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 President to submit a report to Congress to extend the controls. Such authority has been delegated to the Secretary of Commerce. 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 those sections. 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 13222 of August 17, 2001 (Executive Order), as extended by the Notice of August 2, 2005 (70 Fed. Reg. 45273 (August 5, 2005)). Therein, the President, by reason of the expiration of the Act, invoked his authority, including authority under the International Emergency Economic Powers Act (IEEPA), 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, 2006, to January 20, 2007. The Bureau of Industry and Security (BIS) of the Department of Commerce is taking this action pursuant to 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 2005 calendar year, most of the statistical data presented in the report are based on Fiscal Year 2005 export licensing statistics, unless otherwise noted. BIS generates this data from the computer 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 or may not ship at all.
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.
Certain crime control and detection instruments, equipment, related technology, and software may be exported to Australia, Japan, New Zealand, and members of the North Atlantic Treaty Organization (NATO) without a specific license, consistent with Section 6(n) of the Export Administration Act. The U.S. Government has a general policy of denial for license applications to export crime control items to a country in which the government engages in a consistent pattern of gross violations of internationally recognized human rights. For other countries, the U.S. Government will consider applications for crime control items favorably, on a case-by-case basis, unless there is civil disorder in the country or region of concern, or there is evidence that the government may have violated human rights and that the judicious use of export controls would be helpful in minimizing regional instability, deterring the development of a consistent pattern of such violations, or in demonstrating U.S. opposition to such violations.
The U.S. Government has a policy of denial for any license application to export specially designed implements of torture, including thumbscrews. No applications for the export of these items were submitted in 2005.
The Department of Commerce consults with the Regulations and Procedures Technical Advisory Committee (RPTAC), one of six such committees that advises the Bureau of Industry and Security (BIS), in preparation for publication of major regulatory changes affecting crime control.
In 2005, there was one addition to Regional Stability (RS) controls. On July 15, 2005, the United States imposed a unilateral license requirement to export and reexport commodities (and related technology) controlled under certain export control classification numbers (ECCNs) for RS reasons to all countries, except Canada. The commodities affected were certain types of non-space-qualified infrared focal plane arrays, and imaging cameras incorporating these focal plane arrays. These RS controls are in addition to the multilateral national security controls on these items. Applications to export and reexport these commodities will be reviewed on a case-by-case basis to determine whether the export or reexport could contribute directly or indirectly to any country’s military capabilities in a manner that would alter or destabilize a region’s military balance contrary to the foreign policy interests of the United States.
On March 22, 2005, the Department of Commerce published in the Federal Register an amendment to the Export Administration Regulations to implement further changes in export controls with respect to Libya (70 FR 70 FR 14387). The amendment defines the policies and requirements related transactions involving items subject to the Export Administration Regulations that were shipped to Libya in violation of the U.S. embargo (i.e., “installed base items”). Various transactions involving installed base items represent violations under §764.2(e) of the EAR. The Department, in consultation with the Departments of State and Defense, decided to institute a policy through which exporters could overcome the prohibition in order to support increased trade with Libya and U.S. investment in Libya. As explained in the rule, persons can overcome the prohibition through submission of a report, if the installed base items concerned fall within a defined group of low-level items, or through submission of a license application for technologically sophisticated installed base items. The rule also makes certain clarifications regarding the license review policy for the export and reexport of certain items to Libya and the availability of certain license exceptions for use in shipments to Libya.
On November 16, 2005, the Department of Commerce published in the Federal Register an amendment to the Export Administration Regulations to implement additional changes in export controls with respect to Libya (70 FR 69432). Changes in the rule included the creation of a new license exception to allow the shipment of certain items controlled on the Commerce Control List to U.S. persons in Libya. As a result of the amendment, nine entries controlled on the Commerce Control List for anti-terrorism reasons only became eligible for shipment to Libya under new License Exception “U.S. Persons Libya (USPL)” when shipped to U.S. persons in Libya for their use. These entries are ECCNs: 2A994 (portable generators), 5A992 (encryption hardware), 5D992 (information security software not controlled by 5D002), 9A990 (diesel engines); and certain items under ECCNs 3A991 (electronic devices), 3A992 (electronic equipment), 3B992 (test and inspection equipment for electronic components), 4A994 (computers), and 5A991 (telecommunications equipment).
