Where Industry and Security Intersect
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Thank
you for the opportunity to testify on H.R. 361, the Omnibus Export Administration
Act of 1996. Reauthorization of an Export Administration Act (EAA) that takes
into account the end of the Cold War is long overdue. In addition to helping
exporters by bringing the law up to date with current global realities, it
is also essential that we enact a new law in order to minimize the possibility
of legal challenges under the current emergency authority and to enhance our
credibility in international fora.
The Administration supports H.R. 361. We believe it provides the proper balance for controlling dual-use items while minimizing the burden on U.S. exporters. We do have concerns about several of its provisions, which my testimony details.
Before I get to those issues, however, let me explain why enactment of a new EAA is essential.
Simply put, continuing to operate under emergency authority raises the possibility of increasing legal and political complications. Operating under authority of the International Emergency Economic Powers Act (IEEPA), as we have done on a number of occasions, most recently for the past two years, means that we must function under certain legal constraints, and it leaves important aspects of our dual-use export control system increasingly at risk of legal challenge. Operating under emergency authority also can undercut our credibility as leader of the world's efforts to stem the proliferation of weapons of mass destruction.
While I do not want to overstate the case, because these complications are currently surmountable, and we will continue to pursue our export control policies despite them, at a minimum they are likely to consume increasing amounts of resources that could certainly be better used to administer and enforce the export control system effectively.
In some significant areas, we have less authority under IEEPA than under the EAA. Foremost among them are the penalty authorities. The penalties for violations of the Export Administration Regulations that occur under IEEPA, both criminal and administrative, are significantly lower than those available for violations that occur under the EAA. Even the EAA penalties are too low, having been eroded over the past 17 years by inflation. One of H.R. 361's most useful enforcement features is its increase in criminal and administrative penalties.
We rely on the deterrent effect of stiff penalties for export control violations. The longer we are under IEEPA, or even the EAA of 1979, the more the deterrent effect will erode, and companies will begin to think of the lower penalties merely as a cost of doing business, especially for nonproliferation and foreign policy cases.
Another limitation of IEEPA concerns export enforcement agents' police powers (e.g., the authority to make arrests, execute search warrants, and carry firearms). Those powers lapsed with the EAA. Our agents must now obtain Special Deputy U.S. Marshal status, which expires and must be renewed annually, in order to exercise these authorities and function as law enforcement officers. While this complication can be overcome, doing so consumes limited resources that would be better used on enforcement.
Finally, the longer the EAA lapse continues, the more likely we will be faced with attempts to impose additional limits on our authority. For example, IEEPA does not have an explicit confidentiality provision like that in section 12(c) of the EAA or the similar provision in H.R. 361. As a result, the Department's ability to protect from public disclosure information obtained concerning export license applications, the export licenses themselves, and related export enforcement information is likely to come under increasing attack on several fronts. Similarly, the absence of specific antiboycott references in IEEPA has led some respondents in antiboycott cases to argue -- thus far unsuccessfully -- that BXA has no authority to implement and enforce the antiboycott provisions of the EAA and Export Administration Regulations.
The lapse of authority also has domestic and international policy ramifications. Although we have made great progress in eliminating unnecessary controls while enhancing our ability to control truly sensitive exports, industry has the right to expect these reforms to be certain and permanent. For example, while the Administration has begun to implement the President's executive order on license processing, which increases the discipline on and timeliness of the license review process, a statutory foundation for that process would send an important message to U.S. exporters that these reforms will not be rolled back. That will give our exporters the certainty they need to plan their export transactions.
In addition, failure to enact a new EAA that reflects the changed world situation sends the wrong message to our allies and regime partners, many of whom we have been urging to strengthen their export control laws and systems. We have also been urging, as part of our export control cooperation with the former Soviet Union and Warsaw Pact countries, that those countries adopt control laws passed by their respective parliaments. Our credibility could be diminished by our own lack of a statute.
Some of these same issues militate against a simple renewal of the EAA of 1979. For example, as I noted earlier, the penalties of the EAA of 1979 have been substantially eroded by inflation. In addition, the EAA of 1979 is a Cold War statute that simply does not reflect current geo-political realities. Its basic national security control authorities are predicated on the existence of a multilateral regime, CoCom, that ended more than two years ago. A renewal of the EAA of 1979 is not much better than operating under IEEPA.
H.R. 361 makes several needed and significant improvements to the EAA which are similar to those proposed in the Administration's 1994 bill. They include control authority updated to address current security threats, increased discipline on unilateral controls, and enhanced enforcement authorities. H.R. 361 also contains provisions consistent with recent Administration licensing process and commodity jurisdiction reforms.
