Export controls maintained for foreign policy purposes require annual extension according to the provisions of Section 6 of the Export Administration Act of 1979, as amended (the Act). Section 6(f) of the Act requires the Secretary of Commerce, through authority delegated by the President, to submit a report to Congress to extend the controls. Sections 6(b) and 6(f) of the Act require the report to include certain considerations(1) and determinations(2) on the criteria established in that section. This report complies with all the requirements set out in the Act for extending, amending or imposing foreign policy controls. The Department of Commerce is acting under authority conferred by the Act. Public Law No.106-508 reauthorized the Act until August 20, 2001.
With this report, the United States is extending all foreign policy controls in effect on December 31, 2000. The Department of Commerce is taking this action at the recommendation of the Secretary of State. As further provided by the Act, foreign policy controls remain in effect for replacement parts and for parts contained in goods subject to such controls. The controls administered in accordance with procedures established pursuant to Section 309(c) of the Nuclear Nonproliferation Act of 1978 likewise remain in effect.
Each chapter of this report describes a particular category of foreign policy controls and delineates modifications that have taken place over the past year. Although this report covers the 2000 calendar year, most of the statistical data presented in the report is based on fiscal year 2000 export licensing statistics, unless otherwise noted. The Department of Commerce generates this data from the computer automated system it uses to process and track export license activity. Due to the tabulating procedures used by the system in accounting for occasional license applications that list more than one country or destination, the system has certain limitations as a means of gathering data. In addition, the Commerce Department based the data in the report on values contained in export licenses it issued. Such values may not represent the values of actual shipments made against those licenses, because in some cases an exporter may ship only a portion of the value of an approved license.
Crime Control/Human Rights In September 2000, the Department of Commerce published a regulation that made three major revisions to the crime control category. The first revision imposed a global license requirement, excluding Canada, on export and reexports of restraint-type items such as stun guns, handcuffs and shackles. The second revision regrouped existing crime control categories by creating new Commerce Control List (CCL) entries for saps, police helmets and shields, fingerprint inks and dyes and technology for restraint-type items. The last revision modified the license review policy for all crime control items to include a determination of the civil disorder in a given country or region before issuing a license to such areas.
The Department of Commerce made these changes in response to comments from human rights organizations that electric shock devices (particularly stun guns) were a favored tool used in numerous countries for human rights violations. By making unique Export Commodity Classification Numbers (ECCNs) for electronic discharge devices and restraint items, the Commerce Department made the controls more transparent and export license activity easier to track.
Cuba In January 2000, a precedent-setting exhibition of American health products, authorized by the Treasury Department, was held in Havana, Cuba. The Department of Commerce contributed to the success of the exhibition by processing over 65 licenses allowing the temporary export of goods for display. Since the exhibition, the rate of applications to sell medical items to Cuban entities has increased. In October 28, 2000, the President signed the "Trade Sanctions Reform and Export Enhancement Act of 2000," which authorizes exports of food to Cuba without a license. The Department of Commerce expects to publish the enabling regulations in late February 2000. We anticipate U.S. exporters will then be able to sell food to Cuba under a Commerce Department license exception. Exports of medical items are governed by provisions of the Cuba Democracy Act and still require a license.
Embargoes and Sanctioned Countries and Entities The Administration initiated a review of the list of sanctioned Indian and Pakistani entities with the aim of refining the list and targeting the items controlled. On March 17, 2000, the Commerce Department published a regulation in the Federal Register that removed 51 entities from the list and changed the policy for EAR99 items exported to listed Indian and Pakistani entities to presumption of approval. On July 26, 2000, the Commerce Department published a regulation making further revisions to the list: two Indian entities were removed from the list and one entity was added to the list.
On October 12, 2000, in the wake of Vojislav Kostunica's victory in the Serbian elections, President Clinton announced his intention to lift economic sanctions imposed on the Federal Republic of Yugoslavia, except for certain sanctions maintained against Slobodan Milosevic, his close associates and those indicted for war crimes. An Executive Order and regulations implementing this policy change are expected to be issued early in 2001.
On October 28, 2000, the President signed the "Trade Sanctions Reform and Export Enhancement Act of 2000." Agencies have 120 days from the date of enactment to implement the Act, which requires the President to terminate all unilateral sanctions on agricultural products, medicines and medical devices. Accordingly, the Department of Commerce is developing regulations that will lift existing unilateral agricultural sanctions on Cuba, and agricultural and medical sanctions on the Federal Republic of Yugoslavia (Serbia and Montenegro).
