[Senate Report 107-10]
[From the U.S. Government Publishing Office]



                                                        Calendar No. 26
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-10
_______________________________________________________________________




                       THE EXPORT ADMINISTRATION


                              ACT OF 2001

                               __________

                              R E P O R T

                                 of the

                     COMMITTEE ON BANKING, HOUSING,

                           AND URBAN AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                 S. 149

                             together with

                            ADDITIONAL VIEWS




                 April 2, 2001.--Ordered to be printed
                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
89-010                     WASHINGTON : 2001

            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      PHIL GRAMM, Texas, Chairman
RICHARD C. SHELBY, Alabama           PAUL S. SARBANES, Maryland
ROBERT F. BENNETT, Utah              CHRISTOPHER J. DODD, Connecticut
WAYNE ALLARD, Colorado               TIM JOHNSON, South Dakota
MICHAEL B. ENZI, Wyoming             JACK REED, Rhode Island
CHUCK HAGEL, Nebraska                CHARLES E. SCHUMER, New York
RICK SANTORUM, Pennsylvania          EVAN BAYH, Indiana
JIM BUNNING, Kentucky                ZELL MILLER, Georgia
MIKE CRAPO, Idaho                    THOMAS R. CARPER, Delaware
JOHN ENSIGN, Nevada                  DEBBIE STABENOW, Michigan
                                     JON S. CORZINE, New Jersey
                   Wayne A. Abernathy, Staff Director
     Steven B. Harris, Democratic Staff Director and Chief Counsel
                      Linda L. Lord, Chief Counsel
           Amy F. Dunathan, Senior Professional Staff Member
             Katherine McGuire, Subcommittee Staff Director
                 Joel Oswald, Professional Staff Member
             Martin J. Gruenberg, Democratic Senior Counsel
                       George E. Whittle, Editor

                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     1
Purpose and Need for Legislation.................................     1
History of the Legislation.......................................     2
Background and Key Provisions....................................     5
Purpose and Scope of the Legislation.............................     9
    Title I. General Authority...................................     9
    Title II. National Security Export Controls..................    11
    Title III. Foreign Policy Export Controls....................    16
    Title IV. Procedures for Export Licenses and Interagency 
      Dispute Resolution.........................................    18
    Title V. International Arrangements: Foreign Boycotts; 
      Sanctions; and Enforcement.................................    20
    Title VI. Export Control Authority and Regulations...........    24
    Title VII. Miscellaneous Provisions..........................    24
Section-by-Section Analysis of S. 149: ``The Export 
  Administration Act of 2001''...................................    26
Regulatory Impact Statement......................................    36
Cost of Legislation..............................................    36
Additional Views.................................................    40

                                                        Calendar No. 26
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-10

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



 
                 THE EXPORT ADMINISTRATION ACT OF 2001

                                _______
                                

                 April 2, 2001.--Ordered to be printed

                                _______
                                

 Mr. Gramm, from the Committee on Banking, Housing, and Urban Affairs, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 149]

    The Committee on Banking, Housing, and Urban Affairs, to 
which was referred the bill S. 149, the ``Export Administration 
Act of 2001,'' a bill to provide authority to control exports, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment in the nature of a 
substitute, and recommends that the bill as amended do pass.

                              INTRODUCTION

    On March 22, 2001, the Senate Committee on Banking, 
Housing, and Urban Affairs met in legislative session and 
marked up and ordered to be reported with an amendment in the 
nature of a substitute S. 149, a bill to establish an 
effective, modern framework for export controls, with a 
recommendation that the bill do pass.

                    PURPOSE AND NEED FOR LEGISLATION

    The bill (S. 149) establishes an effective, modern 
framework for export controls by reforming and replacing the 
Export Administration Act of 1979, a statute that authorizes 
the President to control the export of dual-use items for 
national security, foreign policy, and short supply purposes. 
The bill recognizes and seeks to balance three important United 
States policy interests. First, the United States has a 
national security interest in controlling the export of dual-
use goods, services, and technologies to (a) limit the military 
potential of countries that threaten the United States or its 
allies; (b) impede the proliferation of weapons of mass 
destruction and the means to deliver them; and (c) deter 
international terrorism. Second, the United States has an 
economic and national security interest in promoting U.S. 
exports and maintaining U.S. leadership in the global economy. 
Third, the United States has strong foreign policy interests in 
promoting international peace, stability, and respect for 
fundamental human rights, and this legislation establishes the 
principles for effective use of economic sanctions, including 
foreign policy export controls, to promote such interests.
    Since the Export Administration Act expired on August 20, 
1994, the President has continued export controls pursuant to 
his authority under the International Emergency Economic Powers 
Act (IEEPA) (Executive Order 12924). However, IEEPA is a poor 
instrument for maintaining export controls indefinitely in 
place of the Export Administration Act. The IEEPA-based export 
control regime has lower penalties for violations, is 
structured in a manner detrimental to our commercial and 
national security interests, and has been subjected to judicial 
challenge (particularly with regard to confidential licensing 
information). Therefore, Congress last year enacted legislation 
providing for a short-term extension of the Export 
Administration Act (through August 20, 2001), allowing Congress 
the time to consider legislation to establish an effective 
control system on a more satisfactory footing.

                       HISTORY OF THE LEGISLATION

    The current effort to establish an effective, modern 
statutory framework for export controls began during the 106th 
Congress. During the 106th Congress, the Banking Committee, and 
its Subcommittee on International Trade and Finance, held seven 
hearings on export controls.
    At the first hearing, on January 20, 1999, the Subcommittee 
on International Trade and Finance heard testimony from the 
Honorable William Reinsch, Under Secretary of Commerce for 
Export Administration, on the reauthorization of the Export 
Administration Act.
    At the second hearing, on March 16, 1999, the Subcommittee 
heard testimony focusing on multilateral control regimes from 
Mr. John Barker, Deputy Assistant Secretary for Export Controls 
of the Department of State; the Honorable R. Roger Majak, 
Assistant Secretary for Export Administration of the Department 
of Commerce; Ms. Patricia Dedik, Nuclear Transfer and Suppliers 
Policy Division, Director of the Department of Energy; Mr. Dan 
Hoydysh on behalf of the Computer Coalition for Responsible 
Exports; Dr. Paul Freedenberg on behalf of the Association for 
Manufacturing Technology; Mr. John Douglass, President of the 
Aerospace Industries Association; and Dr. Stephen Bryen, former 
Deputy Under Secretary of Defense for Trade Security Policy.
    At the third hearing, on April 14, 1999, the Subcommittee 
heard testimony relating to the export control process, once 
again from the Honorable R. Roger Majak, accompanied by Ms. 
Carol Kalinoski, Chairwoman of the Department of Commerce 
Operating Committee; Mr. Dave Tarbell, Director for Technology 
Security at the Defense Threat Reduction Agency, for the 
Department of Defense; Mr. James W. Jarrett, President, Intel 
China; Mr. Larry E. Christensen, Vice President, International 
Trade Content, Vastera, Inc; and Dr. Gary Milhollin, Director 
of the Wisconsin Project on Nuclear Arms Control.
    At the fourth hearing, on June 10, 1999, the Committee 
heard testimony from Representative Christopher Cox, Chairman 
of the Select Committee on U.S. National Security and Military/
Commercial Concerns with the People's Republic of China; and 
from Representative Norman D. Dicks, Ranking Member of the 
Select Committee.
    At the fifth hearing, on June 17, 1999, the Committee heard 
testimony on export control issues relating to emerging 
technologies from Mr. Frank Carlucci, Chairman, Nortel 
Networks; Mr. Tom Arnold, Chief Technology Officer of 
Cybersource, Inc; Mr. Michael Maibach, Vice President, Intel 
Corp; Mr. Eric Hirschhorn, Executive Secretary for the Industry 
Coalition on Technology Transfer; and Mr. Rhett Dawson, 
President, Information Technology Industry Council.
    At the sixth hearing, on June 23, 1999, the Committee heard 
comment from the Executive branch on the first discussion draft 
of the bill that was released on June 17, 1999. Testimony was 
received from the Honorable William Reinsch, Under Secretary of 
Commerce for Export Administration; the Honorable John Hamre, 
Deputy Secretary of Defense; the Honorable James Schroeder, 
Deputy Under Secretary of Agriculture for Farm and Foreign 
Agriculture Services; the Honorable Rose Gottemoeller, 
Assistant Secretary of Energy for Nonproliferation and National 
Security; and Mr. John Barker, Deputy Assistant Secretary of 
State for Nonproliferation Controls.
    At the seventh hearing, on June 24, 1999, the Committee 
heard private sector views on the first discussion draft. 
Testimony was heard from Mr. John Douglass, President, 
Aerospace Industries Association; Mr. Kyle Seymour, President, 
Cincinnati Machine Co; Mr. Andrew Whisenhunt, President, 
Arkansas Farm Bureau; Ms. Karen Murphy, Director of Global 
Customs and Export Compliance, Applied Materials Corp; Dr. 
Richard T. Cupitt, Associate Director, Center for International 
Trade and Security, University of Georgia; Dr. Stephen Bryen, 
former Deputy Under Secretary of Defense for Trade Security 
Policy; and Mr. Craig Elwell of the Congressional Research 
Service.
    In addition to the seven hearings, the Committee held 
frequent meetings with, and received written comments from, a 
variety of interested parties. Additional comments, 
suggestions, and assistance in considering and evaluating the 
legislation were received from the Departments of Commerce, 
Defense, State, Justice, Energy, and Agriculture, as well as 
the National Security Agency and National Security Council.
    The Committee released two staff discussion drafts of the 
bill, the first on June 17, 1999, and the second on August 9, 
1999. On September 23, 1999, the Committee voted 20-0 to report 
a reform bill (S. 1712), with one amendment, to the Senate for 
consideration. The bill was not taken up for consideration by 
the full Senate prior to the adjournment of the 106th Congress.
    On January 23, 2001, during the first week of the 107th 
Congress, Senators Enzi, Gramm, Sarbanes, Johnson, Hagel, 
Roberts, and Stabenow introduced S. 149, the Export 
Administration Act of 2001. This legislation, based on S. 1712, 
included certain improvements relating to enhanced controls, 
maintenance of the National Security Control List, and finality 
in foreign availability and mass-market determinations. The 
Committee held two hearings on S. 149.
    At the first hearing, on February 7, 2001, the Committee 
heard private sector and academic views on S. 149. Testimony 
was received from Mr. Dan Hoydysh, on behalf of the Computer 
Coalition for Responsible Exports; Dr. Paul Freedenberg, on 
behalf of the Association for Manufacturing Technology; Mr. 
Larry E. Christensen, Vastera, Inc., on behalf of AeA (formerly 
known as the American Electronics Association); and Dr. Richard 
T. Cupitt, Associate Director, Center for International Trade 
and Security, University of Georgia.
    At the second hearing, on February 14, 2001, the Committee 
heard views from defense and national security experts. 
Testimony was received from the Honorable John J. Hamre, 
President and Chief Executive Officer, Center for Strategic & 
International Studies, and former Deputy Secretary of Defense; 
and the Honorable Donald A. Hicks, Chairman, Hicks & 
Associates, and former Under Secretary of Defense for Research 
and Engineering, and chairman, Defense Science Board Task Force 
on Globalization and Security.
    In addition to the two hearings, the Committee held 
frequent meetings with, and received written comments from, a 
variety of interested parties. The Committee also conferred 
closely with Administration officials. In March, prior to 
Committee action on S. 149, the Administration renewed its 
support for the bill in general and sought several refinements 
to the legislation.
    These improvements, along with certain technical and 
conforming amendments, were incorporated into a managers' 
amendment approved unanimously by the Committee on March 22, 
2001. In addition, the Committee unanimously adopted two 
second-degree amendments to the managers' amendment. The first, 
offered by Senator Enzi with the support of the Administration, 
proposed to terminate the authority granted under S. 149 on 
September 30, 2004, unless the President provides Congress with 
a report on the implementation and operation of S. 149 and the 
operation of U.S. export controls in general, and either 
provides to Congress legislative reform proposals in connection 
with that report or certifies to Congress that no such 
legislative reforms are necessary. The second, offered by 
Senator Bennett, also with the support of the Administration, 
proposed to repeal civilian export control provisions relating 
to performance levels of computers, as incorporated in Subtitle 
B of Title XII of Division A of the National Defense 
Authorization Act for fiscal year 1998.
    With the adoption of these changes, the Administration 
extended its formal support to S. 149. In a letter to Chairman 
Gramm dated March 21, 2001, National Security Advisor 
Condoleezza Rice stated:

          The Administration has carefully reviewed the current 
        version of S. 149, the Export Administration Act of 
        2001, which provides authority for controlling exports 
        of dual-use goods and technologies. As a result of its 
        review, the Administration has proposed a number of 
        changes to S. 149. The Secretary of State, Secretary of 
        Defense, Secretary of Commerce, and I agree that these 
        changes will strengthen the President's national 
        security and foreign policy authorities to control 
        dual-use exports in a balanced manner, which will 
        permit U.S. companies to compete more effectively in 
        the global market place. With these changes, S. 149 
        represents a positive step towards the reform of the 
        U.S. export control system supported by the President. 
        If the Committee incorporates these changes into S. 
        149, the Administration will support the bill. We will 
        continue to work with the Congress to ensure that our 
        national security needs are incorporated into a 
        rational export control regime.1
---------------------------------------------------------------------------
    \1\ Letter from the Honorable Condoleezza Rice, Assistant to the 
President for National Security Affairs, to the Honorable Phil Gramm, 
Chairman, Senate Committee on Banking, Housing, and Urban Affairs, 
March 21, 2001.

