    [House Report 107-297]
    [From the U.S. Government Publishing Office]

    107th Congress                                            Rept. 107-297
                            HOUSE OF REPRESENTATIVES
     2d Session                                                      Part 2

    ======================================================================

                       EXPORT ADMINISTRATION ACT OF 2001

                                   __________

                                  R E P O R T

                                     OF THE

                          COMMITTEE ON ARMED SERVICES

                            HOUSE OF REPRESENTATIVES

                                       ON

                                   H.R. 2581

                                 together with

                        ADDITIONAL AND DISSENTING VIEWS

          [Including cost estimate of the Congressional Budget Office]

     March 8, 2002.--Committed to the Committee of the Whole House on the
                  State of the Union and ordered to be printed
                       HOUSE COMMITTEE ON ARMED SERVICES
                          One Hundred Seventh Congress

                          BOB STUMP, Arizona, Chairman
    DUNCAN HUNTER, California            IKE SKELTON, Missouri
    JAMES V. HANSEN, Utah                JOHN M. SPRATT, Jr., South
    CURT WELDON, Pennsylvania                Carolina
    JOEL HEFLEY, Colorado                SOLOMON P. ORTIZ, Texas
    JIM SAXTON, New Jersey               LANE EVANS, Illinois
    JOHN M. McHUGH, New York             GENE TAYLOR, Mississippi
    TERRY EVERETT, Alabama               NEIL ABERCROMBIE, Hawaii
    ROSCOE G. BARTLETT, Maryland         MARTIN T. MEEHAN, Massachusetts
    HOWARD P. ``BUCK'' McKEON,           ROBERT A. UNDERWOOD, Guam
        California                       ROD R. BLAGOJEVICH, Illinois
    J.C. WATTS, Jr., Oklahoma            SILVESTRE REYES, Texas
    MAC THORNBERRY, Texas                TOM ALLEN, Maine
    JOHN N. HOSTETTLER, Indiana          VICTOR F. SNYDER, Arkansas
    SAXBY CHAMBLISS, Georgia             JIM TURNER, Texas
    VAN HILLEARY, Tennessee              ADAM SMITH, Washington
    WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
    LINDSEY GRAHAM, South Carolina       JAMES H. MALONEY, Connecticut
    JIM RYUN, Kansas                     MIKE McINTYRE, North Carolina
    BOB RILEY, Alabama                   CIRO D. RODRIGUEZ, Texas
    JIM GIBBONS, Nevada                  CYNTHIA A. McKINNEY, Georgia
    ROBIN HAYES, North Carolina          ELLEN TAUSCHER, California
    HEATHER WILSON, New Mexico           ROBERT BRADY, Pennsylvania
    KEN CALVERT, California              ROBERT E. ANDREWS, New Jersey
    ROB SIMMONS, Connecticut             BARON P. HILL, Indiana
    ANDER CRENSHAW, Florida              MIKE THOMPSON, California
    MARK STEVEN KIRK, Illinois           JOHN B. LARSON, Connecticut
    JO ANN DAVIS, Virginia               SUSAN A. DAVIS, California
    EDWARD L. SCHROCK, Virginia          JAMES R. LANGEVIN, Rhode Island
    W. TODD AKIN, Missouri               RICK LARSEN, Washington
    RANDY FORBES, Virginia
    JEFF MILLER, Florida
    JOE WILSON, South Carolina
                        Robert S. Rangel, Staff Director
                   Erin C. Conaton, Professional Staff Member
                       Jarrod Tisdell, Research Assistant
                                C O N T E N T S

                                  ----------
                                                                       Page

    Purpose and Background...........................................     7
    Legislative History..............................................    10
    Section-by-Section Analysis......................................    10
      Section 2--Definitions.........................................    10
      Section 105--Export Control Advisory Committees................    10
      Section 201--Authority for National Security Export Controls...    11
      Section 202--National Security Control List....................    12
      Section 203--Country Tiers.....................................    12
      Section 206--Congressional Review and Report...................    12
      Section 211--Determination of Foreign Availability and Mass
        Market Status................................................    13
      Section 221--Exports of High Performance Computing Technology..    14
      Section 309--Compliance with International Obligations.........    15
      Section 310--Designation of Countries Supporting Terrorism.....    16
      Section 402--lnteragency Dispute Resolution Process............    16
      Section 506--Enforcement.......................................    16
      Title VII--Export of Satellites................................    17
      Section 807--Technical and Conforming Amendments...............    17
    Committee Position...............................................    17
    Fiscal Data......................................................    17
      Congressional Budget Office Estimate...........................    18
      Committee Cost Estimate........................................    22
    Oversight Findings...............................................    22
    Constitutional Authority Statement...............................    22
    Statement of Federal Mandates....................................    22
    Record Vote......................................................    32
    Changes in Existing Law Made by the Bill, as Reported............    24
    Additional and Dissenting Views..................................    28
      Additional Views of Robin Hayes................................    28
      Dissenting Views of Gene Taylor................................    29
      Dissenting Views of Adam Smith, Ellen O. Tauscher, and Rick
        Larsen.......................................................    30

    107th Congress                                            Rept. 107-297
                            HOUSE OF REPRESENTATIVES
     2d Session                                                      Part 2

    ======================================================================

                       EXPORT ADMINISTRATION ACT OF 2001

                                    _______

    March 8, 2002.--Committed to Committee of the Whole House on the State
                     of the Union and ordered to be printed

                                    _______

        Mr. Stump, from the Committee on Armed Services, submitted the
                                   following

                                  R E P O R T

                                 together with

                        ADDITIONAL AND DISSENTING VIEWS

                            [To accompany H.R. 2581]

          [Including cost estimate of the Congressional Budget Office]

      The Committee on Armed Services, to whom was referred the
    bill (H.R. 2581) to provide authority to control exports, and
    for other purposes, having considered the same, report
    favorably thereon with amendments and recommend that the bill
    as amended do pass.
      The amendments (stated in terms of the page and line numbers
    to the committee print document containing the text of the
    amendment as reported by the Committee on International
    Relations) are as follows:
      Page 5, strike lines 7 and 8 and insert the following:

                              (iii) the release of an item to a
                            foreign national within or outside of
                            the United States;

      Page 6, strike line 22 and all that follows through page 7,
    line 2, and insert the following:

                              (ii) Technology.--The term
                            ``technology'' means specific
                            information, communicated by any means
                            tangible or intangible, that is
                            necessary for the design, development,
                            production, or use of an item,
                            including taking the form of technical
                            data or technical assistance.

      Page 13, lines 4 and 5, strike ``by the business community on
    the export control advisory committees'' and insert ``on the
    export control advisory committees by nonproliferation and
    national security experts, and by the business community''.
      Page 16, lines 10 and 11, strike ``in consultation with the
    Secretary of Defense, the Secretary of State,'' and insert
    ``with the concurrence of the Secretary of Defense and in
    consultation with the Secretary of State,''.
      Page 16, line 16, strike ``would'' and insert ``could''.
      Page 17, strike line 17 and insert the following:

              (3) To restrict the export of items that could
            contribute to acts of international terrorism so as to
            prove detrimental to the national security of the
            United States, its allies, or countries sharing common
            strategic objectives with the United States.

      Page 21, lines 13, 17, and 23, strike ``would'' and insert
    ``could''.
      Page 22, line 1, strike ``would'' and insert ``could''.
      Page 24, insert the following after line 2:

              (4) Militarily critical technologies list.--
                      (A) Establishment.--The Secretary of Defense
                    shall establish and maintain a Militarily
                    Critical Technologies List, which shall be part
                    of the National Security Control List.
                      (B) Contents.--The Militarily Critical
                    Technologies List shall be composed of a list
                    of items that are, or could be, critical to the
                    United States military maintaining or advancing
                    its qualitative advantage and superiority
                    relative to other countries or potential
                    adversaries.
                      (C) Authority of the secretary of defense.--
                    Notwithstanding any other provision of this
                    Act, other than section 201(d)(2), the
                    Secretary of Defense shall have sole authority
                    for adding any item to or removing any item
                    from the Militarily Critical Technologies List,
                    regardless of whether that item is otherwise on
                    the Control List or otherwise controlled for
                    export under this Act.
                      (D) Licensing of militarily critical
                    technologies list items.--Items listed on the
                    Militarily Critical Technologies List shall not
                    be approved for export without the express
                    consent of the Secretary of Defense, unless the
                    President determines otherwise pursuant to
                    section 402(b).
                      (E) Annual report.--The Secretary of Defense
                    shall report annually to the Committee on Armed
                    Services of the House of Representatives and
                    the Committee on Armed Services of the Senate
                    on actions taken to carry out this paragraph.

      Page 24, line 5, insert ``as set forth in paragraphs (1),
    (2), and (3) of subsection (a)'' after ``Control List''.
      Page 27, insert the following after line 11:

              (4) Nondelegation.--The President may not delegate
            the authorities he has under subsection (a) and this
            subsection.

      Page 31, insert the following after line 10:

    SEC. 206. CONGRESSIONAL REVIEW AND REPORT.

