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ÝÒX°Òà@øø1ü!àDepartment€of€Commerce€Export€Enforcement€CasesˆÌà@¬¬2ü!àClosed€October€1,€1995€to€September€30,€1996ˆÌÌOrder€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€€Sections€€€€€€€€€€€€€€€€€€€€€€€€€€€€€ÌDate€€€€€€€Cases€€€€€€€€€€€€Charges€€€€€€€€€€€€€€€€€€€€€€€€Violated€€€€€€€€Respondents€€€€€€€€€€ResultÌ-----€€€€€€-----€€€€€€€€€€€€-------€€€€€€€€€€€€€€€€€€€€€€€€--------€€€€€€€€-----------€€€€€€€€€€------ *Ý ƒ -ø$ÝÓ  Óà  àòòÚ  Ú1Ú  ÚóóÝ  ÝÔ‡XXveXXXÔÔ‡X&ª H%XXveÔ€€€For€the€purpose€of€this€section,€ð ðcontrolled€countriesðð€are:€Albania,€Armenia,€Azerbaijan,Ð ° ÐBelarus,€Bulgaria,€Cambodia,€China€(PRC),€Cuba,€Estonia,€Georgia,€Kazakhstan,€Kyrgyzstan,€Laos,ÏLatvia,€Lithuania,€Moldova,€Mongolia,€North€Korea,€Romania,€Russia,€Tajikistan,€Turkmenistan,ÏUkraine,€Uzbekistan,€and€Vietnam.Ô#†XXveXH%&ª n#ÔÔ#†YX»ØXXXveO#Ô(ÖÃ9 Z ‹6Times New Roman Regular<èÀ( 9Z &Courier Regular 4Ý ƒPOš'ÝÓ  ÓÝ  ÝÒð°ÒÒá°ÒÔ‡\X@ŠXXXÔÔ‡\ô:7õX\X@ŠÔà@šš ÈàDepartment€of€Commerce€Export€Enforcement€CasesˆÐ È Ðà@00!ÈàClosed€October€1,€1995€to€September€30,€1996ˆÌÌòòOrder€Dateóóà0   àà0ø  2  2àòòCasesóóà0P ø 2ø 2àà0¨ P  2P  2àà0¨  2¨  2àà0X 2 2àòòChargesà  àà ` àà ¸ àSections€Violatedà À! àà $ àRespondentsà È( àà + àà x- àResultsóó´±Ó ^ 9Z+‹.Courier New Regular Ñ   ÑÑ   Ñ Ñ ° ÑÑ ° ÑÝ ƒæ¹!ÝÑ  ÑÓ  ÓÑ = ÑÝ  ݛԇXveXXXÔÙÙò òÑ€ ÑÑ8€SïXXdðdÈ8Ñà@;;!ìàÔ‡RÇQXXveÔII.€€ANNUAL€REPORTÔ#†XveXQRÇÊ#ԈР° ÐÌÌÔ‡¼ »XXveÔ1.€€The€Office€of€Exporter€ServicesÔ#†XveX»¼ 6#Ôó óÐ Ô$ ÐÌà@ ìàò òGovernment€and€Industry€Cooperative€Efforts€ó óˆÐ Ô $ ÐÌà  àBXA€manages€dual„use€export€controls€and€U.S.€non„proliferation€efforts€in€a€mannerÏthat€furthers€vital€national€security€and€foreign€policy€interests€of€the€United€States,€whileÏminimizing€the€economic€impact€on€the€American€business€community.€€BXA€is€responsible€forÏadapting€this€export€control€system€as€needed€to€keep€pace€with€rapid€technological€advances€andÏchanges€in€U.S.€international€relations.€€BXA€regulates€exports€through€a€licensing€system€setÏforth€in€the€Export€Administration€Regulations€(EAR)(15€œCFR€Parts€730„774).€€The€success€ofÏBXAððs€initiatives€undertaken€in€the€past€year€is€a€direct€result€of€the€cooperative€effort€betweenÏBXA€and€industry.€€ÌÌà  àThe€Office€of€Exporter€Services€(OExS)€has€the€responsibility€for€administering€EA'sÏeducation€and€compliance€role€and€implements€of€export€policy€within€Export€Administration.€ÏIn€this€role,€OExS€has€spearheaded€government„industry€cooperative€efforts€through€participationÏin€several€initiatives,€including€regulation€reform,€implementation€of€new€processing€timeÏframes,€export€control€liberalization,€and€industry€outreach.Ìà  àÌÓ  Óò òRegulation€Reform€EffortÐ €Ð Ðó óÓ†ÓÌà  àThe€Administration€completed€the€first€comprehensive€rewrite€of€the€ExportÏAdministration€Regulations€(EAR)€in€over€40€years€with€the€March€25,€1996€publication€in€theÏFederal€Register€of€an€interim€rule€simplifying€and€streamlining€the€EAR.€€BXA€involvedÏindustry€in€the€development€of€this€rule€and€companiesðð€participation€throughout€theÏsimplification€process€had€a€direct€impact€on€its€success.€€ÌÌà  àBXA€began€this€reform€effort€by€releasing€four€draft€"Discussion€Packages",€bothÏelectronically€and€in€hard€copy,€to€solicit€industry€participation€and€comment€and€maximize€theÏtransparency€of€the€process.€à  àOn€May€11,€1995,€the€Federal€Register€published€a€proposed€ruleÐ ¸"  Ðwith€a€request€for€comments.€€The€proposed€rule€reflected€several€new€features€based€on€theÏcomments€received€from€the€public€on€how€the€EAR€could€be€improved.€€Immediately€followingÏthe€publication€of€the€proposed€rule,€BXA€conducted€numerous€town„hall€style€meetings€aroundÏthe€United€States€to€engage€in€constructive€dialogue€with€the€exporting€community€in€preparationÏfor€issuing€the€interim€rule€in€the€Spring€of€1996.€€ÌÌà  àWith€the€publication€of€the€interim€rule€on€March€25,€1996,€OExS€began€a€series€of€13Ï"Roll„Out"€seminars€throughout€the€United€States.€€These€seminars€were€designed€not€only€toÏeducate€and€guide€the€public€through€the€new€EAR,€but€also€to€address€the€publicððs€commentsÐ  +T&)=÷ Ѐand€concerns€in€more€detail.€€The€series€drew€over€4000€people€and€generated€favorable€reviewÏfrom€industry.€€BXA€continues€to€respond€to€comments€and€suggestions€on€the€new€EAR€fromÏan€involved€exporting€community.€ÌÌÓ  Óò òThe€New€Export€Administration€Regulationsó óÐ `° ÐÓn ÓÌà  àThe€EAR€comprise€the€regulatory€regime€through€which€BXA€imposes€export€controls€onÏthose€commodities,€technology,€software,€and€activities€within€its€jurisdiction.€€Over€severalÏdecades,€the€EAR€had€been€amended€frequently€to€respond€quickly€to€the€various€nationalÏsecurity,€nonproliferation,€and€foreign€policy€concerns€of€the€United€States.€€However,€duringÏthis€time,€they€had€not€been€subjected€to€a€systematic€and€comprehensive€review.€€BXAÏrestructured€the€revised€EAR€to€make€them€consistent€and€easy€to€use.€€ÌÌà  àAimed€at€people€new€to€exporting,€the€new€EAR€use€"plain€English"€principles€and€haveÏa€streamlined€"decision€tree"€structure.€€All€license€requirements€are€consolidated€into€a€singleÏpart€near€the€beginning€of€the€EAR.€€The€previous€scattering€of€prohibitions€throughout€variousÏparts€essentially€forced€exporters€to€read€the€entire€body€of€regulations€from€cover€to€cover€inÏorder€to€determine€whether€or€not€a€license€was€required€for€a€particular€transaction.€€Not€onlyÏare€the€new€EAR€easier€to€negotiate,€they€provide€a€high€level€of€confidence€that€answers€foundÏare€in€fact€correct.€€Since€the€vast€majority€of€exports€do€not€require€a€license,€exporters€whoÏhave€minimal€controls€applicable€to€their€transactions€will€be€able€to€quickly€find€the€informationÏthey€need€and€disregard€the€sections€that€they€do€not€need.€€Others€will€be€able€to€determine€whatÏto€do€more€easily€with€a€Country€Chart€that€graphically€depicts€requirements.ÌÌÓ  Óò òExport€Control€Liberalizationsó óÐ Ð  ÐÓ¡ÓÌà  àIn€an€attempt€to€enhance€U.S.€competitiveness,€BXA€undertook€several€licensingÏliberalization€efforts€in€key€areas€that€benefit€U.S.€industry.€€OExS€played€a€lead€role€inÏdeveloping€and€drafting€these€rules.€€On€January€25,€1996,€BXA€published€in€the€FederalÏRegister€a€rule€to€implement€the€Presidentððs€October€6,€1995,€announcement€on€major€computerÏexport€control€reforms.€€This€rule€liberalizes€export€controls€on€all€computers,€and€establishesÏfour€tiers€of€computer€controls.€€In€addition,€this€rules€establishes€General€License€G„CTP,€whichÏfacilitates€the€liberalization€of€export€controls€of€computers.€€This€new€rule€provides€significantÏbenefit€to€the€international€competitiveness€of€the€U.S.€computer€industry€and€affects€anÏestimated€$10€billion€in€exports.€ÌÌà  àBXA€furthered€its€commitment€to€industry€by€publishing€an€interim€rule€amending€aÏnumber€of€Export€Control€Classification€Numbers€(ECCNs)€on€the€Commerce€Control€List€inÏorder€to€make€the€Nuclear€Referral€List€conform€more€closely€with€the€items€contained€in€theÏNuclear€Suppliers€Groups€(NSG)€Annex€published€by€the€International€Atomic€Energy€Agency,Ïâ âwhich€is€adhered€to€by€the€United€States€and€other€subscribing€governments€in€the€NSG.€€ThisÐ )à$( Ðrule€also€added€several€countries€eligible€to€receive€exports€under€General€License€G„NSG.€€AsÏpart€of€the€Regulation€Reform€effort,€G„NSG€was€incorporated€into€the€EAR€Country€Chart€inÏpart€738.€€Both€actions€have€simplified€the€licensing€process€for€U.S.€industry.Ìâ âÌà  àBXA€enhanced€the€flexibility€and€competitiveness€of€U.S.€international€marketingÏoperations€through€the€implementation€of€a€Special€Comprehensive€License€(SCL).€€The€SCLÏregulation€was€published€as€part€of€the€Regulation€Reform€effort€and€was€effective€March€25,Ï1996.€€This€license€allows€experienced€high€volume€exporters€to€export€virtually€all€items€on€theÏCommerce€Control€List€under€this€procedure.ÌÌÓ  Óò òCustomer€Service€Ð è 8  ÐÓ¬Óó óÌà  àIndustry€counseling€remains€an€essential€component€of€BXAððs€mission.€€Through€aÏvariety€of€outreach€programs,€BXA€promotes€an€understanding€of€U.S.