[House Document 108-79]
[From the U.S. Government Publishing Office]
108th Congress, 1st Session - - - - - - - - - - - - - House Document 108-79
PERIODIC REPORT ON THE NATIONAL EMERGENCY CAUSED BY THE LAPSE OF THE
EXPORT ADMINISTRATION ACT OF 1979
__________
COMMUNICATION
from
THE PRESIDENT OF THE UNITED STATES
transmitting
A 6-MONTH 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 3, 2003.--Referred to the Committee on International Relations and
ordered to be printed
The White House,
Washington, May 29, 2003.
Hon. J. Dennis Hastert,
Speaker of the House of Representatives,
Washington, DC.
Dear Mr. Speaker: Consistent with 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.
Sincerely,
George W. Bush.
Periodic Report on the National Emergency Caused by the Lapse of the
Export Administration Act of 1979 for August 19, 2002, to February 19,
2003
The following report fulfills the requirements of section
204 of International Emergency Economic Powers Act (IEEPA) (50
U.S.C. 1703), and section 401(c) of the National Emergencies
Act (50 U.S.C. 1641(c)). These provisions require the President
to report to the Congress every 6 months on, respectively,
activities undertaken pursuant to the national emergency
declared in Executive Order 13222 (issued August 17, 2001), and
the total expenditures directly attributable to that
declaration. The following combined activities and expenditures
report covers the 6-month period from August 19, 2002, to
February 19, 2003.
Detailed information on export control activities is
contained in the most recent Export Administration Annual
Report and the January 2003 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 the 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 No. 13222, the
Department of Commerce has continued to administer and enforce
the system of export controls, including the antiboycott
provisions, contained in the Export Administration Regulations
(EAR). In administering these controls, the Department has
acted under a policy of conforming actions under Executive
Order No. 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, 2002, to February 19, 2003, 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 $28,749,000, most of
which represents program operating costs, wage and salary costs
for federal personnel, and overhead expenses.
During the reporting period, there were several significant
export control developments:
A. MULTILATERAL DEVELOPMENTS
The Wassenaar Arrangement
The Wassenaar Arrangement is a multilateral regime
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. Wassenaar members maintain export controls on
the agreed Wassenaar munitions and dual-use lists through their
national policies.
In September 2002, the Experts Group of the Wassenaar
Arrangement agreed to definition and control list changes,
including relaxed controls on analog-to-digital converters, the
retention of software and technology controls for computers
capable of greater than 28,000 million theoretical operations
per second (MTOPS), updated controls on low-bit-rate digital
voice used in command and control, and the retention of
software and technology controls on the ``Sensitive List'' for
certain machine tools.
In October 2002, Wassenaar's General Working Group
exchanged information on regions and projects of concern,
exports of dual-use items, and the scope of dual-use
notifications among members. Discussions also centered on
combating terrorism, U.S. proposals for expanded reporting of
conventional arms transfers, including the establishment of a
reporting category for small arms and light weapons,
strengthening dual-use notification procedures by establishing
a denial consultation mechanism, and adopting ``catch-all''
controls.
In December 2002, the Wassenaar Arrangement Plenary agreed
to several significant initiatives to combat terrorism,
including intensified cooperation among members to prevent the
acquisition by terrorists of conventional arms and dual-use
items and new means for sharing information to strengthen
controls over such items. Agreement also was reached on ``best
practices'' guidelines and criteria for the export of small
armsand light weapons. To keep pace with advances in technology
and developments in international security, the Plenary agreed to
several control list amendments, including strengthened controls on
radiation hardened integrated circuits. At the same time, taking into
account the widespread availability of certain items and a broad
diversity of suppliers, the Plenary agreed to raise the control
threshold for computers and eliminate controls on general purpose
microprocessors. Finally, the Plenary reached agreement on a Statement
of Understanding that recognizes the importance of controlling arms
brokering.