      (a) Notification.--The Secretary shall inform the appropriate
    committees of Congress at least 30 days before any change to
    the export status of an item on the National Security Control
    List (other than the Military Critical Technologies List) is
    made.
      (b) Report.--Upon the request of either the chairman or
    ranking member of any of the committees of Congress notified of
    a proposed change under subsection (a), the Secretary shall
    promptly provide to that committee a report that contains a
    clearly stated description of the proposed change, and the
    reasons why the change is justified and necessary. The report
    shall include in its entirety the assessment of the Secretary
    of Defense under subsection (c). The report may be provided on
    a classified basis if the Secretary considers it necessary.
      (c) Assessment.--The Secretary of Defense, in consultation
    with the Secretary of State and the Director of Central
    Intelligence, shall submit to the Secretary an assessment of
    the following with respect to a proposed change on which a
    report is requested under subsection (b):
              (1) The impact that the proposed change will have on
            the national security of the United States with respect
            to the purposes of export controls set forth in section
            201(b).
              (2) The impact the proposed change will have on the
            United States Armed Forces and the intelligence
            community.
              (3) The cumulative effects that the proposed change
            could have on the national security of the United
            States, as well as the military potential,
            proliferation activities, and support for international
            terrorism by countries that may receive the exported
            items with respect to which the proposed change would
            apply.
      (d) Appropriate Committees.--For purposes of this section,
    the appropriate committees of Congress are the Committee on
    Armed Services and the Committee on International Relations of
    the House of Representatives, and the Committee on Foreign
    Relations, the Committee on Armed Services, and the Committee
    on Banking, Housing, and Urban Affairs of the Senate.

      Page 31, line 21, strike ``and determine''.
      Page 32, lines 2 and 3, strike ``and making a determination
    with respect to''.
      Page 32, line 9, insert ``, with the concurrence of the
    Secretary of Defense and the Secretary of State,'' after
    ``Secretary''.
      Page 32, line 10, insert ``in accordance with subsection
    (c)'' after ``determine''.
      Page 32, lines 14 and 15, strike

      (c) Result of Determination.--In any case in which the
    Secretary determines,

     and insert

      (c) Determination.--In any case in which the Secretary, with
    the concurrence of the Secretary of Defense and the Secretary
    of State, determines,

      Page 33, strike lines 7 through 23 and insert the following:

              (1) Foreign availability status.--An item has foreign
            availability status under this subtitle only if the
            item--
                      (A) is available to controlled countries
                    without restriction from sources outside the
                    United States, more than one of which are
                    countries that participate with the United
                    States in multilateral export control regimes
                    as members; and
                      (B) is available in significant quantity and
                    comparable quality to the item produced in the
                    United States so that the requirement of a
                    license or other authorization with respect to
                    the export of the item is or would be
                    ineffective.

      Page 33, strike line 24 and all that follows through page 34,
    line 25, and insert the following:

              (2) Mass-market status.--An item has mass-market
            status under this subtitle only if the following
            criteria are met:
                      (A) The item is produced in a large volume
                    and is available for sale to multiple potential
                    purchasers.
                      (B) The item is widely distributed through
                    normal commercial channels, such as retail
                    stores, direct marketing catalogues, electronic
                    commerce, and other channels.
                      (C) The item is conducive to shipment and
                    delivery by generally accepted commercial means
                    of transport.
                      (D) The item can be used for its normal
                    intended purpose without substantial and
                    specialized service provided by the
                    manufacturer, distributor, or other third
                    party.

      Page 35, strike lines 1 through 21.
      Page 44, insert the following after line 14:

                     Subtitle C--High Performance Computers

    SEC. 221. EXPORTS OF HIGH PERFORMANCE COMPUTING TECHNOLOGY.

      (a) Joint Process.--The Secretary, the Secretary of State,
    the Secretary of Defense, and the Secretary of Energy shall
    jointly develop and implement a process that would permit the
    United States to monitor effectively the export of high
    performance computing technology to countries of proliferation
    concern. Such a process shall include, at a minimum, the
    following:
              (1) A definition of high performance computing
            technology and any associated performance metrics.
              (2) The ability to assess the proposed export of high
            performance computing technology prior to its export
            and possibly require a license for such export to end
            users or end uses of concern.
              (3) The use of post-shipment verifications and other
            procedures to monitor end uses and end users in order
            to ensure that exports of high performance computing
            technology are not being used by countries of
            proliferation concern in a manner detrimental to the
            national security of the United States.
      (b) Report to Congress.--The President shall submit to the
    Congress, not later than 180 days after the date of the
    enactment of this Act, a report describing the process
    developed under subsection (a).
      (c) Implementation.--The process developed under subsection
    (a) shall first become effective 60 days after the end of the
    180-day period described in subsection (b).
      (d) Repeal of Certain Export Controls.--Subtitle B of title
    XII of division A of the National Defense Authorization Act for
    Fiscal Year 1998 (50 U.S.C. App. 2404 note) is repealed,
    effective 60 days after the end of the 180-day period described
    in subsection (b).
      (e) Inclusion of Items in Definition.--The definition of
    ``high performance computing technology'' under subsection
    (a)(1) shall include computer hardware, software, technical
    data, and source codes.
      (f) End Use Review.--
              (1) Notification.--Any United States person that
            exports a computer with a dollar value of more than
            $250,000, or any equivalent metric developed pursuant
            to subsection (a), shall, not less than 10 days before
            the item is exported, provide to the Secretary a 1-page
            notification described in paragraph (2) with respect to
            the export.
              (2) Content.--A notification under paragraph (1) with
            respect to a proposed export shall include the
            following:
                      (A) A detailed description of the item to be
                    exported.
                      (B) Performance measures of the item to be
                    exported.
                      (C) The quantity and dollar value of the item
                    to be exported.
                      (D) The name, address, and telephone number
                    of the end user of the exported item.
                      (E) The end uses of the exported item.
              (3) Interagency review.--Within 24 hours after
            receiving a notification under paragraph (1), the
            Secretary shall refer the notification to the Director
            of Central Intelligence (in this subsection referred to
            as the ``Director'') and the Secretary of Defense. The
            Director and the Secretary of Defense shall review the
            notification to determine whether the end user or any
            end use of the item to be exported--
                      (A) could threaten the national security of
                    the United States;
                      (B) could contribute to the proliferation of
                    weapons of mass destruction or the means to
                    deliver them; or
                      (C) could assist foreign terrorist
                    organizations in performing acts of
                    international terrorism.
              (4) Determination.--Within 7 calendar days after
            receiving a notification under paragraph (3), the
            Director and the Secretary of Defense shall inform the
            Secretary of any determinations they made under
            paragraph (3) with the respect to the notification. If
            the Director or the Secretary of Defense determines
            that a proposed export meets any of the criteria set
            forth in subparagraphs (A), (B), and (C) of paragraph
            (3), the Secretary shall immediately so notify the
            United States person exporting the item.
              (5) Report.--The Secretary, with the concurrence of
            the Secretary of Defense and the Director, shall report
            annually to the Congress on the implementation of this
            subsection. The report shall contain the number and
            type of determinations made by the Director and the
            Secretary of Defense under paragraph (3).
              (6) Effective date.--This subsection shall take
            effect 90 days after the date of the enactment of this
            Act.

      Page 57, lines 15 and 16, strike ``and except as provided in
    section 304, the President may'' and insert ``, the President
    shall''.
      Page 58, line 7, strike ``that''.
      Page 58, line 8, insert ``that'' after ``(1)''.
      Page 58, line 11, insert ``in consultation with the Secretary
    of Defense, that'' after ``(2)''.
      Page 84, line 22, strike ``chairperson'' and insert
    ``committee''.
      Page 85, line 2, strike the period and insert the following:
    ``, except that any decision of the committee is not valid
    unless it is unanimous. If such a unanimous decision is not
    reached, the license at issue shall be denied, unless the
    matter is appealed under paragraph (3).''.
      Page 85, strike lines 7 through 13 and insert the following:

              (3) Further resolution.--The President shall
            establish additional levels for review or appeal of any
            matter that cannot be resolved pursuant to the process
            described in paragraph (1). Each such review shall--
                      (A) provide for decision-making based on the
                    concurrence of the participating departments
                    and agencies;
                      (B) provide that a department or agency that
                    fails to take a timely position, citing the
                    specific statutory and regulatory bases for a
                    position, shall be deemed to have no objection
                    to the pending decision;
                      (C) provide that any decision of an
                    interagency committee established under
                    paragraph (1) or interagency dispute resolution
                    process established under this paragraph may be
                    escalated to the next higher level of review at
                    the request of an official appointed by the
                    President, by and with the advice of the
                    Senate, or an officer properly acting in such
                    capacity, of a department or agency that
                    participated in the interagency committee or
                    dispute resolution process that made the
                    decision; and
                      (D) ensure that matters are resolved or
                    referred to the President not later than 90
                    days after the date the completed license
                    application is referred by the Secretary.
            If concurrence of the participating departments and
            agencies is not reached at a level of review
            established under this paragraph, the license at issue
            shall be denied unless the matter is escalated to the
            next higher level of review or the President determines
            otherwise.

      Page 145, line 4, strike ``repeatedly''.
      Strike title VII.
      Strike section 807(k).
      Redesignate title VIII as title VII and redesignate the
    sections therein accordingly.
      Amend the table of contents accordingly.