€export€control€laws,€byÏenhancing€compliance€and€providing€assistance€in€navigating€the€regulatory€regime.€€TheseÏefforts€facilitate€U.S.€international€competitiveness.ÌÌà  àThe€Office€of€Exporter€Services€accomplishes€its€outreach€and€counseling€activityÏthrough€its€headquarters€in€Washington,€D.C.€and€its€Western€Regional€Office€(WRO)€inÏCalifornia,€the€state€ranked€2nd€in€1996€for€the€number€of€Fortune€500€companies.€€From€its€twoÏoffices,€the€WRO€assists€companies€located€throughout€the€Western€United€States.€€The€WROððsÏmain€office€is€located€in€Orange€County,€California,€with€a€branch€office€in€Santa€Clara,ÏCalifornia.€€These€two€offices€are€within€commuting€distance€of€29€of€the€50€fastest€growingÏtelecommunication€and€interactive€media€companies€in€the€United€States.€€This€organizationÏpermits€OExS€to€meet€the€needs€of€the€rapidly€expanding€exporting€community.€ÌÌòòRegulations€Roll„OutóóÐ ¨ø ÐÌà  àTo€help€businesses€understand€and€adapt€to€the€dramatic€changes€in€the€EAR,€OExSÏdeveloped€and€conducted€numerous€training€sessions€throughout€the€country.€€Within€days€of€theÏpublication€of€the€new€regulations,€OExS€began€presenting€seminars€in€all€major€markets€andÏthousands€of€business€executives€attended€these€events.€€ÌÌà  àOExS€also€conducted€training€sessions€on€regulations€reform€for€our€colleagues€in€otherÏU.S.€Government€agencies.€€Specialized€training€in€Washington,€D.C.€was€provided€to€thoseÏagencies€that€contribute€their€expertise€to€the€export€control€system.€€These€agencies€include€theÏDepartments€of€Defense,€State,€and€Energy,€the€Arms€Control€and€Disarmament€Agency,€and€theÏNon„Proliferation€Center.€€OExS€also€provided€extensive€training€to€the€U.S.€Customs€ServiceÏfield€offices€via€satellite€and€provided€them€with€specialized€on„site€programs€in€high€volumeÏexport€areas.ÌÐ  )à$( ÐòòExport€Compliance€Seminar€Programóóò òÐ ° ÐÌó óà  àThe€Office€of€Exporter€Services€(OExS)€interacts€with€all€segments€of€the€privateÐ ˆØ Ðbusiness€community€regarding€export€control€issues€and€policies.€€An€important€aspect€of€thisÏactivity€is€the€cosponsoring€of€programs€throughout€the€United€States€with€a€variety€of€industryÏtrade€associations,€universities€and€colleges,€state€and€local€governments,€and€nonprofitÏinternational€business€related€organizations.€€Working€with€these€organizations€furthers€BXAððsÏgoal€of€maintaining€a€cooperative€relationship€with€industry.€€ÌÌà  àIn€FY€1996,€OExS€conducted€68€export€compliance€seminars€with€over€5,700Ïparticipants.€€In€addition€to€the€programs€sponsored€by€BXA,€OExS€participated€in€over€175Ïinternational€trade„related€events€sponsored€by€numerous€public€and€private€sector€organizationsÏwhich€reached€over€18,000€business€representatives.€€This€is€the€largest€number€of€individualsÏthat€OExS€has€trained€in€its€history.€€ÌÌà  àOExS€also€helped€defense„dependent€firms€to€diversify€into€new€commercial€andÏinternational€markets€by€providing€financial,€technical,€and€regulatory€information€to€enhanceÏtheir€competitiveness.€€During€FY€1996,€the€Western€Regional€Office€conducted€a€series€of€18Ï"hands„on"€workshops€that€were€attended€by€over€760€participants€in€seven€western€states.€€WROÏrepresentatives€also€participated€in€another€26€conferences€providing€trade€competitivenessÏcounseling€to€4,942€attendees.ÌÌòòUpdate€1996óóÐ øH ÐÌà  àBXAððs€Update€1996€conference€attracted€the€largest€exporting€audience€in€over€fiveÏyears.€€With€over€850€participants,€the€program€provided€the€exporting€community€an€update€onÏall€export„€related€issues€and€events€of€the€past€year.€€This€annual€event€is€held€in€Washington,ÏD.C.€and€hosted€by€numerous€high„level€government€representatives.€ÌÌà  àThis€yearððs€program€was€highlighted€by€a€keynote€speech€by€Commerce€SecretaryÏMichael€Kantor.€€Commerce€Department€officials€and€representatives€from€the€interagencyÏcommunity€discussed€major€developments€in€export€control€policy,€including€the€newly€releasedÏExport€Administration€Regulations,€export€control€liberalizations,€technical€data€and€softwareÏcontrols,€and€other€relevant€issues€relating€to€export€control€requirements.ÌÌòòOne„on„one€CounselingóóÐ ô$D # ÐÌà  àTo€complement€its€seminar€program,€OExS€regulatory€specialists€in€Washington,€D.C.Ïand€in€OExS€field€offices€provide€extensive,€one„on„one€counseling€to€the€exporting€community.€ÏAs€in€past€years,€counselors€provided€accurate€and€in„depth€responses€on€a€wide€range€of€exportÏcontrol€and€licensing€issues€of€interest€to€the€exporting€community.€€This€yearððs€completion€ofÏthe€proposed€rewrite€of€the€Regulations€brought€an€increase€in€correspondence€and€telephoneÏcalls€to€OExS.€Ð h+¸&* Їà  àThrough€OExS,€BXA€advises€industry€on€a€broad€range€of€export€control€issues,Ïincluding€export€licensing€requirements€to€ship€high€technology€products,€documentationÏrequirements€for€export€transactions,€and€special€country€policy€concerns.€€Counselors€act€as€anÏintermediary€between€exporters€and€licensing€officials€by€forwarding€relevant€case„specificÏinformation€to€the€licensing€officers,€and€arranging€meetings€with€licensing€officers€and€industryÏrepresentatives€as€necessary.€€In€addition,€OExS€provides€referrals€to€other€trade€organizationsÏwhich€offer€assistance€with€other€export€related€issues€such€as€trade€finance€and€marketing.€ÏDuring€FY€1996,€OExS€responded€to€173,000€inquiries€regarding€BXA€policy€and€licensingÏissues,€and€received€1,268€visitors.€Ìà  àÌà  àAs€part€of€the€BXA€and€industry€cooperative€effort,€OExS€authorizes€emergencyÏprocessing€through€the€licensing€system€on€export€applications€which€meet€specific€criteria.€€IfÏapproved,€verbal€authorization€to€ship€is€given€to€the€exporter€followed€by€issuance€of€a€license.€ÏThese€cases€are€often€approved€within€a€few€hours€of€receipt€of€the€application.€€In€FY€1996,ÏOExS€granted€emergency€processing€to€37€cases,€representing€$41€million€in€authorized€exports.€€ÌÌà  àIn€FY€1996,€OExS€continued€its€customer€service€initiatives€through€the€distribution€ofÏbrochures€and€export€control„related€publications.€€This€year,€OExS€published€two€ð ðhow„toððÏdocuments€to€assist€exporters€entitled€the€"Procedures€for€Obtaining€an€Export€ControlÏClassification€Number"€and€"Helpful€Hints€for€Completing€the€Multipurpose€Application€FormÏBXA„748P".ÌÌà  àAs€an€additional€service€to€industry,€OExS€maintains€export€control€material€inÏinformation€libraries€in€Washington,€D.C.€and€Orange€County,€California.€€Information€andÏpublications€on€exporting,€marketing,€Denied€Persons€List,€and€seminar€schedules,€as€well€asÏcounseling€services,€are€among€the€many€types€of€export€control€and€marketing€informationÏavailable.€€OExS€also€ensures€that€this€information€is€made€available€to€various€regionalÏgovernment€trade€offices.Ì€€€ÌòòExpanded€Automation€ServicesÐ l¼ ÐóóÌà  àThrough€its€automation€efforts,€OExS€dramatically€enhanced€its€customer€serviceÏcapabilities.€€OExS's€"Fax„on„Demand"€system,€which€enables€exporters€to€access€usefulÏinformation€by€facsimile€24€hours€a€day,€was€expanded€significantly€this€year.€€The€system€nowÏprovides€over€80€documents,€covering€such€areas€as€recent€regulatory€changes,€upcomingÏworkshops,€useful€points€of€contact,€and€a€wide€variety€of€other€competitiveness€and€trade„¼related€information.€€Over€2,500€faxes€per€month€are€sent€to€our€customers€by€this€system.€ÌÌà  àOExS€also€expanded€its€free€broadcast€subscription€services€this€year€with€its€broadcastÏE„mail€system,€"netFacts".€€This€system€complements€our€longstanding€facsimile€service,€"FastÏFacts."€€Together,€these€two€systems€provide€regular€and€timely€updates€to€subscribers€onÏregulatory€and€policy€changes,€upcoming€workshops€and€other€items€of€interest.€€Roughly€3,000Ïorganizations€currently€subscribe€to€these€broadcast€services.Ð h+¸&* ЇÓ  Óò òLicense€Reviewó óÐ ° ÐÓý;ÓÌà  àOn€December€6,€1995,€the€President€issued€Executive€Order€12981€(EO€12981)€relatingÏto€the€licensing€process€for€dual„use€items.€€The€purpose€of€the€Executive€Order€was€to€provideÏbetter€discipline€to€the€licensing€process€as€committed€to€by€the€Trade€Promotion€CoordinatingÏCommittee.