The United States also continues to participate in
submissions of export data by regime members. Wassenaar members
make arms and dual-use data submissions on a semi-annual basis,
in April and October, and specific data submissions as needed.
The Missile Technology Control Regime (MTCR)
The MTCR is an informal nonproliferation regime comprised
of 33 countries that have agreed to coordinate national export
controls to prevent missile proliferation. Each member, under
its own laws and practices, adheres to the export licensing
policy reflected in the MTCR Guidelines for items on the MTCR
Equipment, Software, and Technology Annex.
The MTCR Plenary and Technical Experts Meeting were held in
Warsaw, Poland, on September 21-27, 2002. Consensus was reached
on several major technical issues, the most important being the
definitions of missile range and payload, the parameters that
determine if a missile system falls under the MTCR's purview.
New controls on unmanned aerial vehicles designed or modified
for aerosol delivery were tentatively agreed upon, and will go
into effect in 6 months barring objections by MTCR members in
the interim. Agreement also was reached on the refinement and/
or clarification of existing controls on propellants,
navigation equipment, flight controls, and avionics.
The Nuclear Suppliers Group (NSG)
The NSG is comprised of 40 Participating Governments that
contribute to the nonproliferation of nuclear weapons by
voluntary implementation of guidelines on the export of nuclear
and nuclear-related dual-use items and through exchanges of
information on nuclear proliferation concerns.
The NSG agreed at an Extraordinary Plenary meeting in
December 2002: (i) to adopt U.S. proposed anti-terrorism
amendments to the NSG's Guidelines; (ii) to issue a press
statement alerting supplier states to concerns about the North
Korean (DPRK) nuclear weapons program; and (iii) to authorize
the Chairman to communicate with key non-member supplier and
transit states to alert them to the risks of diversion of
controlled and non-controlled equipment, materials, and
technology to the DPRK nuclear weapons program.
The Australia Group (AG)
The Australia Group (AG) is an informal export control
regime comprised of 33 members that seeks to impede the
proliferation of chemical and biological weapons through the
harmonization of export controls, information exchange on
global proliferation activities, and outreach to non-members.
Australia Group member countries meet annually and communicate
intersessionally to review and refine the list of controlled
chemicals, biological agents, and related equipment and
technology.
The AG convened a Technical Experts Meeting in Paris,
France, during the week of February 10, 2003, to discuss the
possible addition of new controls--as proposed by the United
States--on certain chemical precursors and toxic chemicals.
Export controls on biological agents, as well as U.S.-proposed
control on agricultural sprayers that can be used in the
delivery of biological agents, also were discussed. These
issues will be discussed further at the AG Plenary in June
2003.
The Chemical Weapons Convention (CWC)
The CWC is an international 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 needed
to implement the CWC are reflected in the EAR.
Firearms Convention
The Inter-American Convention Against the Illicit
Manufacturing of and Trafficking in Firearms, Ammunition,
Explosives, and Other Related Materials (Firearms Convention)
isa treaty that Organization of American States (OAS) member
states signed to control the illicit trafficking of firearms. The
Convention was signed in 1998 but awaits ratification by a number of
OAS member states, including the United States. The Convention requires
OAS member states to establish a program to issue authorizations for
the import and export of firearms. Convention requirements relating to
the export of firearms subject to the EAR have been implemented.
However, those requirements pertaining to transit and explosives
continue to be reviewed by an interagency working group.
B. ENCRYPTION/HIGH PERFORMANCE COMPUTER AND MICROPROCESSOR POLICY
Encryption
During the reporting period, BIS conducted seminars in
Washington, D.C.; Minneapolis, Minnesota; and Santa Clara,
California, on the June 2002 amendments to the encryption
regulations. The Department of Commerce's Bureau of Industry
and Security also continued to consult with industry and the
interagency community on emerging technical and policy issues
to assure the continued effectiveness of encryption export
controls. The Department of Commerce's Bureau of Industry and
Security also processed technical review requests and export
license applications for a wide variety of products with
encryption features.