                             Purpose and Background

        The purpose of H.R. 2581, the Export Administration Act
    (EAA) of 2001, as amended, is to establish a modern,
    comprehensive framework for the control of U.S. exports of
    dual-use items (those goods, technologies, and services with
    both military and commercial application) that protects and
    advances U.S. national security without unnecessarily
    restricting free trade and international commerce.
        The last comprehensive legislative effort to fashion a
    dual-use export control system was the Export Administration
    Act of 1979 (Public Law 96-72), which expired in 1994. Since
    then, and with the exception of brief reauthorizations, the
    export control process has been implemented through emergency
    executive order. As such, the committee recognizes the need not
    only to pass a new EAA, but to update current law where
    appropriate so U.S. export controls address the new national
    security needs of the United States, the economic realities of
    globalization, and the changed international security
    environment of the 21st Century, for the next several years.
        The committee considered H.R. 2581, as reported by the
    Committee on International Relations; this bill is the House
    alternative to S. 149, which passed the Senate on September 6,
    2001. In the course of this consideration, the committee held a
    two-panel hearing that included witnesses from the Departments
    of Defense, Commerce, and State, and from industry, the
    national security community, and the General Accounting Office
    (GAO). This hearing highlighted significant problems with H.R.
    2581 as reported, particularly regarding the role of the
    Secretary of Defense in the export control process, the
    shortcomings of national security safeguards within the
    proposed system, and the inadequacies of executive branch
    implementation of current law and Congressional intent, among
    other things.
        Based on that hearing, the committee decided to consider
    and amend H.R. 2581 as reported. The bill as amended includes
    provisions to restore and strengthen the role of the Secretary
    of Defense in the export control process and to impose
    additional safeguards to ensure that sensitive dual-use items
    are not transferred to potential adversaries, proliferators of
    weapons of mass destruction, or terrorists, where they could
    prove detrimental to U.S. national security. The amended bill
    also reestablishes important elements of the EAA of 1979 that
    were not included in either S. 149 and H.R. 2581 as reported.
    Incorporation of these provisions is designed to ensure the
    proper involvement of the Secretary of Defense, commensurate
    with his duties and responsibilities, in the export licensing
    process.
        The committee amendment would strengthen the role of the
    Secretary of Defense in several key ways. First, it would
    reestablish the Militarily Critical Technologies List (MCTL)--a
    list of technologies most critical to the maintenance and
    advancement of the U.S. military's qualitative superiority over
    other countries and potential adversaries. The Secretary of
    Defense would have sole authority over the creation and
    maintenance of this list, and would have veto authority over
    any licenses involving an item on this list. Only the
    President, by using the dispute resolution process specified in
    Section 402 of the bill, could overrule the Secretary of
    Defense's decisions with regard to the MCTL.
        Second, the committee amendment would not allow the
    Secretary of Commerce to make export control decisions that
    impact U.S. national security, unless he has the concurrence of
    the Secretary of Defense. The basic statement of authority for
    the Secretary of Commerce would be altered to require the
    Secretary of Defense's, as well as the Secretary of State's,
    concurrence with regard to the regulation of national security
    export controls. Further, the committee amendment would require
    unanimity in the dispute resolution process among participating
    departments and agencies before a license could be approved.
    This change would preserve the Secretary of Defense's authority
    to object to a license on national security grounds, and is
    consistent with the bill's underlying presumption of denial.
        Third, the committee amendment would require the Secretary
    of Commerce to seek the concurrence of the Secretaries of
    Defense and State when making foreign availability and mass
    market determinations as the basis for decontrol of dual-use
    items. In addition, with regard to ``foreign availability,''
    the bill would restore the standards codified in the 1979 EAA,
    which are well-understood by the implementing bureaucracy and
    have served the nation's security well over the last twenty
    plus years. These standards would improve the definition of
    foreign availability contained in S. 149 and HR 2581, which
    could otherwise lead to the decontrol of scores of items based
    on a relaxed standard of foreign availability, quantity, and
    quality. The committee amendment would also require that strict
    criteria be met (rather than merely considered as under the
    base bill) before a determination of foreign availability or
    mass market status is made.
        The committee amendment would make two major changes to
    strengthen national security export controls. First, it would
    broaden the number of items available for control to encompass
    those that ``could'' contribute to the military capabilities,
    proliferation activities, or terrorism potential of a country,
    thus giving the Secretary of Defense more say over items for
    control. Second, the committee amendment would close a loophole
    in the base text by requiring the President to impose controls,
    regardless of a foreign availability or mass market finding, if
    the item in question is controlled by a multilateral export
    control regime or international agreement to which the United
    States is a party. This change would help ensure that the
    United States maintains its international responsibilities and
    that sensitive dual-use items remains controlled.
        The committee amendment would also change the underlying
    bill with regard to two particular commodities. In terms of
    satellite exports, the amendment strikes Title VII of the bill
    as reported by the International Relations Committee. That
    version would have overturned provisions of the Strom Thurmond
    National Defense Authorization Act for Fiscal Year 1999 (Public
    Law 105-261) which moved satellite exports from the primary
    jurisdiction of the Commerce Department to the State
    Department. The committee amendment would retain the State
    Department's authority over satellite exports, as the committee
    feels this is the most appropriate process to ensure the
    national security implications of these items are fully
    considered in decisions to export.
        On the subject of high-performance computer exports, the
    committee was concerned about the action taken in the
    underlying bill to strike provisions of the National Defense
    Authorization Act for Fiscal Year 1998 (Public Law 105-85).
    That Act requires notification of departments involved in the
    licensing process before computers above a certain performance
    threshold could be exported to nations of proliferation
    concern. The Act also includes provisions allowing the
    President to adjust that performance thresholdfollowing
    Congressional notification, and requires the Secretary of Commerce to
    conduct post-shipment verification of high-performance computer
    exports.
        The committee amendment would require the Secretaries of
    Commerce, Defense, State, and Energy to jointly develop and
    implement a process for monitoring high-performance computer
    exports, including a new definition and metric(s) for high-
    performance computers; an ability to assess proposed exports of
    such items in advance; and post-shipment verification
    procedures to ensure that high-performance computing technology
    is not diverted to an improper end-use or end-user. Sixty days
    after the President submits a report to Congress on this new
    process, the provisions of the 1998 defense act would be
    repealed.
        Finally, the committee amendment would require exporters to
    provide a one-page notification to the Department of Commerce
    10 days prior to exporting any computer with a dollar value
    greater than $250,000. The Secretary of Commerce would then
    refer this notification to the Secretary of Defense and the
    Director of Central Intelligence, who would then determine
    whether the end use or end user of the item could threaten U.S.
    national security, contribute to the proliferation of weapons
    of mass destruction, or assist foreign terrorist organizations.
    If a positive determination is made, the exporter would be
    immediately notified, prior to shipment, by the Secretary of
    Commerce.

                              Legislative History

        H.R. 2581 was introduced on July 20, 2001 and was referred
    to the Committee on International Relations and the Committee
    on Rules. The bill was reported (amended) November 16, 2001 by
    the Committee on International Relations (H. Rept. 107-297,
    Part I). The bill was also referred jointly and sequentially to
    the Committee on Agriculture, the Committee on Armed Services,
    the Committee on Energy and Commerce, the Committee on the
    Judiciary, the Committee on Ways and Means, and the Committee
    on Intelligence (Permanent Select) on November 16, 2001.
        On March 6, 2002 the Committee on Armed Services held a
    mark-up session to consider H.R. 2581 as amended by the
    Committee on International Relations. The committee adopted the
    amended bill with an amendment and reported the same favorably
    by a rollcall vote. The record vote can be found at the end of
    this report.

                          Section-by-Section Analysis

        The following is a section-by-section analysis of those
    sections of H.R. 2581 amended by the Armed Services Committee.

                             Section 2--Definitions

        Changes made to this section of the underlying bill would
    strengthen the definitions of ``technology'' and ``export.''
    The amended definition of ``technology'' would broaden the term
    to cover both tangible and intangible transfers of information,
    including but not limited to, information communicated by word
    of mouth; by fax, e-mail, or other electronic means; through
    sketches, letters, and memos; or made available for visual
    inspection.
        The amended definition of ``export'' would better encompass
    two areas to strengthen the control and enforcement of ``deemed
    exports.'' First, the release of technology to a foreign
    national in the United States would include the release of any
    ``item''--a broader term that includes the previously-covered
    technology, as well as goods and services--to a foreign
    national in the United States. Second, the release of items to
    foreign nationals would be expanded to include the release to a
    foreign national ``within or outside of'' the United States.
    According to a senior Department of Commerce official during
    testimony before the committee, this was a definitional
    shortcoming requiring correction to prevent the release of
    sensitive dual-use items outside of the United States.

                Section 105--Export Control Advisory Committees

        Changes made to this section of the underlying bill would
    permit the participation of nonproliferation and national
    security experts in any export control advisory committees
    established by the Secretary of Commerce pursuant to this
    section. The underlying bill made no allowances for these types
    of experts, but permitted the widest possible participation by
    the business community. By including nonproliferation and
    national security experts on the Secretary's advisory
    committees, the committee intends that he receive more balanced
    information and advice when faced with weighing U.S. national
    security and economic interests regarding export controls.