    On March 22, 2001, the Committee voted 19-1 (Senators 
Gramm, Bennett, Allard, Enzi, Hagel, Santorum, Bunning, Crapo, 
Ensign, Sarbanes, Dodd, Johnson, Reed, Schumer, Bayh, Miller, 
Carper, Stabenow, Corzine voting aye; Senator Shelby voting no) 
to report the bill, with an amendment in the nature of a 
substitute, to the Senate for consideration.
    On March 28, 2001, President Bush called the Committee's 
action ``good news,'' saying that ``after a lot of work with 
industry leaders and the administration and members of the 
Senate, the Export Administration Act, a good bill, passed the 
Banking Committee 19 to 1 * * * And I urge the Senate to pass 
it quickly.''

                     BACKGROUND AND KEY PROVISIONS

    The United States faces a different world since the last 
major revision of the Export Administration Act in 1985. The 
bill updates that Act to reflect the changes that have occurred 
since the end of the Cold War and the emergence of new threats, 
as well as the increasingly rapid expansion of the global 
marketplace for goods, services, and technology. The bill seeks 
to restore an appropriate balance between national security 
interests and our interest in a strong, growing and innovative 
economy that forms the basic infrastructure of our security.
    Under the Export Administration Act of 1979, national 
security export controls sought to prevent exports of dual-use 
goods, services, and technologies to the Soviet bloc from the 
United States or its allies, in cooperation with the 
Coordinating Committee on Multilateral Export Controls (CoCom). 
In the intervening years, however, the Soviet Union was 
dissolved and the Warsaw Pact disbanded. In 1994, CoCom, a 
system under which the United States or any other country could 
exercise a unilateral veto over dual-use exports, expired. The 
less stringent Wassenaar Arrangement, which requires only post-
export notification of sales of controlled items by 
participating countries, subsequently was formed in 1996.
    Not only have the threats to national security changed in 
the last two decades, but the U.S. economy has been 
transformed, as well. As Dr. Donald A. Hicks, former Under 
Secretary of Defense for Research & Engineering and chairman of 
the Defense Science Board Task Force on Globalization and 
Security, testified on February 14, 2001, ``Today, the `U.S. 
defense industrial base' no longer exists in its Cold War form 
* * * DoD is relying increasingly on the U.S. commercial 
advanced technology sector to push the technological envelope 
and enable the Department to `run faster' than its competitors. 
DoD is not a large enough customer, however, to keep the U.S. 
high-tech sector vibrant. Exports are now the key to growth and 
good health * * * If U.S. high-tech exports are restricted in 
any significant manner, it could well have a stifling effect on 
the U.S. military's rate of technological 
advancement.''2
---------------------------------------------------------------------------
    \2\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable Donald 
A. Hicks, Chairman, Hicks & Associates, and former Under Secretary of 
Defense for Research and Engineering, and chairman, Defense Science 
Board Task Force on Globalization and Security.
---------------------------------------------------------------------------
    Hence, S. 149 seeks to update national security export 
controls to reflect the current world situation by recognizing 
the changed nature of the threat as well as the importance of 
exports to U.S. economic and national security interests.

The Cox Committee and WMD Commission

    In 1999, the Select Committee on U.S. National Security and 
Military/Commercial Concerns with the People's Republic of 
China (``Cox Committee'') released its report.3 The 
Cox Committee's bipartisan recommendations included several 
relating to the U.S. dual-use export control system. The Cox 
Committee's key recommendations have been incorporated into S. 
149. For example, Section 401 (export license procedures), 
Section 501 (multilateral efforts), Section 503 (criminal and 
civil penalties), and Sections 504 and 505 (sanctions for 
multilateral regime violations) specifically address key Cox 
Committee recommendations.4 Moreover, a critical 
recommendation of the Cox Committee was reenactment of the 
Export Administration Act.5
---------------------------------------------------------------------------
    \3\ Report of the Select Committee on U.S. National Security and 
Military/Commercial Concerns with the People's Republic of China, May 
25, 1999.
    \4\ See, e.g., Recommendations 10, 11, 29, and 32 of the Report of 
the Select Committee on U.S. National Security and Military/Commercial 
Concerns with the People's Republic of China, May 25, 1999.
    \5\ See Recommendation 29 of the Report of the Select Committee on 
U.S. National Security and Military/Commercial Concerns with the 
People's Republic of China, May 25, 1999.
---------------------------------------------------------------------------
    In the same year, the Commission to Assess the Organization 
of the Federal Government to Combat the Proliferation of 
Weapons of Mass Destruction (``WMD Commission'') submitted its 
report.6 Its key recommendations also have been 
incorporated into S. 149. For example, Section 201 (national 
security export controls), Section 401 (export license 
procedures), Section 402 (interagency dispute resolution 
process), and Section 501 (multilateral efforts) address key 
WMD Commission recommendations.7 Here, too, a core 
recommendation of the WMD Commission was enactment of a new 
Export Administration Act.8
---------------------------------------------------------------------------
    \6\ Report of the Commission to Assess the Organization of the 
Federal Government to Combat the Proliferation of Weapons of Mass 
Destruction, July 14, 1999.
    \7\ See Recommendations 4.1, 4.2, and 4.3 of the Report of the 
Commission to Assess the Organization of the Federal Government to 
Combat the Proliferation of Weapons of Mass Destruction, July 14, 1999.
    \8\ See Recommendation 5.18 of the Report of the Commission to 
Assess the Organization of the Federal Government to Combat the 
Proliferation of Weapons of Mass Destruction, July 14, 1999.
---------------------------------------------------------------------------

Enhanced enforcement

    Enhanced enforcement, a central theme of the 
recommendations of the Cox Committee,9 is a key 
aspect of S. 149. Penalties under both IEEPA and the current 
Export Administration Act are grossly inadequate to deter and 
punish those who would violate U.S. export control law and 
place at risk U.S. national security and foreign policy 
interests. Therefore, S. 149 substantially increases criminal 
and civil penalties for export control violations. Moreover, it 
strengthens post-shipment verification procedures by targeting 
resources to exports involving the greatest risk to national 
security, and by providing increased resources for additional 
post-shipment investigators. In addition, S. 149 includes 
funding for the hiring and training of license review officers, 
fulfilling an important recommendation of the WMD 
Commission.10
---------------------------------------------------------------------------
    \9\ See, e.g., Recommendations 10 and 29 of the Report of the 
Select Committee on U.S. National Security and Military/Commercial 
Concerns with the People's Republic of China, May 25, 1999.
    \10\ See Recommendation 5.22 of the Report of the Commission to 
Assess the Organization of the Federal Government to Combat the 
Proliferation of Weapons of Mass Destruction, July 14, 1999.
---------------------------------------------------------------------------

Strengthening and enforcing multilateral regimes

    Because the U.S. is not the sole supplier of most dual-use 
technologies, the need for multilateral agreement among 
supplier nations is critical to the success of export control 
mechanisms. Improving multilateral export control regimes also 
requires a firm commitment on the part of the U.S. to engage 
with other nations. In his testimony to the Committee on June 
14, 2001, Dr. John J. Hamre, President and Chief Executive 
Officer, Center for Strategic & International Studies, and 
former Deputy Secretary of Defense, stated that ``[i]f we want 
to encourage American partnering with trusted friends and 
allies in order to foster closer collaboration for national 
security reasons, we must extend closer working collaboration 
government-to-government.'' 11 The bill emphasizes 
the importance of multilateral initiatives by encouraging the 
President to undertake international efforts to improve the 
effectiveness of existing regimes and promote the creation of 
new regimes through such features as full membership, a common 
list of items and countries of concern, harmonization of 
license procedures and standards, a ``no undercut'' policy, and 
a common standard of enforcement.
---------------------------------------------------------------------------
    \11\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable John 
J. Hamre, President and Chief Executive Officer, Center for Strategic & 
International Studies, and former Deputy Secretary of Defense.
---------------------------------------------------------------------------

Risk-focused approach

    The bill adopts a risk-focused approach to export controls 
by targeting national security export controls on those items 
and destinations that the U.S. determines to be the greatest 
risk to national security, while removing ineffective controls 
that serve as unnecessary barriers to trade. Among the risk 
management processes established by this legislation are the 
conduct of risk analyses of items under consideration for 
control; continuous review of the list of items subject to 
national security controls for potential addition, removal, or 
update; establishment of a country tier system that assigns 
items and countries to tiers according to their potential 
threat to U.S. national security; establishment of an Office of 
Technical Evaluation to assess, evaluate, and monitor 
technological and other developments; and targeting of post-
shipment verification resources to exports posing the greatest 
risk to U.S. national security.

National security protections

    Because the President requires the flexibility to impose 
controls in those circumstances where national security so 
warrants, S. 149 ensures the President's ability to impose 
controls in certain critical circumstances. Thus, the bill 
grants the President special control authorities for cases 
involving national security, international obligations, and 
international terrorism.12
---------------------------------------------------------------------------
    \12\ For national security, see Section 201(c) (end-use and end-
user controls); Section 201(d) (enhanced controls); Section 212 
(presidential set-aside of foreign availability status determination); 
Section 213 (presidential set-aside of mass-market status 
determination). For international obligations, see Section 309 
(compliance with international obligations). For international 
terrorism, see Section 310 (designation of countries supporting 
international terrorism).
---------------------------------------------------------------------------

Foreign policy disciplines

    The bill authorizes the President to control exports for 
the purpose of promoting the U.S. foreign policy objectives; 
promoting peace, stability, and respect for human rights; and 
deterring and punishing acts of international terrorism. While 
the bill does not forbid all foreign policy export controls, it 
places emphasis on the use of such controls in order to 
increase their effectiveness. By instituting new disciplines on 
foreign policy export controls, it ensures that such controls 
maximize the general welfare of the United States.

Foreign availability

    Trade and investment liberalization under the North 
American Free Trade Agreement, the Uruguay Round Agreements, 
and other international agreements have accelerated the 
fundamental changes in production locations and processes that 
have been occurring in recent decades. Today, many goods, 
services, and technologies originate only in part from places 
within the United States. Increasingly, dual-use goods, 
services, and technologies can be obtained through firms 
outside of the United States. Firms in newly industrialized 
countries that did not participate in CoCom now supply many 
dual-use goods, services, and technology. Moreover, national 
discretion in application of national security export controls 
among the Wassenaar members makes uniform application of 
controls problematic.
    These changes can place American firms at unfair 
competitive disadvantage with their foreign rivals. The current 
Export Administration Act does not address the issue of foreign 
availability in a manner that meets the challenges of the world 
today. It is based on the anachronistic assumption that the 
United States can effectively control the export of dual-use 
goods, services, or technologies either because the United 
States is the sole supplier, or that all significant suppliers 
are in (now former) CoCom countries. Acknowledging the 
``futility of the U.S. attempting to control unilaterally 
technologies, products and services that even its closest 
allies are releasing onto the world market,'' 13 S. 
149 updates the current Export Administration Act by making 
changes that will strengthen foreign availability recognition 
in connection with national security export controls.
---------------------------------------------------------------------------
    \13\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable Donald 
A. Hicks, Chairman, Hicks & Associates, and former Under Secretary of 
Defense for Research and Engineering, and chairman, Defense Science 
Board Task Force on Globalization and Security.
---------------------------------------------------------------------------

Mass-market

    The nature of dual-use technology has also changed in 
recent years, primarily because of the computer revolution. In 
1979, many dual-use goods were produced in small numbers. 
Today, many dual-use items are marketed to a mass audience. 
Even though such mass-market goods may have military 
applications, they are produced in the millions and sold 
through a variety of retail outlets.
    Imposing export controls on such items is ineffective. As 
Representative Christopher Cox, Chairman of the Select 
Committee on U.S. National Security and Military/Commercial 
Concerns with the People's Republic of China, noted during his 
June 10, 1999, testimony before the Committee, ``We ought not 
to have export controls to pretend to make ourselves safe as a 
country. We ought to have export controls that work. And you 
have to assume that if the Ministry of State Security in the 
People's Republic of China can gain access to the computers at 
Los Alamos, they can probably gain access to a Radio Shack in 
Europe.'' Recognizing these technological changes that have 
given rise to mass-market goods, S. 149 creates a new 
requirement for mass-market recognition in connection with 
national security controls.

                  PURPOSE AND SCOPE OF THE LEGISLATION

    The bill consists of two sections (short title, table of 
contents; definitions) and seven titles, as follows: general 
authority; national security export controls; foreign policy 
export controls; procedures for export licenses and interagency 
dispute resolution; international arrangements, foreign 
boycotts, sanctions, and enforcement; export control authority 
and regulations; and miscellaneous provisions.
    Section 2 defines the terms used in the bill. With regard 
to the term ``export,'' the bill's definition allows the 
Secretary of Commerce the flexibility to define further, via 
regulation, the term export to deem the disclosure of an item 
to a foreign person to be an export to the country of which the 
foreign person is a national. This definition, being virtually 
the same as the definition of export in the current Export 
Administration Act, as amended, is not intended to require a 
change to the Export Administration regulations in effect upon 
enactment of this bill. It is the Committee's understanding 
that the Administration will be reviewing the deemed export 
control process with a view to clarifying its application.