€€EO€12981€expands€the€scope€of€interagency€review€and€at€the€same€time€reduces€theÏtime€permitted€to€process€license€applications.€€Under€EO€12981,€new€authority€is€granted€to€theÏDepartments€of€State,€Defense,€and€Energy,€and€the€Arms€Control€and€Disarmament€agency€toÏreview€any€export€license€application.€€The€Executive€Order€permits€agencies€to€informÏCommerce€as€to€the€specific€types€of€applications€that€they€do€òònotóó€wish€to€review.€€AgenciesÐ ü L  Ðare€required€to€state€a€statutory€or€regulatory€basis€for€their€denial€recommendations.ÌOExS€developed€and€coordinated€procedures€for€EAððs€implementation€of€the€new€processingÏtime€frames.€€Agencies€implemented€the€Executive€Order€on€February€3,€1996.ÌÌà  àBXA€ensures€that€export€license€applications€are€analyzed€and€acted€upon€accurately,Ïquickly,€and€consistently,€and€that€exporters€have€access€to€the€decision„making€process,€withÏcurrent€status€reports€available€at€all€times.€€Rapid€processing€is€available€for€the€majority€ofÏapplications€BXA€receives.€€Authorization€to€ship€and€current€status€are€available€through€theÏcomputerized€voice€response€system,€STELA€(System€for€Tracking€Export€LicenseÏApplications).ÌÌà  àBXA€carefully€analyzes€each€export€license€application€it€receives.€€All€applications€areÏreviewed€for€the€reliability€of€the€exporter€and€end€user,€the€level€of€technology,€and€theÏappropriateness€of€the€items€to€the€stated€end€use.€€In€addition,€the€FY€1991€implementation€ofÏthe€Enhanced€Proliferation€Control€Initiative€(EPCI)€continues€to€place€increasing€emphasis€onÏreviewing€applications€for€countries,€regions,€and€projects€of€proliferation€concern€related€toÏnuclear,€chemical€and€biological€weapon,€and€missile€technology€development€areas.€€UponÏcompletion€of€this€analysis,€BXA€either€approves,€denies,€or€returns€a€license€application€withoutÏaction€(RWA).€Individual€licenses€are€valid€for€two€years.ÌÌÓ  Óò òExport€License€ProcessingÐ X ¨ ÐÓEÓó óÌà  àDramatic€licensing€liberalizations€implemented€following€the€September€30,€1993,Ïrelease€of€the€Trade€Promotion€Coordinating€Committeeððs€(TPCC)€report€to€Congress€onÏdeveloping€a€ð ðNational€Export€Strategyðð€greatly€reduced€licensing€activity€in€the€past€three€fiscalÏyears.€€For€instance,€the€number€of€applications€for€individual€licenses€has€been€reduced€by€moreÏthan€65€percent€between€FY€1993€and€FY€1996.€€During€FY€1996,€8,705€applications€wereÏreceived.€€In€contrast,€in€FY€1995,€BXA€received€9,982€applications,€which€in€turn€was€an€overÏ20€percent€reduction€from€the€12,609€applications€BXA€received€in€1994.ÌÌÌâ âÐ |*Ì%) Ðà  àBy€the€end€of€FY€1996,€BXA€acted€upon€8,695€applications€(including€cases€that€wereÏâ âpending€from€FY€1995),€approving€7,102€individual€licenses,€returning€1,337€without€action€andÏdenying€256.€€(See€Table€II.€1„1).€€At€the€end€of€FY€1996€there€were€934€applications€stillÏpending.€€All€actions€represent€a€reduction€in€the€number€of€cases€processed.ÌÌà  àDue€to€the€1994€and€1995€liberalization€for€computers,€this€commodity€group€has€beenÏreplaced€by€shotguns€as€being€the€most€significant€commodity€group€for€which€export€licenseÏapplications€were€received€in€FY€1996.€€From€FY€1994€to€FY€1995,€the€number€of€incomingÏexport€license€applications€for€computers€in€Category€4€decreased€by€approximately€69%.€€ThisÏcommodity€group€experienced€an€equally€significant€drop€in€FY€1996€by€approximately€45%.Ì€Ìà  àBXA€experienced€decreases€in€license€applications€in€all€the€Country€Groups€during€FYÏ1996,€the€highest€being€an€approximate€30%€decrease€in€licenses€received€for€exports€to€formerÏCOCOM€countries.€€This€decrease€in€license€applications€is€based€on€recent€liberalizations€andÏincreased€eligibility€for€general€licenses€and€license€exceptions.€ÌÌà  àDuring€FY€1996,€BXA€continued€to€concentrate€on€reducing€the€number€of€applicationsÏpending€past€statutory€deadlines.€€By€the€end€of€FY€1996,€only€49€applications€were€still€pendingÏover€the€statutory€deadlines.€€This€is€a€significant€decrease€compared€to€FY€1995€when€theÏnumber€of€applications€still€pending€past€the€statutory€deadline€was€82.ÌÌà  àPrior€to€implementation€of€Executive€Order€12981,€the€average€processing€time€forÏapplications€during€FY€1996€that€did€not€require€referral€to€another€agency€increased€to€16€days,Ïfrom€12€days€in€FY€1995.€€The€average€processing€time€for€applications€requiring€referral€was€47Ïdays,€an€increase€from€41€in€FY€1995.€€After€implementation€of€EO€12981,€the€averageÏprocessing€time€for€applications€that€did€not€require€referral€to€another€agency€was€nine€days,€andÏthe€average€processing€time€for€applications€requiring€referral€was€30€days.€€During€the€secondÏand€third€quarters€of€FY€1996,€91€percent€of€all€applications€required€interagency€referral.€ÏOverall,€average€processing€times€increased€from€30€days€in€FY€1995€to€33€days€in€FY€1996.€ÏThis€increase€in€processing€time€can€be€attributed€to€the€backlog€of€cases€that€developed€duringÏthe€government€furlough€and€the€increased€percentage€of€cases€referred€to€other€agencies.ÌÌò òà@ÐÐìàLicense€Referral€ProcessˆÐ 0"€  Ðó óÌà  àThe€Department€of€Commerce,€both€by€law€and€practice,€refers€certain€applications,Ïbased€on€the€level€of€technology,€the€appropriateness€of€the€items€for€the€stated€end€use,€and€theÏcountry€of€destination,€to€other€agencies€for€review€and€recommendation.€€The€principal€referralÏagencies€are€the€Department€of€Defense,€the€Department€of€Energy,€the€Department€of€State€andÏthe€Arms€Control€and€Disarmament€Agency€(ACDA).€€ACDA€has€increased€its€role€in€theÏlicense€review€process€with€the€implementation€of€Executive€Order€12981.ÌÌâ âÐ |*Ì%) Ðà  àDuring€the€first€few€months€of€FY€1996€(prior€to€Executive€Order€12981),€the€interagencyÏâ âlicense€review€and€escalation€procedure€was€governed€by€guidelines€established€by€a€PresidentialÏDirective€in€December€1990.€€Contentious€export€license€applications€were€referred€to€variousÏworking„level€interagency€groups€for€resolution,€under€agreed€procedures.€€Agencies€representedÏat€the€working€level€were€the€Departments€of€Commerce,€Defense,€Energy€and€State.€ÌÌà  àCommerce€chairs€the€interagency€Operating€Committee€(OC),€which€reviews€casesÏinvolving€national€security€and€certain€foreign€policy€controlled€items.€€The€Department€of€StateÏchairs€the€Subgroup€on€Nuclear€Export€Coordination€(SNEC),€the€Missile€Technology€ExportÏControl€group€(MTEC)€and€the€Chemical€and€Biological€Weapons€Control€group€(SHIELD).€ÏThese€groups€review€cases€subject€to€nuclear€nonproliferation,€missile€technology,€andÏchemical/biological€weapons€controls,€respectively.ÌÌà  àIf€the€reviewing€agencies€do€not€reach€consensus€on€an€application€at€the€working€level,Ïthe€application€is€escalated€to€the€Advisory€Committee€on€Export€Policy€(ACEP).€€This€AssistantÏSecretary„level€body€is€chaired€by€Commerce€with€its€principal€members€coming€from€theÏagencies€listed€above.€€If€a€dispute€remains€unresolved€at€this€level,€the€decision€can€be€furtherÏescalated€to€the€Export€Administration€Review€Board€(EARB),€a€Cabinet„level€group€chaired€byÏthe€Secretary€of€Commerce€with€the€Secretaries€of€Defense,€and€State€as€the€other€statutoryÏmembers.€€The€Chair€of€the€Joint€Chiefs€of€Staff€and€the€Director€of€Central€Intelligence€haveÏnon„voting€rights€as€members€of€the€Board.€€If€a€participating€agency€disagrees€with€theÏrecommendation€of€the€EARB,€it€can€escalate€the€decision€to€the€President.ÌÌà  àUnder€Executive€Order€12981,€applications€that€are€in€dispute€among€the€agencies€areÏreferred€to€the€OC.€€Export€license€applications€are€no€longer€referred€to€the€working€groupsÏ(SNEC,€MTEC€and€SHIELD).€€These€working„level€interagency€groups€remain€a€part€of€theÏlicensing€process€in€a€consultative€basis.€€With€the€Executive€Order€implementation,€the€role€ofÏthe€OC€was€expanded€to€include€the€review€of€all€license€applications€for€which€reviewingÏdepartments€and€agencies€are€not€in€agreement.€€The€Commerce€Chair€considers€theÏrecommendations€of€the€reviewing€agencies€and€informs€these€entities€of€the€Chairððs€decisionÏwithin€14€days€after€receipt€of€the€agency€recommendations.