Where Industry and Security Intersect
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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) with respect to the criteria established in that section. This report complies with all of the requirements set out in the Act for extending, amending, or imposing foreign policy controls.
The Department of Commerce is acting under the authority conferred by Executive Order No. 13222 of August 17, 2001, as extended by the Notice of August 14, 2002. Therein, the President, by reason of the expiration of the Act, invoked his authority, including authority under the International Emergency Economic Powers Act, to continue in effect the system of controls that had been maintained under the Act. Under a policy of conforming actions under the Executive Order to those under the Act, the Department of Commerce, insofar as appropriate, is following the provisions of Section 6 of the Act with regard to extending foreign policy controls.
With this report, all foreign policy export controls discussed herein are hereby extended for the period from January 21, 2003, to January 20, 2004. The Bureau of Industry and Security (BIS) (formerly known as the Bureau of Export Administration) of the Department of Commerce is taking this action at the recommendation of the Secretary of State. As further authorized by the Act, foreign policy export 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 similarly 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 2002 calendar year, most of the statistical data presented in the report are based on fiscal year 2002 export licensing statistics, unless otherwise noted. BIS 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, BIS bases the data in this report on values contained in issued export licenses. 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.
Certain goods, technology, and software described in this report also may require a license for national security purposes for export to certain destinations in accordance with Section 5 of the Act.
As an ongoing result of the Trade Sanctions Reform and Export Enhancement Act of 2000, licensing activity for Cuba continued to expand, particularly for exports of food and certain other agricultural products. For 2002, a record number of applications were processed for Cuba. This was largely the result of a privately organized food and agribusiness exhibition held in Havana in September 2002, for which BIS issued over 170 licenses. However, exports of medicines and other medical items were subject to heightened scrutiny reflecting the U.S. Government's concern about Cuba's chemical and biological weapons programs.
Revisions to regional stability (RS) controls were published on September 23, 2002 through a rule that clarified the licensing jurisdiction of "space qualified" items. The rule extended RS controls to "space qualified" items under nine Export Control Classification Numbers (ECCNs): 6A002.e; 6A008.j.1; 6A998.b; 6D001 (for items in 6A002.c or 6D008.j.1); 6D002 (for items in 6A002.c or 6D008.j.1); 6D991 (for items in 6A002.e or 6A998.b); 6E001 (for items in 6A002.e or 6A008.j.1); 6E002 (for items in 6A002.e, 6A003.b.4, or 6A008.j.1); and 6E991 (for items in 6A998.b).
The Department of Commerce also intends to modify RS controls by publishing an amendment to the Export Administration Regulations (EAR) that expands the scope of explosive detection equipment controls under ECCN 2A993, to be renumbered as 2A983, and creates new license requirements for the export and reexport of related software and technology, under ECCNs 2D983 and 2E983, imposing broader controls, by requiring a license for RS reasons for equipment, software, and technology to all destinations except members of the North Atlantic Treaty Organization (NATO), Japan, Australia, and New Zealand. The amendment is designed to enhance the security and safety of airline travel and physical structures, including government buildings.
On November 25, 2002, the U.S. Government removed the special controls on the export and reexport of arms-related items that had been imposed on the Federal Republic of Yugoslavia (Serbia and Montenegro)(FRY) on July 14, 1998. Consequently, arms embargo-based licensing requirements for exports and reexports to the FRY for certain items, such as water cannons, are removed and a case-by-case license review policy is reinstated for the export and reexport of items controlled for regional stability and crime control reasons. This rule is consistent with U.N. Security Council (UNSC) Resolution 1367 of September 10, 2001, which terminated the international arms embargo mandated by UNSC Resolution 1160 of March 3, 1998.