High Performance Computer and Microprocessor Controls
There were no revisions to high performance computer (HPC)
export control policy during the reporting period. The
Department of Commerce's Bureau of Industry and Security
continued to work with industry and interagency expert groups
to explore alternatives to the current HPC export control
metric based on MTOPS.
On January 14, 2003, BIS published a regulation that
streamlined export controls on general purpose microprocessors,
which are used worldwide in commercial applications, such as
personal computers and cell phones. Under the new rule, a
license only is required to export general purpose
microprocessors to designated terrorism-supporting countries or
to military end-uses or end-users in countries posing national
security concerns (e.g., China and Russia). This action is
consistent with a decision made by the Wassenaar Arrangement in
February 2002 to decontrol general purpose microprocessors, and
was necessary to ensure a level playing field for U.S. industry
in the growing commercial market for microprocessors, yet
protect U.S. national security interests.
C. BILATERAL COOPERATION/TECHNICAL ASSISTANCE
As part of the Administration's continuing effort to
encourage other countries to strengthen their national export
control systems, the Department of Commerce and other agencies
conducted a wide range of export control cooperation
discussions with a number of countries.
Singapore, Malaysia, and Thailand
From October 11-23, 2002, Under Secretary of Commerce
Kenneth I. Juster led a delegation consisting of
representatives from the Departments of State and Commerce to
Singapore, Malaysia, and Thailand. The purpose of the trip was
to consult with senior government officials and industry
representatives in these countries on trade security issues,
including export control matters and the Department of
Commerce's Transshipment Country Export Control Initiative
(TECI). The trip also sought to gain support from the countries
for the STAR Initiative (Secure Trade in the APEC Region) and
to promote attendance by these countries in an international
conference on transshipment and export control issues that was
held in Bangkok from December 11-13, 2002. The Bangkok
conference was organized and funded by the State Department's
Export Control and Related Border Security Assistance (EXBS)
program. As a result of this visit, each country agreed to
participate in the conference in Bangkok, and BIS received a
positive response and willingness to cooperate on trade
security initiatives from senior government officials in all
three countries.
India
In furtherance of the November 2001 pledge by President
Bush and Prime Minister Vajpayee to stimulate U.S.-India high-
technology commerce, Under Secretary Juster led an interagency
delegation of senior officials from the Department of Commerce,
the Department of State, and the White House to New Delhi,
Mumbai, and Bangalore, India, from November 8-17, 2002. The
purpose of the trip was to deliver the United States
Governmentresponse to several Government of India proposals to
stimulate U.S.-India high-technology trade. The U.S. delegation reached
agreement with the Government of India on establishing the India-U.S.
High Technology Cooperation Group, which will be a formal mechanism to
discuss a wide range of high-technology trade issues, including
sensitive export control issues. The U.S. delegation also presented
facts that helped dispel Indian misperceptions that U.S. export
controls on nuclear and missile items are a significant barrier to
increased high-technology trade.
Panama
From January 14-17, 2003. Under Secretary Juster led a
delegation to Panama to consult with senior government
officials on trade security issues and TECI. This trip also
sought to promote participation in U.S. export control
assistance programs. As a result of this visit, the Government
of Panama agreed to cooperate with the United States on export
controls and trade security and designated a governmental
point-of-contact for future discussions on these matters.
Nonproliferation and Export Control International Cooperation Program
During the reporting period, BIS's Nonproliferation and
Export Control International Cooperation Programs (NEC) was
involved in 27 technical exchanges on export controls,
including: (i) a forum in August 2002 to initiate the U.S.-
India Export Control Cooperative Exchange Program; (ii) the
Fourth International Conference on Export Controls in Warsaw,
Poland, in October 2002; (iii) the Regional Forum on
Transshipment Controls in Bangkok, Thailand, in December 2002;
and (iv) a February 2003 meeting on the Regional Transit
Agreement for the Caucasus and Central Asian for six
participating countries, which concluded a 3-year effort to
finalize a draft agreement and summary protocol.