€€Agency€recommendations€areÏrequired€to€be€submitted€within€30€days€of€receipt€of€the€original€referral€from€Commerce.€€AnyÏreviewing€agency€may€appeal€the€decision€of€the€Chair€of€the€OC€to€the€Chair€of€the€AdvisoryÏCommittee€on€Export€Policy€(ACEP).€€In€the€absence€of€a€timely€appeal,€the€Chairððs€decisionÏwill€be€final.ÌÌà  àIf€any€agency€disagrees€with€a€licensing€determination€of€the€Department€of€CommerceÏmade€through€the€OC,€it€may€appeal€the€matter€to€the€ACEP€for€resolution.€€An€agency€mustÏappeal€a€matter€within€5€days€of€the€OCððs€final€decision.€€Appeals€must€be€in€writing€from€anÏofficial€appointed€by€the€President€with€consent€of€the€Senate,€or€an€officer€properly€acting€inÏsuch€capacity,€and€must€cite€both€the€statutory€and€regulatory€bases€for€the€appeal.€€Decisions€ofÏthe€ACEP€are€based€on€a€majority€vote.€€Any€dissenting€agency€may€appeal€the€decision€byÏsubmitting€a€letter€from€the€head€of€the€agency€to€the€Secretary€of€Commerce,€in€his€role€as€ChairÐ h+¸&* Ðof€the€Export€Administration€Review€Board€(EARB),€and€the€Secretary€of€Commerce€will€thenÏcall€a€meeting€to€consider€the€license€application.€€In€the€absence€of€a€timely€appeal,€the€majorityÏvote€decision€of€the€ACEP€shall€be€final.ÌÌà  àExport€applications€considered€by€the€EARB€are€resolved€by€a€majority€vote€decision.€ÏAny€agency€may€appeal€this€decision€to€the€President.€€In€the€absence€of€a€timely€appeal,€theÏmajority€vote€decision€of€the€EARB€shall€be€final.€ÌÌà  àExecutive€Order€12981€reduces€the€time€permitted€to€process€license€applications.€€NoÏlater€then€90€calendar€days€after€it€is€submitted,€a€complete€license€application€will€either€beÏfinally€disposed€of€or€escalated€to€the€President€for€decision.€€Prior€to€Executive€Order€12981Ïimplementation,€statutory€authority€required€all€license€applications€to€be€resolved€within€120Ïdays€after€an€application€was€submitted.ÌÌÓ  Óò òCommodity€Jurisdiction€Processó óÐ ˜è  ÐÓŠeÓÌà  àThe€Administration€achieved€its€goal€of€developing€an€efficient€and€transparent€process€toÏresolve€disputes€by€implementing€a€new€Commodity€Jurisdiction€(CJ)€process.€€The€proceduresÏto€implement€this€process€are€intended€to€improve€interagency€coordination€€with€regard€toÏcommodity€jurisdiction€and€commodity€classification€requests.€€New€procedures,€based€on€anÏinteragency€agreement€between€the€Departments€of€Commerce,€State,€and€Defense,€wereÏimplemented€on€May€15,€1996.€ÌÌà  àThe€Department€of€Commerce€will€share€with€the€Departments€of€State€and€Defense€allÏcommodity€classification€requests€and€license€requests€for€items/technologies€specificallyÏdesigned,€developed,€configured,€adapted€and€modified€for€a€military€application,€or€derivedÏfrom€items/technologies€specifically€designed,€developed,€configured,€adapted€or€modified€for€aÏmilitary€application.€€The€Department€of€State€will€share€with€Commerce€all€applications€forÏmunitions€licenses€for€items/technologies€not€specifically€designed,€developed,€configured,Ïadapted€and€modified€for€a€military€application,€or€not€derived€from€items/technologiesÏspecifically€designed,€developed,€configured,€adapted€or€modified€for€a€military€application.€ÏCommerce,€State€and€Defense€may€refer€any€of€the€classification€requests€or€munitions€licenseÏapplications€for€€commodity€jurisdiction€determinations€within€two€working€days€of€receipt.€ÏSilence€will€be€deemed€to€be€consent€at€the€end€of€those€two€working€days€and€the€originatingÏagency€may€proceed€with€the€processing€of€a€final€and€binding€commodity€classification€orÏmunitions€license€in€accordance€with€its€own€regulations,€practices€and€policies.ÌÌà  àCommodity€classifications€and€munitions€license€applications€referred€to€the€CJ€process,Ïas€well€as€any€CJ€requests,€have€a€95€calendar€day€cumulative€time€line€for€resolution€of€anyÏconflict.€€The€guidelines€for€resolution€begin€with€referral€of€CJ€applications€by€the€StateÏDepartmentððs€Defense€Trade€Controls€(DTC)to€other€agencies€within€five€days.€€Departments€areÏrequired€to€submit€recommendations€to€DTC€within€five€days€and€may€request€ten€additionalÏdays€to€submit€recommendations€for€extraordinary€cases.€€The€Director€of€DTC€makes€a€finalÐ h+¸&* Ðdecision€within€five€days€of€receipt€of€such€recommendations.€€If€the€decision€is€disputed€byÏanother€agency€the€decision€must€be€escalated€within€five€days€and€reviewed€for€up€to€ten€daysÏby€an€Assistant€Secretary.€The€matter€may€be€further€escalated€to€the€Cabinet€level,€withÏauthority€to€escalate€the€decision€to€the€President.€€The€exporter€will€be€notified€and€may€thenÏappeal€that€determination.ÌÓ  Óò òÌElectronic€Licensingó óÐ 8 ˆ ÐÓWpÓÌà  àBXA€continues€to€upgrade€and€expand€its€electronic€licensing€process€to€provide€promptÏcustomer€service.€€This€year,€BXA€introduced€the€License€Application€Scanning€SystemÏ(LASSie)€which€is€a€PC„based€forms€processing€and€image€management€system.€€To€ensureÏcompatibility€with€LASSie,€BXA€revised€the€export€application€form.€€The€new€748PÏMultipurpose€Application€Form€can€be€used€to€apply€for€an€export€license€or€a€classificationÏrequest.€€In€FY€l996,€BXA€processed€70%€of€the€submitted€applications€for€all€destinations€onÏLASSie.€€The€remaining€30%€of€all€applications€received€in€FY€1996€were€submittedÏelectronically€using€the€Export€License€Application€and€Information€Network€(ELAIN).€€ForÏboth€LASSie€and€ELAIN,€technical€specifications,€import€certificates,€and€other€documents€areÏsubmitted€by€telefax€or€express€mail.€ÌÌà  àBXA€is€currently€updating€the€Multipurpose€Application€Records€&€Retrieval€SystemÏ(MARRs)€as€the€replacement€for€the€current€microfiche€system.€€MARRs€is€a€PC„based€formsÏand€image€management€system.€€The€automated€data€base€will€provide€an€electronic€image€of€allÏexport€and€classification€requests€and€supporting€documentation€whether€submitted€manually€orÏelectronically.€€The€database€will€be€accessible€to€all€BXA€personnel€with€export€licensing€dutiesÏand€to€any€U.S.€Government€Agency€to€which€export€requests€are€referred.€€It€will€be€capable€ofÏaccepting€exporter€transmissions€of€various€digitized€media€and€will€also€allow€immediate€accessÏfor€retrieval€of€all€data€existing€within€the€data€base.€ÌÌÓ  Óò òSpecial€Licensing€Proceduresó óÐ €Ð ÐÓÃvÓÌòòSpecial€Comprehensive€LicenseóóÐ X ¨ ÐÌà  àIn€an€effort€to€respond€to€concerns€from€high„tech€businesses,€BXA€removed€regulatoryÏobstacles€and€streamlined€the€Special€License€procedure€outlined€in€the€EAR€to€offer€a€newÏlicensing€option€titled€the€Special€Comprehensive€License€(SCL).€€The€new€SpecialÏComprehensive€License€(SCL)€replaces€and€consolidates€all€of€the€separate€Special€Licenses.€ÏThe€SCL€became€effective€through€Federal€Register€Notice,€Vol.€61,€No.€58,€dated€March€25,Ï1996.€€This€SCL€allows€for€expanded€commodities€and€destinations€and€permits€companies€toÏperform€all€existing€export/reexport€activities€under€one€license€authorization.ÌÌà  àBy€creating€this€new€license,€BXA€has€provided€more€flexibility€that€allows€a€company€toÏtailor€a€license€to€its€individual€needs.€€The€SCL€is€available€to€experienced€exporters€that€areÏreliable€and€have€a€strong€corporate€commitment€to€the€development€and€maintenance€of€anÐ h+¸&* ÐInternal€Control€Program€(ICP).€€This€new€license€expands€the€ICP€to€cover€export€activities€notÏpreviously€performed€under€the€Special€Licensing€Procedures.€€Unlike€Special€Licenses,€the€SCLÏwas€automated€to€provide€exporters€the€ability€to€submit€applications€electronically,€similar€toÏother€license€submissions.€€ÌÌà  àBefore€implementation€of€the€SCL€through€the€Regulation€Reform€effort,€there€were€sixÏseparate€types€of€Special€License€procedures:€(1)€Project€License;€(2)€Distribution€License;€(3)ÏService€Supply€Procedure;€(4)€Humanitarian€License;€(5)€Aircraft€and€Vessel€Repair€StationÏProcedure;€and€(6)€Special€Chemical€License.€€The€following€is€a€description€of€each€type€ofÏlicense€procedure:ÌÌòòProject€LicenseÐ Ô$  ÐóóÌà  àThe€Project€License€(PL)€authorizes€large€scale€exports€of€a€wide€variety€of€commoditiesÏand€technical€data€for€specified€activities.