          Section 201--AUTHORITY FOR NATIONAL SECURITY EXPORT CONTROLS

        The committee amendment includes several changes to this
    section. First, the amendment would modify the overall
    authority for imposing national security export controls. The
    Secretary of Commerce's authority would no longer be exercised
    ``in consultation with'' the Secretary of Defense; the revised
    provision would now require the Secretary of Defense's
    concurrence. This change is one of several made by the
    committee to address significant concerns that the Secretary of
    Defense have a prominent enough role in the export control
    process to adequately safeguard national security.
        Second, the committee amendment would also change the
    standard for the first purpose of national security controls
    which relates to the impact of a proposed export on the
    military potential of countries so as to prove detrimental to
    the national security of the United States, its allies, or
    countries sharing common strategic objectives with the United
    States.
        While both ``could'' and ``would'' are subjective
    standards, the committee's intent is to safeguard U.S. national
    security by anticipating unforeseeable threats and uses of
    dual-use items. To accomplish this, the standard would be
    raised from one where a direct, causal link to a threat is
    probable, to one where such a link is possible. The committee
    intends that this change require those implementing the export
    control system to at least consider a broader category of items
    for control. It is not intended to have the effect that all
    licenses considered under this standard would necessarily be
    denied; ratherthe goal would be to ensure closer scrutiny of
    the impact of potential end-uses, and the possible intentions of their
    end-users, on U.S. national security.
        Third, the committee amendment would clarify a provision
    from the underlying bill. As reported by the International
    Relations Committee, H.R. 2581 expressed the third purpose of
    national security export controls as ``to deter acts of
    international terrorism.'' Because the deterrence of terrorism
    is also a purpose of foreign policy controls in Title III of
    both versions of the bill, the committee intended to clarify
    the difference between the two definitions. Foreign policy
    controls could be imposed on items to deter or punish a country
    or entity for committing or preparing to commit terrorist acts.
    National security controls, under this new definition, would
    ``restrict the export of items that could contribute to acts of
    terrorism so as to prove detrimental to the national security
    of the United States, its allies, or countries sharing common
    strategic objectives with the United States.'' The use of the
    term ``could'' is intended to capture a broader range of items
    in the same way as its use was explained in the preceding
    paragraph.
        Finally, a similar change was made to the underlying bill
    to change ``would'' to ``could'' for the risk factors listed in
    paragraph (e) of this section--presumption of denial of certain
    licenses.

                  SECTION 202--NATIONAL SECURITY CONTROL LIST

        The committee amendment would change this section to
    include the requirement to preserve the current Military
    Critical Technologies List (MCTL), created under the Export
    Administration Act of 1979, but as a subset of the broader
    National Security Control List (NSCL). Neither the underlying
    bill nor S. 149 included such a provision. Items listed on the
    MCTL would not be able to be licensed for export without the
    approval of the Secretary of Defense, and only the Secretary of
    Defense would be authorized to add or remove items from the
    MCTL. The President, however--using the authority given him in
    the dispute resolution process of section 402(b)--would retain
    the ability to overrule a decision of the Secretary of Defense.
    The provision would also require an annual report by the
    Secretary of Defense to the Committees on Armed Services of the
    Senate and the House of Representations on implementation of
    this provision. Finally, the committee amendment would clarify
    that the risk assessment required in subsection (b) would only
    apply to the NSCL, not the MCTL.
        With this modification, the committee intends to further
    strengthen the role of the Secretary of Defense. The provision
    would give the Secretary of Defense sole authority to establish
    and maintain a list of dual-use technologies that he determines
    are critical to the United States maintaining its military
    superiority and qualitative advantage relative to other
    countries or potential adversaries. Examples of critical items
    the committee expects the Secretary of Defense would place on
    the Military Critical Technologies List include, but are not
    limited to, stealth technology and jet engine ``hot section''
    technologies.
        An important distinction to be made between S.149 and the
    underlying House bill on the one hand, and the 1979 EAA on the
    other, is that the National Security Control List established
    by the Senate version would focus controls primarily on the
    current threats to U.S. national security, such as the
    proliferation of weapons of mass destruction and terrorism.
    Only the provision contained in the committee amendment would
    provide an explicit provision focusing controls on preserving
    and advancing U.S. military capabilities as intended by the
    establishment of the Militarily Critical Technologies List.

                           SECTION 203--COUNTRY TIERS

        Under this section, as amended, the President would not be
    able to delegate his authority to establish and maintain a
    country tiering and assignment system. The assessments to be
    used by the President in assigning countries to tiers would all
    relate to the potential risks such countries may pose to U.S.
    national security. The committee is concerned that, if the
    President can delegate this authority, he may do so to an
    agency without particular national security expertise. The
    provision to prevent that delegation aims to ensure that
    national security concerns remain primary in the tiering
    system.

                  SECTION 206--CONGRESSIONAL REVIEW AND REPORT

        The committee amendment would establish a new provision to
    address what the General Accounting Office (GAO) has described
    as a longstanding problem: executive branch failure to
    implement policies and procedures in the export control process
    as Congress intended. To respond to this concern, the provision
    would require the Secretary of Commerce to notify the Congress
    at least thirty days prior to a change being made to the export
    status of an item on the National Security Control List. The
    provision would also require the Secretary of Defense, in
    consultation with the Secretary of State and the Director of
    Central Intelligence, to conduct an assessment of the national
    security impact of making such a change to the control list.
        Under this provision, the chairman or ranking member of the
    House Armed Services Committee (and other committees) would
    have the right to require a detailed report by the Secretary of
    Commerce on the proposed change and the justifications for it,
    along with the Secretary of Defense's national security
    assessment, before the change is implemented.
        In addition to mandating a notification and report
    requirement for the Congress, the committee intends this
    provision to require the executive branch to do its homework
    and have a full understanding of the national security impact
    of changes in the export status of the item before it is
    decontrolled, and to be able to justify this decision to the
    Congress. Given reports by the GAO and other national security
    experts that past decontrol decisions had limited analytical
    bases, the committee fully expects that the national security
    impact assessments required under this provision be
    comprehensive, rigorous, and analytically based, and that the
    scope and methodology employed be scientifically sound.

      SECTION 211--DETERMINATION OF FOREIGN AVAILABILITY AND MASS MARKET
                                     STATUS

        The committee amendment would make several changes to this
    section. First, it would clarify that while the Secretary of
    Commerce would be responsible for reviewing the foreign
    availability and mass market status of controlled items,
    determinations madeunder this section would require the
    concurrence of the Secretaries of Defense and State.
        Second, the amendment would restore the definition of
    foreign availability from the 1979 EAA which provides for
    decontrol if an item of comparable quality is available in
    sufficient quantities to controlled countries without
    restriction from foreign suppliers. However, the amended
    provision would make two changes to the 1979 standard--that of
    ``significant'' rather than ``sufficient'' quantity and the
    requirement that at least one of the foreign suppliers be
    participants with the United States in a multilateral control
    regime. This change was made due to the committee's concern
    that the definition contained in S. 149 and H.R. 2581 had been
    dramatically altered to allow for the possible decontrol of
    scores of items based on a relaxed standard of foreign
    availability, quantity, and quality. The committee believes
    that if items of comparable quality to controlled U.S. items
    are available without restriction in significant quantities
    from sources outside of the United States, then the U.S.-origin
    items should be strong candidates for decontrol under the
    ``foreign availability'' provision.
        Finally, the provision would require that the criteria for
    foreign availability or mass market status be met before
    decontrol; S. 149 and H.R. 2581 as reported by the
    International Relations Committee would have allowed for
    decontrol after only considering such criteria.
        The committee intends the change requiring Secretary of
    Defense concurrence to address a key finding of the GAO--namely
    that in the past, the Department of Commerce had unilaterally
    decontrolled items under the ``foreign availability'' exemption
    category based on little or no analysis. It is the intent of
    the committee that the Secretary of Defense and Secretary of
    State have an equal voice and role in making these
    determinations given the serious national security
    implications, and the expectation of the committee that
    ``foreign availability'' and ``mass market'' assessments will
    be comprehensive, rigorous, and scientifically sound.
        An exemption for ``mass marketed'' items is a new concept
    introduced by the authors of the Senate bill; it is the
    ``domestic'' counterpart to foreign availability. In S. 149 and
    H.R. 2581, the Secretary of Commerce can make a ``mass market''
    determination--which would result in the automatic decontrol of
    the item--after considering a set of general criteria. This
    approach raised concern that U.S. companies could simply mass
    produce and mass market their controlled items off of the
    Commerce Control List, even when there was no evidence that
    these sensitive items were acquired by countries of concern.
    Given the lack of strict standards, the unusual amount of
    discretion given to the Secretary, and the serious national
    security implications of decontrol decisions, the committee
    decided that it was in the best interests of the nation to
    transform these ``considerations'' into requirements.