Title I--General authority

    Title I provides general authorities for the conduct of 
United States export control policy. As has been the practice 
under previous versions of the Export Administration Act, the 
power to establish and conduct export control policy, under the 
statutory direction and restrictions imposed by the bill, is 
vested in the President.
    Unless otherwise limited, the President may delegate the 
authority granted under S. 149 to Federal departments, 
agencies, and officials he considers appropriate. However, the 
President may only delegate this authority to officials of 
departments or agencies, the heads of which are appointed by 
the President and confirmed by the Senate. The Committee notes 
that this is intended to include officials serving in such a 
post under a recess appointment by the President.
    As a basis for the conduct of export control policy, Title 
I directs the Secretary of Commerce to establish and maintain a 
Commerce Control List (Control List), consisting of items that 
if exported to certain end-users or for certain end-uses could 
jeopardize U.S. national security.
    Under Title I, the Secretary may require a license, other 
authorization, or other requirement for the export of any item 
on the Control List. The bill establishes several forms of 
licensing and other authorizations. The list of types of 
licenses or other authorizations is not exclusive. The 
Secretary may establish conditions, including reporting and 
recordkeeping requirements, for the use of any license or other 
authorization to ensure proper use of the license or other 
authorization.
    The Committee intends that exporters be able to provide 
replacement parts for their exports unless the Secretary 
determines that there is a reason not to do so. Toward that 
end, Title I provides that a license or other authorization 
will not be required for after-market service or replacement 
parts provided on a one-for-one basis for a lawfully exported 
item. Exceptions to this provision are authorized when the 
Secretary of Commerce determines that a license or other 
authorization is necessary, or when the after-market or 
replacement part or service would enhance the capabilities of 
an item that gave rise to control of that item in the first 
place.
    The Committee also intends that exporters be able to export 
technologies incidental to an exported item, as long as such 
technologies relate to the installation and operation of the 
item, and do not enhance any capability that led to the item's 
inclusion on the Control List. The bill therefore provides that 
a license for an export of an item includes the export of 
incidental technology, but only so long as that technology does 
not exceed the minimum necessary to install, maintain, repair, 
inspect, operate, or use the item.
    The Committee believes that export control processes and 
procedures should be transparent. The Committee also recognizes 
the value in allowing exporters to make their case about what 
items should and should not be controlled. Toward that end, 
Section 103 directs the Secretary to consult with a broad array 
of interested parties, particularly when it comes to decisions 
on the mass-market or foreign availability status of items on 
the Control List, and to inform the public about changes in 
export policy, procedures, and regulations. Additionally, 
Section 105 authorizes the Secretary to establish, on the 
Secretary's own initiative or at the request of industry 
representatives, Export Control Advisory Committees consisting 
of experts from industry and government. Furthermore, the 
President may establish a President's Technology Export Council 
(PTEC) to advise him on the implementation, operation, and 
effectiveness of our export control system, including key 
trends and issues related to the export of high-tech items.
    The bill provides that the Secretary may create regulations 
to implement the bill's provisions regarding the Control List, 
export licenses, and other authorizations and requirements, and 
any other provisions of S. 149, and states specifically that no 
fees may be charged in connection with an export license 
application.
    Finally, the bill reaffirms the basic right of U.S. 
companies and individuals to export.

Title II--National security export controls

    Title II authorizes the President to impose export controls 
for national security purposes. Subtitle A details the 
authorities and procedures necessary to implement national 
security export controls. Subtitle B outlines the foreign 
availability and mass-market determination and set-aside 
procedures.
            Subtitle A: Authority for national security export controls
    Under S. 149, the authority to impose national security 
controls is vested in the President and exercised by the 
Secretary of Commerce, in consultation with the Secretary of 
Defense, the intelligence agencies, and other appropriate 
departments and agencies. The bill's grant of authority is 
identical to that of the current Export Administration Act, 
with one exception: a specific reference to the role of 
intelligence agencies is included. This change reflects the 
Committee's belief that the intelligence community plays an 
important role in providing information that could be useful 
for the development and implementation of export control 
policy.
    The bill retains the purpose set forth in the current 
Export Administration Act for imposing controls for reasons of 
national security: to restrict the export of items that would 
contribute to the military potential of countries so as to 
prove detrimental to the national security of the United 
States. However, S. 149 expands this purpose in two important 
areas. First, the Committee authorizes national security export 
controls to stem the proliferation of weapons of mass 
destruction and the means to deliver them. Second, national 
security export controls are authorized to deter acts of 
international terrorism.
    The bill authorizes export controls based on the end-use or 
end-user of an item if that item could contribute to the 
proliferation of weapons of mass destruction or the means to 
deliver them. The Committee intends this provision to permit 
the control of items that may not be listed on the Control 
List, but that should be controlled due to the intended 
recipient or anticipated use of the item.
    Section 201(d) authorizes the President to impose enhanced 
controls on an item controlled for national security purposes, 
notwithstanding its status as an incorporated part or component 
or as foreign available or mass-market item, if the President 
determines that removing controls would constitute a 
significant threat to the national security of the United 
States. The Committee intends for this authority to be used 
only in extraordinary circumstances, thus ensuring that the 
export control system maintains maximum transparency and 
predictability, with minimum regulatory burden, for the 
exporter. If enhanced control authority is exercised, the 
President must report the determination, along with the 
specific reason for the determination, to the congressional 
committees of jurisdiction. These review and reporting 
requirements are intended to promote accountability, 
discipline, and transparency in the decision-making process.
    Section 202 authorizes the Secretary of Commerce to 
establish and maintain a National Security Control List. The 
Secretary, with the concurrence of the Secretary of Defense and 
in consultation with other appropriate agencies, is to identify 
and place items on the list. The Secretary is required to 
review the list continually and, with the concurrence of the 
Secretary of Defense and in consultation with other appropriate 
agencies, add items that require control and remove items that 
no longer warrant control, a process similar to that outlined 
in the current Export Administration Act. Since the Committee 
expects continuity in the initial identification of items 
controlled for national security purposes, the bill requires 
that all items that are included on the Control List on the day 
prior to the date of enactment of the bill and controlled for 
national security purposes be included on the National Security 
Control List. The National Security Control List subsequently 
would be modified in accordance with this section. The 
Committee also provides guidance, in the form of risk factors, 
for determining those items to be placed on the National 
Security Control List.
    The Committee seeks to increase the transparency and 
predictability of the export control system by creating a 
country tiering mechanism to be used in the determination of 
license requirements or other authorizations. Section 203 
requires the President to establish a tiering system consisting 
of no less than three tiers. Each country is to be assigned to 
a tier for each controlled item or group of controlled items. 
The lowest risks of diversion or misuse are to be assigned to 
the lowest tier, while the highest risks are to be assigned to 
the highest tier. Within this framework, the Committee intends 
that the President have a great deal of flexibility in 
assigning countries and items to the appropriate tiers, taking 
into consideration the factors set forth in Section 203(c). As 
a result of the assessments, and in order to achieve the 
purposes enumerated in Section 201(b), any given country may be 
placed in different tiers for different groups of items (e.g., 
computers, chemicals) and may even be placed in different tiers 
for individual items within a group of items. Being placed at a 
certain tier level with respect to one item or group of items 
does not create a presumption that the country will be placed 
at that level for any other item or group of items.
    The Committee intends for the tiering system to provide 
license applicants with greater knowledge of the likelihood of 
their license applications being approved. Furthermore, the 
Committee expects that the tiering system will provide an 
incentive for countries to improve their export control systems 
and to reduce the incidents of misuse or diversion of 
controlled items, and thereby be assigned to a lower tier.
    The bill recodifies Section 5(m) of the existing Export 
Administration Act by setting certain limitations on 
controlling the export of items containing controlled parts or 
components and the reexport of foreign-made items incorporating 
controlled parts or components. Under Section 204(a), controls 
may not be placed on an item solely because the item contains 
parts or components subject to controls if the parts or 
components are essential to the functioning to the item, are 
customarily included in the sales of the item, and comprise 25 
percent or less of the total value of the item. Likewise, 
Section 204(b) codifies current regulatory practice by 
providing that no authority or permission may be required to 
reexport to a country (other than one designated under section 
310) an item produced in a foreign country that contains 
controlled U.S. parts or components, if the value of the parts 
or components comprise 25 percent or less of the total value of 
the item. For reexport to those countries designated as 
countries supporting international terrorism pursuant to 
Section 310 the value threshold is reduced to 10 percent.
    Section 205 requires the Secretary of Commerce to establish 
a process for interested persons to petition to change the 
status of an item on the Control List. The Committee believes 
that persons outside of the government may have information 
relevant to whether an item should remain on the Control List, 
and this section is intended to ensure that such information is 
transmitted to and considered by the Secretary.
            Subtitle B: Foreign availability and mass-market status
    The Committee has concluded that the effectiveness of U.S. 
export controls is increased if targeted on those items that 
can, in fact, be controlled. It does little to promote U.S. 
interests if items that are available from foreign sources or 
on a mass-market basis are controlled. Instead, it directs 
scarce control resources into unproductive avenues. Unilateral 
controls on U.S. exports, unlike multilateral controls, rarely 
achieve their intended results. While controls on foreign-
available or mass-market items are ineffective in promoting 
national security, they effectively decrease the 
competitiveness of U.S. exporters.
    The Committee believes that the U.S. export control regime 
should focus on controlling those items that pose the greatest 
risk to national security. Dr. Hicks testified that the U.S. 
``must put up higher walls around a much smaller group of 
capabilities and technologies.'' 14 The Committee 
believes there is little national security benefit derived from 
controlling U.S. items if substantially identical items can be 
acquired through another source or if such items are produced 
and available for sale in large volume to multiple purchasers. 
Therefore, the U.S. export control system must include 
effective mechanisms whereby controls on items which have 
foreign availability or mass-market status would be 
removed.15
---------------------------------------------------------------------------
    \14\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable Donald 
A. Hicks, Chairman, Hicks & Associates, and former Under Secretary of 
Defense for Research and Engineering, and chairman, Defense Science 
Board Task Force on Globalization and Security.
    \15\ Under S. 149, foreign availability and mass-market status 
would apply only to items controlled for national security purposes; 
items that are foreign-available or mass-market would remain subject to 
foreign policy controls.
---------------------------------------------------------------------------
    Because unilateral controls on foreign-available items are 
ineffective given their availability from foreign sources, S. 
149 recognizes the need to continue and strengthen the existing 
foreign availability exemption from export controls. Mr. John 
Douglass, President of the Aerospace Industries Association, 
testified that ``[e]xcept for very unusual circumstances, 
mostly related to lethal military equipment, U.S. companies 
should be allowed to sell products that are, or are expected to 
be, available from other sources. Shifting the source of supply 
does not punish the importer; it punishes the 
exporter.''16 Additionally, Dr. Hicks noted:
---------------------------------------------------------------------------
    \16\ Hearing on the reauthorization of the Export Administration 
Act before the Senate Subcommittee on International Trade and Finance 
of the Senate Committee on Banking, Housing, and Urban Affairs, June 
24, 1999, testimony of Mr. John Douglass, President and Chief Executive 
Officer, Aerospace Industries Association.

          DoD should attempt to protect for the purposes of 
        maintaining military advantage only those capabilities 
        and technologies of which the U.S. is the sole 
        possessor and whose protection is deemed necessary to 
        preserve an essential military capability. Protection 
        of capabilities and technologies readily available on 
        the world market is, at best, unhelpful to the 
        maintenance of military dominance and, at worst, 
        counterproductive (e.g., by undermining the industry 
        upon which U.S. military-technological supremacy 
        depends).17
---------------------------------------------------------------------------
    \17\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable Donald 
A. Hicks, Chairman, Hicks & Associates, and former Under Secretary of 
Defense for Research and Engineering, and chairman, Defense Science 
Board Task Force on Globalization and Security.

    The bill states that an item has foreign availability 
status if it is available: (a) from sources outside the U.S., 
including countries that participate with the U.S. in 
multilateral export controls; (b) at a price that is not 
excessive when compared to the price at which a controlled 
country could acquire such item; and (c) in sufficient quantity 
that renders control ineffective. This foreign availability 
definition modifies that contained in the current Export 
Administration Act in order to address problems with the 
operation of the existing definition.
    Likewise, because mass-market items are virtually 
uncontrollable by the nature of their wide distribution 
channels, large volumes, and general purposes, S. 149 
recognizes the necessity of a mass-market exemption from export 
controls. Mr. James W. Jarrett, President of Intel China, 
summed up the reasoning for a mass-market exemption from 
controls as follows:

          A major step in achieving a refocusing of export 
        controls is the removal of restrictions on mass market 
        products. Mass market products, by their very nature, 
        are not susceptible to effective control and can 
        contribute to strategic military capability in only the 
        most generalized way. They are sold in very high 
        volumes through a multitude of distribution channels 
        and are not uniquely designed for individual 
        applications.18
---------------------------------------------------------------------------
    \18\ Hearing on the reauthorization of the Export Administration 
Act before the Senate Subcommittee on International Trade and Finance 
of the Senate Committee on Banking, Housing, and Urban Affairs, April 
14, 1999, testimony of Mr. James W. Jarrett, President, Intel China.

