
2002.

India and Pakistan: Lifting of sanctions

    On September 22, 2001, the President waived sanctions 
placed on India and Pakistan in May 1998, including those 
sanctions implemented by regulations issued on November 19, 
1998. On October 1, 2001, BIS published a rule implementing the 
waiver of these sanctions by removing the policy of denial for 
exports and reexports of items controlled for Nuclear 
Proliferation (NP) and MT reasons to India and Pakistan and 
restoring the use of license exceptions for these items for 
entities not on the Entity List. In addition, this rule removed 
a large number of Indian and Pakistani entities from the Entity 
List.

Australia Group and Chemical Weapons Convention Controls

    On September 28, 2001, BIS published a rule implementing 
agreements reached at the October 2000 plenary meeting of the 
AG. This final rule amended the CCL and the corresponding 
export licensing provisions in the EAR to liberalize controls 
and certain medical, analytical, diagnostic, and food testing 
kits, implement a new AG policy on mixtures, and clarify 
controls on certain chemical manufacturing equipment. 
Furthermore, the rule added Cyprus and Turkey to the countries 
that participate in the AG, thereby eliminating license 
requirements for exports and reexports of certain AG-controlled 
items to these countries. This rule also amended the CWC-
related provisions in the EAR to clarify the export license 
requirements and policies for certain toxic chemicals and 
precursors listed in the Schedules of Chemicals contained 
within the Annex on Chemicals to the CWC. Finally, this rule 
updated the list of countries that are currently States Parties 
to the CWC by adding the following countries: Azerbaijan, 
Colombia, Dominica, Eritrea, Gabon, Jamaica, Kazakhstan, 
Kiribati, Liechtenstein, Malaysia, Mozambique, Nicaragua, San 
Marino, The United Arab Emirates, Yemen, the Federal Republic 
of Yugoslavia (Serbia and Montenegro), and Zambia.

                     E. EXPORT LICENSE INFORMATION

    During the reporting period, BIS continued to receive many 
requests for export licensing information through the Freedom 
of Information Act and through discovery requests during 
enforcement proceedings. Consistent with section 12(c) of the 
EAA, BIS continues to withhold from public disclosure 
information obtained for the purpose of consideration of, or 
concerning, export license applications, unless the release of 
such information is determined by the Under Secretary to be in 
the national interest, pursuant to Executive Order 13222's 
directive to carry out the provisions of the EAA, to the extent 
permitted by law.

   F. OFFICE OF INSPECTOR GENERAL AND THE GENERAL ACCOUNTING OFFICE 
                                STUDIES

    During the reporting period, BIS continued its cooperation 
with the Office of Inspector General (OIG) and the GAO. 
Specifically, OIG continued two and closed two studies, and GAO 
initiated 14, continued 16, and closed three studies.

                         G. EXPORT ENFORCEMENT

    In the reporting period, BIS's Export Enforcement, through 
its offices of Enforcement Analysis, Export Enforcement, and 
Anti-Boycott Compliance, continued its programs to prevent 
diversions of controlled items, investigate and enforce export 
control violations, and enforce U.S. anti-boycott rules.

Office of Enforcement Analysis (OEA)

    In the reporting period, OEA continued to expand its Visa 
Review Program. This program targets visa applications of 
foreign nationals who may be entering the United States to 
access technology controlled for national security reasons or 
to procure items useful for weapons of mass destruction 
programs. The Visa Review Program also provided leads to BIS's 
Office of Export Enforcement relating to possible terrorist 
activities identified subsequent to the terrorist attacks of 
September 11, 2001.
    OEA prevention activities also include a plan to target and 
prioritize pre-license checks (PLCs) and post-shipment 
verifications (PSVs) to ensure that such end-use visits reflect 
the full range of U.S. export control concerns. PLCs validate 
information on export license applications, including end-user 
reliability. PSVs strengthen assurancesthat exporters, 
shippers, consignees, and end-users comply with the terms of export 
licenses. The overall objective for conducting PLCs and PSVs is to 
detect and prevent the illegal transfer of controlled U.S.-origin 
items.
    Another OEA activity is to compile information regarding 
parties of concern and to maintain a watch list. Parties on the 
watch list are screened against names of license applications 
received by BIS to assess diversion risks, identify potential 
violations, and determine the reliability of proposed end-users 
of controlled U.S. items.
    On December 20, 2001, as required by the National Defense 
Authorization Act for FY 1998, BIS delivered to the Congress 
its fourth annual report on HPC exports to Computer Tier 3 
countries.

Office of Export Enforcement (OEE)

    During this reporting period, OEE opened 489 
investigations, some of which led to both criminal and 
administrative sanctions. A total of $4,419,000 in civil 
penalties and criminal fines were imposed for violations during 
this period. OEE also issued 70 warning letters in cases of 
minor violations, informing the recipients that OEE had reason 
to believe they had violated the EAR, and that increased 
compliance efforts were warranted.

Office of Anti-boycott Compliance (OAC)

    OAC implements the anti-boycott provisions of the EAA and 
the EAR. OAC performs three main functions: enforcing the EAR, 
assisting the public in complying with anti-boycott provisions, 
and compiling and analyzing information regarding international 
boycotts. During the reporting period, OAC opened nine cases, 
closed 13 investigations, and imposed $9,000 in civil 
penalties.

                                  
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