On March 7, 2005, the Department of Commerce published an amendment to the EAR in the Federal Register (70 FR 10865) regarding the Bureau of Industry and Security’s licensing policy regarding transactions involving entities sanctioned by the Department of State. The rule covers entities sanctioned under three specified statutes: the Iran-Iraq Arms Nonproliferation Act of 1992 (Pub. L. 102-484), the Iran Nonproliferation Act of 2000 (Pub. L.107-178, as amended by Pub. L. 109-112 on November 22, 2005 and renamed the Iran and Syria Non-proliferation Act), and Section 11B(b)(1) of the Export Administration Act of 1979. The amendment creates new Section 744.19 of the EAR, which specifies that the Department of Commerce will deny applications to export or reexport items subject to the EAR to entities sanctioned by the Department of State under the authorities of the three statutes. The amendment also creates new Section 744.20 of the EAR, imposing new foreign policy-based controls on items subject to the EAR to entities sanctioned by the State Department. The Department of Commerce imposed these foreign policy-based controls in Section 744.20, which are in addition to those imposed by other provisions of the EAR, on a case-by-case basis. Finally, the amendment identifies a new entity (Tula Design Bureau of Russia) as subject to the license requirement under Section 744.20. The Department adopted this rule in final form on June 9, 2005 (70 FR 33693).
On February 18, 2005, the Department of Commerce published an amendment to the Export Administration Regulations in the Federal Register authorizing the export under revised License Exception “Temporary Imports, Exports and Reexports” (TMP) of certain items controlled on the Commerce Control List to Sudan for use in humanitarian activities (70 FR 8251). Items authorized under this amendment include basic telecommunications devices controlled under export classification control number (ECCN) 5A991, low-level computers controlled under ECCN 4A994, parts and components of authorized 4A994 and 5A991 items controlled under ECCN 5A992, global positioning systems and similar satellite receivers controlled under ECCN 7A994, and software controlled under ECCNs 4D994 and 5D992. These items are for use in Sudan by the staff and employees of eligible non-governmental organizations working to relieve human suffering in Sudan. As a result of the dual-license requirement for Sudan (that is, authorization is required from both the Departments of Commerce and Treasury), end-users eligible to receive the items identified as authorized under the revised license exception are those already in receipt of authorization to operate in Sudan from the Department of the Treasury.
On March 10, 2005, the Department of Commerce published in the Federal Register an amendment to the Export Administration Regulations adding four Syrian entities to the Entity List (Supplement 4 to Part 744 of the EAR): the Higher Institute of Applied Science and Technology, the Industrial Establishment of Defense, the National Standards and Calibration Laboratory, and the Scientific Studies and Research Center (70 FR 11858). The Department had previously determined that the entities presented an unacceptable risk of using or diverting certain items to activities related to weapons of mass destruction (WMD) or development programs thereof. In the rule, the Department clarified that license applications for items destined to these entities will be reviewed under a general policy of denial. This change was contained within a rule that also reflected changes to the Missile Technology Control Regime Annex, as agreed at the October 2004 Plenary, and revised the missile catch-all controls for Restrictions on Certain Rocket Systems. Since this control relates to Enhanced Proliferation Control Initiative (EPCI) controls on missile technology, it is discussed in Chapter 8.
During the past year, the Department: (1) increased the country scope of Commerce Control List (CCL) entries that contain chemical/biological equipment and related technology to all destinations, worldwide, except for those countries that participate in the Australia Group (AG); (2) expanded end-user/end-use based controls to include transfers (in-country), as well as exports and reexports; (3) clarified controls on pumps usable for making chemical weapons and AG-controlled precursor chemicals; and (4) added controls on certain spraying or fogging systems, spray booms, or arrays of aerosol generating units and components thereof. The Department updated the EAR to include new members of the Australia Group and the Chemical Weapons Convention.
On March 10, 2005, the Department of Commerce published a rule in the Federal Register revising the EAR to implement changes to the MTCR Annex that the member countries agreed to at the October 2004 Plenary in Seoul, South Korea (70 FR 11858). The rule added a new missile technology control for radial ball bearings. The rule also expanded controls to capture additional frequency bandwidth for ceramic composite materials used for radomes. In addition, this rule published clarified definitions and an exemption from the licensing requirement for rocket systems in NATO countries that are declared nuclear weapons states, modified existing controls on solid oxidizers to capture additional chemicals, and clarified parameters on numerous entries to consistently use the phrase “equal to or greater than.”
BIS export enforcement efforts focus on the most significant international threats facing U.S. national and homeland security, foreign policy, and economic interests: the proliferation of weapons of mass destruction (WMD), international terrorism and state sponsors of terrorism, and diversions of U.S. dual-use goods and technologies to unauthorized military end-uses.
