[House Report 104-605]
[From the U.S. Government Publishing Office]



104th Congress                                            Rept. 104-605
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
                   EXPORT ADMINISTRATION ACT OF 1996

                                _______
                                

 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 361]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 361) to provide authority to control exports, and 
for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the 
bill, as amended by the Committee on International Relations, 
do pass.

                            I. INTRODUCTION

                         A. PURPOSE AND SUMMARY

    H.R. 361, as amended, reauthorizes and reforms the Export 
Administration Act of 1979, the statute which governs U.S. 
controls of exports of dual-use goods, commodities, and 
technologies. In contrast to munitions which are controlled by 
the Department of State, dual-use goods, commodities, and 
technologies are civilian items that possess potential military 
applications.
    The purposes of the bill are: (1) to adapt the dual-use 
export control system to the post-Cold War environment; and (2) 
to remove unnecessary bureaucratic and other impediments to 
U.S. export competitiveness.
    H.R. 361 contains several provisions on import sanctions 
that fall within the jurisdiction of the Committee on Ways and 
Means.
    The first two provisions (Sec. 111(d) and (e)) would 
recodify sanctions that previously existed in the Export 
Administration Act for proliferation of chemical and biological 
weapons, and for trade in violation of the Missile Technology 
Control Regime (MTCR).
    Section 111(g) is a new provision which would require the 
Secretary of State to seek multilateral support for sanctions 
imposed pursuant to sec. 111(d) and (e).
    Finally, Sec. 203 would add a new import sanction to a list 
of seven mandatory sanctions in current law for countries who 
engage in nuclear proliferation activities, which are defined 
as the transfer of nuclear weapons or nuclear components or 
design information to a non-nuclear-weapon state, or efforts by 
such state itself to acquire such items.

                 B. BACKGROUND AND NEED FOR LEGISLATION

    On March 29, 1996, the Committee on International Relations 
ordered favorably reported, with an amendment, H.R. 361, a bill 
to reauthorize and amend the Export Administration Act (EAA) of 
1979, which expired on June 30, 1994. For most of the last 
seventeen years, the Export Administration Act has provided the 
executive branch authority to control exports of dual-use 
items.
    Since expiration of EAA, the statutory authority to control 
dual-use exports has derived from a state of emergency declared 
by the President, pursuant to his authorities under the 
International Emergency Economic Powers Act, so that the 
pertinent regulations and most enforcement powers could remain 
in effect.
    The Export Administration Act has not been significantly 
rewritten since 1988, although attempts were made in the 101st, 
102nd, and 103rd Congresses. The nature of threats to national 
security has changed since then. The end of the Cold War 
brought with it an end to the tight international coordination 
and political commitments that were embodied in the 
Coordinating Committee for Multilateral Controls (COCOM). 
Secondly, in the post-Cold War era, the capacity to build 
weapons of mass destruction, including nuclear, chemical and 
biological weapons, and the missiles to deliver them, is an 
increasing danger. The magnitude of the problem highlights the 
need to improve multilateral non-proliferation efforts that 
reflect the new international environment.

                         C. LEGISLATIVE HISTORY

    H.R. 361, The Omnibus Export Administration Act of 1996, 
was ordered favorably reported by the Committee on 
International Relations on March 29, 1996. The bill was 
sequentially referred to the Committee on Ways and Means for 
consideration of provisions within its jurisdiction until June 
28, 1996.
    On June 27, 1996, the Full Committee met to consider 
provisions of H.R. 361 within its jurisdiction. The bill was 
ordered favorably reported by voice vote, as amended by the 
Committee on International Relations.
    Provisions similar to the import sanction provisions 
included in section 203 of H.R. 361 were approved by the 
Committee on Ways and Means on June 15, 1994 as part of its 
consideration of H.R. 3937, ``The Export Administration Act of 
1994.'' (See Secs. 221 and 226 of that bill.) H.R. 3937 was 
approved on June 15, 1994, by the Committee by voice vote (H. 
Rpt. 103-531, Part 3). The bill, however, was not further 
considered and did not become law.

