[Congressional Record Volume 142, Number 80 (Tuesday, June 4, 1996)]
[Senate]
[Pages S5758-S5760]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 REPORT CONCERNING THE NATIONAL EMERGENCY WITH RESPECT TO THE LAPSE OF 
 THE EXPORT ADMINISTRATION ACT OF 1979--MESSAGE FROM THE PRESIDENT--PM 
                                  151

  The Presiding Officer laid before the Senate the following message 
from the President of the United States, together with an accompanying 
report; which was referred to the Committee on Banking, Housing, and 
Urban Affairs.
To the Congress of the United States:
  As required by section 204 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 
periodic report on the national emergency declared by Executive Order 
No. 12924 of August 19, 1994, 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.
                                                  William J. Clinton.  
  The White House, June 4, 1996.

  President's Periodic Report on the National Emergency Caused by the 
             Lapse of the Export Administration Act of 1979

       1. On August 19, 1994, in Executive Order No. 12924, I 
     declared a national emergency under the International 
     Emergency Economic Powers Act (IEEPA) (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 (50 U.S.C. App. 2401 et seq.) and the system of 
     controls maintained under that Act. In that order, I 
     continued in effect, to the extent permitted by law, the 
     provisions of the Export Administration Act of 1979 (EAA), as 
     amended, the Export Administration Regulations (15 CFR 768 et 
     seq.), and the delegations of authority set forth in 
     Executive Order No. 12002 of July 7, 1977 (as amended by 
     Executive Order No. 12755 of March 12, 1991), Executive Order 
     No. 12214 of May 2, 1980, Executive Order No. 12735 of 
     November 16, 1990 (subsequently revoked by Executive Order 
     No. 12938 of November 14, 1994), and Executive Order No. 
     12851 of June 11, 1993. As required by the National 
     Emergencies Act (50 U.S.C. 1622(d)), I issued a notice on 
     August 15, 1995, continuing the emergency declared in 
     Executive Order No. 12924.
       2. I issued Executive Order No. 12924 pursuant to the 
     authority vested in me as President by the Constitution and 
     laws of the United States, including, but not limited to, the 
     IEEPA. At that time, I also submitted a report to the 
     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 or 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, 
     report to the Congress on the total expenditures directly 
     attributable to that declaration. To comply with these 
     requirements, I have submitted combined activities and 
     expenditures reports for the 6-month periods from August 19, 
     1994, to February 19, 1995, and from February 19, 1995, to 
     August 19, 1995. The following report covers the 6-month 
     period from August 19, 1995, to February 19, 1996.
       3. Since the issuance of Executive Order No. 12924, the 
     Department of Commerce has continued to administer and 
     enforce the system of export controls, including 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. 12924 to those required under the 
     Export Administration Act, insofar as appropriate.
       4. Since my last report to the Congress, there have been 
     several significant developments in the area of export 
     controls:


                      a. multilateral developments

       Wassenaar Arrangement for Export Controls for Conventional 
     Arms and Dual-Use Goods and Technologies. The Bureau of 
     Export Administration (BXA) of the Department of Commerce 
     participated in several rounds of negotiations to establish a 
     successor regime to COCOM. On December 19, 1995, 28 countries 
     (former COCOM partners, cooperating countries, Russia, and 
     the Visegrad states) agreed to establish a new regime, called 
     the Wassenaar Arrangement, to control conventional arms and 
     munitions and related dual-use equipment. The Wassenaar 
     Arrangement will be headquartered in Austria. The first 
     plenary meeting of the new regime was held in Vienna in April 
     1996.
       Australia Group. The Australia Group (AG) is an informal 
     multilateral body formed in 1984 to address concerns about 
     proliferation of chemical and biological warfare 
     capabilities. Currently, 29 governments, representing 
     supplier or producer countries, are members. The AG operates 
     by consensus.
       At the October 1995 plenary meeting, the Biological Weapons 
     Experts conducted a technical review of the AG biological 
     control list, which has been in force for 3 years. There was 
     agreement on tightening the controls on certain 
     microorganisms and equipment (e.g., fermenters) that can be 
     used in the production of biological weapons. Regulations are 
     being drafted to reflect these changes in biological weapons 
     export controls.
       The AG also agreed at the October 1995 plenary to tighten 
     controls on license-free sample shipments. Accordingly, BXA 
     will monitor its recently revised sample shipments rule to 
     determine if it should be modified.
       The United States shared its experiences at the October 
     1995 meeting in implementing