         SECTION 221--EXPORTS OF HIGH PERFORMANCE COMPUTING TECHNOLOGY

        The committee amendment would add a new section
    specifically addressing high-performance computing technology.
    This provision would require the Secretaries of Commerce,
    Defense, State, and Energy, within 180 days of the enactment of
    this Act, to jointly develop and implement a process that would
    permit the United States to effectively monitor the export of
    this technology. At a minimum, the process would have to
    include a definition of high performance computing technology
    and any associated performance metric(s); an ability to assess
    proposed exports in advance and possibly require a license for
    them for end uses or to end users of concern; and the use of
    post-shipment verifications and other procedures to monitor end
    uses and end users. Sixty days after the President reports to
    Congress on this new process, provisions of the 1998 National
    Defense Authorization Act requiring notification of computers
    exports above a certain performance threshold to countries of
    proliferation concern, reporting to Congress before adjustments
    to that threshold are made, and post-shipment verifications
    would be repealed.
        In addition, the committee amendment would provide a
    mechanism for exporters to determine whether an end use or end
    user of a proposed export is of national security concern. Not
    less than 10 days before a proposed shipment of a computer with
    a dollar value of $250,000--and regardless of whether the
    computer is subject to a license--a U.S. exporter would have to
    provide the Secretary of Commerce with a one-page notification
    regarding the technology, end use, and end user of the item. In
    turn, the Secretary of Commerce would notify the Secretary of
    Defense and the Director of Central Intelligence (DCI) of the
    proposed export. Within seven days, the Secretary of Defense
    and DCI would then determine and notify the Secretary of
    Commerce as to whether the end use or end user could threaten
    U.S. national security, contribute to the proliferation of
    weapons of mass destruction, or assist foreign terrorist
    organizations in undertaking terrorist acts. If such a
    determination were made, the Secretary of Commerce would
    immediately notify the exporter in question. Finally, the
    provision would require the Secretary of Commerce, with the
    concurrence of the Secretary of Defense and the Director of
    Central Intelligence, to report annually to Congress on
    determinations made under this section.
        The committee intends these provisions to respond to the
    concerns of the Administration and industry while protecting
    U.S. national security. It recognizes the limited utility of
    the existing computing performance measure, millions of
    theoretical operations per second (MTOPS), and responds to
    Administration and industry complaints about its use. It also
    responds to the view of industry raised during a hearing on
    this subject that exporters are willing to self-police their
    exports if they can obtain better information about end uses
    and end users of concern.
        Yet, the committee also intends these provisions to address
    the view of a senior Defense Department official that the
    government should not ``decontrol high-end computers, either
    from a hardware perspective or a software perspective.'' The
    committee seeks to give the Administration the flexibility it
    has sought in establishing a new definition and process for
    controlling high-performance computing technology. It also
    addresses the real problem raised by the GAO in its testimony
    before the committee, that there is a need for continued
    Congressional oversight in this area, given the outdated MTOPS
    metric and the lack of adequate national security analyses in
    decisions about high-performance computing.

             SECTION 309--COMPLIANCE WITH INTERNATIONAL OBLIGATIONS

        The committee amendment would make two changes to this
    section. First, it would exempt controls imposed to comply with
    a multilateral export control regime or with an international
    obligation from the reporting requirements of section 304.
    Second, it would close a loophole in the underlying bill by
    requiring the President to impose controls, regardless of a
    foreign availability or mass market finding, if the item in
    question is controlled by a multilateral export control regime
    or international agreement to which the United States is a
    party. This change would help ensure that the United States
    maintains its international responsibilities and that sensitive
    dual-use items remain controlled. The committee believes that,
    with regard to controlling dual-use exports for national
    security purposes, the United States must play a leadership
    role internationally by maintaining high standards and opposing
    the decontrol of sensitive items covered by international
    agreement due to pressure from exporters.

           SECTION 310--DESIGNATION OF COUNTRIES SUPPORTING TERRORISM

        The committee amendment would modify this section to
    require the Secretary of State to consult with the Secretary of
    Defense when determining whether a license is required for
    items being exported to a country that has repeatedly provided
    support for acts of international terrorism. The role of the
    Secretary of Defense would be to offer his assessment as to
    whether the item could make a significant contribution to the
    military potential of such country, including its ability to
    support acts of international terrorism. This change would
    address a weakness in the corresponding section of the
    underlying bill that was highlighted by the GAO. The GAO
    testified before the committee that ``without the Department of
    Defense's input into these important military assessments,
    Congress might receive notifications that do not fully reflect
    the potential military impact of these exports.''

              SECTION 402--INTERAGENCY DISPUTE RESOLUTION PROCESS

        The committee amendment would modify this section to
    require unanimity among participating departments and agencies
    at the first level of dispute resolution before a license could
    be approved, thus preserving the Secretary of Defense's ability
    to object to a license on national security grounds.
    Additionally, failure to reach concurrence would result in
    license denial, which is consistent with the presumption of
    denial that is the foundation of H.R. 2581, as reported by the
    International Relations Committee. The amended section would
    also restore key elements of S. 149 regarding further
    resolution of conflicts if the initial interagency committee
    cannot reach a unanimous decision, thus streamlining the
    decision-making process so as to allow for timely
    determinations of export decisions. At each level, however,
    failure to reach concurrence would result in license denial,
    unless appealed to the next higher level or the President
    determines otherwise.
        The committee believes the interagency dispute resolution
    process proposed under both S. 149 and H.R. 2581 would give too
    much authority to the Secretary of Commerce, would skew
    decisions toward the interests of the business community, and
    would fail to give the Secretary of Defense a role in the
    process commensurate with his duties, responsibilities, and
    expertise. For example, under S. 149 and H.R. 2581, license
    disputes would be resolved at the first level through the
    unilateral decision of a chairperson selected by the Secretary
    of Commerce. Appeals would be allowed under these bills, but
    the process for decision-making at these higher levels of
    appeal, at least in S. 149, would be based on majority vote.
    The committee is concerned that the Secretary of Defense could
    easily be outvoted during a license dispute--and the license
    approved--even though the Secretary of Defense has unique
    expertise and insight with regard to national security, and the
    item in question had clear national security implications.

                            SECTION 506--ENFORCEMENT

        The committee amendment would modify this section to
    require the Secretary of Commerce, if a country has obstructed
    or denied post-shipment verifications (PSVs), to deny a license
    for the export of those items (or any substantially identical
    or directly competitive items or class of items) to all end
    users in that country until such post-shipment verification is
    allowed. The standard used in the underlying bill would have
    only required the Secretary of Commerce to take such action if
    a country had repeatedly obstructed or denied post-shipment
    verification.
        Given that the GAO raised the issue of post-shipment
    verification enforcement as a major weakness in the U.S. export
    control system, and cited the fact that the People's Republic
    of China has obstructed U.S. post-shipment verification efforts
    for years the committee believes that requiring license denial
    for repeated obstruction is too subjective (if not too lenient)
    a standard. As amended, the Secretary would be required to deny
    licenses under this section if a country obstructs any U.S.
    enforcement efforts.

                        TITLE VII--EXPORT OF SATELLITES

        The committee amendment would modify the bill to retain the
    current law provisions on satellite exports of the Strom
    Thurmond National Defense Authorization Act for Fiscal Year
    1999 (Public Law 105-261).
        H.R. 2581 as reported by the International Relations
    Committee would have overturned these provisions and returned
    jurisdiction for most satellite and related exports to the
    Department of Commerce from the Department of State. The
    committee did not find sufficient evidence of problems with
    this arrangement to justify changing the prevailing law. In
    testimony before the committee, the Department of Defense noted
    its support on this issue by endorsing S. 149, which retained
    existing law. In addition, significant concerns remain about
    the national security implications of satellite exports. For
    these reasons, the committee recommends retaining the State
    Department's authority over these items.

                SECTION 807--TECHNICAL AND CONFORMING AMENDMENTS

        The committee amendment would strike subsection (k) of this
    section which would repeal provisions of the National Defense
    Authorization Act for Fiscal Year 1998 (Public Law 105-85)
    regarding high performance computing technology. As explained
    inthe new section 221, such repeal would be conditional upon
    required Administration actions and reports.

                               Committee Position

        On March 6, 2002, the Committee on Armed Services ordered
    H.R. 2581, as amended, reported to the House with a favorable
    recommendation by a vote of 44-6, a quorum being present.

                                  Fiscal Data

        Pursuant to clause 3(d)(2)(A) of rule XIII of the Rules of
    the House of Representatives, the committee attempted to
    ascertain annual outlays resulting from the bill during fiscal
    year 2003 and the four following fiscal years. The results of
    such efforts are reflected in the cost estimate prepared by the
    Director of the Congressional Budget Office under section 402
    of the Congressional Budget Act of 1974, which is included in
    this report pursuant to clause 3(c)(3) of rule XIII of the
    Rules of the House.

                      Congressional Budget Office Estimate

        In compliance with clause 3(c)(3) of rule XIII of the Rules
    of the House of Representatives, the cost estimate prepared by
    the Congressional Budget Office and submitted pursuant to
    section 402(a) of the Congressional Budget Act of 1974 is as
    follows:

                                                         March 8, 2002.
    Hon. Bob Stump,
    Chairman, Committee on Armed Services,
    House of Representatives, Washington, DC.
        Dear Mr. Chairman: The Congressional Budget Office has
    prepared the enclosed cost estimate for H.R. 2581, the Export
    Administration Act of 2001.
        If you wish further details on this estimate, we will be
    pleased to provide them. The CBO staff contacts are Ken Johnson
    (for federal costs), Angela Seitz (for the state and local
    impact), and Paige Piper/Bach (for the private-sector impact).
                Sincerely,
                                              Barry B. Anderson
                                        (For Dan L. Crippen, Director).