II. EXPLANATION OF PROVISIONS WITHIN THE JURISDICTION OF THE COMMITTEE 
                           ON WAYS AND MEANS

A. Chemical and biological weapons proliferation sanctions (Sec.111(d))

            Expired law
    Under section 11(c) of the Export Administration Act of 
1979, if the President determines that a foreign person has 
knowingly and materially contributed, through export of a 
controlled item, to the efforts of a terrorist country or 
certain other countries, projects and entities, to use, 
develop, produce, stockpile or otherwise acquire chemical or 
biological weapons, the President shall, for a minimum of 12 
months:
          (1) prohibit the person from participating in United 
        States Government procurement contracts; and
          (2) prohibit the importation into the United States 
        of products produced by that person.
    The President may waive the application of sanctions if he 
determines and certifies to Congress that such a waiver is 
important to the national security interests of the United 
States.
            Explanation of provision
    Section 111(d) of H.R. 361 would recodify the chemical and 
biological weapons sanctions that existed under section 11(c) 
of the Export Administration Act of 1979, as amended, which are 
described above.
            Reason for change
    The provision would reenact expired law. It is the 
Committee's understanding that the President would have full 
discretion to determine the type and volume of imports 
prohibited under this section.

B. Missile proliferation control violations (Sec. 111(e))

            Expired law
    Under Section 11(b) of the Export Administration Act, if 
the President determines that a foreign person knowingly 
engages in or facilitates, or attempts to engage in trade in 
violation of the Missile Technology Control Regime that 
substantially contributed to the design, development or 
production of missiles to a non-adherent country, the President 
shall, for two years:
          (1) deny Department of Commerce export licenses for 
        missile equipment or technology to such person;
          (2) deny all Department of Commerce licenses to such 
        person; or
          (3) prohibit the importation into the United States 
        of products produced by that foreign person.
    Under Section 11(b) the severity of the sanction is tied to 
the type of missile technology that was transferred. The 
President may waive the imposition of sanctions if he 
determines that a waiver is essential to the national security 
interests of the United States.
            Explanation of provision
    Section 111(e) would recodify the missile proliferation 
control sanctions that existed under section 11(b) of the 
Export Administration Act of 1979, as amended.
            Reason for change
    The provision would reenact expired law. It is the 
Committee's understanding that the President would have full 
discretion to determine the type and volume of imports 
prohibited under this section.

C. Seeking multilateral support for unilateral sanctions (Sec. 111(g))

            Expired law
    There is no requirement in the expired law for the 
Administration to seek multilateral support for missile 
proliferation control sanctions imposed under this Act.
            Explanation of provision
    Section 111(g) would require that the Secretary of State 
seek other countries' support for sanctions imposed under this 
section.
            Reason for change
    It is the view of the Committee that a multilateral 
approach to trade sanctions is by far preferable to unilateral 
measures. The Committee expects the President to make every 
effort to achieve agreement among our trading partners to take 
strong measures to curtail missile proliferation.

D. Annual report on unilateral sanctions (Secs. 115(b) and (c))

            Expired law
    No provision.
            Explanation of provision
    Section 115(b) requires the Secretary of Commerce to 
include in the annual report submitted under this title a 
listing of U.S. unilateral controls and sanctions and their 
estimated economic impact. Section 115(c) requires the General 
Accounting Office to analyze the annual section 115(b) report 
and provide its own views to Congress not later than 120 days 
after the report is submitted.
            Reason for change
    These reports will help the Committee assess the economic 
impact of unilateral trade sanctions.