These exchanges sought to familiarize participating
governments with the major elements of an effective export
control system and to assist these governments in developing
and strengthening their national export control systems. These
elements include: (i) the necessary legal and regulatory
framework, (ii) licensing procedures and control lists, (iii)
enforcement mechanisms, (iv) industry-government relations, and
(v) system administration and automation support. The intent of
these programs is to reduce the proliferation threat from/
through these countries by strengthening their national export
control systems.
D. REGULATORY ACTIONS: PUBLISHED AND PENDING
During the reporting period, BIS published several
amendments to the EAR.
On August 29, 2002, BIS published a rule amending several
provisions of the EAR related to nuclear controls. The rule
reformatted approximately 50 Export Control Classification
Numbers (ECCNs) on the Commerce Control List (CCL) to make them
conform more closely with the language used to identify such
items on the European Union (EU) and Nuclear Suppliers Group
(NSG) dual-use lists. The rule amended the EAR to reflect the
membership of Belarus, Cyprus, Slovenia, and Turkey in the NSG.
On September 18, 2002, BIS amended the EAR by clarifying
that all production equipment and facilities related to the
production of missile technology items described in ECCNs
IB115, IB117, 9B115, 9B116 are subject to the EAR an controlled
on the CCL.
On September 23, 2002, BIS published a rule that revised
the CCL to clarify which ``space qualified'' items identified
under certain ECCNs are subject to the EAR. A separate rule
published concurrently by the U.S. Department of State
clarifies which ``space qualified'' items are on the U.S.
Munitions List and, therefore, subject to the International
Traffic in Arms Regulations. The rule also added ``regional
stability'' as a reason for control for certain items in
Category 6 of the CCL.
On November 21, 2002, BIS published a notice removing S.B.
Submarine Systems Co., Ltd. (located in the People's Republic
of China), from the ``Unverified List.'' This action followed
the completion of a post-shipment verification (PSV) at the
company's facilities. BIS established the ``Unverified List''
with the publication of a notice in the Federal Register on
June 14, 2002. The ``Unverified List'' consists of foreign
endusers and consignees that have been involved in export
transactions in which BIS officials (or other federal officials
acting on BIS's behalf) have been unable to perform pre-
licensechecks or PSVs for reasons outside the control of the United
States Government. Participation of a person on the ``Unverified List''
in any proposed export transaction is considered by BIS to raise a
``red flag'' for purposes of the ``Know Your Customer'' guidance set
forth in EAR. Under that guidance, the ``red flag'' requires heightened
scrutiny by the exporter before proceeding with the transaction.
On November 25, 2002, BIS amended the EAR to remove the
special controls on the export and reexport of arms-related
items imposed on July 14, 1998, on the Federal Republic of
Yugoslavia (Serbia and Montenegro) (FRY). The rule also made a
minor clarification to the arms embargo-based controls in place
with respect to Rwanda pursuant to UNSC Resolution 918 of May
17, 1994.
On January 14, 2003, BIS published a revision to the EAR
regarding export controls on general purpose microprocessors.
This rule streamlined export controls on general purpose
microprocessors. A license is now required only for the export
of general purpose microprocessors to designated terrorism-
supporting countries or to military end-users or end-users in
countries posing national security concerns.
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 of
Industry and Security to be in the national interest, pursuant
to Executive Order No. 13222's directive to carry out the
provisions of the EAA, to the extent permitted by law.