[[Page S5759]]

     its chemical mixtures regulations, and is seeking a 
     comprehensive understanding of how other members implement 
     the AG mixture controls.
       Members agreed to U.S. proposals at the October 1995 
     meeting for intensified information exchange and other 
     measures to better address chemical and biological warfare 
     terrorism.
       Nuclear Suppliers Group. The Nuclear Suppliers Group (NSG), 
     currently composed of 32 member countries, maintains a 
     control list of nuclear related dual-use items and guidelines 
     for their control.
       NSG member countries have recently completed a technical 
     review of the dual-use control list and are presently engaged 
     in restructuring the present control language to better 
     reflect nuclear proliferation concerns as well as to allow 
     the more effective implementation of export controls for 
     these items.
       The Department of Commerce continues to issue license 
     denials for NSG-controlled items as part of the ``no-
     undercut'' provision. Under this provision, a denial 
     notification received from an NSG member country precludes 
     other member countries from approving similar transactions, 
     thereby assuring that the earlier denial is not ``undercut.'' 
     There are procedures for member countries to consult on 
     specific denials if they wish to disagree with the original 
     denial.
       Missile Technology Control Regime. The Missile Technology 
     Control Regime (MTCR), founded in 1987 and currently 
     comprising 28 member countries, is an informal group whose 
     members coordinate their national export controls to help 
     prevent missile proliferation. Each member country, under its 
     own national laws, has agreed to abide by multilateral MTCR 
     Guidelines for controlling the transfer of items that 
     contribute to missile programs. These items are identified in 
     an MTCR Equipment and Technology Annex to the Guidelines.
       The Department continues to implement the Enhanced 
     Proliferation Control Initiative (EPCI), which is a ``catch-
     all'' control on items that are not on the MTCR Annex, but 
     could be used directly in projects of missile proliferation 
     concern. As a result of U.S. leadership, similar controls 
     have now been adopted by over half of the MTCR members.
       As a consequence of bilateral missile nonproliferation 
     agreements with Russia and South Africa, those two countries 
     have conformed their national export controls to MTCR 
     standards and were formally admitted to membership in the 
     MTCR in October 1995.
       The United States also supported Brazil's candidacy for 
     membership in the MTCR, and Brazil was accepted unanimously 
     in October 1995.


             b. 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 a wide range of discussions with a number of 
     foreign countries.
       Russian Exchanges. In October 1995, BXA hosted a large 
     delegation of senior Russian industry executives and 
     government export control officials. They met in Boston and 
     in Washington, D.C., to discuss industry-government 
     cooperation on export controls. The purpose of this program 
     was to bring together U.S. and Russian business executives 
     and government officials to discuss such issues as the 
     administration of export controls, legal reform, licensing, 
     industry compliance, and enforcement.
       In December 1995, BXA participated in an interagency 
     delegation to a briefing hosted by the Russian government on 
     the operation of Russia's export control system. Russian 
     ministries, organizations, and enterprises gave 
     presentations.
       Central Asian/Caucasus Export Control Forum. In November 
     1995, BXA participated in an interagency delegation as co-
     hosts with Turkey in an export control forum for seven 
     Central Asian and Caucasus states (Armenia, Azerbaijan, 
     Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and 
     Uzbekristan). Presentations were given on legal, legislative, 
     and non proliferation issues, including licensing, 
     enforcement, and industry-government relations.
       Nonproliferation and Export Control Cooperation. In late 
     1994, BXA created the Nonproliferation and Export Control 
     Cooperation (NEC) team to marshal BXA's resources and 
     expertise to support U.S. export control cooperation programs 
     in the former Soviet Union, other newly emerging states in 
     the Central Asian, Transcaucasian, and Baltic regions, and 
     certain central European states. From August to December 
     1995, the NEC team, with representatives from the Departments 
     of State, Defense, and Energy, and the U.S. Customs Service, 
     coordinated 14 cooperative exchanges with Belarus, 
     Kazakhstan, Ukraine, Lithuania, Bulgaria, Romania, and 
     Poland. These cooperative exchanges focused on the legal 
     bases for export control systems, regulatory procedures, 
     licensing processes, preventive enforcement mechanisms, 
     industry-government relations, and systems automation.