E. Sanctions under the Arms Export Control Act (Sec. 203)

            Expired law
    Present law does not contain import sanctions against 
countries or persons which engage in nuclear proliferation 
activities.
    Section 102(B)(2) of the Arms Export Control Act (AECA) 
requires that if the President determines that a country: (a) 
has transferred a nuclear explosive device to a non-nuclear 
state; (b) is a non-nuclear state and has either received a 
nuclear explosive device or detonated a nuclear explosive 
device; (c) transferred to a non-nuclear-weapon state either 
non-public design information or a component of a nuclear 
explosive device which is determined by the President to be 
important to, and known by the transferring country to be 
intended for use in the development or manufacture of any 
nuclear explosive device; or (d) is a non-nuclear state and 
sought and received such design information or component which 
is determined by the President to be important to, and intended 
for use in, the development or manufacture of any nuclear 
explosive device, then the President is required to impose 
sanctions.
    The AECA requires that the President impose seven 
sanctions. These sanctions are: (1) termination of all but 
humanitarian and agricultural assistance; (2) termination of 
all sales of defense articles and services and U.S. Military 
Licenses; (3) termination of all foreign military financing; 
(4) denial of any credit, credit guarantees, or other financial 
assistance; (5) opposition to any international loans or 
financial assistance; (6) prohibition on U.S. bank loans or 
credits to the Federal government (except for agricultural 
commodities); and (7) use of EAA authorities to prohibit export 
specific goods and technology, except such prohibition shall 
not apply to Title V activities.
    The President may delay imposition for no more than 30 days 
if immediate imposition would be detrimental to the national 
security. The President may waive sanctions invoked pursuant to 
triggers (c) and (d) if there would be serious adverse effect 
on vital U.S. interests of imposing the sanction.
    The waiver pursuant to triggers (a) and (b) can only be 
exercised by the President if imposition of such sanction would 
be seriously prejudicial to the achievement of United States 
nonproliferation objectives or otherwise jeopardize the common 
defense and security, and the Congress passes a joint 
resolution within 30 days authorizing him to do so.
            Explanation of provision
    This section would add an eighth sanction to the list of 
sanctions in the Arms Export Control Act. Under this section, 
the President would be required to prohibit the importation of 
specific products by persons who have engaged in sanctionable 
nuclear proliferation behavior.
            Reason for change
    It is the Committee's view that, in light of the threat 
posed by nuclear proliferation activities to U.S. national 
security, it is appropriate for the President to have 
discretionary authority to impose import sanctions in response 
to violations under this section. The Committee intends that 
the President would have full discretion to determine the type 
and volume of imports to be prohibited under this section. The 
Committee also intends that this authority would be used in a 
manner consistent with the international legal obligations of 
the United States. It is the Committee's view that the 
President must have the flexibility to tailor import 
restrictions imposed under this section to the circumstances of 
the specific case, and with the goal of achieving international 
cooperation to stem the proliferation of nuclear weapons.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statement 
is made concerning the vote of the Committee in its 
consideration of the bill, H.R. 361:
            Motion to report H.R. 361
    H.R. 361 was ordered favorably reported, as amended, by 
voice vote, on June 26, 1996, with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               a. committee estimate of budgetary effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made: 
The Committee agrees with the estimate prepared by the 
Congressional Budget Office (CBO), which is included below.

    b. statement regarding new budget authority and tax expenditures

    In compliance with subdivision (B) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, the 
Committee states that the provisions of H.R. 361 would affect, 
at a de minimis level, direct spending and receipts, and would 
be subject to pay-as-you-go procedures under section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985.

      C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with subdivision (C) of clause 2(l)(3) of 
rule XI of the Rules of the House of Representatives, requiring 
a cost estimate prepared by the Congressional Budget Office, 
the following report prepared by CBO is provided:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 27, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 361, the Omnibus 
Export Administration Act of 1996.
    Enactment of H.R. 361 would affect direct spending and 
receipts. Therefore, pay-as-you-go procedures would apply to 
the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.