WMD Proliferation: In August 2005, Asher Karni, a South African businessman, was sentenced to three years imprisonment as part of his guilty plea to conspiracy and export control violations arising out of the unlawful exports to Pakistan and India of U.S.-origin goods controlled for nuclear nonproliferation reasons. In April 2005, the U.S. Attorney for the District of Columbia announced that Humayun Khan, of Islamabad, Pakistan, had been indicted for conspiring to violate U.S. export restrictions on goods controlled for nuclear nonproliferation reasons. Khan was also indicted on three counts of violating U.S. export restrictions on goods controlled for nuclear nonproliferation reasons. Khan is alleged to have arranged, through Karni, the purchase of and export to Pakistan of U.S. origin triggered spark gaps. These triggered spark gaps can be used as switches in nuclear weapons firing sets. Khan falsely indicated that the goods were intended for medical use. Khan, currently in Pakistan, and his company, Pakland PME Corporation, are presently subject to a Temporary Denial Order to prevent further violations as this case proceeds. The Department of Commerce’s Office of Export Enforcement of the Bureau of Industry and Security, the Federal Bureau of Investigation, and the Department of Homeland Security's Immigration and Customs Enforcement jointly conducted this investigation.
In July 2005, six individuals, including several former employees of Maine Biological Labs (MBL), were sentenced in U.S. District Court in Bangor, Maine, in connection with various charges including conspiracy, illegal exports, smuggling, false statements, aiding and abetting and antiboycott offenses in connection with unlicensed exports of virus toxins to Syria. One individual was sentenced to 2 years probation; the remaining five were each sentenced to terms of imprisonment ranging from 9 months to 12 months and 1 day. The court also imposed criminal fines ranging from $5,000 to $30,000 on the defendants. Two other former employees were previously convicted on similar charges and sentenced to probation. On August 5, 2005, the company, MBL, was criminally fined $500,000 and placed on five years probation. The Department of Commerce’s Office of Export Enforcement of the Bureau of Industry and Security, the Department of Homeland Security's Immigration and Customs Enforcement (ICE), and the U.S. Department of Agriculture jointly conducted this investigation.
Counter-Terrorism: On August 9, 2005, Naji Antoine Abi Khalil pled guilty to criminal charges for attempting to export Department of Commerce-controlled and Department of State-controlled night vision units to Greece knowing they would be shipped to the foreign terrorist organization Hezbollah in Beirut, Lebanon. In June 2004, Khalil was indicted for allegedly providing material support to a foreign terrorist organization, and has been in federal custody since his arrest. An associate of Khalil, Tomer Grinberg of Tober Group Inc., a Brooklyn, New York, freight forwarder, was also arrested and indicted for his role in allegedly conspiring to export the same night vision units to Greece knowing they would be shipped to Lebanon. Grinberg pled guilty on July 28, 2005, and is currently free on bond. Prosecution of both defendants is ongoing. The Department of Commerce’s Office of Export Enforcement of the Bureau of Industry and Security jointly conducted this investigation as a member of the New York Joint Terrorism Task Force.
Diversion for Unauthorized Use: On September 30, 2004, Ning Wen, Hailin Lin, Jian Guo Qu and Ruo Ling Wang were arrested on charges of conspiring to illegally export more than $500,000 worth of controlled electronic components to China. BIS has issued Temporary Denial Orders against Ning Wen, Hailin Lin, Wen Enterprises, and Beijing Rich Linscience Electronics to prevent further violations as this case proceeds. On July 25, 2005, Jian Guo Qu was sentenced to 46 months imprisonment, a $2,000 criminal fine, two years supervised release and a $100 special assessment. On September 21, 2005, Ning Wen was found guilty at trial on all charges against him in regard to these exports. The Department of Commerce’s Office of Export Enforcement of the Bureau of Industry and Security, the Federal Bureau of Investigation, the Department of the Treasury’s Internal Revenue Service, and the Department of Homeland Security's Immigration and Customs Enforcement jointly conducted this investigation.
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 provided 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 2006. 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 Industry. 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 Controls. Whether 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. In an October 13, 2005, Federal Register notice (70 FR 59678), the Department of Commerce solicited comments from industry on the effectiveness of U.S. foreign policy-based export controls. Comments were solicited from all six of the Department’s Technical Advisory Committees, as well as from the President’s Export Council Subcommittee on Export Administration. Comments also were solicited from the public via the BIS website. The comment period closed on November 14, 2005, and four comments were received. A detailed review of all comments received can be found in Appendix I.
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.
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 footnote 1, supra.)
3. Limitations exist when assessing the economic impact of certain controls because of the unavailability of data or because of the influence 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 prevent 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 more difficult to enforce.