On May 31, 2002, the EAR provisions on chemical controls were revised. Some of those revisions were based on actions taken at the Australia Group (AG) Plenary Meeting held in October 2001, and on decisions made subsequent to the Plenary. The AG revisions permit the export without a license of medical, analytical, diagnostic, and food testing kits containing small quantities of controlled chemicals to most destinations. Also reflected in the EAR is a decision made at the AG 2001 Plenary to expand controls on chemical items by requiring a license for exports and reexports of critical components of certain controlled chemical manufacturing equipment. This ensures that equipment critical to the development of chemicals useful in weapons of mass destruction cannot be created from disparate parts not formerly subject to export restrictions. Controls also were expanded on the types of freeze-drying equipment, valves, and protective suits that require licenses to certain non-AG destinations. In addition, the licensing policy for the reexport of Chemical Weapons Convention (CWC) Schedule 3 chemicals was clarified, and new States Parties to the CWC were included in the EAR. Anti-terrorism controls applicable to several AG and CWC-related entries on the Commerce Control List (CCL) were harmonized. This resulted in the expansion of controls on certain chemicals, chemical mixtures, and test kits to designated terrorist countries.
The Department of Commerce worked with industry to clarify controls on servo valves, which are an essential component in the flight control of missiles. The export controls on servo valves were clarified to differentiate between those servo valves that can be used in missiles versus those used in other general purpose applications.
Two adjustments were made to High Performance Computers (HPC) controls in 2002. On March 6, 2002, the Country Tier III license exception limit was raised to 190,000 from 85,000 MTOPS (Millions of Theoretical Operations per Second); the notification level required by the FY98 National Defense Authorization Act (NDAA) was raised to 190,000 MTOPS; and, effective May 2, 2002, Latvia was moved from Country Tier III to Tier I. These changes reflect advances in computer technology, mass-market conditions, and increased foreign availability. The second set of changes to HPC policy was implemented as a result of multilateral agreements reached in the Wassenaar Arrangement in December 2000. Specifically, BIS raised the national security control parameters for computers from 6,500 to 28,000 MTOPS. Computers performing below this level are now eligible for export without a license, except to Tier IV (designated terrorist) countries. This level harmonizes U.S. controls with Wassenaar Arrangement levels.
Following extensive industry consultation and interagency review, the Department of Commerce revised the EAR to further update export controls on cryptography. The regulations allow "mass market" encryption products using symmetric encryption algorithms with key lengths exceeding 64 bits to be exported and reexported to most destinations under ECCNs 5A992 and 5D992 after a 30-day technical review by the Department of Commerce and the ENC Encryption Request Coordinator of the National Security Agency.
Chapters 2-12 of this report describe the various export control programs maintained by the Department of Commerce for foreign policy reasons. Each of these programs is extended for another year. The analysis required for such an extension is presented in each chapter in the format described below.
This section defines the export controls maintained for a particular foreign policy purpose that are imposed or extended for the year 2003. Each of the following chapters describes the licensing requirements and policy applicable to a particular control.
Section 6(f)(2) of the Act requires that the Secretary of Commerce describe the purpose of the controls and consider or determine whether to impose or extend foreign policy controls based on specified criteria, including consultation efforts, economic impact, alternative means, and foreign availability. For each control program, the Department of Commerce's conclusions are based on the following required criteria:
This section provides the foreign policy purpose and rationale for each particular control.
This section describes the Secretary's determinations or considerations with respect to the following criteria:
1. Probability of Achieving the Intended Foreign Policy Purpose.
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.
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.
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 Indus
Whether 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 exceeds the benefit to U.S. foreign policy objectives. (3)
5. Effective Enforcement of Control.
Whether the the United States has the ability to enforce the controls. Some enforcement problems are common to all foreign policy controls. (4) Other enforcement problems are associated with only one or a few controls. Each 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 to the extension or imposition of controls. It also includes comments provided to BIS by Technical Advisory Committees (TACs). Such comments are to be attributed to the TACs unless otherwise indicated.
This section reflects consultations on the controls with countries that cooperate with the United States on multilateral controls and 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.
In a September 27, 2002 Federal Register notice, the Department of Commerce solicited comments from industry on the effectiveness of U.S. export control policy. Comments also were solicited via the BIS Web page. The comment period closed on November 29, 2002, and five comments were received. A detailed review of these comments can be found in Appendix I.
1. Section 6(b)(2) requires the Secretary 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 Secretary 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 the United States implements controls 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. Controls on items that are small, inexpensive, easy to transport or conceal, or that have many producers and end-users, are harder to enforce.