    In determining whether an item has mass-market status, the 
Secretary is to consider the following criteria with respect to 
the item or a substantially identical or directly competitive 
item: (a) the production and availability for sale in a large 
volume to multiple potential purchasers; (b) the widespread 
distribution through normal commercial channels; (c) the 
conduciveness to shipment and delivery by generally accepted 
commercial means; and (d) the use for the item's normal 
intended purpose without substantial and specialized service.
    The Committee expects the Secretary's mass-market 
determination to be consistent with past practice in connection 
with, for example, the establishment of new export control 
thresholds for microprocessors and computers. Under Section 
211, a determination of mass-market status is to apply to all 
items that are substantially identical or directly competitive 
in order to avoid discriminatory treatment and disruption of 
the competitive balance among products or technology.
    While individual or particular items are eligible for mass-
market status, the initial determination should, whenever 
possible, be made for the generic class or category of items, 
following the current practice with respect to the Commerce 
Control List. Thus, mass-market calculations should include 
production or sales of all items that are either substantially 
identical or directly competitive to the item under assessment. 
These generally equivalent items should qualify for mass-market 
status even though as individual products they may not 
otherwise meet the production or sales volumes required for 
mass-market status.
    The Committee expects foreign availability and mass-market 
status reviews of items to occur on a continuing basis, 
including reviews initiated at the request of the Office of 
Technology Evaluation (established pursuant to Section 214) or 
upon the receipt of a request from an interested party. To 
promote maximum responsiveness to the exporter, and consistent 
with the current Export Administration Act, S. 149 requires the 
Secretary to respond within a specified period of time (here, 
six months) with regard to requested guidance on the foreign 
availability or mass-market status of an item.
    In order to keep pace with changing technology and markets, 
the Secretary's determination should take into consideration 
developing technological and market trends. As Dr. Hicks noted:

          What is new [today] is the dramatic acceleration of 
        global integration and the resulting political, 
        economic, and technological change the world has seen 
        over the last decade. Goods and services, materials, 
        capital, technology (know-how and equipment), 
        information, customs, people, and energy all flow 
        across national borders, not always freely but most 
        often successfully * * * At the core of accelerated 
        global integration--indeed, its principal cause and 
        consequence--is the information revolution. Driven by 
        quantum leaps in telecommunications and computing 
        efficiency and effectiveness, the information 
        revolution is knocking down barriers of physical 
        distance, blurring national boundaries and creating 
        cross-border communities of all types.19
---------------------------------------------------------------------------
    \19\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable Donald 
A. Hicks, Chairman, Hicks & Associates, and former Under Secretary of 
Defense for Research and Engineering, U.S. Department of Defense, and 
chairman, Defense Science Board Task Force on Globalization and 
Security.

Thus, the Secretary's assessments should take account of 
changes brought about by the globalization of business and 
trade flows. As Dr. Hamre stated, ``export controls must 
recognize and complement modern business 
practices.''20
---------------------------------------------------------------------------
    \20\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 14, 2001, testimony of the Honorable John 
J. Hamre, President and Chief Executive Officer, Center for Strategic & 
International Studies, and former Deputy Secretary of Defense.
---------------------------------------------------------------------------
    The Committee notes that there may be occasions--albeit 
rare--when an item that is available from foreign sources or is 
mass-market should be controlled because the item nonetheless 
would pose a threat to U.S. national security. Therefore, the 
bill allows the President to ``set-aside'' mass-market or 
foreign availability determinations in certain circumstances. 
Any presidential set-aside determination is to be reviewed 
every six months, with a report sent to the congressional 
committees of jurisdiction for each set-aside. These review and 
reporting requirements are intended to promote accountability, 
discipline, and transparency in the decision-making process. It 
also must be emphasized that the set-aside authority cannot be 
delegated by the President.
    Consistent with the foreign availability provisions 
contained in Section 5(f) of the current Export Administration 
Act, the set-aside of such determination is to expire no later 
than 18 months after such determination, unless the President 
has been able to achieve an agreement to eliminate the foreign 
availability of that item. The Committee believes that if the 
President cannot convince other suppliers of that item to 
impose export controls on that item within an 18-month period, 
multilateral controls for that item are not likely to occur. 
Moreover, the increasingly truncated production cycle of high-
tech goods is likely to result in pervasive availability or 
obsolescence of the item on the world market within the 18-
month time frame.
    Unlike a foreign availability determination set-aside, a 
mass-market determination does not automatically expire. The 
President, however, still must review the mass-market set-aside 
every six months. The Committee intends for the six-month 
review to impose accountability and discipline in the 
President's decision-making process.
    Given the rapid changes in technology and its importance to 
the U.S. economy, the Committee believes a specifically 
dedicated office is necessary to track worldwide technological 
developments in industry sectors critical to U.S. national 
security interests. Therefore, Section 214 establishes an 
Office of Technology Evaluation (OTE) within the Department of 
Commerce to facilitate technical studies of foreign 
availability and mass-market conditions, as well as evaluations 
of multilateral export control regimes, other governments' 
export control policies, and U.S. industrial sectors critical 
to the U.S. defense industrial base. As Dr. Richard T. Cupitt, 
Associate Director, Center for International Trade and 
Security, University of Georgia, noted, ``the Office of 
Technology Evaluation will need to apply considerable resources 
to this task.'' 21
---------------------------------------------------------------------------
    \21\ Hearing on the establishment of an effective, modern framework 
for export controls before the Senate Committee on Banking, Housing, 
and Urban Affairs, February 7, 2001, testimony of Dr. Richard T. 
Cupitt, Associate Director, Center for International Trade and 
Security, University of Georgia.
---------------------------------------------------------------------------
    Toward that end, the Committee expects OTE personnel to 
have training and expertise in economic analysis, the defense 
industrial base, technological developments, and national 
security and foreign policy export controls. The bill permits 
the Secretary to accept, on nonreimbursable detail to the 
Office, employees of other appropriate departments and 
agencies, thus allowing the Commerce Department to draw upon 
the unique skills and competencies of employees of other 
departments or agencies.

Title III--Foreign policy export controls

    Title III authorizes the imposition of export controls for 
foreign policy purposes. Since most foreign policy controls 
often are unilateral in practice, and because it is clear that 
multilateral controls are preferable to unilateral controls, 
Title III imposes certain disciplines on the imposition of 
foreign policy controls to ensure that they principally affect 
the target of the controls rather than American suppliers.
    The disciplines detailed in Title III track, in most 
respects, those set forth in Section 6 of the current Export 
Administration Act. However, there is at least one significant 
difference: the bill narrows the scope of purposes for which 
foreign policy controls can be imposed, most notably by moving 
to Title II the authorization to impose export controls to stem 
the proliferation of weapons of mass destruction, chemical and 
biological weapons, and the means to deliver them. These goals 
have such clear national security implications that they are 
more appropriately comprehended within Title II.
    Title III specifically authorizes export controls to be 
imposed to promote the foreign policy objectives of the United 
States; to promote international peace, stability, and respect 
for fundamental human rights; and to deter and punish acts of 
international terrorism.
    Section 301(c) codifies current regulatory practice that 
prohibits controlling reexports from a foreign country of items 
containing parts or components produced in the United States, 
unless such reexport is destined to go to a country supporting 
international terrorism and the value of the parts and 
components originating in the United States is more than 10 
percent of the total value of the item. Section 301(d) 
recodifies to a large extent Section 6(p) of the current Export 
Administration Act relating to contract sanctity.
    In order to impose foreign policy controls, the President 
must follow the procedures outlined in Title III. Both the 
current Export Administration Act and Title III of S. 149 
require the President to consult with the congressional 
committees of jurisdiction and negotiate with the government of 
the country against which the control is proposed prior to 
imposing a foreign policy export control. Title III, however, 
imposes an additional requirement. Section 302 provides that 
the President must publish notice in the Federal Register at 
least 45 days, and solicit public comment at least 30 days, 
prior to imposition of a control. The Committee believes this 
requirement will increase transparency in the process of 
imposing foreign policy controls and allow all interested 
parties to provide information relating to any potential impact 
the control may have. Title III also allows the President to 
defer compliance with this requirement, as well as the 
reporting requirement of Section 304, if deferral is in the 
national interest and the President satisfies these 
requirements within 60 days of the imposition of the control.
    Section 303 provides criteria to guide the President in 
imposing export controls for foreign policy purposes, which 
build on the criteria set forth in Section 6(b) of the current 
Export Administration Act. An export control imposed under this 
title must (a) have a specific objective; (b) have an objective 
standard for evaluating its success; (c) include an assessment 
by the President that the control is likely to achieve its 
objective and that the achievement of the objective outweighs 
any potential cost to other U.S. interests; (d) be targeted 
narrowly; and (e) seek to minimize the impact on humanitarian 
activities of the United States in the country subject to the 
control.
    Section 307 requires the President to review all existing 
controls by February 1, 2002, and every two years thereafter 
(the ``renewal year''). Any control not specifically renewed 
pursuant to the required report to the congressional committees 
of jurisdiction is to expire on March 31 of the renewal year. 
While the current Export Administration Act terminates foreign 
policy controls one year after imposition unless extended by 
the President, the Committee believes the additional 
requirement imposed on the President in Title III justify 
extending the review and renewal period to two years.
    Section 309 authorizes the President to impose controls on 
exports in order to comply with international obligations and 
multilateral export control regime commitments, notwithstanding 
any other provision of S. 149. This section, derived from 
Section 6(i) of the current Export Administration Act, is 
intended to apply to those items that could be controlled for 
national security purposes pursuant to Title II or foreign 
policy purposes pursuant to Title III. Section 310 recodifies 
Section 6(j) of the current Export Administration Act relating 
to the designation of countries determined to be supporters of 
international terrorism and the requirement that exports to 
such countries be licensed. Finally, Section 311 preserves 
authority contained in Section 6(n) of the current Export 
Administration Act to ensure that crime control and detection 
instruments and equipment may be exported only subject to an 
export license.

Title IV--Procedures for export licenses and interagency dispute 
        resolution

    The Committee strongly believes that transparency and 
accountability are necessary components of the export license 
process. Government must avoid unreasonable delays in 
processing license applications. This will ensure both that 
U.S. exporters are not disadvantaged in the global marketplace 
and that national security or foreign policy concerns are 
promptly addressed. Sharing information between the departments 
or agencies that have an export control mandate is vital to 
making well-informed license decisions.
    To ensure that export license decisions are consistent with 
U.S. national security and foreign policy goals, the bill 
establishes a risk management framework. Criteria for the 
evaluation of export license applications include the 
characteristics of the item, the threat to U.S. national 
security or foreign policy, the risk of diversion or misuse, 
the end-user or end-use, and various risk mitigating factors. 
The analytic product of the intelligence community is to be 
fully considered with regard to license applications.
    Under Section 401, the Department of Commerce will have 
nine days to ensure an application for export license is 
complete, verify that a license is required for the item, and 
make the appropriate referrals to other departments and 
agencies (the ``referral agencies''). The referral agencies 
will have 30 days to consider the application and forward a 
recommendation to Commerce. If any department or agency fails 
to respond within the 30 days, it is to be deemed to have no 
objection to the issuance of the license. These time limits for 
interagency review comport with the deadlines under current 
practice as established by Executive Order 12981.
    To ensure compliance with the time limits, Section 401(f) 
allows an applicant to file a petition with the Secretary. In 
response, the Secretary is directed to act immediately to 
correct the situation causing the delay, and so notify the 
applicant. If 20 days after submission of the petition the 
processing of the application still is not in conformance with 
the time limits set forth in this section, the applicant is 
authorized to pursue action in U.S. district court to compel 
compliance with the time limits.
    The Committee believes, however, that without some 
exceptions to these mandatory time limits for processing 
license applications, there could be an increased occurrence of 
unnecessary license denial. Therefore, Section 401(g) includes 
certain specific exceptions to the mandatory time periods to 
allow for ``stopping the clock.'' These exceptions include 
situations in which (a) the license applicant and Secretary of 
Commerce mutually agree that more time is necessary to process 
the application; (b) more time is needed to verify the identity 
and reliability of the end-user; (c) additional time is 
necessary to secure government-to-government assurances 
regarding item end-use; (d) more time is required for 
multilateral review, when applicable; (e) additional time is 
needed to allow for congressional notification, when required; 
or (f) more time is necessary to permit consultation with 
foreign governments.
    At the end of 30 days (excluding the aforementioned 
exceptions), the Secretary of Commerce is directed to issue the 
license, notify the applicant of the intent to deny the 
license, or notify the applicant that the application is being 
referred to the interagency dispute resolution process. If an 
export license application is to be denied, the Secretary is to 
inform the applicant of the determination to deny, the specific 
basis for the denial, and any modifications to the proposed 
export that might permit the export to be approved. The 
applicant is permitted 20 days in which to respond to a 
proposed denial, thus allowing an opportunity to address or 
correct the concerns prompting the denial. If an applicant 
wishes to withdraw an application at any time, the withdrawal 
must be submitted in writing.
    In any case in which the Secretary of Commerce receives a 
written request for classification of a proposed export, 
Section 401(h) directs the Secretary to notify the Secretary of 
Defense and other appropriate departments or agencies to ensure 
that other agencies have appropriate input. The Secretary must 
inform the requestor of the proper classification within 14 
days. Currently, interagency review of commodity classification 
requests are subject to a set of administrative guidelines 
issued in 1996 to improve interagency coordination and 
transparency with regard to such requests.22 The 
Committee intends for S. 149 to leave intact the 1996 
guidelines until they are modified or replaced by the 
Administration. Toward that end, Section 401(h) neither 
codifies the commodity classification procedures detailed in 
the current guidelines nor restricts the Administration's 
ability to modify or replace them.
---------------------------------------------------------------------------
    \22\ Memorandum from the National Security Council, April 15, 1996.
---------------------------------------------------------------------------
    The Committee believes that effective interagency dispute 
resolution is important to ensure that (a) a wide range of 
facts and opinions are brought to bear on each case; (b) the 
system encourages decision rather than indecision; and (c) 
agencies are allowed when necessary to escalate disputed cases 
to the highest levels of government. Section 402 of bill 
therefore establishes an improved, statutory interagency 
dispute resolution process.
    Under Section 402, if the agencies do not agree on an 
export license application, the application is to be referred 
to the initial level of review within the interagency dispute 
resolution process. The Secretary of Commerce is directed to 
establish an interagency committee for this review and 
designate a committee chair. The chair is to consider the 
reviewing agencies' positions and make a decision on the 
license application. The chair's decision may be appealed by 
the representative of a dissenting agency, and additional 
levels of review must provide for decision-making based on a 
majority vote (rather than the current practice of unanimity). 
Any appeal of an approval or denial of a license application at 
the higher level of review may only be escalated by an official 
appointed by the President, by and with the advice and consent 
of the Senate, or an officer properly acting in such capacity. 
Section 402 also requires that the interagency committee keep 
minutes of all meetings, permitting agencies to go ``on the 
record'' with their votes and promoting accountability.
    The entire interagency process is to be completed or 
referred to the President not later than 90 days after the date 
of initial referral for interagency review, consistent with 
current practice under Executive Order 12981. Once a final 
decision is made under the interagency dispute resolution 
process, the Secretary of Commerce is directed to issue the 
license or notify the applicant of the intention to deny the 
application.