H.R. 361's structure reflects the new challenges resulting from the end of the Cold War. The basic control authorities are multilateral and unilateral (emergency) controls instead of the national security and foreign policy authorities of the EAA of 1979, just as the Administration's bill proposed. H.R. 361's new structure explicitly recognizes the preference for compliance with international regimes that the U.S. either is a member of (such as the Wassenaar Arrangement, the Missile Technology Control Regime, the Australia Group, and the Nuclear Suppliers' Group) or may help create or join in the future. H.R. 361's clear preference and explicit guidelines for multilateral controls is essential for achieving our nonproliferation goals without disadvantaging U.S. exporters.
Another significant positive feature of H.R. 361 is its increased discipline on unilateral controls. The determinations required by H.R. 361 for the imposition, extension, or expansion of unilateral controls are similar to those proposed by the Administration. These determinations will require a more precise analysis of the anticipated and actual effectiveness of unilateral controls. This more precise analysis will ensure that the economic security of the U.S. is not adversely affected by controls which do not significantly advance national security, foreign policy, or nonproliferation objectives.
H.R. 361 also supports the recent Administration reforms of the licensing and commodity jurisdiction processes. Its standards for license processing, which are consistent with the new executive order, include shortening the time allowed for review of applications and adding discipline to the interagency process, while permitting all pertinent agencies to review any license applications. These reforms improve the system's responsiveness to exporters while also enhancing our ability to meet our national security, foreign policy, and nonproliferation goals.
Consistent with the President's recent revision of the commodity jurisdiction process, H.R. 361 requires timely settlement of interagency disputes on whether an item is dual-use or munitions. It also requires increased coordination and transparency among the agencies in commodity jurisdiction and classification determinations. These reforms will make the export control system more responsive to exporters without diminishing the system's ability to meet our national security, foreign policy, and nonproliferation objectives.
One other area where H.R. 361 makes significant improvements is enforcement. First, it substantially increases criminal and civil penalties, which, as I mentioned, is long overdue. Not only has inflation eaten away at the 1979 penalty levels, but global political changes demand the significantly higher civil penalties that H.R. 361 provides for violations of nonproliferation controls in order to add credibility to our efforts. H.R. 361 also provides greater operational enforcement authority for undercover operations and forfeitures. These enhancements are particularly important in the current environment, with more diffuse threats, elaborate procurement networks, and suspect end users more difficult to identify.
We do have concerns, however, about H.R. 361's terrorism, unfair impact, antiboycott private right of action, and judicial review provisions, which I will outline. We also have constitutional concerns which another Administration witness will address.
The Administration shares the Congress' concern about terrorism, and we have adopted a very hard line against terrorist states, including support for Senator D'Amato's Iran-Libya legislation. However, H.R. 361's terrorism provision would significantly reduce the Administration's flexibility to regulate exports to countries on the terrorist list to reflect unique or changed circumstances. For example, the Administration would lack the necessary flexibility to supply U.S. government (diplomatic, military, or humanitarian) operations, multilateral peacekeeping and humanitarian missions, International Atomic Energy Agency inspections, and activities of U.S. or third country nationals unaffiliated with the terrorism-list government.
H.R. 361's unfair impact provision is a step backward from the Administration's proposal to clarify exporters' rights to petition for relief from burdensome and ineffective export control requirements. The provision limits U.S. exporters' statutory right to seek relief by failing to include ineffective controls and competitive disadvantage as statutory grounds upon which U.S. exporters can petition for relief. Second, it exempts some of the bill's provisions from the unfair impact process entirely. Third, it fails to explicitly allow unfair impact petitions based on anticipated market conditions.
H.R. 361's authorization of private actions for antiboycott violations could compromise enforcement of the antiboycott provisions of the EAA. Allowing suits for actual and punitive damages, whether or not a violation has been found through government enforcement action, could jeopardize the record of successful enforcement of the antiboycott law through inconsistent judicial interpretations, diversion of government resources, and private settlements that deny access to evidence.
Finally, H.R. 361's judicial review provision should be clarified to ensure it does not inadvertently allow inappropriate judicial review of U.S. foreign and national security policies.
Those are our concerns, Mr. Chairman, and we look forward to working with the Committee to address them. The important point, however, is the need to act this year on the bill in order to provide the proper balance for controlling dual-use items while minimizing the burden on U.S. exporters.
In April of 2002 the Bureau of Export Administration (BXA) changed its name to the Bureau of Industry and Security(BIS). For historical purposes we have not changed the references to BXA in the legacy documents found in the Archived Press and Public Information.