     c. regulatory actions: published and pending regulatory reform

       For almost three decades, the EAR have been amended 
     frequently to respond to various national security, 
     nonproliferation, and foreign policy crises. Until recently, 
     the EAR had never been subjected to a systematic and 
     comprehensive review for the purpose of coordinating and 
     restructuring these many amendments to create a set of 
     regulations that is internally consistent and easier to 
     use. Last May, BXA published a proposed rule that included 
     a comprehensive revision and reorganization of the EAR 
     that will, in accordance with the goal set by the Trade 
     Promotion Coordinating Committee, ``make the regulations 
     more user-friendly.'' The BXA has involved the exporting 
     community in every step of the process, releasing early 
     drafts as ``discussion packages,'' conducting ``town 
     hall''--style-fora in 13 States, and redrafting to 
     incorporate the many industry comments and suggestions 
     received once the proposed rule was published. In November 
     1995, BXA circulated a draft interim rule for interagency 
     review. The BXA delivered the interim rule to the Federal 
     Register in February for publication in March.
       General License Eligibility Extended to Semiconductor 
     Manufacturing Equipment. BXA published a final rule on 
     February 14 to expand general license eligibility to most 
     destinations to include certain semiconductor manufacturing 
     equipment: ion implanters, etching systems, chemical vapor 
     deposition equipment, certain ``cluster tools,'' masks, 
     reticles, and test systems.
       High-Performance Computers. On January 25, BXA published a 
     rule that implements the President's October 6, 1995, 
     announcement of a major reform of computer export controls. 
     The rule liberalizes export controls on all computers, and 
     establishes four tiers of countries and a new policy for each 
     tier. This new rule will provide significant benefit to the 
     international competitiveness of the U.S. computer industry. 
     This rule was effective January 22.
       Nuclear Controls. On February 1, BXA published an interim 
     rule to amend a number of Export Control Classification 
     Numbers (ECCNs) in order to make the U.S. Nuclear Referral 
     List conform more closely with the items contained in the 
     multi-lateral NSG Annex published by the International Atomic 
     Energy Agency and adhered to by the United States and other 
     subscribing governments in the NSG. In addition, this rule 
     removed Poland from general license General Nuclear Suppliers 
     Group (GNSG) restrictions, and added Argentina, New Zealand, 
     South Africa, and South Korea to the countries that are 
     eligible to receive exports under general license GNSG.
       Expansion of Foreign Policy Controls for Sudan. In 
     December, BXA circulated for interagency review a draft rule 
     that will establish foreign policy controls on exports to 
     Sudan. New controls are being published with the 
     comprehensive revision and reorganization of the Export 
     Administration Act. These controls are consistent with the 
     Secretary of State's determination that the Government of 
     Sudan has repeatedly provided support for acts of 
     international terrorism.
       Expansion of General Licenses GLX and GTDR. On December 20, 
     1995, BXA published a final rule that expands general license 
     for exports for civil end-users in countries of the former 
     Soviet Union, Romania, and the People's Republic of China 
     (GLX) eligibility to include: microprocessors with a 
     composite theoretical performance not exceeding 500 million 
     theoretical operations per second, memory integrated 
     circuits, certain digital integrated circuits, field 
     programmable gate arrays and logic arrays, portable 
     (personal) or mobile radiotelephones not capable of end-to-
     end encryption, and software to protect against computer 
     viruses. In addition, revisions were made to expand 
     eligibility for general license for technical data (GTDR) 
     with written assurance to include certain virus protection 
     software.
       Specially Designed Implements of Torture. On November 28, 
     1995, BXA published a final rule that expanded foreign policy 
     controls on specially designed implements of torture. 
     Previously, such implements were controlled as ``crime 
     control and detection'' commodities in the same category as 
     handcuffs, police helmets, and shields. As such, they did not 
     require a validated license for export to member countries of 
     the North Atlantic Treaty Organization (NATO), Australia, 
     Japan, or New Zealand. This new rule created a control list 
     entry requiring a validated license for export of specially 
     designed implements of torture to all destinations, including 
     Canada. Applications for such exports will continue to be 
     subject to a general policy of denial.
       Chemical Mixtures. On October 19, 1995, BXA published a 
     final rule that implements the agreement reached by the AG in 
     December 1994 on certain technical revisions in the AG's 
     harmonized controls on chemical weapons precursors. The rule 
     refines and clarifies the scope of controls on exports of 
     sample shipments and mixtures containing controlled precursor 
     and intermediate chemicals. The rule also revised the list of 
     countries eligible to receive AG benefits under U.S. 
     regulations by adding Poland, the Slovak Republic, and 
     Romania.