Title V--International arrangements; foreign boycotts; sanctions; and 
        enforcement

    The Committee believes that the United States should 
continue to exercise its leadership in export controls by 
increased emphasis on active participation in multilateral 
export control efforts. The Committee strongly encourages 
strengthening adherence to these regimes, as well as 
participation in new export control regimes that serve the 
national security and foreign policy interests of the United 
States.
    The Committee notes that certain multilateral export 
control regimes work more effectively than others. The 
Wassenaar Arrangement arguably is the least effective, largely 
because it does not contain a ``no undercut'' policy to prevent 
one regime member from exporting an item previously denied by 
another member to the same destination. In addition, non-regime 
members do not respect Wassenaar regime guidelines, further 
weakening its effectiveness. For example, China is making great 
inroads in the computer and semiconductor field, and India is 
producing high-quality encryption software; yet neither are 
members of the Wassenaar regime. Current controls on these 
items could become ineffective if these nonmembers continue to 
produce and freely export items that exceed the control 
criteria of the Wassenaar regime.
    Section 501 of the bill encourages U.S. participation in 
multilateral export control regimes that support U.S. national 
security objectives. Section 501(b) requires the President to 
submit to the congressional committees of jurisdiction an 
annual report in which the President evaluates the 
effectiveness of the multilateral export control regimes and 
makes an assessment of the steps taken by the U.S. to 
strengthen the regimes.
    Section 501(c) directs the President to establish standards 
for any membership or future membership of the United States in 
a multilateral export control regime. The President also is to 
take steps to establish certain features in multilateral 
regimes, including (a) full membership and adherence to the 
policies and objectives of a regime; (b) enforcement and 
compliance with regime rules and guidelines; (c) enhancement of 
public understanding of the purpose of the regime; (d) 
consistent and uniform interpretation of export control 
policies; (e) enhanced cooperation and compliance of nonmembers 
with regime guidelines; (f) coordinated export control 
strategies among high level representatives of the governments 
of members of the regimes; (g) a common list of regime-
controlled items; (h) regular updates of the list to reflect 
when new and sensitive items should be controlled or when items 
no longer warrant control or pose a risk to the national 
security of the regime's members; (i) agreement on preventing 
export or diversion of the most sensitive items to countries 
whose activities pose a threat to the U.S. or its allies; (j) 
harmonization of export license approval procedures, practices, 
and standards among regime members; and (k) limits on 
``undercutting'' among regime members. The Committee places 
great emphasis on the importance of establishing a ``no 
undercut'' rule whereby members of regimes agree to limit 
exports of substantially similar or directly competitive items 
in cases where any member has denied an export license for such 
item, and to refrain from approving a license to an end-user to 
which a member has denied a license for a similar item.
    Section 501(d) directs the President to take steps to 
establish standards for export control systems for members of 
each regime. These standards are to include enforcement 
authority sufficient to deter potential violations, a common 
license approval process, adequate training of enforcement 
officers to investigate and prevent illegal exports, and 
uniform recordkeeping, information sharing, and devotion of 
resources to administer an effective export control system.
    With respect to foreign boycotts, Section 502 recodifies 
Section 8 of the current Export Administration Act. As a clear 
demonstration that the Congress places strong emphasis on the 
continued unacceptability of this boycott, enforcement of the 
antiboycott provisions is strengthened by raising penalties for 
antiboycott violations to the same level as those for export 
control violations.
    For many potential violators, the monetary penalties 
associated with the current Export Administration Act pose no 
compelling deterrent. The Committee believes the success of 
export control efforts depends upon vigorous enforcement of the 
law with meaningful punishment of violators. A variety of 
experts have stressed the need for tougher penalties. As Dr. 
Cupitt noted, ``sharply increasing the penalties for violations 
* * * helps implement the first element of a `higher fences, 
fewer goods' strategy.'' 23 The WMD Commission also 
strongly supported enhanced penalties as a deterrent to would-
be violators, stating that under current law, ``an export 
control violator could view the risk and burden of penalty for 
a violation as low enough to be merely a `cost of doing 
business,' to be balanced against the revenue received from an 
illegal transaction.'' 24 The Cox Committee 
recommended particular attention in reauthorization legislation 
to re-establishing higher penalties for export control 
violations.25
---------------------------------------------------------------------------
    \23\ Hearing on the reauthorization of the Export Administration 
Act before the Senate Committee on Banking, Housing, and Urban Affairs, 
June 24, 1999, testimony of Dr. Richard T. Cupitt, Associate Director, 
Center for International Trade and Security, University of Georgia.
    \24\ Report from the Commission to Assess the Organization of the 
Federal Government to Combat the Proliferation of Weapons of Mass 
Destruction, July 14, 1999.
    \25\ See Recommendation 29 of the Report of the Select Committee on 
U.S. National Security and Military/Commercial Concerns with the 
People's Republic of China, May 25, 1999.
---------------------------------------------------------------------------
    Toward that end, S. 149 significantly enhances criminal and 
civil penalties for export control violations. Section 503 
subjects individuals to a criminal fine of up to 10 times the 
value of the exports or $1 million for each violation, 
whichever is greater, for willfully violating or willfully 
conspiring to violate the provisions of S. 149 or any 
regulation issued thereunder. In addition, individuals may be 
imprisoned for a period of up to 10 years. Persons other than 
individuals (such as companies) are to be fined up to 10 times 
the value of the export or $5 million, whichever is greater, 
for each violation.
    Under Section 503, the Secretary of Commerce may impose on 
a violator, in addition to or in lieu of criminal penalties, a 
maximum civil fine of $500,000 for each export control 
violation. The Committee intends that the Secretary exercise 
this authority to impose penalties commensurate with the 
offense. The Committee recognizes that the gravity of different 
violations may vary widely and the Secretary needs discretion 
to take into account the aggravating and mitigating factors 
that may be present in any given case.
    The Secretary also may deny for up to 10 years the export 
privileges of any person convicted of violating export control 
law, or exclude the person from practice before the Department 
of Commerce. Moreover, to increase the effectiveness of overall 
U.S. export control efforts, those convicted of other criminal 
statutes which prohibit trafficking in weapons of mass 
destruction or lesser offenses in connection with export 
control violations also are subject to denial of export 
privileges. Furthermore, those convicted of export control 
violations will find the property they exported and the fruits 
and instrumentalities of their crime subject to forfeiture.
    The bill establishes a statute of limitations of five years 
for violations, and sets forth time periods during which the 
statute of limitations is tolled. In a case where criminal 
prosecution is pursued, the statute of limitations for bringing 
an administrative proceeding is tolled from the date of 
indictment until 6 months after the date the criminal action is 
concluded, thus preserving the government's civil recourse 
against a violator without endangering the pursuit of a 
criminal prosecution.
    With regard to sanctions, Sections 504 and 505 reauthorize 
both the current missile proliferation control sanctions and 
the current chemical and biological weapons control sanctions. 
The Committee believes that these sanctions serve as strong 
deterrents to U.S. or foreign persons who may knowingly 
transfer missile technology or lethal chemical or biological 
weapons to persons in violation of the Missile Technology 
Control regime guidelines, or to persons that the President has 
determined has directly engaged in the illegal use, transfer or 
preparation of chemical and biological weapons.
    The bill further strengthens the enforcement tools of the 
Office of Export Enforcement of the Bureau of Export 
Administration at the Department of Commerce. Section 506 
authorizes the Office of Export Enforcement to conduct 
undercover investigations in furtherance of its enforcement 
responsibilities. It also establishes procedures for the use of 
funds to support such undercover investigations, and sets forth 
reporting requirements. Violations of the Export Administration 
Act are made predicate offenses for wiretap authority.
    The bill also establishes procedures for administrative 
actions, including the imposition of Temporary Denial Orders 
(TDO). A TDO may be sought when there is reasonable cause to 
believe that a person is engaging in or is about to engage in 
activity which would constitute an export control violation. In 
cases where a criminal indictment for export control or related 
violations has been returned, there may be considerable concern 
on the part of the government that the person could continue to 
engage in illegal export activity. Therefore, criminal 
indictment is a condition considered as adequate grounds for 
the issuance of a TDO.
    The Committee places strong emphasis on the use of post-
shipment verifications (PSVs) as an important part of the 
enforcement effort. Such verifications will focus on exports 
involving the greatest risk to national security. To strengthen 
compliance with these PSVs, the bill authorizes the Secretary 
may take action against those who refuse to allow such checks. 
If an end-user refuses to allow a post-shipment verification, 
export licenses for controlled items to that end-user will be 
denied until such time as the post-shipment verification is 
conducted. If a country refuses to allow a post-shipment 
verification, the Secretary is authorized to deny the export of 
substantially identical or directly competitive items to all 
end-users in that country until such time as the country allows 
the post-shipment verification.
    Section 506 includes an authorization for funding for the 
Bureau of Export Administration of the Department of Commerce 
for fiscal year 2002 through fiscal year 2005, with certain 
funds dedicated to enforcement and compliance activities.
    Section 506(h) authorizes funding of $3.5 million for the 
Department of Commerce to hire additional staff to work with 
U.S. freight forwarders, who are important partners in 
exporting U.S. goods, to develop and implement a ``best 
practices'' program. This voluntary program is intended to help 
ensure that freight forwarders are facilitating exports in 
compliance with export control requirements.
    Currently, the Office of Export Enforcement has few 
investigators posted in important areas such as the People's 
Republic of China. This is inadequate to meet the need for 
post-shipment verifications, a significant part of the 
Department of Commerce's compliance program. In support of this 
effort, Section 506(i) authorizes the sum of $4.5 million to 
hire and place 10 additional overseas investigators in China, 
Russia, Hong Kong, India, Singapore, Egypt, Taiwan or other 
appropriate posts. The section further requires the Department 
to report as part of its annual report to Congress, and no 
later than two years after the date of enactment and annually 
thereafter, on the effectiveness of its end-use verification 
activities. Finally, Section 506(i) authorizes $5 million for 
the Department to enhance its program for verifying the end-use 
of items subject to controls.
    To provide additional assistance to the Department of 
Commerce in the administration of its responsibilities in 
processing export licenses and maintaining records, Section 
506(l) authorizes the sum of $5 million for the acquisition of 
a new computer system for export licensing and enforcement. 
Section 506(o) authorizes $2 million for the Department of 
Commerce to hire additional license review officers, and $2 
million for the department to conduct professional training of 
its license review officers, auditors and investigators who 
conduct post-shipment verification checks.
    Finally, Section 506(p) sets forth a limitation terminating 
the authority granted under S. 149 on September 30, 2004, 
unless the President provides to Congress a detailed report on 
the operation of the Export Administration Act of 2001 and of 
U.S. export controls in general, and either submits to Congress 
legislative reform proposals in connection with that report or 
certifies to Congress that reforms in connection with that 
report are not necessary. This is a one-time condition, which, 
once met, sets aside the effect of the sunset in the statute. 
Such report and legislative proposals are to be submitted to 
the Congress any time prior to October 1, 2004. If submitted 
after September 30, 2004, the provision would not have the 
effect of reviving the authority of the statute.

Title VI--Export control authority and regulations

    Title VI authorizes certain officials to implement the 
authorities granted under this bill. Section 601 provides for 
the delegation of authority not otherwise reserved for the 
President to the Secretary of Commerce, and, subsequently, to 
the Under Secretary of Commerce for Export Administration. The 
title also authorizes the appointment of such an Under 
Secretary, as well as the appointment of two Assistant 
Secretaries to assist the Secretary and Under Secretary in 
carrying out the authorities under the bill. The Committee 
intends this grant of authority to reflect the organizational 
structure currently in place at the Department of Commerce. 
This section also authorizes the President and Secretary of 
Commerce to issue regulations as necessary to carry out S. 149, 
and requires notification to the congressional committees of 
jurisdiction for amendments to such regulations.
    Section 602 recodifies Section 12(c) of the current Export 
Administration Act provisions relating to confidentiality of 
information and the availability of information to Congress and 
the General Accounting Office. The section also increases the 
penalties that can be imposed for disclosure of confidential 
information. If an officer or other employee of the U.S. 
government knowingly discloses confidential information, such 
person can be fined up to $50,000, and imprisoned not more than 
one year, for each violation. The bill also authorizes the 
Secretary to impose civil penalties of not more than $5,000 on 
persons who otherwise disclose information in violation of the 
provisions of the bill.

