[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
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\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
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\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.
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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
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\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.
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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
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\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.
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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
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\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.
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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.
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\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.
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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
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\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).
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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.
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\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.
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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
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\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:
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\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
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\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
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\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
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\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
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\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
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\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.
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\22\ Memorandum from the National Security Council, April 15, 1996.
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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
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\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.