€€Those€activities€can€include€capital€expansion,Ïmaintenance,€repair€or€operating€supplies,€or€the€supply€of€materials€to€be€used€in€the€productionÏof€other€commodities€for€sale.€€The€typical€users€of€the€PL€are€firms€wishing€to€establish€offshoreÏmanufacturing€facilities€or€firms€that€wish€to€supply€maintenance,€repair,€and€operating€suppliesÏto€serve€an€existing€facility€such€as€an€airline.Ì€à  àà ` àà ¸ àà  àà h àà À àÐ 4„ ÐòòDistribution€LicensesÐ  p ÐóóÌà  àThe€Distribution€License€(DL)€authorizes€U.S.€companies€to€make€multiple€exports€andÏreexports€of€certain€controlled€commodities€to€pre„approved€consignees€located€in€most€countriesÌin€Country€Groups€T€and€V,€except€Iran,€Jordan,€Lebanon,€Syria,€and€the€People's€Republic€ofÏChina.€€DL€consignees,€whether€resellers€(e.g.,€distributors)€or€end„users€(e.g.,€manufacturers)Ïmay€be€affiliated€or€unaffiliated€with€the€DL€holder.€€Only€firms€that€demonstrate€a€thoroughÏknowledge€of€the€EAR€and€strictly€adhere€to€the€DL€requirements€are€granted€this€privilege.€€ÌÌà  àAn€Internal€Control€Program€(ICP)€is€a€mandatory€requirement€of€the€DL€and€is€craftedÏby€each€DL€participant€to€ensure€that€its€export€procedures€comply€with€the€requirements€of€theÏDL€and€the€EAR.€€Broadly€speaking,€the€15€elements€of€the€ICP€can€be€summarized€under€theÏheadings€of:€(1)€Customer€Screening€(i.e.,€EPCI,€Denied€Persons€List,€Diversion€Risk€Profile,Ïand€Product/Country);€(2)€Auditing;€(3)€Training;€and€(4)€Administrative,€(e.g.€CorporateÏcommitment€to€EAR€compliance).€€BXA€has€assisted€exporters€and€consignees€which€participateÏin€this€procedure€to€develop€and€refine€their€internal€control€programs.€€The€DL€Internal€ControlÏProgram€has€been€the€standard€for€use€by€multinational€companies€worldwide€since€itsÏimplementation€in€1985.€€€€€ÌÌòòÌÌÌÐ h+¸&* ÐService€Supply€License€Procedureóó€€Ð ° Ðà  àà ` àà ¸ àà  àà h àà À àà  à€Ìà  àThe€Service€Supply€Procedure,€which€encompasses€both€the€Service€Supply€License€andÏforeign„based€Service€Facility,€enables€persons€or€firms€in€the€United€States€and€abroad€toÏprovide€prompt€service€for€equipment:€(1)€exported€from€the€United€States;€(2)€produced€abroadÏby€a€subsidiary,€affiliate€or€branch€of€the€U.S.€firm;€or€(3)€produced€abroad€by€a€manufacturerÏwho€uses€parts€imported€from€the€United€States€in€the€manufactured€product.€€The€ServiceÏSupply€Procedure€permits€the€export€and€reexport€of€spare€and€replacement€parts€to€customers€inÏmost€countries€in€Country€Groups€T€and€V,€and€under€certain€conditions,€the€export€and€reexportÏof€replacement€parts€(but€not€spare€parts)€to€customers€in€Country€Groups€Q,€W,€and€Y.€ÌÌòòHumanitarian€LicenseóóÐ Ô$  ÐÌà  àThe€Humanitarian€License€(HL)€authorizes€exports€of€donated€goods€to€meet€basicÏhuman€needs.€€The€exporter€should€have€experience€in€this€field€and€may€not€charge€recipientsÏfor€the€exported€products.€€Further,€firms€must€have€a€monitoring€system€that€ensure€goods€reachÏthe€intended€beneficiaries.€ÌÌà  àThis€procedure€was€abolished€upon€publication€of€the€revised€regulations€on€March€25,Ï1996.€License€Exception€NEED€was€created€to€cover€most€export€transactions€for€donated€goodsÏto€meet€basic€human€needs.€ÌÌòòThe€Aircraft€and€Vessel€Repair€Stationó󀀀РøH ÐÌà  àThe€Aircraft€and€Vessel€Repair€Station€Procedure€is€an€alternative€method€of€supplyingÏan€end„use€document€that€would€otherwise€be€required€to€support€an€application€for€an€individualÏlicense.€€Parts€exported€under€the€license€must€be€for€installation€on€the€aircraft€or€vessel.€€NoÏreexports€of€the€uninstalled€parts€by€the€Repair€Station€are€authorized.€€This€procedure€wasÏabolished€upon€publication€in€of€the€revised€regulations€on€March€25,€1996,€due€to€the€decontrolÏof€commodities€associated€with€the€airline€industry.€€In€most€instances,€other€commodities€thatÏwere€not€decontrolled€are€controlled€for€missile€technology€reasons€and€must€be€exported€underÏan€individual€license.€ÌÌòòSpecial€Chemical€LicenseóóÐ #l! ÐÌà  àThe€Special€Chemical€License€authorizes€exports€of€certain€controlled€chemicals€andÏchemical€and€biological€equipment€to€all€destinations€except€Country€Groups€S€and€Z,€Iran,€Iraq,Ïand€Syria.€€This€procedure€is€intended€to€assist€those€firms€that€ship€significant€amounts€of€theseÏcommodities€by€removing€the€requirement€for€applying€for€numerous€individual€licenses.€€OnlyÏreliable€firms€that€can€demonstrate€the€ability€to€adhere€to€the€EAR€and€the€Special€Chemical€ÌÌâ âÐ |*Ì%) ÐLicense€requirements€may€participate,€and€eligibility€is€further€restricted€to€consignees€that€areÏâ âsubsidiaries,€affiliates,€or€unaffiliated€firms€which€are€the€actual€end„users€of€the€commodities.€ÏThere€is€a€general€prohibition€on€resale,€transfer,€and€reexport€of€commodities€received€underÏthis€procedure€without€prior€written€authorization€from€BXA.€€€ÌÌòòUSG„Agency€International€Cooperative€LicensesÐ L œ ÐóóÌà  àIn€1993,€a€license€was€developed€to€assist€a€U.S.€Government€Agency€in€meeting€itsÏmission€and€activities€under€the€Nunn„Lugar€Program€for€the€dismantlement€of€weapons€of€massÏdestruction€in€Belarus,€Kazakhstan,€Russia,€and€the€Ukraine€under€the€Cooperative€ThreatÏReduction€Program€(CTRP).€€ÌÌà  àIn€FY€1996,€OEXS€approved€11€requests€to€multiple€consignees€for€the€shipment€of€itemsÏneeded€to€support€the€various€projects€involved€under€the€CTRP.€€Some€of€these€projects€involveÏassistance€in€export€control€development,€defense€conversion,€accountability,€control,€andÏprotection€systems€for€nuclear€material,€the€dismantlement€of€nuclear€weapons€and€destruction€ofÏstrategic€nuclear€vehicles,€and€rail€transport€of€nuclear€weapons.€€€€ÌÌà  àIn€FY€1996,€a€license€was€developed€to€assist€a€U.S.€Government€Agency€in€fulfilling€theÏU.S.€partnership€role€in€the€international€Space€Station€Program.€€The€license€authorizes€exportsÏof€items€that€are€part€of€bilateral€agreements€between€the€U.S.€and€foreign€government€spaceÏagencies.ÌÌòòEvaluation€of€Special€LicensingóóÐ ä4 ÐÌà  àOriginally,€Special€Licenses€were€established€for€exporters€who€routinely€make€highÏvolume€shipments€of€pre„approved€items€to€pre„approved€destinations€and€end€uses/users.€€TheseÏprocedures€were€established€to€help€U.S.€firms€remain€competitive€in€the€global€market€place€byÏallowing€special€licenses€in€lieu€of€submitting€individual€applications.€€By€approving€theseÏlicense€paperwork€burden€on€exporters/reexporters,€improving€U.S.€competitiveness€in€the€globalÏmarket€by€allowing€more€flexibility,€and€improving€delivery€times€by€not€having€to€wait€forÏindividual€license€approvals€from€BXA.ÌÌà  àExporters€can€now€receive€most€of€these€same€benefits€through€the€increased€availabilityÏof€general€license€and€commodity€decontrols,€rather€than€seeking€Special€Licensing€authority.€ÏThe€number€of€Special€Licenses€has€continued€to€decline€in€FY€1996€in€direct€proportion€to€theseÏdecontrols€and€general€license€availability.€€The€most€significant€impact€on€Special€LicensesÏduring€this€period€was€the€October€6,€1995,€Presidential€announcement€to€reform€computerÏexport€controls.€€Since€the€majority€of€Distribution€License€Holders€have€been€computer€relatedÏcompanies,€the€changes€made€to€computer€export€controls,€as€found€in€Federal€Register€Notice,Ïâ âVol.61,€No.€17,€dated€January€25,€1996,€essentially€eliminated€the€need€for€a€Special€License€for€Ð )à$( Ðthese€types€of€companies.€€Exporters€can€now€use€General€License€G„CTP€for€the€export/reexportÏof€higher€level€computers.€€A€breakdown€of€the€total€number€of€current€Special€License€holdersÏfor€FY€1996€are€identified€below.Ìâ âÌà  àà ` àDistribution€Licenseà h àà À àà  à27Ð `° Ðà  àà ` àProject€Licenseà h àà À àà  à24Ð L œ Ðà  àà ` àService€Supplyà h àà À àà  à€7Ð 8 ˆ Ðà  àà ` àService€Facilityà h àà À àà  à24Ð $ t Ðà  àà ` àSpecial€Chemicalà h àà À àà  à€1Ð  ` Ðà  àà ` àHumanitarianà  àà h àà À àà  à€0Ð ü L  Ðà  àà ` àAircraft/Vessel€Repairà À àà  à€0Ð è 8  Ðà  àà ` àSpecial€Intl.