               D. STRATEGIC INDUSTRIES/ECONOMIC SECURITY

       In late 1994, the National Security Advisor directed that 
     an interagency study be prepared to assess the current and 
     future international market for software products containing 
     encryption (PRD/NSC-48). The directive was in response 
     to industry claims that U.S. export controls on certain 
     powerful encryption technologies were providing no benefit 
     to national security, and were hampering the software 
     industry's ability to compete in the global marketplace. 
     On January 11, the Department of Commerce announced the 
     public release of the study,

[[Page S5760]]

     jointly prepared by BXA and the National Security Agency. 
     The study provides an in-depth evaluation of the 
     international market, reviews the availability of foreign 
     encryption software, and assesses the impact that U.S. 
     export controls for encryption have had on the 
     competitiveness of the software industry. The study found 
     that the U.S. software industry still dominates world 
     markets, but the existence of strong export controls, both 
     in the United States and other major countries, is slowing 
     the growth of the international market.


                         e. export enforcement

       Over the last 6 months, the Department of Commerce 
     continued its vigorous enforcement of the EAR through 
     educational outreach, license application screening, spot 
     checks, investigations, and enforcement actions. In the last 
     6 months, these efforts resulted in civil penalties, denials 
     of export privileges, criminal fines, and imprisonment. Total 
     penalties imposed from August 10, 1995, through February 15, 
     1996, amounted to $3,226,750 in export control and 
     antiboycott compliance cases, including criminal fines 
     totaling $255,000; in addition, 14 parties were denied export 
     privileges.
       Two Companies and an Individual Penalized Total of $1.45 
     Million for Alleged Antiboycott Violations. On August 29, 
     1995, Assistant Secretary for Export Enforcement John Despres 
     signed an order imposing civil penalties totaling $1,446,400 
     on Parbel of Florida, Inc., formerly known as Helena 
     Rubenstein, Inc., and Cosmair, Inc., both subsidiaries of 
     L'Oreal, S.A., the French cosmetic company, and on Bruce L. 
     Mishkin, an employee of Cosmair, Inc., for 291 alleged 
     violations of the antiboycott provisions of the EAA and EAR.
       The Department of Commerce alleged that, in 1989, in 
     response to a request from L'Oreal, S.A., Helena Rubinstein, 
     Inc., and Bruce L. Mishkin each furnished or agreed to 
     furnish 144 items of information about Helena Rubinstein, 
     Inc.'s business relationships with or in Israel. The 
     Department further alleged that Cosmair, Inc., did not 
     prevent Mr. Mishkin from furnishing information about Helena 
     Rubinstein, Inc.'s business relationships with or in Israel. 
     The Department alleged that, in so doing. Cosmair, Inc., 
     violated the EAR by permitting the doing of an act prohibited 
     by the EAR.
       The companies and Mishkin each agreed to pay the civil 
     penalties in separate but related settlements, which 
     combined, constitute one of the largest for the Office of 
     Antiboycott Compliance (OAC). Under the terms of the Consent 
     Agreements, Parbel paid $1,387,000, Mr. Mishkin paid $50,400, 
     and Cosmair paid $9,000 to settle the allegations.
       California Man Penalized for Alleged Export Control 
     Violations Involving Shotguns to Namibia and South Africa. On 
     November 28, 1995, Assistant Secretary for Export 
     Enforcements John Despres imposed a 15-year denial of export 