Title VII--Miscellaneous provisions

    The Committee recognizes the importance of keeping Congress 
fully informed about the conduct of export control policy. 
Toward that end, Section 701 requires the Secretary to report 
annually to Congress regarding export controls. The report is 
to include, among other items, (a) a description of the 
implementation of the law, including regulations issued, 
organizational changes, and delegations of presidential 
authority; (b) a status report regarding country tiering and 
the Commerce Control List; (c) a description of mass-market and 
foreign availability determinations, and foreign availability 
negotiations; (d) a description of any enhanced controls 
imposed pursuant to section 201(d); (e) descriptions of 
enforcement actions taken and sanctions imposed; (f) a detailed 
statistical summary of all applications, notifications, and 
processing times pursuant to the provisions of the law; (g) an 
assessment of the effectiveness of multilateral regime 
commitments and negotiations regarding export controls; (h) a 
description of differences between U.S. export control 
requirements and those of other multilateral regime members; 
(i) an assessment of the costs of export controls; and (j) a 
description of the progress of achieving goals set by the 
Department of Commerce under the Government Performance and 
Results Act.
    Finally, Section 701 requires that any publication in the 
Federal Register required under the bill also is to be made 
available on the Department of Commerce or another appropriate 
government website.
    Section 702 makes a number of technical and conforming 
amendments. Section 702(j) preserves authority contained in 
Section 17(c) of the current Export Administration Act to 
ensure that standard, integral civil aircraft products remain 
subject to the Export Administration Act. The Committee 
believes that commercial passenger safety is a top priority and 
that delays in the approval of licenses for standard aircraft 
equipment should be reduced in order to ensure the highest 
standard of flight safety.
    Section 702(k) repeals certain provisions of the fiscal 
year 1998 National Defense Authorization Act (NDAA) relating to 
the measurement standard used for control of high performance 
computers. The Committee believes this repeal will allow the 
President the flexibility that is necessary to rely upon the 
most appropriate and effective measurement for the control of 
computer technologies as the current state of the art would 
indicate. In the early 1990s, the United States and its allies 
developed a computer performance measurement--millions of 
theoretical operations per second (MTOPS)--for export control 
purposes. Initial U.S. controls were set at 195 MTOPS. In 1997, 
Congress codified the MTOPS standard by requiring controls on 
any computer export of more than 2,000 MTOPS; adjustments to 
the MTOPS level were permitted only pursuant to presidential 
notification and a subsequent layover period. Today, due to 
rapid technological advances, and after several adjustments, 
the MTOPS control level stands at 85,000 MTOPS.
    More and more experts agree, however, that the MTOPS 
standard does not adequately protect national security. In a 
January 2001 letter to Congress, former Secretary of Defense 
William Cohen stated that ``[o]ver the last year, DoD has 
sought to identify an alternative to the MTOPS approach to 
controlling hardware that would permit effective export 
controls on high performance computers hardware. After 
intensive effort, DoD concluded that no alternative approach is 
feasible * * * [O]ur ability to control the acquisition of 
computer hardware is largely ineffective and will be 
increasingly so within a very short time frame.'' 26 
Likewise, the General Accounting Office recently concluded that 
``using MTOPS to establish export control thresholds is 
outdated and no longer a valid measure for controlling 
computing capabilities.'' 27 Finally, a Defense 
Department report released last month agreed that ``license 
exception limits based on MTOPS do not restrict foreign access 
to high performance computing,'' and recommended abandoning 
MTOPS controls for high performance computers.28 The 
Committee recognizes the difficulty of effectively controlling 
widely available commercial computer systems in today's rapidly 
changing world, and believes that the repeal of the MTOPS 
standard will allow the President the flexibility to address 
computer controls in an effective manner.
---------------------------------------------------------------------------
    \26\ Letter from the Honorable William Cohen, Secretary of Defense, 
to the Honorable Carl Levin, Chairman, Senate Committee on Armed 
Services, January 18, 2001.
    \27\ Report to the Chairman, Senate Committee on Armed Services, 
``Export Controls: System for Controlling Exports of High Performance 
Computing Is Ineffective,'' United States General Accounting Office, 
December 2000.
    \28\ Defense Science and Technology Technical Reports, ``Export 
Control of High Performance Computing: Analysis and Alternative 
Strategies,'' Office of the Deputy Under Secretary of Defense (Science 
and Technology), Department of Defense, February 2, 2001.
---------------------------------------------------------------------------
    Section 703 includes a savings provision to preserve 
delegations, rules, regulations, and other actions made or 
issued under a number of statutes that have governed export 
control policy. It also makes clear that the prohibitions under 
S. 149 do not apply to transactions subject to certain 
requirements of the National Security Act, and that nothing 
shall affect the responsibilities of the Director of Central 
Intelligence under that Act. Finally, it directs the Secretary 
to make revisions to the Export Administration regulations, as 
required by S. 149, within 180 days.

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title; table of contents

    Section 1 provides that the bill may be cited as the 
``Export Administration Act of 2001,'' and provides a table of 
contents.

Section 2. Definitions

    Section 2 defines the terms used in the Act.

Section 101. Commerce control list

    Section 101(a) directs the Secretary of Commerce to 
establish and maintain a Commerce Control List consisting of 
items that require a license or other authorization prior to 
export. Section 101(b) specifies the types of licenses or other 
authorization that can be required. Section 101(c) provides 
that no license or other authorization is required to provide 
after-market service or replacement parts, to replace on a one-
for-one basis parts that were in an item lawfully exported from 
the United States, unless the Secretary determines that a 
license is required or the after-market service or replacement 
parts would materially enhance the capability of the item. 
Section 101(d) provides that a license or other authorization 
to export an item includes authorization to export incidental 
technology related to the item. Section 101(e) authorizes the 
Secretary to prescribe regulations to carry out the Act.

Section 102. Delegation of authority

    Section 102 allows the President to delegate the authority 
granted to him under this Act. Section 102(b)(1) limits this 
delegation to officials that are appointed by the President 
with the advice and consent of the Senate. Section 102(b)(2) 
states that the President may not delegate or transfer his 
authority to overrule or modify recommendations or decisions 
made by the Secretaries of Commerce, Defense, or State.

Section 103. Public information; consultation requirements

    Section 103 requires the Secretary of Commerce to keep the 
public fully informed of changes in export control policies and 
procedures and to consult regularly with representatives from a 
broad spectrum of enterprises, labor organizations, and 
interested citizens.

Section 104. Right of export

    Section 104 affirms that U.S. persons have the right to 
export, except as provided under this Act.

Section 105. Export control advisory committees

    Section 105 authorizes the Secretary of Commerce to appoint 
export advisory committees, made up of industry representatives 
and government officials (including officials from the 
Departments of Commerce, Defense, and State, and other 
appropriate departments or agencies), to provide technical 
advice and assistance to the Secretary and other appropriate 
officials or departments regarding actions designed to carry 
out the Act.

Section 106. President's Technology Export Council

    Section 106 authorizes the President to establish a 
President's Technology Export Council to advise the President 
on the implementation, operation, and effectiveness of the Act.

Section 107. Prohibition on charging fees

    Section 107 provides that no fee may be charged to process 
an export license application under the Act.

Section 201. Authority for national security export controls

    Section 201 authorizes the President to control exports for 
national security purposes to stem contributions to the 
military capability of potential adversaries; to stem the 
proliferation of weapons of mass destruction and the means to 
deliver them, and other significant military capabilities; and 
to deter acts of international terrorism. Section 201(c) 
authorizes export controls on items that, based on the end-use 
or end-user, could contribute to the proliferation of weapons 
of mass destruction or the means to deliver them. Section 
201(d)(1) authorizes the President to impose enhanced controls 
on National Security Control List items, notwithstanding their 
status as incorporated parts or as mass-market or foreign-
available items, if removing controls would constitute a 
significant threat to U.S. national security. Section 201(d)(2) 
requires the President to report any enhanced control 
determination, along with the specific reason for the 
determination, to the committees of jurisdiction.

Section 202. National security control list

    Section 202 requires the Secretary of Commerce to establish 
and maintain a National Security Control List, composed of 
items controlled for national security purposes, as part of the 
Commerce Control List. Section 202(a)(3) directs the Secretary, 
with the concurrence of the Secretary of Defense and in 
consultation with other appropriate departments or agencies, to 
identify items for inclusion on the List, provided that the 
List shall include all of the items on the Commerce Control 
List on the day before the date of enactment of this Act. 
Section 202(a)(3) further requires the Secretary to review the 
List on a continuing basis, and, with the concurrence of the 
Secretary of Defense and in consultation with other appropriate 
departments or agencies, make adjustments to the List. Section 
202(b)(1) requires the Secretary to consider certain risk 
factors, weighing national security concerns and economic 
costs, in establishing and maintaining the List. Section 
202(b)(2) specifies the risk factors for the Secretary's 
consideration.

Section 203. Country tiers

    Section 203 directs the President to establish a country 
tiering system of not less than 3 tiers, and assign each 
country to an appropriate tier for each controlled item or 
group of items. Section 203(b) requires that countries 
representing the lowest risk of diversion or misuse of an item 
be assigned to the lowest tier, while those representing the 
highest risk of diversion or misuse be assigned to the highest 
tier. Section 203(c) provides a number of risk factors to be 
used by the President in making assessments of countries for 
tier assignment purposes.

Section 204. Incorporated parts and components

    Section 204(a) provides that controls may not be imposed on 
an item solely because the item incorporates parts or 
components that are controlled if the part or component is 
essential to the functioning of the item, is customarily 
included in sales of the item, and is valued at 25 percent or 
less of the total value of the item, unless the item itself 
would make a significant contribution to the military or 
proliferation potential of a country or end-user which would 
prove detrimental to U.S. national security, or unless failure 
to control the item would be contrary to controls imposed under 
section 201(c) or section 309. Section 204(b) provides that no 
authority may be required for the re-export of foreign-made 
items incorporating U.S.-controlled parts if the value of the 
U.S.-controlled parts is 25 percent or less of the total value 
of the item, except that controls may be imposed on reexports 
of items to countries designated as countries supporting 
international terrorism if the controlled U.S. content is 
greater than 10 percent of the total value of the item.

Section 205. Petition process for modifying export status

    Section 205 directs the Secretary of Commerce to establish 
a process for interested persons to petition the Secretary to 
change the status of an item on the List.

Section 211. Determination of foreign availability and mass-market 
        status

    Section 211(a) directs the Secretary of Commerce to review 
and determine the foreign availability and mass-market status 
of an item on a continuing basis, upon a request from the 
Office of Technology Evaluation, or in response to a petition. 
Section 211(b) requires the Secretary to establish a process 
for interested parties to petition for a foreign availability 
or mass- market determination for an item. Section 211(c) 
provides that in any case in which the Secretary determines 
that an item has foreign availability or mass-market status, no 
license or other authorization shall be required for the export 
of such item, unless the President makes a set- aside 
determination under section 212 or 213. Section 211(d) 
establishes criteria for determining foreign availability and 
mass-market status.

Section 212. Presidential set-aside of foreign availability status 
        determination

    Section 212(a)(1) provides the President with non-delegable 
authority to set aside a foreign availability status 
determination if failing to control the item constitutes a 
threat to U.S. national security, if there is a high 
probability that the foreign availability will be eliminated 
through international negotiations, or if U.S. controls on the 
item have been imposed under section 309. Section 212(a)(2) 
requires the President to report any set-aside determination, 
along with the specific reason for the determination, to the 
committees of jurisdiction, and to publish the determination in 
the Federal Register. Section 212(b)(1) requires the President, 
if he has made a set-aside determination under section 212(a), 
to actively pursue negotiations with the governments of 
appropriate countries for the purposes of eliminating the 
foreign availability, and to notify the committees of 
jurisdiction of these negotiations. Section 212(b)(2) directs 
the President to review a set-aside determination under section 
212(a) every six months. Section 212(b)(3) provides that except 
for a set-aside determination made under section 309, a set-
aside determination shall cease to apply within 6 months if 
negotiations are never commenced, on the date that negotiations 
end without success, on the date the President determines there 
is not a high probability of eliminating foreign availability 
through negotiation, or within 18 months if the President has 
been unable to achieve agreement to eliminate foreign 
availability.

Section 213. Presidential set-aside of mass-market status determination

    Section 213(a) provides the President with non-delegable 
authority to set aside a mass-market status determination if 
failing to control the item constitutes a serious threat to 
U.S. national security and controlling the item would advance 
U.S. national security interest, or if U.S. controls on the 
item have been imposed under section 309. Section 213(b)(1) 
requires the President to report any set-aside determination, 
along with the specific reason for the determination, to the 
committees of jurisdiction, and to publish the determination in 
the Federal Register. Section 213(b)(2) directs the President 
to review a set-aside determination under section 212(a) every 
six months.

Section 214. Office of technology evaluation

    Section 214(a)(1) establishes within the Department of 
Commerce an Office of Technology Evaluation to gather, 
coordinate, and analyze all information necessary for the 
Secretary of Commerce to make foreign availability and mass-
market status determinations under the Act. Section 214(a)(2) 
directs the Secretary to ensure that the Office includes 
persons with the training, expertise and experience in economic 
analysis, the defense industrial base, technological 
developments, national security, and foreign policy export 
controls to carry out the Office's responsibilities. Section 
214(b) directs the Office to conduct a number of assessments, 
evaluations, and monitoring functions. Section 214(c) requires 
the Secretary to make available to the committees of 
jurisdiction information on the Office's operations and 
improvements in ability to assess foreign availability and 
mass-market status. Section 214(d) directs departments and 
agencies and their contractors to furnish to the Office 
information about foreign availability and mass-market status 
of items.

Section 301. Authority for foreign policy export controls

    Section 301 authorizes the President to control exports for 
the purposes of promoting foreign policy objectives; promoting 
peace, stability and respect for human rights; and deterring 
and punishing acts of international terrorism. Section 301(c) 
prohibits controlling for foreign policy reasons the export 
from a foreign country of an item containing parts or 
components produced in the United States, unless the export is 
to a country designated as a country supporting international 
terrorism if the value of the controlled U.S. parts or 
components is greater than 10 percent of the total value of the 
item. Section 301(d) prohibits controlling the export of an 
item for foreign policy purposes if the export of such item is 
in performance of a binding contract or is under an already 
issued license, unless the export of such item would constitute 
a serious threat to a foreign policy interest of the United 
States and controls on that item will be instrumental in 
remedying the situation posing the threat.

