House Report 107-297 - EXPORT ADMINISTRATION ACT OF 2001

[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

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

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).

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.