Chemical Precursors On December 30, 1999, the Commerce Department published an interim final rule establishing the Chemical Weapons Convention Regulations that implement the export control and reporting provisions of the Chemical Weapons Convention (CWC). The CWC bans the development, production, stockpiling, and retention of chemical weapons, and provides for an extensive verification regime for legitimate activities involving certain toxic chemicals. The interim final rule, effective on the date of publication, sets forth U.S. industry's data declaration and reporting requirements, and inspection procedures. Companies exceeding certain chemical production, processing, consumption, and export or import thresholds were required to submit the appropriate declarations or reports to BXA by March 29, 2000. Over 319 companies representing over 750 plant sites responded, providing a total of 3,075 completed declarations and reports. Chemical industry site inspections by international inspectors under the auspices of the Organization for the Prohibition of Chemical Weapons (OPCW), the administrative arm of the CWC, began in May 2000; 18 inspections of U.S. chemical facilities were successfully completed in 2000.
High Performance Computers On February 1, 2000, the United States announced the first of two adjustments to High Performance Computer (HPC) controls. The revised controls amended the countries in, and control levels for, the following country groups:
The second adjustment was announced on August, 3, 2000. The revision:
Encryption During 2000 the Bureau of Export Administration (BXA) published two adjustments to encryption controls. The first regulation was published on January 14, 2000, and implemented the Administration's September 16, 1999, announcement to simplify the export of cryptography. The regulation allows the export of any encryption commodity or software, regardless of key length, under a license exception, after a technical review, to any non-government end user worldwide, except for sanctioned or embargoed countries. To ensure streamlined exports to non-government end users, companies may export products under this provision thirty days after submitting the products for technical review. Moreover, exporters may export a new category of products called "retail encryption commodities and software" after technical review to any end user, including government end users, under this same license exception. Certain restrictions applied to telecommunications and Internet service providers, and exporters could not export network infrastructure products such as high-end routers and switches under these retail provisions.
Previous liberalizations for banks, financial institutions and other approved sectors were subsumed under this license exception. The United States continues to consider licensing of commercial encryption source code, toolkits, and technology on a case-by-case basis. Foreign nationals working for U.S. companies in the United States no longer need an export license to work on encryption items.
On July 17, 2000, the Administration announced further updates to U.S. encryption export policy to bring U.S. regulations in line with European Union regulations. The most significant change for U.S. companies was U.S. exporters of encryption products and technology could export under a Commerce Department license exception to any end user in the 15 nations of the European Union as well as Australia, the Czech Republic, Hungary, Japan, New Zealand, Norway, Poland and Switzerland, upon notifying BXA of intent to export. Companies would no longer need to wait thirty days before exporting to these destinations.
Under these new procedures, exporters may now export highly sophisticated encryption items such as source code, general purpose toolkits, and high-end routers and switches. The Department of Commerce only requires licenses for "cryptanalytic items" -- a specialized class of tools not normally used in commercial environments. The Commerce Department published the regulation implementing these changes on October 19, 2000.
The new regulation streamlines export provisions for exporters of beta test software, products which are compiled from "open" sources, and products which implement short-range wireless encryption technologies such as HomeRF and Bluetooth. The regulation also streamlines post-export reporting, eliminating reporting for products exported by U.S.-owned subsidiaries overseas, or for retail operating systems or desktop applications (such as e-mail programs and browsers) designed for, bundled with, or pre-loaded on single CPU devices such as personal computers, laptops, or handheld devices.
Commercial Communications Satellites and Hot Section Technology On March 18, 1999 (with an effective date of March 15), the Department of Commerce published a final rule in the Federal Register removing commercial communications satellites from the Commerce Control List (CCL) and retransferring these items to the Department of State, under the United States Munitions List (USML). On March 22, 1999, the State Department published a corresponding amendment to the International Traffic in Arms Regulations (ITAR) accepting jurisdiction and designating commercial communications satellites on the USML.
The transfer of commercial communications satellites to the Department of State has resulted in some confusion among exporters concerning licensing jurisdiction for satellite parts and components not specified in the transfer. During 2000 the Administration initiated a review of 16 items on the Commerce Control List which contain "space qualified" items to determine whether any of these items should be transferred from the export licensing jurisdiction of the Commerce Department to that of the State Department. To date, the National Security Council has not made a final determination. In the interim, licensing jurisdiction for the items in question remains with the Commerce Department.