Section 302. Procedures for imposing controls

    Section 302 outlines procedures for the imposition of 
foreign policy export controls. Section 302(a) requires the 
President, not later than 45 days before imposing a foreign 
policy export control, to publish notice of intent to do so in 
the Federal Register and provide for a 30-day period for public 
comment. Section 302(b) authorizes the President to negotiate 
with the government of the foreign country against which the 
export control is imposed during the 45-day notice period. 
Section 302(c) directs the President to consult with the 
committees of jurisdiction regarding a proposed foreign policy 
control and efforts to achieve multilateral cooperation on the 
issues underlying the proposed control.

Section 303. Criteria for foreign policy export controls

    Section 303 requires foreign policy export controls to have 
clearly stated and specific foreign policy objectives, to have 
objective standards for evaluation, to include certain 
assessments by the President, to be targeted narrowly, and to 
seek to minimize any adverse impact on humanitarian activities.

Section 304. Presidential report before imposition of controls

    Section 304(a) directs the President to submit a report to 
the committees of jurisdiction prior to imposing a foreign 
policy export control. Section 304(b) details the contents of 
such report.

Section 305. Imposition of controls

    Section 305 authorizes the President to impose a foreign 
policy export control after the submission of the report 
required under section 304 and notice of the imposition of the 
control is published in the Federal Register.

Section 306. Deferral authority

    Section 306 authorizes the President to defer compliance 
with the requirements of sections 302(a), 304, or 305 if he 
determines that deferral is in the U.S. national interest and 
compliance occurs not later than 60 days after the foreign 
policy export control is imposed.

Section 307. Review, renewal, and termination

    Section 307(a)(1) provides that foreign policy export 
controls shall terminate on March 31 of each renewal year, 
defined as 2003 and every two years thereafter, unless 
specifically renewed by the President. Section 307(a)(2) 
provides an exception for a foreign policy export control that 
is required by law, is targeted against a country designated as 
supporting international terrorism, or has been in effect for 
less than one year as of February 1 of a renewal year. Section 
307(b) requires the President to review all foreign policy 
export controls in effect and, during the review period, 
consult with the committees of jurisdiction and provide for a 
period of public comment on the renewal of each export control. 
Section 307(c) requires the President to submit to the 
committees of jurisdiction a report on each export control he 
wishes to renew.

Section 308. Termination of controls under this title

    Section 308(a) requires the President to terminate any 
foreign policy export control that has substantially achieved 
the objective for which it was imposed, and authorizes him to 
terminate at any time any foreign policy export control that is 
not required by law. Section 308(b) provides an exception for 
foreign policy export controls imposed against countries 
designated as supporting international terrorism.

Section 309. Compliance with international obligations

    Section 309 authorizes the President to control exports of 
items listed on the control list of a multilateral export 
regime, or in order to comply with resolutions of the United 
Nations, treaties, or other international agreements and 
arrangements.

Section 310. Designation of countries supporting international 
        terrorism

    Section 310(a) requires a license for the export of an item 
to a country if the Secretary of State has determined that the 
government of the country has repeatedly provided support for 
international terrorism, and the export of the item could make 
a significant contribution to the military potential of the 
country or its ability to support international terrorism. 
Section 310(b) requires the Secretaries of Commerce and State 
to notify the committees of jurisdiction at least 30 days 
before issuing a license under section 310(a). Section 310(c) 
requires the Secretary of State to publish each determination 
made under section 310(a) in the Federal Register. Section 
310(d) provides that a designation made under section 310(a) 
shall not be rescinded unless the President submits to the 
Speaker of the House of Representatives, and the Chairmen of 
the Committees on Banking, Housing, and Urban Affairs and on 
Foreign Relations of the Senate a report making certain 
certifications about the government of the designated country.

Section 311. Crime control instruments

    Section 311(a) requires that crime control and detection 
instruments be approved for export only pursuant to an 
individual export license, and that determinations to approve 
or deny an export license application be made by the Secretary 
of Commerce in concurrence with the Secretary of State. Section 
311(b) provides an exception for exports to North Atlantic 
Treaty Organization member nations, Japan, Australia, or New 
Zealand, or other countries designated by the President.

Section 401. Export license procedures

    Section 401 outlines the process by which export license 
applications are considered by the Secretary of Commerce and 
other departments and agencies. Section 401(a) describes the 
responsibilities of the Secretary with regard to export license 
procedures, and outlines the criteria for evaluating 
applications. Section 401(b) requires the Secretary, within 9 
days, to review an application to ensure it is complete, verify 
that a license is required for the item, and refer it to the 
appropriate departments and agencies. Section 401(c) directs 
referral departments and agencies to respond with a 
recommendation on a referred application within 30 days of 
referral. Section 401(d) provides that within 30 days of 
referral, if the referral departments and agencies are in 
agreement, the Secretary must issue the license or notify the 
applicant of the intent to deny the license; if the referral 
departments and agencies are not in agreement, the Secretary 
must notify the applicant that the application is subject to 
interagency dispute resolution. Section 401(e) requires the 
Secretary to inform an applicant of a denial, the statutory and 
regulatory basis for the denial, the modifications (if any) 
that would permit approval, the considerations that led to the 
denial, and the availability of appeal procedures, with 
applicants permitted 20 days to cure the application's 
deficiencies. Section 401(f) directs the Secretary to establish 
an appeals process for application denials; and authorizes the 
filing of a petition with the Secretary or the filing of an 
action in United States District Court to enforce the time 
limits prescribed in this section. Section 401(g) details 
certain actions that are not to be included in the time periods 
prescribed in the section. Section 401(h) requires the 
Secretary to notify the Secretary of Defense and other 
appropriate departments or agencies of classification requests, 
and to respond within 14 days to the person making the request.

Section 402. Interagency dispute resolution process

    Section 402(a) provides that all license applications on 
which agreement cannot be reached shall be referred to the 
interagency dispute resolution process for decision. Section 
402(b) directs the Secretary of Commerce to establish an 
interagency committee for review of license applications on 
which there is disagreement, and authorizes the chair of that 
committee to consider the positions of the referral departments 
and agencies and make decisions on applications. Section 
402(b)(2) states that the analytic product of the intelligence 
community should be fully considered with regard to proposed 
licenses. Section 402(b) further directs the President to 
establish additional levels of appeal, at which decision-making 
is by majority vote, departments or agencies that fail to take 
a timely position are deemed to have no objection, and 
escalation to the next higher level of review may be made at 
the request of a Senate-confirmed official of a participating 
department or agency; and requires that all matters be resolved 
or referred to the President within 90 days of referral. 
Section 402(c) directs the Secretary, once a final decision is 
made, to promptly issue the license and ensure all appropriate 
Department personnel are notified, or notify the applicant of 
the intent to deny the application.

Section 501. International arrangements

    Section 501(a) states the policy of the United States with 
regard to multilateral arrangements, and encourages the 
President to participate in multilateral export control 
regimes. Section 501(b) requires the President to submit to the 
committees of jurisdiction an annual report evaluating the 
effectiveness of each multilateral export control regime and 
detailing efforts to strengthen and harmonize the controls of 
such regimes. Section 501(c) directs the President to establish 
certain features in any multilateral export control regimes in 
which the United States is participating. Section 501(d) 
directs the President to seek the cooperation of regime members 
in establishing certain features in the members' national 
export control systems. Section 501(e) directs the President to 
seek to achieve certain objectives with regard to multilateral 
export control regimes. Section 501(f) requires the Secretary 
of Commerce, within 120 days of the date of enactment of the 
Act, to publish in the Federal Register and post on the 
Department of Commerce website information on multilateral 
export control regimes. Section 501(g) encourages the Secretary 
to participate in the training of foreign officials regarding 
implementation of effective export controls.

Section 502. Foreign boycotts

    Section 502 directs the President to issue regulations 
prohibiting the participation of U.S. persons in boycotts 
imposed by a foreign country against a country that is friendly 
to the United States.

Section 503. Penalties

    Section 503(a)(1) provides that an individual who willfully 
violates the Act shall, for each violation, be fined up to 10 
times the value of the exports involved or $1 million, 
whichever is greater; imprisoned for up to 10 years; or both. 
Section 503(a)(2) provides that an entity that willfully 
violates the Act shall, for each violation, be fined up to 10 
times the value of the exports involved or $5 million, 
whichever is greater. Section 503(b) provides that those 
convicted of a willful violation of the Act also shall forfeit 
any property that was the subject of the violation or that was 
derived from the violation. Section 503(c) authorizes the 
Secretary of Commerce to impose civil penalties of up to 
$500,000 per violation, and to deny the export privileges of 
persons who violate the Act or its regulations. Section 503(f) 
provides that persons convicted of violations of certain laws 
may, at the discretion of the Secretary, be denied export 
privileges for up to 10 years.

Section 504. Missile proliferation control violations

    Section 504 requires the President to impose sanctions on 
U.S. or foreign persons who knowingly export or trade in items 
on the Missile Technology Control Regime (MTCR) Annex, and 
provides waiver authority in limited circumstances.

Section 505. Chemical and biological weapons proliferation sanctions

    Section 505 requires the President to impose sanctions on 
persons who have knowingly and materially contributed to 
efforts by certain countries to use, develop, or acquire 
chemical or biological weapons, and provides waiver authority 
in limited circumstances.

Section 506. Enforcement

    Section 506(a) provides general enforcement authorities for 
enforcement of the Act. Section 506(b) authorizes forfeiture of 
items seized in enforcement of the Act. Section 506(c) provides 
that cases involving violations under this Act shall be 
referred to the Secretary of Commerce for civil action, or the 
Attorney General for criminal action, or to both. Section 
506(d) authorizes the use of funds for undercover investigative 
operations. Section 506(e) authorizes the use of wiretaps for 
enforcement of the Act. Section 506(f) directs the Secretary to 
target post-shipment verifications to those exports involving 
the greatest risk to national security. Section 506(g) requires 
the Secretary to deny licenses to end-users who refuse to allow 
post-shipment verification of a controlled item. Section 506(h) 
authorizes $3.5 million to hire 20 additional employees to 
assist freight forwarders in developing a voluntary ``best 
practices'' program. Section 506(i) authorizes $4.5 million to 
hire 10 additional overseas investigators for post-shipment 
verification. Section 506(j) authorizes the Secretary, in 
cooperation with the U.S. Customs Service, to undertake 
necessary measures to detect unlawful exports and enforce 
violations of the Act. Section 506(l) authorizes $5 million for 
an export licensing and enforcement computer system. Section 
506(o) authorizes $2 million to hire additional license review 
officers, and $2 million to conduct training for new license 
review officers, auditors, and post-shipment verification 
investigators. Section 506(p)(1) authorizes funding in the 
amount of $72 million for fiscal year 2002, $73 million for 
fiscal year 2003, $74 million for fiscal year 2004, and $76 
million for fiscal year 2005, for the Department of Commerce to 
carry out the Act. Section 506(p)(2) terminates the authority 
granted by the Act unless the President provides to Congress a 
detailed report on the implementation and operation of the Act 
and of export controls in general, and either provides to 
Congress legislative reform proposals in connection with such 
report or certifies to Congress that no such legislative 
reforms are necessary.

Section 507. Administrative procedures

    Section 507 describes the administrative provisions for the 
execution of authorities under the Act.

Section 601. Export control authority and regulations

    Section 601(a) authorizes the exercise of any function 
under the Act not otherwise reserved to the President or 
another department to the Secretary of Commerce, and authorizes 
the delegation of any function under the Act from the Secretary 
to the Under Secretary of Commerce for Export Administration or 
other Commerce official. Section 601(b) establishes within the 
Department of Commerce an Under Secretary for Export 
Administration, an Assistant Secretary for Export 
Administration, and an Assistant Secretary for Export 
Enforcement, to carry out functions under the Act. Section 
601(c) authorizes the President and the Secretary to issue such 
regulations as are necessary to carry out the Act, and direct 
the Secretary to report to the committees of jurisdiction on 
proposed amendments to the regulations.

Section 602. Confidentiality of information

    Section 602(a) exempts from disclosure proprietary 
information associated with the processing of license 
applications. Section 602(b) authorizes Congress and the 
General Accounting Office to obtain information from 
appropriate departments and agencies regarding activities 
conducted in the furtherance of the Act. Section 602(c) 
requires the Secretary of Commerce and the Commissioner of 
Customs to exchange licensing and enforcement information to 
facilitate enforcement efforts. Section 602(d) provides that 
any officer or employee who knowingly discloses exempt 
information shall, for each violation, be fined up to $50,000 
in criminal penalties, imprisoned for up to 1 year, or both; or 
shall, for each violation, be fined up to $5,000 in civil 
penalties; or may be removed from office or employment.

Section 701. Annual report

    Section 701(a) directs the Secretary of Commerce to submit 
to Congress, prior to February 1 of each year, a report on the 
administration of the Act. Section 701(b) details the specific 
items that are to be included in the report. Section 701(c) 
provides that whenever information under the Act is required to 
be published in the Federal Register, such information also 
shall be made available on the Department of Commerce or other 
appropriate government website.

Section 702. Technical and conforming amendments

    Section 702 contains technical and conforming amendments, 
including repeal of the provisions relating to performance 
levels of computers in the National Defense Authorization Act 
for fiscal year 1998.

Section 703. Savings provisions

    Section 703(a) provides that all delegations, rules, 
regulations, or other forms of administrative action effective 
under certain previous or other statutes and in effect on the 
date of enactment of this Act shall continue in effect unless 
superseded. Section 703(b) provides that the Act does not 
affect administrative or judicial proceedings commenced under 
the Export Administration Act of 1979 or Executive Order 12924. 
Section 703(c) ensures that determinations regarding support of 
international terrorism made under the Export Administration 
Act of 1979 or Executive Order 12924 shall be deemed to be made 
under section 310 of this Act. Section 703(d) provides that the 
prohibitions of the Act do not apply to transactions subject to 
the requirements of the National Security Act of 1947, and that 
nothing shall affect the responsibilities and authorities of 
the Director of Central Intelligence under Section 103 of the 
National Security Act of 1947. Section 703(e) requires the 
Secretary of Commerce to make any revisions to current 
regulations required under the Act no later than 180 days after 
the date of enactment of this Act.