    Export Administration Act of 2001

        H.R. 2581 would replace the expired Export Administration
    Act of 1979 (EAA) and would update the system of export
    controls and penalties for national security and foreign policy
    purposes. Since the expiration of the EAA in August 2001, 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 administers export controls. This bill
    would authorize such activities through 2005.
        CBO estimates that implementing H.R. 2581 would cost about
    $310 million over the 2002-2007 period, assuming appropriation
    of the necessary funds. Because the bill would increase
    criminal and civil penalties for violations of export controls,
    CBO estimates governmental receipts would increase by $3
    million in 2005 and $7 million a year thereafter. The increase
    in criminal penalties would cause direct spending from the
    Crime Victims Fund to rise by about $1 million in 2006 and $3
    million in subsequent years. Because the bill would affect
    direct spending and receipts, pay-as-you-go procedures would
    apply.
        H.R. 2581 contains no intergovernmental mandates as defined
    in the Unfunded Mandates Reform Act (UMRA) and would impose no
    costs on state, local, or tribal governments.
        The bill would impose private-sector mandates as defined by
    UMRA on certain exporters. CBO estimates that the total direct
    cost of those mandates would fall below the annual threshold
    established by UMRA for private-sector mandates ($115 million
    in 2002, adjusted annually for inflation).
        Estimated cost to the Federal Government: The estimated
    budgetary impact of the bill is shown in the following table.
    The costs of this legislation fall within budget functions 370
    (commerce and housing credit), 050 (national defense), and 150
    (international affairs).

    ----------------------------------------------------------------------------------------------------------------
                                                                         By fiscal year, in millions of dollars--
                                                                     -----------------------------------------------
                                                                       2002    2003    2004    2005    2006    2007
    ----------------------------------------------------------------------------------------------------------------
                                         CHANGES IN REVENUES AND DIRECT SPENDING

    Estimated Revenues..............................................       0       0       0       3       7       7
    Estimated Budget Authority......................................       0       0       0       0       1       3
    Estimated Outlays...............................................       0       0       0       0       1       3

                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

    EAA Spending by the Bureau of Export Administration:
        Estimated Authorization Level...............................      39      86      87      90       0       0
        Estimated Outlays...........................................      11      98      85      90      13       5
    EAA Spending by the Departments of State and Defense:
        Estimated Authorization Level...............................       2       2       2       2       0       0
        Estimated Outlays...........................................       1       3       2       2       0       0
    Total Proposed Changes:
        Estimated Authorization Level...............................      41      88      89      92       0       0
        Estimated Outlays...........................................      12     101      87      92      13       5
    ----------------------------------------------------------------------------------------------------------------

        Basis of estimate: H.R. 2581 would authorize the BXA to
    control the export of certain items from the United States for
    national security or foreign policy purposes. Generally, export
    controls would not apply to products that are widely
    distributed through normal commercial channels. For this
    estimate, CBO assumes that H.R. 2581 will be enacted in the
    spring of 2002. When fully phased in, CBO estimates that
    provisions of the Export Administration Act of 2001 would
    increase revenues by about $7 million a year beginning in
    fiscal year 2006 and direct spending by about $3 million a year
    beginning in 2007. In addition, we estimate that implementing
    the bill would cost $310 million over the 2002-2007 period,
    assuming appropriation of the necessary amounts.
                Revenues
        Since the expiration of the Export Administration Act of
    1979 in August 2001, criminal and civil penalties for violating
    export control laws have been collected under the International
    Economic Emergency Powers Act. H.R. 2581 would significantly
    raise the maximum criminal fines that could be imposed for
    violations of export controls. The bill would set the maximum
    criminal fines at 10 times the value of the exports involved,
    or $5 million for corporations and $1 million for individuals,
    whichever is greater. Under the bill, civil penalties of up to
    $500,000 could also be imposed for violations of the law. On
    average, about three years elapse between the initial
    investigation of violations of export control law and the
    collection of a penalty. Because the amount of a fine is based
    on the law in force at the start of an investigation, CBO does
    not expect penalties under the new law to be collected until
    fiscal year 2005. Based on information from the Department of
    Commerce, CBO estimates that enacting the bill would increase
    receipts from civil penalties by about $4 million a year and
    receipts from criminal penalties by about $3 million a year
    beginning in 2006.
                Direct spending
        Collections of criminal fines are recorded in the budget as
    governmental receipts (i.e., revenues), which are deposited in
    the Crime Victims Fund and spent in subsequent years. CBO
    estimates that the additional direct spending resulting from
    the increase in criminal penalties would be about $3 million a
    year beginning in 2007, because spending from this fund
    generally lags behind the collection of criminal fines by about
    a year.
                Spending subject to appropriation
        H.R. 2581 would authorize the appropriation of between $72
    million and $76 million a year for the BXA to implement the
    provisions of the bill during the 2002-2005 period. Also, the
    bill would authorize additional appropriations of at least $3.5
    million annually to hire 20 employees to establish a best
    practices program for exporters, at least $4.5 million annually
    to hire 10 overseas investigators, $5 million to enhance the
    BXA's program to verify the end use of controlled exports, at
    least $5 million to procure a computer system for export
    licensing and enforcement, and $4 million annually to hire and
    train additional license review officers.
        CBO estimates that the BXA has already received an
    appropriation of $55 million for fiscal year 2002 to implement
    the Export Administration Act. The bill would authorize a total
    of $72 million for this year. This estimate assumes the
    additional $17 million would be provided in a supplemental
    appropriation this spring. Also, CBO estimates that
    implementing a best practices program for exporters would cost
    about $4 million a year, stationing overseas investigators
    would cost about $5 million a year, and procuring the computer
    system would cost about $2 million in 2002 and $3 million in
    2003. Any such spending would be subject to appropriation of
    the necessary amounts. Based on BXA's historical spending
    patterns, CBO estimates that implementing the bill would cost
    the agency about $302 million over the 2002-2007 period. This
    estimate assumes that funds are appropriated for the BXA
    through 2005, as provided in section 506 of the bill.
        H.R. 2581 also would require the Departments of State and
    Defense to review the classification of exports under the new
    rules established by the bill, and to make any recommendations
    concerning these rules to the Department of Commerce. Based on
    information from the Departments of State and Defense, CBO
    assumes that those two agencies would need to hire additional
    staff to conduct these reviews. CBO estimates that implementing
    these provisions would cost about $1 million in 2002 and $8
    million over the 2002-2005 period.
        Pay-as-you-go considerations: The Balanced Budget and
    Emergency Deficit Control Act establishes pay-as-you-go
    procedures for legislation affecting direct spending or
    receipts. The net changes in outlays and governmental receipts
    that are subject to pay-as-you-go procedures are shown in the
    following table. For the purposes of enforcing pay-as-you-go
    procedures, only the effects through 2006 are counted.

    ----------------------------------------------------------------------------------------------------------------
                                                           By fiscal year, in millions of dollars--
                                        ----------------------------------------------------------------------------
                                          2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012
    ----------------------------------------------------------------------------------------------------------------
    Changes in outlays.................      0      0      0      0      1      3      3      3      3      3      3
    Changes in receipts................      0      0      0      3      7      7      7      7      7      7      7
    ----------------------------------------------------------------------------------------------------------------

        Estimated impact on state, local, and tribal governments:
    H.R. 2581 contains no intergovernmental mandates as defined in
    UMRA and would impose no costs on state, local, or tribal
    governments.
        Estimated impact on the private sector: The bill would
    require pharmaceutical companies that apply for licenses to
    export certain test articles, including drugs, medical devices,
    biological products, and additives, to undertake new
    procedures. Such firms would have to identify each clinical
    investigation concerning those articles involving human
    subjects and submit proof that the protocols for each
    investigation have been examined by an institutional review
    board. Based on information from the Pharmaceutical Research
    and Manufacturers of America and the Food and Drug
    Administration, CBO estimates that the cost to identify and
    submit proof of review would be small and that few test
    articles would be subject to the new procedures.
        The bill would prohibit implements of torture from being
    exported to certain countries. According to the Bureau of
    Export Administration, the number of prohibited instruments
    would be minimal. Historically, the value of such exports has
    been small.
        H.R. 2581 also would require exporters not currently filing
    their applications through the Automated Export System (AES) to
    do so. Based on information from the Bureau of Export
    Administration, the number of additional exporters that would
    now be required to file through the AES would be minimal.
        Previous CBO estimate: On September 21, 2001, CBO
    transmitted an estimate for H.R. 2581, as ordered reported by
    the House Committee on International Relations on August 1,
    2001. Previously, on April 2, 2001, CBO completed an estimate
    of S. 149, the Export Administration Act of 2001, as ordered
    reported by the Senate Committee on Banking, Housing, and Urban
    Affairs on March 22, 2001.
        Both these prior estimates contained CBO's estimates for
    increases in revenues and direct spending resulting from higher
    civil and criminal penalties. Based on new information from the
    BXA, CBO now estimates that enacting either H.R. 2581 or S. 149
    would increase penalty collections by $7 million a year and
    direct spending by $3 million a year when fully phased in.
        CBO estimates that implementing H.R. 2581, as ordered
    reported by either the House Committee on International
    Relations or the House Committee on Armed Services, would
    increase the discretionary costs of the Departments of State
    and Defense by a total of $8 million during the 2002-2005
    period. CBO did not anticipate any such increases in cost for
    these departments as a result of S. 149.
        On November 9, 2001, CBO transmitted a private-sector
    mandate statement for H.R. 2581, as ordered reported by the
    House Committee on International Relations on August 1, 2001.
    Both versions of H.R. 2581 contain the same private-sector
    mandates. CBO determined that S. 149 contained no private-
    sector mandates as defined by UMRA.
        Estimate prepared by: Federal Costs: Ken Johnson; Federal
    Receipts: Erin Whitaker; Impact on State, Local, and Tribal
    Governments: Angela Seitz; and Impact on the Private Sector:
    Paige Piper/Bach.
        Estimate approved by: Robert A. Sunshine, Assistant
    Director for Budget Analysis and G. Thomas Woodward, Assistant
    Director for Tax Analysis.