               congressional budget office cost estimate

    1. Bill number: H.R. 361.
    2. Bill title: Omnibus Export Administration Act of 1996.
    3. Bill status: As ordered reported by the House Committee 
on Ways and Means on June 26, 1996.
    4. Bill purpose: H.R. 361 would replace the expired Export 
Administration Act (EEA), thereby updating the system of export 
controls for dual-use technologies and commodities. Since 
expiration of the EEA in 1994, the President has extended 
export controls pursuant to his authority under the 
International Emergency Economic Powers Act. The Bureau of 
Export Administration (BXA) in the Department of Commerce 
currently administers the system of export controls.
    Title I of H.R. 361 would require the Secretary of Commerce 
to establish a Commodity Control Index of all items subject to 
unilateral, multilateral, or short supply export controls. The 
title would establish procedures for including items on the 
control index and would provide for an export advisory 
committee to provide technical assistance to the BXA. The BXA 
also would be required to publish specific information 
concerning export controls, and to prepare an annual report to 
Congress on the status of export controls.
    Title I also would establish procedures for export license 
applications and would require the BXA to make decisions on 
such applications within nine days of when the application is 
submitted. The BXA would be required to consult with various 
agencies when issuing export licenses for certain commodities. 
Finally, this title would enable BXA to carry out enforcement 
activities and would increase the fines and penalties for 
violations of export controls.
    Title II would repeal the expiration date of the Nuclear 
Proliferation Prevention Act of 1994 (Public Law 103-236), 
thereby extending the law indefinitely. Title II also would 
require the Secretary of State to seek overseas support for 
sanctions imposed under this act.
    5. Estimated cost to the Federal Government: The following 
table summarizes the budgetary impact of H.R. 361. Because the 
bill does not provide a specific authorization, the table shows 
two alternative authorization levels for fiscal years 1997-
2000--without adjustment for anticipated inflation, and with 
adjustment for inflation. Outlay estimates are based on 
historical spending rates for this program and assume that 
appropriations will be provided before the start of each fiscal 
year.
    Assuming an adjustment for inflation, CBO estimates that 
discretionary spending to carry out the provisions of this bill 
would total $170 million over the 1997-2000 period. H.R. 361 
also would affect direct spending and receipts, but all such 
changes would be less than $500,000 for each year.

----------------------------------------------------------------------------------------------------------------
                                                                       1996     1997     1998     1999     2000 
----------------------------------------------------------------------------------------------------------------
                                       SPENDING SUBJECT TO APPROPRIATIONS                                       
                                                                                                                
Spending under current law:                                                                                     
    Budget authority...............................................       39  .......  .......  .......  .......
    Estimated outlays..............................................       38        6        2  .......  .......
                                                                                                                
                                        Without Adjustment for Inflation                                        
                                                                                                                
Proposed changes:                                                                                               
    Estimated authorization level..................................  .......       41       41       41       41
    Estimated outlays..............................................  .......       35       39       41       41
Spending under H.R. 361:                                                                                        
    Estimated authorization level \1\..............................       39       41       41       41       41
    Estimated outlays..............................................       38       41       41       41       41
                                                                                                                
                                          With Adjustment for Inflation                                         
                                                                                                                
Proposed changes:                                                                                               
    Estimated authorization level..................................  .......       42       44       45       47
    Estimated outlays..............................................  .......       36       42       45       47
Spending under H.R. 361:                                                                                        
    Estimated authorization level \1\..............................       39       42       44       45       47
    Estimated outlays..............................................       38       42       44       45       47
                                                                                                                
                                          REVENUES AND DIRECT SPENDING                                          
                                                                                                                
Estimated revenues.................................................    (\2\)    (\2\)    (\2\)    (\2\)    (\2\)
Estimated budget authority.........................................  .......    (\2\)    (\2\)    (\2\)    (\2\)
Estimated outlays..................................................  .......    (\2\)    (\2\)    (\2\)    (\2\)
----------------------------------------------------------------------------------------------------------------
\1\ The 1996 level is the amount appropriated for that year.                                                    
\2\ Less than $500,000.                                                                                         

    The costs of this bill fall primarily within budget 
function 370.
    6. Basis of estimate: For purposes of this estimate, CBO 
assumes that the bill is enacted by the end of fiscal year 
1996, that amounts of the estimated authorization levels are 
appropriated prior to the start of each fiscal year, and that 
outlays follow historical spending rates for BXA programs.