€Licenseà h àà À àà  à€2Ð Ô$  ÐÌà  àà ` àTotalà ¸ àà  àà h àà À àà  à85Ð ¬ü  ÐÌòòTransitionóóÐ „Ô  ÐÌà  àAll€current€Special€Licenses€(i.e,€Distribution,€Project,€Service€Supply€&€Facility,€SpecialÏChemical)€will€expire€on€March€31,€1997.€€OExS€has€contacted€each€current€Special€LicenseÏholder€to€offer€counseling€to€those€who€are€still€in€the€process€of€analyzing€the€benefits€of€theÏnew€SCL.€€During€FY€1996,€OExS€completed€seven€pre„application€consultations€with€SCLÏapplicants€to€determine€eligibility€under€a€SCL.€€OExS€reviewed€other€written€advisory€requestsÏby€firms€to€determine€eligibility€under€the€SCL.€ÌÌà  àIn€addition€to€working€through€the€transition€period€of€the€new€license,€OExS€counselsÏexporters€on€the€establishment€of€Internal€Control€Programs€(ICP).€€Current€Distribution€LicenseÏholders€already€have€Internal€Control€Programs€that€can€be€adapted€to€the€new€SCL.€€EvenÏthough€the€other€types€of€SL€holders€do€not€require€ICPs,€OExS€continues€working€with€firms€toÏcustomize€ICPs€to€unique€exporter€activities.€ÌÌÓ  ÓòòSystems€ReviewsóóÐ X ¨ ÐÌà  àSection€4€of€the€EAA€requires€the€Secretary€to€conduct€periodic€reviews€of€all€active€SpecialÏLicenses.€€The€purpose€of€these€reviews€is€to€evaluate€the€adequacy€of€the€mandatory€ICPÏimplemented€by€SL€holders€and€consignees,€to€ensure€compliance€with€the€EAR,€and€to€provideÏnecessary€education€and€guidance€to€the€SL€holders€and€consignees.€€Reviews€are€conducted€byÏexport€compliance€specialists€located€in€the€OExSðð,€Special€Licensing€and€Compliance€DivisionÏ(SLCD)€in€Washington,€D.C.€ÌÌà  àFurthering€BXAððs€customer€service€objectives€during€FY€1996,€OExS€revised€and€updatedÏthe€Special€Comprehensive€License€(SCL)€Internal€Control€Program€(ICP)€Guidelines,€SCL€Holder€Ìâ âReview€Module,€SCL€Holder€and€Consignee€Systems€Reviews€Questionnaires,€and€other€SL€related€Ð |*Ì%) Ðmaterial.€€During€these€revisions,€an€appendix€was€created€to€the€SCL€ICP€Guidelines€that€providesÏâ âguidance€to€participants€on€the€development€of€the€ICP€based€on€their€specific€activities€under€theÏSCL.ÌÌà  àOExS€also€revised€and€updated€the€Export€Management€Systems€(EMS)€Guidelines.€€InÏaccordance€with€the€Enhanced€Proliferation€Control€Initiative€(EPCI)€provisions,€the€80„pageÏpamphlet€includes€a€description€of€how€an€exporter€of€decontrolled€or€license€exception€eligibleÏcommodities€can€set€up€screening€procedures,€similar€to€those€required€under€the€SCL€program,€toÏhelp€ensure€that€sales€are€not€made€to€entities€involved€with€the€design,€development,€production,Ïstockpiling€or€use€of€weapons€of€mass€destruction.€€Sales€to€these€entities€in€specified€countries€areÏprohibited€even€under€general€license.€€The€EMS€Guidelines€are€based€in€part€on€the€experienceÏgained€by€OExS€in€conducting€over€a€thousand€on„site€€systems€reviews.€€All€of€these€publicationsÏare€available€to€the€public.€€In€the€future,€BXA€will€offer€the€ICP€and€EMS€Guidelines€on€BXA'sÏInternet€Website.€€During€July€and€August,€1996,€BXA€distributed€over€800€copies€of€the€revisedÏand€updated€SCL€ICP€and€the€EMS€Guidelines.ÌÐ  „Ô  ÐÌà0  àà ° àà@  ì(#(#àTable€II„1.3€€Summary€of€Systems€ReviewsˆÌÌ_________________________________________________________________ÌFiscal€Year€1984„88€1989€1990€1991€1992€1993€1994€1995€1996€TotalÌ_________________________________________________________________ÌSpecial€Licensing€and€Compliance€Division€(SLCD)ÌÌ€€Domestic:€€€282€€€€69€€€42€€€52€€€39€€€16€€€€9€€€€9€€€€3€€€€521Ì€€Foreign:€€€€€88€€€€61€€€82€€€24€€€41€€€32€€€19€€€€0€€€€0€€€€347Ì€€Desk:€€€€€€€€€0€€€€€0€€€€6€€€€6€€€12€€€€0€€€€0€€€€5€€€€1€€€€€30€€€SLCD€Total:€€370€€€130€€130€€€82€€€92€€€48€€€28€Ï€14€€€€4€€€€898ÌÌÌWestern€Regional€Office€*ÌÌ€€Domestic:€€€€€0€€€€38€€€44€€€33€€€22€€€€6€€€€3€€€**€€**€€€146Ì€€Mini:à  àà ` à€0€€€€€2€€€€4€€€€0€€€€0€€€€0€€€€0€€€**€€**€€€€€6Ð \¬ Ѐ€WRO€Total:€€€€0€€€€40€€€48€€€33€€€22€€€€6€€€€3€€€**€€**€€€152ÌÌTotal€ReviewsÌ€€Conducted:€€370€€€170€€178€€115€€114€€€54€€€31€€€€14€€€4€€€1050Ì_________________________________________________________________ÌÌÌÌ*€€€€€Established€in€1988Ì**à0  à€Discontinued€systems€reviews,€function€returned€to€Special€Ð”ä(#(# Ѐ€€€€€Licensing€and€Compliance€DivisionÌÌÌDefinitions:à0 ` à"Domestic":€1€or€2€day€on„site€visit€to€Special€License€HolderÐD!”` (#` (# Ðà  àà ` àà0 ¸ à"Foreign":€1€or€2€day€on„site€visit€to€the€Special€License€ConsigneeÐ ¸ (#¸ (# Ðà  àà ` àà0 ¸ à"Desk":€Special€License€Holder,€Special€License€Consignee,€and€ExportÏManagement€System€reviews€conducted€by€written€correspondenceÐ ¸ (#¸ (# Ðà  àà ` àà0 ¸ à"Mini":€half€day€on„site€visit€to€Special€License€HolderÐ ¸ (#¸ (# ÐÌÐ  Ì&"% Ðò òÔ‡¼ »XXveÔ2.€€The€Office€of€Strategic€Trade€and€Foreign€Policy€Controls€Ô#†XveX»¼ ´#Ôó óÐ ° ÐÌà  àThe€Office€of€Strategic€Trade€&€Foreign€Policy€Controls€(STFPC)€implements€theÏmultilateral€export€controls€under€the€Wassenaar€Arrangement€to€control€the€spread€of€conventionalÏarms€and€related€technologies.€€STFPC€also€is€responsible€for€the€bilateral€High„PerformanceÏComputer€Regime€with€Japan.€€It€represents€the€Department€in€international€negotiations€on€exportÏcontrols€and€control€list€development€for€both€regimes.€€The€office€is€responsible€for€all€policyÏactions,€export€licenses,€commodity€classifications,€and€advisory€opinions€for€commodities€subjectÏto€these€two€regimes.€STFPC€also€implements€U.S.€foreign€policy€controls€to€ensure€that€exports€areÏconsistent€with€our€national€goals€relating€to€human€rights,€crime€control,€antiterrorism,€and€regionalÏstability.€ÌòòÌóóÓ  Óò òNational€Security€Controlsó óÐ è8  ÐÓÔ·ÓÌà  àThe€United€States€maintains€national€security€controls€on€the€export€and€reexport€of€strategicÏcommodities€and€technical€data€worldwide€to€prevent€the€diversion€of€such€strategic€items€to€certainÏdestinations.€€To€achieve€this€objective,€the€United€States€pursues€a€multilateral€approach€andÏimposes€controls€in€cooperation€with€other€nations€participating€in€the€Wassenaar€Arrangement.ÌÌòòPolicy€Towards€Individual€CountriesÐ \¬ ÐóóÌà  àSection€5(b)€of€the€Export€Administration€Act€of€1979,€as€amended€(the€Act),€requires€theÏPresident€to€establish€a€list€of€controlled€countries€for€national€security€purposes.€€€Executive€OrderÏ12214€(May€2,€1980)€delegated€this€authority€to€the€Secretary€of€Commerce.ÌÌà  àInitially,€this€list€comprised€those€countries€named€in€Section€620(f)€of€the€ForeignÏAssistance€Act€of€1961€(FAA)€(22€U.S.C.€Sec.€2370€(f)€at€the€time€of€the€enactment€of€the€ExportÏAdministration€Act€in€1979.€€The€Secretary€of€Commerce,€however,€may€add€or€remove€countriesÏfrom€the€list€of€controlled€countries€under€criteria€provided€in€Section€5(b).€€Since€1980,€theÏSecretary€has€removed€countries€from€the€list€of€controlled€countries,€including€the€former€FederalÏRepublic€of€Yugoslavia€in€1985,€Hungary€in€1992,€and€the€Czech€Republic,€Poland,€and€the€SlovakÏRepublic€in€1994.€€Public€Law€102„511€(October€24,€1992)€amended€Section€620(f)€of€the€FAA€toÏdelete€the€former€Soviet€Bloc€countries€and€certain€other€nations€from€the€list€of€CommunistÏcountries.€€Under€Section€5(b)€of€the€Act,€the€United€States,€however,€continues€to€control€exportsÏto€some€of€the€countries€deleted€from€the€list€in€Section€620(f)€of€the€FAA.ÌÌà  àThe€countries€currently€controlled€under€Section€5(b)€of€the€Act€are:€Albania,€Bulgaria,€Cuba,ÏEstonia,€Latvia,€Lithuania,€Mongolia,€the€Newly€Independent€States€of€the€former€Soviet€Union,ÏNorth€Korea,€the€Peopleððs€Republic€of€China,€Romania,€Vietnam,€and€Tibet.€€The€Department,€alongÏwith€other€concerned€agencies,€provides€technical€export€control€development€assistance€to€manyÏof€these€countries€with€a€view€to€removing€additional€nations€from€the€list€of€controlled€countries.Ð  ¸)%( ÐòòWassenaar€ArrangementóóÐ ° ÐÌà  àFor€over€two€years€the€members€of€the€former€Coordinating€Committee€on€MultilateralÏControls€(COCOM),€which€was€dissolved€on€March€31,€1994,€have€been€meeting€to€work€out€aÏfollow„on€regime.€€It€was€decided€that€an€important€element€of€the€new€regime€would€be€its€initialÏscope€and€membership„„both€of€which€were€to€be€greatly€expanded.€€These€negotiations€culminatedÏin€an€agreement€on€the€initial€elements€of€the€regime€in€December€1995.