                            Committee Cost Estimate

        Pursuant to clause 3(d) of rule XIII of the Rules of the
    House of Representatives, the committee generally concurs with
    the estimate contained in the report of the Congressional
    Budget Office.

                               Oversight Findings

        With respect to clause 3(c)(1) of rule XIII of the Rules of
    the House of Representatives, this legislation results from
    hearings and other oversight activities conducted by the
    committee pursuant to clause 2(b)(1) of rule X.
        With respect to clause 3(c)(2) of rule XIII of the Rules of
    the House of Representatives and section 308(a)(1) of the
    Congressional Budget Act of 1974, this legislation does not
    include any new spending or credit authority, nor does it
    provide for any increase or decrease in tax revenues or
    expenditures. The fiscal features of this legislation are
    addressed in the estimate prepared by the Director of the
    Congressional Budget Office under section 402 of the
    Congressional Budget Act of 1974.
        With respect to clause 3(c)(4) of rule XIII of the Rules of
    the House of Representatives, the committee has not received a
    report from the Committee on Government Reform and Oversight
    pertaining to the subject matter of H.R. 2581.

                       Constitutional Authority Statement

        Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
    House of Representatives, the committee finds the authority for
    this legislation in Article I, section 8 of the United States
    Constitution.

                         Statement of Federal Mandates

        Pursuant to section 423 of Public Law 104-4, this
    legislation contains no federal mandates with respect to state,
    local, and tribal governments, nor with respect to the private
    sector. Similarly, the bill provides no unfunded federal
    intergovernmental mandates.

                                  Record Vote

        In accordance with clause 3(b) of rule XIII of the Rules of
    the House of Representatives, a record vote was taken with
    respect to the committee's consideration of H.R. 2581, as
    amended. The record of this vote can be found on the following
    page.
        The Committee on Armed Services ordered H.R. 2581, as
    amended, reported to the House with a favorable recommendation
    by a vote of 44-6, a quorum being present.

             Changes in Existing Law Made by the Bill, as Reported

        In compliance with clause 3(e) of rule XIII of the Rules of
    the House of Representatives, changes in existing law made by
    the bill, as reported by the Committee on International
    Relations, are shown in Report 107-297 part I, filed on
    November 16, 2001.
        Changes to existing law made by section 221(d) of the bill,
    as reported by the Committee on Armed Services, are shown as
    follows (existing law proposed to be omitted is enclosed in
    black brackets, and existing law in which no change is proposed
    is shown in roman):

    NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 1998

               *       *       *       *       *       *       *

    DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATIONS

               *       *       *       *       *       *       *

    TITLE XII--MATTERS RELATING TO OTHER NATIONS

               *       *       *       *       *       *       *

           [Subtitle B--Export Controls on High Performance Computers

    [SEC. 1211. EXPORT APPROVALS FOR HIGH PERFORMANCE COMPUTERS.

      [(a) Prior Approval of Exports and Reexports.--The President
    shall require that no digital computer with a composite
    theoretical performance level of more than 2,000 millions of
    theoretical operations per second (MTOPS) or with such other
    composite theoretical performance level as may be established
    subsequently by the President under subsection (d), may be
    exported or reexported without a license to a country specified
    in subsection (b) if the Secretary of Commerce, the Secretary
    of Defense, the Secretary of Energy, the Secretary of State, or
    the Director of the Arms Control and Disarmament Agency
    objects, in writing, to such export or reexport. Any person
    proposing to export or reexport such a digital computer shall
    so notify the Secretary of Commerce, who, within 24 hours after
    receiving the notification, shall transmit the notification to
    the Secretary of Defense, the Secretary of Energy, the
    Secretary of State, and the Director of the Arms Control and
    Disarmament Agency.
      [(b) Covered Countries.--For purposes of subsection (a), the
    countries specified in this subsection are the countries listed
    as ``Computer Tier 3'' eligible countries in section 740.7(d)
    of title 15 of the Code of Federal Regulations, as in effect on
    June 10, 1997, subject to modification by the President under
    subsection (e).
      [(c) Time Limit.--Written objections under subsection (a) to
    an export or reexport shall be raised within 10 days after the
    notification is received under subsection (a). If such a
    written objection to the export or reexport of a computer is
    raised, the computer may be exported or reexported only
    pursuant to a license issued by the Secretary of Commerce under
    the Export Administration Regulations of the Department of
    Commerce, without regard to the licensing exceptions otherwise
    authorized under section 740.7 of title 15 of the Code of
    Federal Regulations, as in effect on June 10, 1997. If no
    objection is raised within the 10-day period, the export or
    reexport is authorized.
      [(d) Adjustment of Composite Theoretical Performance.--The
    President, in consultation with the Secretary of Commerce, the
    Secretary of Defense, the Secretary of Energy, the Secretary of
    State, and the Director of the Arms Control and Disarmament
    Agency, may establish a new composite theoretical performance
    level for purposes of subsection (a). Such new level shall not
    take effect until 60 days after the President submits to the
    congressional committees designated in section 1215 a report
    setting forth the new composite theoretical performance level
    and the justification for such new level. Each report shall, at
    a minimum--
              [(1) address the extent to which high performance
            computers of a composite theoretical level between the
            level established in subsection (a) or such level as
            has been previously adjusted pursuant to this section
            and the new level, are available from other countries;
              [(2) address all potential uses of military
            significance to which high performance computers at the
            new level could be applied; and
              [(3) assess the impact of such uses on the national
            security interests of the United States.
      [(e) Adjustment of Covered Countries.--
              [(1) In general.--The President, in consultation with
            the Secretary of Commerce, the Secretary of Defense,
            the Secretary of Energy, the Secretary of State, and
            the Director of the Arms Control and Disarmament
            Agency, may add a country to or remove a country from
            the list of covered countries in subsection (b), except
            that a country may be removed from the list only in
            accordance with paragraph (2).
              [(2) Deletions from list of covered countries.--The
            removal of a country from the list of covered countries
            under subsection (b) shall not take effect until 120
            days after the President submits to the congressional
            committees designated in section 1215 a report setting
            forth the justification for the deletion.
              [(3) Excluded countries.--A country may not be
            removed from the list of covered countries under
            subsection (b) if--
                      [(A) the country is a ``nuclear-weapon
                    state'' (as defined by Article IX of the Treaty
                    on the Non-Proliferation of Nuclear Weapons)
                    and the country is not a member of the North
                    Atlantic Treaty Organization; or
                      [(B) the country is not a signatory of the
                    Treaty on the Non-Proliferation of Nuclear
                    Weapons and the countryis listed on Annex 2 to
    the Comprehensive Nuclear Test-Ban Treaty.
      [(f) Classification.--Each report under subsections (d) and
    (e) shall be submitted in an unclassified form and may, if
    necessary, have a classified supplement.
      [(g) Delegation of Objection Authority Within the Department
    of Defense.--For the purposes of the Department of Defense, the
    authority to issue an objection referred to in subsection (a)
    shall be executed for the Secretary of Defense by an official
    at the Assistant Secretary level within the office of the Under
    Secretary of Defense for Policy. In implementing subsection
    (a), the Secretary of Defense shall ensure that Department of
    Defense procedures maximize the ability of the Department of
    Defense to be able to issue an objection within the 10-day
    period specified in subsection (c).
      [(h) Calculation of 60-Day Period.--The 60-day period
    referred to in subsection (d) shall be calculated by excluding
    the days on which either House of Congress is not in session
    because of an adjournment of the Congress sine die.

    [SEC. 1212. REPORT ON EXPORTS OF HIGH PERFORMANCE COMPUTERS.