This section of the report defines the export controls maintained for a particular foreign policy purpose that are imposed or extended for the year 2001. The licensing requirements and policy applicable to a particular control are described in this section.
Section 6(f)(2) of the Act requires that the Secretary of Commerce make considerations or determinations on the purpose of the control, certain criteria, consultation efforts, alternative means, and foreign availability. For each control program, the Commerce Department's conclusions are based on the following required criteria:
This section provides the foreign policy purpose and rationale for each particular control.
1. Probability of Achieving the Intended Foreign Policy Purpose.This section considers or determines whether such controls are likely to achieve the intended foreign policy purpose in light of other factors, including the availability from other countries of the goods or technology subject to control, and whether the foreign policy purpose can be achieved through negotiations or other alternative means.
2. Compatibility with Foreign Policy Objectives. This section considers or determines whether the controls are compatible with the foreign policy objectives of the United States and with overall U.S. policy toward the country or the proscribed end-use subject to the controls.
3. Reaction of Other Countries.This section considers or determines whether the reaction of other countries to the extension of such export controls by the United States is likely to render the controls ineffective in achieving the intended foreign policy purpose or to be counterproductive to other U.S. foreign policy interests.
4. Economic Impact on United States Industry.This section considers or determines the effect of the controls on the export performance of the United States, its competitive position in the international economy, the international reputation of the United States as a reliable supplier of goods and technology, or the economic well-being of individual U.S. companies and their employees and communities exceeds the benefit to U.S. foreign policy objectives.(3)
5. Enforcement of Control.This section considers or determines the ability of the United States to enforce the controls. Some enforcement problems are common to all foreign policy controls.(4) Others are associated with only one or a few controls. Each individual control has been assessed to determine if it has presented, or is expected to present, an uncharacteristic enforcement problem.
This section discusses the results of consultations with industry leading up to the extension or imposition of controls. It also includes comments provided to the Department of Commerce by the Technical Advisory Committees (TACs) and the President's Export Council Subcommittee on Export Administration (PECSEA); such comments are to be attributed to the TACs or PECSEA unless otherwise indicated.
This section reflects consultations on the controls with countries that cooperate with the United States on multilateral controls, as well as with other countries as appropriate.
This section specifies the nature and results of any alternative means attempted to accomplish the foreign policy purpose, or the reasons for extending the controls without attempting any such alternative means.
This section considers the availability from other countries of goods or technology comparable to those subject to the proposed export control. It also describes the nature and results of the efforts made pursuant to Section 6(h) of the Act to secure the cooperation of foreign governments in controlling the foreign availability of such comparable goods or technology. In accordance with the Act, foreign availability considerations do not apply to export controls in effect prior to June 12, 1985, to controls maintained for human rights and anti-terrorism reasons, or to controls in support of the international obligations of the United States.
On November 6, 2000, the Department of Commerce, via the Federal Register, solicited comments from industry on the effectiveness of the U.S. export control policy. Comments were also solicited via the BXA web page. A detailed review of the comments received can be found in Appendix I.
1. Section 6(b)(2) requires the Department to consider the criteria set forth in Section 6(b)(1) when extending controls in effect prior to July 12, 1985. In addition, the report must include the elements set forth in Sections 6(f)(2)(A) (purpose of the controls); 6(f)(2)(C) (consultation with industry and other countries); 6(f)(2)(D) (alternative means attempted); and 6(f)(2)(E) (foreign availability).
2. Section 6(b)(1) requires the Department to make determinations regarding the criteria set forth therein when imposing, extending, or expanding controls. The report must also contain the additional information required in Section 6(f)(2)(A), (C)-(E) (as set forth in endnote 1, supra.)
3. Limitations exist when assessing the economic impact of certain controls because of the unavailability of data or because of the prevalence of other factors, e.g., currency values, foreign economic activity, or foreign political regimes, which may restrict imports of U.S. products more stringently than the United States restricts exports.
4. When controls are implemented without the imposition of corresponding restrictions by other countries, it is difficult to guard against reexports from third countries to the target country, to secure third country cooperation in enforcement efforts, and to detect violations abroad and initiate proper enforcement action. The relative ease or difficulty of identifying the movement of controlled goods or technical data is also a factor.