During the reporting period, BIS submitted reports to the
Congress on the actions taken relating to exports of
agricultural commodities to Cuba. Section 906(b) of the Trade
Sanctions Reform and Export Enhancement Act of 2000 (TSRA)
(Title IX of Pub. L. 106-387), as amended, requires the
submission of quarterly reports. Two reports were submitted to
the Congress during this reporting period. The first report
covered July-September 2002, and the second covered October-
December 2002. Section 906(c) of the TSRA requires the
submission of a biennial report to the Congress. BIS submitted
its first such report, covering the 2-year period since the
enactment of TSRA, on October 28, 2002.
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 General
Accounting Office (GAO). Specifically, the OIG initiated two,
continued two, and closed one study during this time. The GAO
initiated eight, continued 15, and closed 15 studies during
this time frame.
G. EXPORT ENFORCEMENT
In the reporting period, BIS through its offices of
Enforcement Analysis, Export Enforcement, and Antiboycott
Compliance, continued its programs to prevent diversions of
controlled items, investigate and enforce export control
violations, and enforce U.S. antiboycott rules.
Office of Enforcement Analysis
In the reporting period, Office of Enforcement Analysis
(OEA) continued to improve 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.
Office of Enforcement Analysis activities also include a
plan to target and prioritize pre-license checks (PLC) and post
shipment verifications (PSV) 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 assurances that
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.
On December 31, 2002, as required by the National
DefenseAuthorization Act for FY 1998 (NDAA), BIS delivered to the
Congress its fifth annual report on HPC exports to Computer Tier 3
countries (e.g., China and Russia), compiled by OEA.
Office of Export Enforcement
During the reporting period, Office of Export Enforcement
(OEE) opened 346 investigations, some of which led to both
criminal and administrative sanctions. A total of $2,114,000 in
civil penalties and criminal fines were imposed for violations
during this period. OEE also issued 11 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.
Significant enforcement activities during the reporting
period included:
On November 4, 2002, BIS announced that Sigma-Aldrich
Corporation of St. Louis, Missouri, and two of its subsidiaries
agreed to pay a $1,760,000 fine to settle charges involving
illegal exports of biological toxins. The settlement was
reached after a significant legal ruling in the Commerce
Department's favor by an administrative law judge adjudicating
the dispute. The penalty is the largest imposed by the Commerce
Department in a case involving biological toxins, and one of
the largest penalties ever paid to the Department for export
control violations.
On January 7, 2003, BIS announced that Silicon Graphics,
Inc. (SGI), of Mountain View, California, pled guilty to
charges that SGI had violated Commerce Department regulations
by illegally exporting high performance computers to a Russian
nuclear weapons laboratory in 1996. SGI agreed to pay $1
million in criminal fines to resolve the charges. In a related
administrative case, SGI agreed to pay $182,000, the maximum
penalty authorized under the EAR, to settle civil charges
arising from the same exports.
Office of Antiboycott Compliance (OAC)
Office of Antiboycott Compliance implements the antiboycott
provisions of the EAA and the EAR. Office of Antiboycott
Compliance performs three main functions: (i) enforcing the
EAR, (ii) assisting the public in complying with antiboycott
provisions, and (iii) compiling and analyzing information
regarding international boycotts. During the reporting period,
OAC opened five cases and closed 12 investigations. Office of
Antiboycott Compliance also made six public presentations on
the antiboycott regulations.
Office of Antiboycott Compliance enforcement activities
involved an agreement pursuant to which Mercator, Inc., an
Englewood Cliffs, New Jersey exporter, agreed to pay a $30,000
civil penalty to settle allegations that Mercator violated the
antiboycott regulations and U.S. export control laws in
connection with shipment of chemicals to Iran through the
United Arab Emirates. This was a joint case developed by the
OAC and BIS's Boston Field Office.
Office of Antiboycott Compliance also assisted the public
in complying with the antiboycott provisions by responding to
558 requests for advice on application of the antiboycott
provisions to specific export transactions. Also, OAC
participated in public presentations on compliance with the
antiboycott regulations at six conferences and seminars in
Detroit, Boston, Orlando, and Washington, D.C.