      [(a) Report.--Not later than 60 days after the date of the
    enactment of this Act, the President shall provide to the
    congressional committees specified in section 1215 a report
    identifying all exports of digital computers with a composite
    theoretical performance of more than 2,000 millions of
    theoretical operations per second (MTOPS) to all countries
    since January 25, 1996. For each export, the report shall
    identify--
              [(1) whether an export license was applied for and
            whether one was granted;
              [(2) the date of the transfer of the computer;
              [(3) the United States manufacturer and exporter of
            the computer;
              [(4) the MTOPS level of the computer; and
              [(5) the recipient country and end user.
      [(b) Additional Information on Exports to Certain
    Countries.--In the case of exports to countries specified in
    subsection (c), the report under subsection (a) shall identify
    the intended end use for the exported computer and the
    assessment by the executive branch of whether the end user is a
    military end user or an end user involved in activities
    relating to nuclear, chemical, or biological weapons or missile
    technology. Information provided under this subsection may be
    submitted in classified form if necessary.
      [(c) Covered Countries.--For purposes of subsection (b), the
    countries specified in this subsection are--
              [(1) the countries listed as ``Computer Tier 3''
            eligible countries in section 740.7(d) of title 15 of
            the Code of Federal Regulations, as in effect on June
            10, 1997; and
              [(2) the countries listed in section 740.7(e) of
            title 15 of the Code of Federal Regulations, as in
            effect on June 10, 1997.

    [SEC. 1213. POST-SHIPMENT VERIFICATION OF EXPORT OF HIGH PERFORMANCE
                        COMPUTERS.

      [(a) Required Post-Shipment Verification.--The Secretary of
    Commerce shall conduct post-shipment verification of each
    digital computer with a composite theoretical performance of
    more than 2,000 millions of theoretical operations per second
    (MTOPS) that is exported from the United States, on or after
    the date of the enactment of this Act, to a country specified
    in subsection (b).
      [(b) Covered Countries.--For purposes of subsection (a), the
    countries specified in this subsection are the countries listed
    as ``Computer Tier 3'' eligible countries in section 740.7 of
    title 15 of the Code of Federal Regulations, as in effect on
    June 10, 1997, subject to modification by the President under
    section 1211(e).
      [(c) Annual Report.--The Secretary of Commerce shall submit
    to the congressional committees specified in section 1215 an
    annual report on the results of post-shipment verifications
    conducted under this section during the preceding year. Each
    such report shall include a list of all such items exported
    from the United States to such countries during the previous
    year and, with respect to each such export, the following:
              [(1) The destination country.
              [(2) The date of export.
              [(3) The intended end use and intended end user.
              [(4) The results of the post-shipment verification.
      [(d) Explanation When Verification Not Conducted.--If a post-
    shipment verification has not been conducted in accordance with
    subsection (a) with respect to any such export during the
    period covered by a report, the Secretary shall include in the
    report for that period a detailed explanation of the reasons
    why such a post-shipment verification was not conducted.
      [(e) Adjustment of Performance Levels.--Whenever a new
    composite theoretical performance level is established under
    section 1211(d), that level shall apply for purposes of
    subsection (a) of this section in lieu of the level set forth
    in subsection (a).

    [SEC. 1214. GAO STUDY ON CERTAIN COMPUTERS; END USER INFORMATION
                        ASSISTANCE.

      [(a) In General.--The Comptroller General of the United
    States shall submit to the congressional committees specified
    in section 1215 a study of the national security risks relating
    to the sale of computers with a composite theoretical
    performance of between 2,000 and 7,000 millions of theoretical
    operations per second (MTOPS) to end users in countries
    specified in subsection (c). The study shall also analyze any
    foreign availability of computers described in the preceding
    sentence and the impact of such sales on United States
    exporters.
      [(b) End User Information Assistance to Exporters.--The
    Secretary of Commerce shall establish a procedure by which
    exporters may seek information on questionable end users in
    countries specified in subsection (c) who are seeking to obtain
    computers described in subsection (a).
      [(c) Covered Countries.--For purposes of subsections (a) and
    (b), the countries specified in this subsection are the
    countries listed as ``Computer Tier 3'' eligible countries in
    section 740.7(d) of title 15 of the Code of Federal
    Regulations, as in effect on June 10, 1997.

    [SEC. 1215. CONGRESSIONAL COMMITTEES.

      [For purposes of sections 1211(d), 1212(a), 1213(c), and
    1214(a) the congressional committees specified in those
    sections are the following:
              [(1) The Committee on Banking, Housing, and Urban
            Affairs and the Committee on Armed Services of the
            Senate.
              [(2) The Committee on International Relations and the
            Committee on Armed Services of the House of
            Representatives.]

               *       *       *       *       *       *       *

                         Congress of the United States,
                                      House of Representatives,
                                         Washington, DC, March 8, 2002.
        Mr. Chairman, due to the enhanced security measures around
    the Capitol, I was unable to return to the committee hearing
    room until just after the vote had concluded on the Manager's
    Amendment to H.R. 3581, the Export Administration Act of 2001.
    Please let the record reflect that had I been present on
    Wednesday, March 2, 2002, I would have voted yea, in favor of
    the Manager's Amendment to H.R. 2581.
                Thank you,
                                                           Robin Hayes.

                      DISSENTING VIEWS OF HON. GENE TAYLOR

        Mr. Chairman, I voted not to favorably report H.R. 2581 to
    the House because I believe that enactment of this legislation
    will make it easier to export technology that may ultimately be
    used by those who seek to threaten or bring harm upon the
    national security interests of the United States.
        I applaud the efforts of Chairman Stump in offering his
    ``manager's amendment'' to H.R. 2581 which addressed the
    obvious flaws of the underlying bill. Unfortunately, I believe
    that this measure may contain other provisions that, if
    enacted, unintentionally weaken existing national security
    safeguards that protect the flow of sensitive dual-use
    technology to the global marketplace.
        I regret that H.R. 2581 was sent to this committee under
    sequential referral and that such a small period of time was
    allotted to us to ensure that the bill was properly considered.
    The subject of export control of dual-use technology is a grave
    matter. It demands the full attention of this committee without
    unrealistic time constraints being attached to it. Legislation
    that makes far-reaching changes to such a complex area of
    national security policy should never be considered in haste.
        Therefore, I could not in good conscience consent to this
    committee's action to positively report H.R. 2581 to the House.

                                                           Gene Taylor.

      DISSENTING VIEWS OF REPRESENTATIVES ADAM SMITH, ELLEN TAUSCHER, AND
                                  RICK LARSEN

        We are writing to express serious reservations with H.R.
    2581 as amended and passed by the House Armed Services
    Committee. The underlying version of the Export Administration
    Authorization (EAA) that we considered--reported by the House
    International Relations Committee--had fundamental flaws.
    Instead of making progress toward improving this legislation,
    we believe the amendments adopted by our committee moved H.R.
    2581 further in the wrong direction. As such, we voted against
    this measure and would like to outline some of the flaws that
    we believe undermine efforts to develop and implement a new
    effective system of national security export controls.
        1. The export of high performance computing technology
    amendment will tie the President's hands by ordering him to
    develop a product-specific export monitoring and control
    system. H.R. 2581 does not dictate to the President how he
    should control any other specific class of products and
    technology. It doesn't tell the President how, for example, to
    control products and technology used to produce chemical and
    biological weapons. The President, drawing on the expertise of
    the Departments of Defense, Commerce, State and Energy, is
    capable of deciding how high performance computing technology
    should be controlled for national security purposes. The
    Administration is already considering a range of options for
    improved computer export controls. This amendment is
    counterproductive since it prejudges those deliberations.
        2. The deemed export provision will also tie the
    President's hands and complicate valuable science exchanges
    between American companies and our allies. The Administration
    has already recognized the need to improve the export control
    system for deemed exports. Rather than forcing a particular
    system on the President, this Committee should provide him the
    flexibility to draw on the expertise in the Departments of
    Defense, Commerce, State and Energy to develop and implement
    the best possible system.
        3. By substituting ``could'' for ``would'', the presumption
    of denial and the license review process create such a vague
    statutory standard that the authority to administer export
    controls in a manner that effectively advances U.S. national
    security will be compromised. In practice, such a vague
    standard will frustrate the effective administration of export
    controls by misdirecting focus and resources away from exports
    that are most relevant to U.S. national security interests.
        4. The foreign availability and mass market amendment is
    another example of a proposal that is problematic. If a product
    is either available from foreign sources or available in such
    mass quantities as to be impossible to control, then a related
    multilateral export control regime is flawed since it makes no
    sense to use scarce resources to control products that are not
    susceptible to being controlled.
        5. The interagency dispute resolution process is a problem.
    It will force the President to become an export licensing
    officer since the requirement of unanimous concurrence at the
    interagency level will clearly force the President to become
    involved.
        6. The export of commercial communications satellites to
    NATO allies and other friendly countries will continue to be a
    problem for US manufacturers by dropping Title VII of the HIRC-
    reported bill. The HIRC amendment had retained all the national
    security provisions written into law by this Committee in 1998
    and 1999 and also maintained all current legislative and
    administrative bars to launching in China. The deletion of this
    provision will simply make it easier for foreign competitors of
    this important industry to undermine our US companies.
        We believe that speedy passage of effective EAA legislation
    is critical to heightening our national security and
    strengthening our nation's economy. Unfortunately, as adopted
    by our committee, this legislation falls short on both of these
    goals. In addition, we are attaching a letter sent by House
    Democratic Leader Gephardt to Speaker Hastert--we believe this
    letter clearly outlines why passage of EAA is so crucial and we
    echo his calls for swift movement on this legislation.
        We look forward to continuing our work on this important
    measure as it moves through the legislative process and to the
    Floor of the House.

                                       Adam Smith.
                                       Ellen Tauscher.
                                       Rick Larsen.