                  CHANGE IN EXISTING LAW (CORDON RULE)

    In the opinion of the Committee, it is necessary to 
dispense with the requirements of paragraph 12 of rule XXVI of 
the Standing Rules of the Senate in order to expedite the 
business of the Senate.

                      REGULATORY IMPACT STATEMENT

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
statement regarding the regulatory impact of S. 149.
    S. 149 reauthorizes the Export Administration Act of 1979. 
It retains the basic structure of that Act, and continues in 
most respects the current licensing process and requirements 
for exporters of dual-use items.
    At the same time, however, S. 149 reduces certain burdens 
on exporters. The bill increases the transparency and certainty 
of the licensing process. It also strengthens the foreign 
availability provisions of the current Export Administration 
Act and adds a mass-market provision, which may result in the 
elimination of controls on some items. Finally, it streamlines 
the regulatory process by requiring coordination and 
information-sharing between the various Federal departments and 
agencies.
    For these reasons, the Committee believes that this 
legislation will have a favorable regulatory impact.

                        COST OF THE LEGISLATION

    Paragraph 11(a) of Senate rule XXVI of the Standing Rules 
of the Senate, and Section 403 of the Congressional Budget 
Impoundment and Control Act, require that each committee report 
on a bill contain a statement, prepared by the Congressional 
Budget Office, that estimates the cost of the proposed 
legislation. The Congressional Budget Office Cost Estimate and 
its Estimate of Costs of Private-Sector Mandates, both dated 
April 2, 2001, are hereby included in this report.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 2, 2001.
Hon. Phil Gramm,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 149, 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), Shelley Finlayson (for the State and local 
impact), and Paige Piper/Bach (for the private-sector impact).
            Sincerely,
                                         Robert A. Sunshine
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 149--Export Administration Act of 2001

    Summary: The bill would replace the expired Export 
Administration Act of 1979 (EAA) and would update the system 
for applying export controls and penalties on American business 
for national security or foreign policy purposes. Since the 
expiration of the EAA in 1994, the President has extended 
export controls pursuant to his authority under the 
International Emergency Economic Powers Act. The Bureau of 
export Administration (BXA) in the Department of Commerce 
administers export controls.
    CBO estimates that implementing S. 149 would cost about 
$377 million over the 2001-2006 period, assuming the 
appropriation of the necessary amounts. Because the bill would 
increase criminal and civil penalties for violations of export 
controls, CBO estimates governmental receipts would increase by 
$23 million over the 2002-2006 period. CBO estimates that the 
increase in criminal penalties would cause direct spending from 
the Crime Victims fund to rise by about $7 million over the 
2002-2006 period. Because the bill would affect direct spending 
and receipts, pay-as-you-go procedures would apply.
    S. 149 contain no intergovernmental or private sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments. This bill would codify existing administrative 
policy and regulatory practice.
    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 function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2001     2002     2003     2004     2005     2006
----------------------------------------------------------------------------------------------------------------
                                     CHANGE IN REVENUES AND DIRECT SPENDING

Estimated Revenues........................................        0        0        2        5        8        8
Estimated Budget Authority................................        0        0        0        1        2        4
Estimated Outlays.........................................        0        0        0        1        2        4

                                        SPENDING SUBJECT TO APPROPRIATION

EAA Spending by the Bureau of Export Administration Under
 Current Law:
    Budget Authority \1\..................................       51        0        0        0        0        0
    Estimated Outlays.....................................       52        9        3        0        0        0
Proposed Changes:
    Estimated Authorization Level.........................       22       84       88       92       96        0
    Estimated Outlays.....................................        6       86       85       91       95       14
EAA Spending by the Bureau of Export Administration Under
 S. 149:
    Estimated Authorization Level \1\.....................       73       84       88       92       96        0
    Estimated Outlays.....................................       58       95       88       91       95      14
----------------------------------------------------------------------------------------------------------------
\1\ The 2001 level is the amount appropriated to the BXA for that year.

    Basis of estimate: S. 149 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 mass-market items 
or available from foreign sources at a comparable price and 
quality. When fully phased in, CBO estimates that provisions of 
the Export Administration Act of 2001 would increase revenues 
by about $8 million a year beginning in fiscal year 2005 and 
direct spending by about $4 million a year beginning in 2006. 
In addition, we estimate that implementing the bill would cost 
$377 million over the 2001-2006 period, assuming appropriation 
of the necessary amounts.
            Revenues
    Since the 1994 expiration of the Export Administration Act 
of 1979, criminal and civil penalties for violating export 
control laws have been collected under the International 
Economic Emergency Powers Act. S. 149 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 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 
2003. Based on information from the Department of Commerce, CBO 
estimates that enacting the bill would increase receipts from 
civil penalties by $4 million a year and receipts from criminal 
penalties by another $4 million a year beginning in 2005.
            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. When 
fully phased in, the additional direct spending resulting from 
the increase in criminal penalties would be about $4 million a 
year beginning in 2006, because spending from the Crime Victims 
Fund lags behind the collection of criminal fines by about a 
year.
            Spending subject to appropriation
    BXA is responsible for implementing the EAA. Based on 
information from the Department of Commerce, CBO estimates 
that, with current funding, the BXA will spend about $52 
million in 2001 on this effort. S. 149 would authorize the 
appropriation of between $72 million and $76 million a year for 
the Department of Commerce 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.
    Based on information from the BXA, 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, hiring and training license 
review officers would cost $4 million a year, and procuring the 
computer system would cost about $1 million in 2001 and $4 
million in 2002. Any such spending would be subject to 
appropriation of the necessary amounts. Based on the agency's 
historical spending patterns, CBO estimates that implementing 
the bill would cost $377 million over the 2001-2006 period. 
This estimate assumes that funds are appropriated for the BXA 
through 2005, as provided in section 607 of the bill.
    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 as pay-as-you-go procedures are shown in the 
following table. For the purposes of enforcing pay-as-you-go 
procedures, only the effects in the current year, the budget 
year, and the succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                       By fiscal year, in millions of dollars--
                                    ----------------------------------------------------------------------------
                                      2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................      0      0      0      1      2      4      4      4      4      4      4
Changes in receipts................      0      0      2      5      8      8      8      8      8      8      8
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private sector impact: S. 149 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would impose no 
costs on state, local, or tribal governments. This bill would 
codify existing administrative policy and regulatory practice.
    Estimate prepared by: Federal costs: Ken Johnson; Federal 
receipts: Erin Whitaker; impact on State, local, and tribal 
governments: Shelley Finlayson; impact on the private sector: 
Paige Piper/Bach.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis; G. Thomas Woodward, Assistant 
Director for Tax Analysis.

                            ADDITIONAL VIEWS

    During the 106th Congress I joined with the national 
security committee chairman and other senators--Senators Helms, 
Warner, Thompson, McCain, Smith, and Kyl--in opposing 
legislation to reauthorize the Export Administration Act. 
Similar legislation, S. 149--the Export Administration Act of 
2001--has been introduced in the 107th Congress. Like last 
year's bill, S. 149 fails to strike the correct balance between 
commercial considerations and national security.
    Just prior to the Banking Committee's consideration of S. 
149, I and other senators met with Vice President Cheney and 
Dr. Rice, the President's National Security Advisor, to discuss 
the Administration's views on S. 149. The Vice President and 
the National Security Advisor agreed that there were 
significant national security concerns that would need to be 
addressed before the Administration could support this bill.
    In an effort to address some of the Administration's 
concerns, the Committee adopted several amendments during mark-
up of the bill. These amendments were designed to correct three 
broad deficiencies in the legislation, specifically by: (1) 
providing the Department of Defense with a greater role in 
export control decisions, and ensuring that the Secretary of 
Defense has full visibility into the Commerce Department export 
control processes and decisions; (2) giving affected agencies 
the ability to escalate issues to an appeals board made up of 
the Commerce and Defense Departments and the National Security 
Council; and (3) providing the President with sufficient 
flexibility to control products that he determines would have 
an impact on U.S. national security.
    On March 21, 2001 Dr. Rice wrote to Chairman Gramm that she 
would support the bill with these amendments. She also wrote 
that the Administration would ``continue to work with the 
Congress to ensure that our national security needs are 
incorporated into a rational export control regime.'' I look 
forward to working with the Administration, this Committee, the 
chairmen of the other national security committees, and other 
interested senators to develop an appropriately balanced and 
rational export control policy.
Process
    During our meeting with the Vice President and Dr. Rice, 
they indicated that the incoming Administration had been given 
a limited time in which to study this long and extremely 
complex piece of legislation, and as a result, had been unable 
to undertake the necessary in-depth review. Although the 
Administration requested that the Banking Committee postpone 
consideration of S. 149 until it had an opportunity to place 
its personnel in the national security and export control 
positions with responsibility for these issues, the Committee 
did not accommodate this request. I regret that the 
Administration was not given more time to consider the 
implications of this complex and critical legislation. Dr. Rice 
told us that the Administration is now commencing an in-depth 
review of U.S. nonproliferation policy, of which export control 
policy is a critical component.
    To support the Administration in these efforts, I intend to 
work with Senators Helms, Warner, Thompson, McCain, and Kyl to 
amend S. 149 on the floor to add a provision creating a ``blue 
ribbon'' commission--similar to the Rumsfeld Commission on the 
ballistic missile threat--that would study our overall 
nonproliferation policy, including our export control regime. 
This Commission would be made up of national security experts. 
During our meeting at the White House, the Vice President, and 
the National Security Advisor told us that they would support 
the creation of such a commission, and I believe that this 
amendment must be included in any EAA legislation.
    In addition, the Administration was not given time prior to 
mark-up to complete its proposed executive order to establish 
an interagency dispute resolution process to ensure that 
national security concerns receive adequate consideration. 
Senate review of the proposed or draft executive order will be 
essential before the Senate considers this legislation. We must 
be certain that the Executive order as drafted incorporates the 
high standards articulated by the Vice President, Secretary 
Rumsfield, and Dr. Rice.
National security problems
    Even with the Administration's improvements to this 
legislation, there remain several overarching issues that 
require a more detailed review of the legislation than the 
Administration has had time to undertake. For an export control 
regime to function properly, it must provide for a balancing of 
the commercial benefits involved--which are generally obvious, 
easily-quantified, concentrated, and immediate--with the 
national security risks, which are often shrouded in secrecy, 
difficult to quantify, diffuse, and long-term in nature. I 
believe that the amendments adopted by the Committee during 
markup represent a useful start toward a balanced and rational 
export control policy. I am concerned, however, that despite 
these changes, the bill in its current form still favors 
commercial interests over national security equities.
    Therefore, I believe that the Administration and the Senate 
should consider the following additional modifications:
    1. A Broad National Security Exemption. S. 149 restricts 
the President's authority to regulate the export of products 
that could have serious implications for our national security. 
The President, as the official ultimately responsible for 
balancing commercial and national security policies, should 
have complete, unqualified discretion to override the mass 
market, foreign availability, overseas production, or 
incorporated parts provisions of the bill if the President 
determines that export of a product would threaten national 
security.
    2. Full Interagency Participation. S. 149 provides overly 
broad or exclusive authority to the Secretary of Commerce on 
important procedural issues such as commodity classifications, 
license and dispute referrals, license exemptions, and 
development of export administration regulations. In export 
controls, as in many other complex areas, procedure is policy. 
If national security concerns are to be given adequate 
consideration in export decisions, the Departments of State and 
Defense must be given greater authority and a larger role in 
the export licensing process.
    As a general matter, S. 149 is permeated by a presumption 
that national security concerns have only equal or lesser 
weight than commercial concerns. Here are just a few examples: 
Section 202 (National Security Control List) establishes a risk 
assessment balancing test that gives equal value to national 
security concerns and economic costs. Elsewhere, despite the 
Administration's intent to ensure that the interagency dispute 
resolution process established under section 502 be comprised 
of national security experts, the legislation does not require 
that this appeals board be so constituted. Section 701(c) 
(issuance of regulations) gratuitously states that nothing 
``require[s] the concurrence or approval of any official, 
department, or agency to which such regulations are 
submitted.'' In other words, regulations may be promulgated 
without the concurrence of the national security agencies.
    3. Problematic Mass Market Provision. S. 149 prohibits 
export controls on items otherwise controlled for national 
security reasons if they are widely available in the United 
States. Domestic availability should be considered along with 
other factors, but ``mass market'' should not be an independent 
exemption category.
    4. Incorporated Parts and Components Loophole. S. 149 
prohibits export controls on items otherwise controlled if they 
are incorporated into productsin which the controlled component 
comprises 25% or less of the total values, or if the controlled 
item is shipped overseas for final assembly. Automatic 
decontrol of an item otherwise appropriately controlled simply 
because it has been incorporated into a larger item, or because 
it is produced overseas using American parts or components, is 
counterintuitive--should the technology be exported or not?--
and will undermine the effectiveness of our export control 
regimes.
    5. Foreign Availability is Inappropriate Measure for 
Decontrol. S. 149 prohibits export controls on items available 
from foreign suppliers, codifying a presumption that when other 
countries sell sensitive technologies to countries of concern 
like China, the United States is obligated to follow suit. The 
degree to which an item is available from foreign sources is a 
factor that should be considered, but should not automatically 
result in the elimination of export controls on an item.
    6. Deemed Exports not Covered. S. 149 does not cover the 
transfer of knowledge, information, or know-how of controlled 
goods or technologies, to foreign persons or entities, whether 
in the United States or abroad.
                                                    Richard Shelby.

                                  
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