€€The€group€took€the€nameÏof€the€city€in€which€the€agreement€was€reached,€Wassenaar,€in€the€Netherlands.€€Membership€wasÏexpanded€and€negotiations€continued.€€ÌÌà  àOn€July€11„12,€1996,€the€33€members€of€the€Wassenaar€Arrangement€on€Export€Controls€forÏConventional€Arms€and€Dual„use€Goods€and€Technologies€approved€the€regimeððs€guidelines€andÏprocedures.€€The€parties€also€approved€lists€of€controlled€arms,€munitions€and€dual„use€goods€andÏtechnologies.€€The€purpose€of€the€regime€is€ð ðto€promote€greater€transparency,€responsibility€andÏrestraint€with€regard€to€transfer€of€arms€and€sensitive€dual„use€goods€and€technologies.ðð€€AnÏimportant€feature€of€the€Wassenaar€Arrangement€is€its€commitment€to€control€conventional€arms€andÏrelated€dual„use€technologies.€€The€regime€is€intended€to€be€a€complement€to€the€existing€non„¼proliferation€regimes:€the€Missile€Technology€Control€Regime,€the€Australia€Group€and€the€NuclearÏSuppliers€Group.€€The€United€States€believes€the€Wassenaar€Arrangement€will€have€two€distinctÏadvantages€over€COCOM.€€First,€it€will€be€a€vehicle€for€monitoring€transfers€of€sensitive€goods€toÏcountries€of€concern.€€Second,€it€will€provide€members€with€a€forum€to€share€information€aboutÏtransfers€for€the€benefit€of€the€group€as€a€whole€and€the€members€themselves„„at€a€national€level.ÌÌà  àThe€regime€enters€into€effect€on€November€1,€1996,€the€target€date€for€implementing€theÏcontrol€lists.€€During€a€September€24„25€working€group,€parties€met€to€finalize€procedures€toÏsafeguard€the€confidentiality€of€information€provided€to€the€secretariat€and€ensure€that€their€ownÏnational€legislation€and€regulations€permit€the€sharing€of€such€information.€€A€voluntary€informationÏexchange€occurred€in€September€with€formal€reporting€due€in€November.€The€next€plenary€will€meetÏin€Vienna€in€December€1996.Ìà  à¹Ó  Óò òExport€Control€ChangesÐ X ¨ Ðó óÓÊÓÌà  àOn€November€28,€1995,€BXA€amended€the€Export€Administration€Regulations€by€expandingÏforeign€policy€controls€on€specially€designed€implements€of€torture.€€Previously,€such€implementsÏwere€controlled€under€ECCN€0A82C€of€the€Commerce€Control€List,€along€with€handcuffs,€policeÏhelmets€and€shields,€as€crime€control€and€detection€commodities.€€As€such,€they€did€not€require€aÏvalidated€license€for€export€to€member€countries€of€the€North€Atlantic€Treaty€Organization€(NATO),ÏAustralia,€Japan€or€New€Zealand.€€The€new€rule€created€a€new€CCL€entry,€0A83D,€requiring€aÏvalidated€license€for€export€of€specially€designed€implements€of€torture€to€all€destinations,€includingÏCanada.€€Applications€for€such€exports€will€continue€to€be€subject€to€a€general€policy€of€denial.Ð  ¤(ô#' Ðà  àOn€December€20,€1995,€BXA€expanded€general€license€GLX€treatment€to€semiconductorÏdevices€(integrated€circuits),€certain€semiconductor€manufacturing€equipment,€certain€cellular€phonesÏcontaining€encryption€and€encrypted€virus€protection€software€programs.€€Industry€has€estimated€thatÏ139€billion€semiconductors€and€33€billion€integrated€circuits€were€sold€worldwide€in€1992.€€LessÏthan€one„third€of€these€were€produced€by€U.S.„owned€firms.€€Industry€believes€that€the€availabilityÏof€general€license€shipments€for€integrated€circuits€will€significantly€improve€the€globalÏcompetitiveness€of€the€U.S.€semiconductor€industry.ÌÌà  àOn€January€25,€1996,€BXA€published€a€regulation€implementing€the€Presidentððs€October€6,Ï1995€announcement€on€major€reform€of€computer€export€controls.€€The€President€announced€aÏliberalization€of€export€controls€on€all€computers€to€countries€in€North€America,€most€of€WesternÏEurope,€and€parts€of€Asia.€€For€certain€other€countries,€including€many€in€Latin€America€and€CentralÏand€Eastern€Europe,€this€rule€also€liberalized€export€controls€on€computers.€€For€the€former€SovietÏUnion,€China€and€certain€other€countries,€U.S.€export€controls€focused€on€computers€intended€forÏmilitary€and€proliferation€end„uses€or€users,€and€eased€controls€on€exports€of€computers€to€civilianÏcustomers.€€Finally,€there€were€no€changes€in€current€policy€for€computer€shipments€to€terroristÏcountries€with€the€exception€of€the€addition€of€Sudan€to€ECCNs€4A994F,€4D994F,€4E994F,€andÏComputer€Tier€4€(a€grouping€of€terrorist€countries,€for€the€purpose€of€computer€controls).€€ThisÏdecision€streamlined€validated€license€requirements€for€U.S.€computer€manufacturers€of€computersÏthat€are,€or€will€be€in€the€next€two€years,€widely€available€in€the€international€market€place.ÌÌà  àOn€March€5,€1996,€BXA€amended€the€Export€Administration€Regulations€(EAR)€to€reflectÏthe€imposition€of€additional€economic€sanctions€on€Iran€as€a€result€of€the€issuance€of€ExecutiveÏOrder€12959€on€May€6,€1995.€€The€Executive€Order€delegates€implementation€responsibility€to€theÏDepartment€of€the€Treasuryððs€Office€of€Foreign€Assets€Control€(OFAC),€including€authority€forÏexports€and€certain€reexports.€€If€OFAC€authorizes€an€export€or€reexport,€no€separate€authorizationÏfrom€BXA€is€necessary.€€This€rule€makes€clear€that€enforcement€action€may€be€taken€under€the€EARÏwith€respect€to€an€export€or€reexport€prohibited€both€by€the€EAR€and€by€the€Executive€Order€andÏnot€authorized€by€OFAC.€€STFPC€has€also€been€providing€technical€analyses€to€OFAC€on€exportÏlicense€applications,including€requests€to€maintain€commercial€passenger€airlines€to€ensure€safetyÏof€flight.ÌÌò òÓ  ÓBilateral€Cooperation/Country€Policy€ó óÐ 0"€  ÐÓñ×ÓÌòòà  àCubaóó:€€Following€the€shootdown€of€U.S.€civilian€aircraft€by€Cuban€military€aircraft€inÐ $X" ÐFebruary€1996,€the€President€ordered€the€grounding€of€U.S.€flights€to€Cuba.ÌÌà  àThe€Cuban€Liberty€and€Democratic€Solidarity€(LIBERTAD)€Act€(Public€Law€104„114)€wasÏsigned€into€law€on€March€12,€1996.€€The€legislation,€among€other€things,€codifies€the€embargo€andÏauthorizes€the€President€to€assist€independent€non„governmental€organizations€in€Cuba€and€toÏestablish€an€exchange€of€news€bureaus.€€The€Act€did€not€impact€current€BXA€licensing€of€exportsÏof€humanitarian€items€to€Cuba€under€Section€1705€of€the€Cuban€Democracy€Act€(CDA).€ÌÐ h+¸&* Ðòòà  àHong€Kong/Taiwanóó:€€In€May€1996,€BXA€participated€in€an€interagency€delegation€that€heldÐ ° Ðexport€control€talks€with€Hong€Kong€and€British€officials€and€with€Taiwan€officials.€€In€Hong€Kong,Ïthe€talks€centered€on€building€nonproliferation€expertise€among€the€Hong€Kong€officials€to€replaceÏtheir€reliance€on€British€expertise.€€Hong€Kong€officials€also€came€to€Washington€in€July€1996€toÏparticipate€in€the€Missile€Technology€Control€Regimeððs€transshipment€seminar.€€Other€Hong€KongÏofficials€came€in€August€1996€to€meet€with€nonproliferation„control€experts€at€BXA€and€at€State€andÏto€attend€the€Department€of€Energyððsððs€Nuclear€Nonproliferation€seminar.€€In€Taiwan,€talks€focusedÏon€helping€Taiwan€to€adopt€nonproliferation€controls€now€that€they€have€munitions€and€dual„useÏgoods€controls€in€place.€€In€September€1996,€an€interagency€team€returned€to€both€Hong€Kong€andÏTaiwan€to€give€further€training€in€nonproliferation€controls.ÌÌà  àòòIsraelóó:€€In€July€1996,€a€group€of€Israeli€export€control€officials€came€to€Washington€for€a€five„Ð Ô$  Ðday€program€that€included€participation€in€BXAððs€annual€ð ðUpdateðð€conference€and€briefings€at€theÏDepartments€of€State€and€Defense.€€In€addition,€BXA€conducted€a€one„day€program€to€discussÏBXAððs€licensing€process,€computer€system,€and€export€control€legal€authorities.ÌÌà  àòòChinaóó:€U.S.€and€Chinese€representatives€met€in€September€1996€for€the€10th€meeting€of€theÐ pÀ ÐJoint€Commission€on€Commerce€and€Trade€(JCCT).€€BXA€was€able€to€arrange€a€side€meeting€onÏexport€controls€with€some€of€the€Chinese€delegates.€€Both€sides€recounted€changes€in€their€exportÏcontrol€system€that€had€occurred€during€the€year€since€the€last€JCCT€meeting€and€both€sides€sharedÏsome€export€control€problems.€€Agreement€was€reached€to€meet€again€in€the€early€spring€to€continueÏexport€control€cooperation.ÌÌà  àòòJapanóó:€U.S.€and€Japanese€representatives€met€in€September€for€export€control€discussions.