     privileges and a $60,000 civil penalty on James L. Stephens, 
     president and co-owner of Weisser's Sporting Goods, National 
     City, California, for the alleged illegal export of certain 
     U.S.-origin shotguns to Namibia and South Africa.
       The Department alleged that, between 1990 and 1992, 
     Stephens conspired with overseas parties to export and, on 
     two separate occasions, actually exported, U.S.-origin 
     shotguns with barrel lengths 18 inches and over to Namibia 
     and South Africa without applying for and obtaining from the 
     Department the validated export licenses he knew or had 
     reason to know were required under the EAA and EAR. In 
     addition, the Department alleged that, in furtherance of the 
     conspiracy, and in connection with each of these exports, 
     Stephens made false or misleading representations of material 
     fact to a U.S. agency in connection with the preparation, 
     submission, or use of export control documents.
       In a separate matter, Weisser's Sporting Goods plead guilty 
     on November 20, 1995, in the Southern District of California, 
     to one criminal count of violating U.S. export control laws 
     in connection with the export of shotguns to South Africa. 
     Sentencing for the criminal violation took place on January 
     16, 1996. Weisser's Sporting Goods was fined $30,000 and 
     placed on 3 years' probation.
       Illinois Company and its French Subsidiary Penalized 
     $550,000 for Alleged Antiboycott Violations. On November 29, 
     1995, Assistant Secretary for Export Enforcement John Despres 
     signed an order imposing civil penalties totaling $550,000 on 
     Sundstrand Corporation (``Sundstrand'') and its wholly owned 
     subsidiary, Sundstrand International, S.A. Zone Industrielle 
     de Dijon-Sud (``Sundstrand Dijon''), for alleged violations 
     of the antiboycott provisions of the EAA and the EAR.
       Sundstrand is a Rockford, Illinois-based manufacturer and 
     exporter of aerospace and industrial equipment. Sundstrand 
     Dijon is a repair and testing facility for Sundstrand 
     equipment located in Dijon, France. While neither admitting 
     nor denying the alleged violations, Sundstrand agreed to pay 
     a $350,000 civil penalty to settle allegations that, on 
     175 occasions between October 1988 and June 1993, it 
     failed to report to the Department its receipt of boycott-
     related requests from the United Arab Emirates (UAE). 
     Sundstrand Dijon agreed to pay a $200,000 civil penalty to 
     settle allegations that, on 100 occasions during the same 
     period, it failed to report to the Department its receipt 
     of boycott-related requests from UAE, Bahrain, and Yemen.
       Swiss and U.S. Companies Denied Export Privileges and 
     Corporate Officers Fined for Illegal Exports. On January 11, 
     1996, Assistant Secretary for Export Enforcement John Despres 
     denied the export privileges of Lasarray Corporation of 
     Irvine, California, and Lasarray, S.A., of Switzerland. The 
     period of the denial is 2 years. Additionally, Ernst Uhlmann, 
     a Swiss businessman who owned Lasarray, received a civil 
     penalty of $50,000 (with $25,000 suspended); Eugene T. 
     Fitzgibbons, the former president of Lasarray Corporation, 
     received a civil penalty of $20,000 (with $10,000 suspended); 
     and Edwin Barrowcliff, a former vice president of Lasarray 
     Corporation, received a civil penalty of $20,000, all of 
     which is suspended. The Department alleged that, between 1990 
     and 1991, Lasarray unlawfully exported base wafer integrated 
     circuits to Switzerland without the required validated export 
     license.