Spending subject to appropriations

    In the absence of a specific authorization of 
appropriations for BXA to carry out the provisions of this 
bill, CBO has estimated the amounts necessary to implement H.R. 
361. We based our estimate on the amount of money that BXA 
currently uses to administer export controls plus the amount 
needed to administer any new tasks required by H.R. 361.
    For 1996, appropriations totaled $39 million, of which an 
estimated $37 million will be used to administer export 
controls. Based on information from BXA, CBO estimates that BXA 
would require an additional $2 million a year to carry out the 
tasks required by H.R. 361 that are not being done under 
current law. These amounts would be spent primarily to support 
at least one export officer in Beijing, China and to comply 
with the expanded reporting requirements of the bill. 
Therefore, CBO estimates that implementation of H.R. 361 would 
result in total costs to the BXA of about $41 million in fiscal 
year 1997 and subsequent years, assuming no adjustment for 
inflation. Costs adjusted for inflation would be higher in each 
year.
    H.R. 361 would require the BXA to consult with various 
agencies when issuing licenses for certain commodities. These 
agencies already provide information to BXA under current law 
and executive order and, hence, the additional cost to the 
government of implementing these provisions of the bill would 
not be significant. The bill also would require the Secretary 
of State to seek international support for sanctions imposed 
under the bill and would require the Department of Defense to 
assess the impact of export controls on national security. 
Based on information from these agencies, CBO estimates that 
the additional cost to the federal government of implementing 
these provisions of the bill would not be significant.

Revenues and direct spending

    Section 110 of the bill would increase the maximum civil 
and criminal penalties for violations of export control 
regulations and statutes. CBO expects that receipts would 
increase as a result of the penalty changes, but that the 
increase would be less than $500,000 annually because the 
maximum penalties are rarely assessed, even under current law. 
Payments of criminal fines are deposited in the Crime Victims 
Fund and are spent without the need for appropriations action, 
in the following year.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. H.R. 361 would increase 
fines and penalties for violations of export controls. Any 
increase in fine collections and civil penalties would be 
classified as a change in governmental receipts and would count 
for pay-as-you-go-scoring. CBO estimates that the increase in 
fine collections would not be significant. Criminal fines would 
be deposited in the Crime Victims Fund and spent in the 
following year. The increase in direct spending would be the 
same as the amount of fines collected with a one-year lag. 
Therefore, additional direct spending would also be negligible. 
The following table summarizes the pay-as-you-go impact of this 
bill.

------------------------------------------------------------------------
                                                 1996     1997     1998 
------------------------------------------------------------------------
Change in outlays............................        0        0        0
Change in receipts...........................        0        0        0
------------------------------------------------------------------------

    8. Estimated impact on State, local, and tribal 
governments: Section 4 of Public Law 104-4 excludes from 
application of the act legislative provisions that are 
necessary for the national security. CBO has determined that 
all provisions of H.R. 361 either fit within this exclusion or 
codify existing federal requirements, and thus do not 
constitute new intergovernmental mandates.
    9. Estimated impact on the private sector: CBO has 
determined that all provisions of H.R. 361 either fit within 
the national security exclusion of Public Law 104-4 or codify 
existing federal requirements, and thus do not constitute new 
private-sector mandates.
    10. Previous CBO estimate: On April 18, 1996, CBO provided 
a cost estimate for H.R. 361, the Omnibus Export Administration 
Act of 1996, as ordered reported by the House Committee on 
International Relations on March 29, 1996. The bills are 
identical as are the cost estimates.
    11. Estimate prepared by: Federal Cost Estimate: Rachel 
Forward, Sunita D'Monte and Stephanie Weiner. State and Local 
Government Impact: Pepper Santalucia. Private Sector Impact: 
Amy Downs.
    12. Estimate approved by: Robert A. Sunshine (for Paul N. 
Van de Water, Assistant Director for Budget Analysis).

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    In compliance with clause 2(l)(3)(A) of the rule XI of the 
Rules of the House of Representatives, the Committee concludes 
that the action taken in this legislation is appropriate given 
its oversight of international trade matters.

B. SUMMARY OF FINDINGS AND RECOMMENDATIONS OF THE GOVERNMENT OPERATIONS 
                               COMMITTEE

    In compliance with clause 2(l)(3)(D) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that no oversight findings and recommendations have been 
submitted to this Committee by the Committee on Government 
Operations with respect to the provisions contained in H.R. 
361.

                    C. INFLATIONARY IMPACT STATEMENT

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the Committee states that the 
provisions of H.R. 361 are not expected to have any 
inflationary impact on the economy.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    The bill was referred to this committee for consideration 
of such provisions of the bill as fall within the jurisdiction 
of this committee pursuant to clause 1(s) of rule X of the 
Rules of the House of Representatives. The changes made to 
existing law by the amendment reported by the Committee on 
International Relations are shown in the report filed by that 
committee (Rept. 104-605, Part 1).