       Civil Penalty of $400,000, Imposed on Illinois Company for 
     Alleged Export Control Violations. On January 31, 1996, the 
     Assistant Secretary for Export Enforcement John Despres 
     signed an order imposing a $400,000 civil penalty on U.S. 
     Robotics Access Corp. of Skokie, Illinois, for 123 alleged 
     violations of the EAA and Regulations. The Department of 
     Commerce alleged that, on 41 separate occasions between June 
     1990 and June 1992, U.S. Robotics exported U.S.-origin, high-
     speed computer modems from the United States to South Africa, 
     Liechtenstein, Czechoslovakia, New Zealand, and Singapore, 
     without obtaining from the Department the required validated 
     licenses. In connection with each of these exports, the 
     Department also alleged that the company falsely represented 
     on air waybills and Shipper's Export Declarations that the 
     modems qualified for export under general license when, in 
     fact, a validated license was required. To settle the 
     allegations, U.S. Robotics will pay $300,000 of the $400,000 
     penalty the Department imposed. Payment of the remaining 
     $100,000 is suspended for 1 year and will be waived if, 
     during the 1-year period of suspension, U.S. Robotics does 
     not violate the Act, Regulations, or any conditions of the 
     Department's order.
       Civil and Criminal Penalties Imposed on Oregon Company. On 
     February 12, 1996, Assistant Secretary for Export Enforcement 
     John Despres imposed a civil penalty of $40,000 ($20,000 
     suspended for 1 year) on Patrick Lumber, of Portland, Oregon, 
     for allegedly violating the embargo on exports to Libya. On 
     the same day, Patrick Lumber was sentenced to pay a criminal 
     fine of $225,000 by the United States District Court in 
     Portland, Oregon, following the company's guilty plea to a 
     two-count indictment charging it with violating the IEEPA. 
     The United States charged that, in 1993, Patrick Lumber 
     exported two shipments of yellow pine wood worth over 
     $800,000 from the United States to Libya in violation of the 
     IEEPA.
       Under Secretary Affirms ALJ Decision and Order Imposing 
     $10,000 Civil Penalty on Florida Freight Forwarder for 
     Antiboycott Violations. On October 30, 1995, the Under 
     Secretary for Export Administration affirmed the May 1, 1995, 
     decision of the Administrative Law Judge (ALJ) that Stair 
     Cargo Services, Inc., of Miami, Florida, a subsidiary of 
     Intertrans Corporation of Dallas, Texas, committed two 
     violations of the antiboycott provisions of the Act and 
     Regulations. The ALJ found that, in 1988, a Stair Cargo 
     branch office in Inglewood, California, complied with a 
     boycott-related request from Kuwait to provide the name of a 
     supplier of goods and services for clearance by Kuwaiti 
     boycott authorities, thereby furnishing information about 
     that firm's business relationships with persons known or 
     believed to be blacklisted. The ALJ also found that Stair 
     Cargo failed to report to the Department its receipt of the 
     boycott-related request, as required by the Regulations. The 
     ALJ imposed a civil penalty of $10,000 for these violations.
       5. The expenses incurred by the Federal Government in the 
     6-month period from August 19, 1995, to February 19, 1996, 
     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, Bureau of Export Administration. 
     Expenditures by the Department of Commerce are anticipated to 
     be $18 million, most of which represents program operating 
     costs, wage and salary costs for Federal personnel, and 
     overhead expenses.

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