€Ð ä4 ÐAgenda€items€included€consideration€of€the€Wassenaar€Arrangement,€joint€export€control€efforts€inÏEast€Asia,€and€the€U.S.„Japan€high€performance€computer€agreement.ÌÌÓ  Óò òCommodity€Jurisdiction€ó óÐ ”ä ÐÓ¸ãÓÌòòCommercial€Communications€Satellites€and€Hot€Section€TechnologyóóÐ l¼ ÐÌà  àIn€October,€BXA€published€a€rule€in€the€Federal€Register€transferring€jurisdiction€on€certainÏcommercial€communications€satellites€and€certain€hot€section€technology€for€the€development€andÏproduction€of€commercial€aircraft€engines€from€the€U.S.€Munition€List,€administered€by€the€StateÏDepartment,€to€the€Commerce€Control€List.€€These€commodities€are€controlled€by€the€WassenaarÏArrangement€whose€members€include€most€of€the€other€producers€of€these€commodities.€€TheseÏitems€are€also€controlled€for€foreign€policy€reasons.€€The€Secretary€of€Commerce€took€this€actionÏwith€the€concurrence€of€the€Secretaries€of€State€and€Defense,€in€the€belief€that€these€controls€areÏnecessary€to€further€significantly€the€foreign€policy€of€the€United€States.€€The€United€States€is€theÏworld€leader€in€the€production€of€commercial€communications€satellites€and€of€hot€sectionÏtechnology.ÌÐ  |*Ì%) ÐòòEncryptionóóÐ ° ÐÌà  àOn€December€30,€1996,€BXA€issued€a€regulation€implementing€the€AdministrationððsÏencryption€policy€announced€by€the€Vice€President€on€October€1,€1996.€€The€regulation€establishesÏprocedures€and€conditions€for€companies€to€follow€for€approval€to€export€encryption€products€andÏcreates€a€new€license€exception€for€recoverable€encryption€products.€€Key€elements€of€the€regulationÏinclude€the€transfer€of€commercial€encryption€items€from€the€U.S.€Munitions€List€to€the€CommerceÏControl€List,€liberalized€treatment€for€recoverable€products€and€a€two-year€transition€period€duringÏwhich€non-key€recovery€56€bit€DES€or€equivalent€strength€encryption€products€may€be€approved€forÏexport€based€on€company€commitments€to€build€and€market€key€recovery€products€and€to€supportÏa€key€management€infrastructure€for€electronic€commerce.€€ÌÌà  àIn€addition,€beginning€on€January€1,€1997,€nonrecoverable€56€bit€DES€or€equivalent€strengthÏencryption€products€will€also€be€exportable€under€a€special€six€month€license€exception,€which€canÏbe€renewed€during€the€two€year€transition€period.€€This€special€license€exemption€requires€a€one€timeÏreview€of€the€product€and€assurances€that€satisfactory€progress€is€being€made€to€build€and€marketÏrecoverable€encryption€products.€€The€Administrationððs€initiative€will€support€the€growth€ofÏelectronic€commerce,€increase€the€security€of€the€global€information,€and€sustain€the€economicÏcompetitiveness€of€U.S.€encryption€product€manufacturers€during€the€transition€to€a€key€managementÏinfrastructure€with€key€recovery.ÌÌÓ  Óò òà @ àEuropean€Union€Harmonization€Effortó óÐ  \ ÐÓ1îÓÌà  àDuring€FY€1996,€STFPC€renumbered€the€national€security€and€foreign€policy€commodities,Ïequipment,€and€technology€on€the€Commerce€Commodity€Control€List€to€conform€with€theÏnumbering€system€of€the€European€Union.€€The€harmonized€control€list€for€these€items€simplifiesÏcomparisons€between€the€U.S.€and€foreign€numbering€systems€for€Customs€and€enforcementÏofficials.€ÌÌÔ‡¼ »XXveÔò òÐ  l¼ Ð3.€€The€Office€of€Nuclear€and€Missile€Technology€Controlsó óÔ#†XveX»¼ ð#ԀР° ÐÌà  àThe€Office€of€Nuclear€and€Missile€Technology€Controls€(NMT)€is€responsible€for€all€policyÏand€technology€issues€related€to€U.S.€dual„use€export€controls€on€nuclear€and€missile€technology,Ïincluding€the€full€range€of€activities€associated€with€the€licensing€of€exports.€€As€the€lead€office€onÏnuclear€and€missile€issues,€NMT€staff€participates€as€part€of€the€U.S.€delegation€to€the€multilateralÏNuclear€Suppliers€Group€(NSG)€and€the€Missile€Technology€Control€Regime€(MTCR).€€TheseÏmultilateral€organizations€coordinate€export€controls€on€items€that€could€contribute€to€theÏproliferation€of€weapons€of€mass€destruction.ÌÌà  àNMT€provides€both€policy€and€technical€perspectives,€ensuring€that€dual€use€equipment€andÏtechnology€critical€to€the€development€of€such€weapons€and€their€delivery€systems€are€controlled.€ÏÌNMT€participates€in€export€control€outreach€efforts,€engaging€foreign€governments,€multilateralÏgovernment€organizations,€and€international€and€U.S.€industry€groups€in€formal€seminars€andÏinformal€contacts€to€enhance€nuclear€and€missile€nonproliferation€efforts€worldwide.€€ò òÐ ¬ü  ÐÓ  ÓÌEuropean€Union€List€HarmonizationÌÓ-õÓó óÌà  àAs€part€of€an€overall€BXA€effort,€NMT€initiated€discussions€with€the€European€Union€(EU)Ïthat€resulted€in€the€harmonization€of€the€Commerce€Control€List€(CCL)€with€the€EU€dual€use€controlÏlist.€€This€effort€has€enabled€BXA€to€publish€a€new€CCL€that€reflects€commonality€with€the€EU€list,Ïwith€few€exceptions.€€Consultations€continue€with€the€EU€to€ensure€that€both€lists€are€kept€current,Ïand€that€questions€and€concerns€have€a€forum€for€discussion€and€resolution.€€By€harmonizing€U.S.Ïcontrol€language€with€that€of€the€EU,€and€eliminating€any€possibility€of€misinterpretation€as€to€whatÏis€intended€to€be€controlled,€U.S.€exporters€are€now€on€a€level€playing€field€internationally€with€theirÏEuropean€competitors,€and€enforcement€of€the€controls€is€strengthened.ÌÌà@ ìàò òThe€Nuclear€Suppliers€Group€Regimeó óˆÐ ¨ø Ѐ€€€Ìà  àThe€Nuclear€Suppliers€Group€Dual„Use€Regime€(NSG),€which€began€in€March€of€1992,€isÏan€informal€group€whose€34€members€have€agreed€to€multilaterally€control€exports€of€dual„useÏcommodities€that€have€nuclear€weapons€utility.€€These€controls€are€described€in€two€NSGÏdocuments,€the€Guidelines€and€the€Annex.€€The€Guidelines€provide€the€underlying€precepts€of€theÏRegime,€while€the€Annex€lists€those€items€subject€to€NSG€controls.€€The€NSG€requires€members€toÏestablish€licensing€procedures€for€the€transfer€of€Annex€items.€€ÌÌà  àOnce€a€nation€indicates€its€willingness€to€abide€by€the€NSG's€precepts€and€demonstrates€thatÏintent€by€adopting€NSG€controls€as€part€of€its€national€laws€and€regulations,€it€may€formally€applyÏfor€membership.€€The€newest€members€to€join€the€NSG€include€Argentina€in€April€1994;€NewÏZealand€in€October€1994;€South€Africa€and€South€Korea€in€April€1995;€and€Brazil€and€Ukraine€inÏApril€1996.ÌÐ +à&* ÐòòExport€Control€ChangesÐ ° ÐóóÌà  àThe€NSG€is€a€dynamic€regime€which€must€be€revised€to€reflect€advances€in€nuclearÏtechnology.€€BXA€has€been€an€active€participant€and€a€strong€advocate€of€revisions€to€the€NSG€DualÏUse€List€to€eliminate€outdated€controls.€€Seminars€and€meetings€are€regularly€held€to€refine€the€listÏof€controlled€items,€and€to€update€procedures€to€enhance€the€regime's€effectiveness.€€ÌÌà  àOn€February€1,€1996,€BXA€published€an€interim€final€rule€amending€a€number€of€ExportÏControl€Classification€Numbers€(ECCNs)€on€the€Commerce€Control€List€in€order€to€make€theÏNuclear€Referral€List€conform€more€closely€with€the€items€contained€in€the€NSG€Annex,€includingÏthe€removal€of€nuclear€proliferation€controls€on€machine€tools€that€are€no€longer€warranted.€€This€Ìrule€also€added€several€countries€which€were€eligible€to€receive€exports€under€general€license€(G„¼NSG),€under€the€old€Regulations,€and€are€eligible€to€receive€exports€without€a€license,€under€theÏrevised€Regulations€published€on€March€25,€1996.€Ìà  àÌòòNSG€List€ReformattingóóÐ „Ô  ÐÌà  àNMT€has€been€actively€involved€in€an€ongoing€U.S.„sponsored€NSG€initiative€to€reformatÏthe€NSG€control€language€by€eliminating€confusing€or€awkward€terms.€€The€new€format€clarifies€theÏexact€meaning€of€the€controls€to€all€NSG€members€and€their€exporting€companies,€so€that€there€isÏconsistency€in€the€application€of€controls€by€all€member€governments.€€BXA€has€championed€thisÏeffort€and€played€a€lead€role€in€the€reformatting.ÌÌà@ ìàò òThe€Missile€Technology€Control€Regime€ó óˆÐ ä4 ÐÌà  àThe€Missile€Technology€Control€Regime€(MTCR)€was€founded€in€1987€by€the€United€StatesÏand€its€six€major€trading€partners:€€the€United€Kingdom,€Germany,€France,€Canada,€Italy€and€Japan.€ÏThe€MTCR€presently€comprises€28€member€countries€that€have€agreed€multilaterally€to€controlÏmissile€related€exports€to€prevent€the€proliferation€of€missiles€capable€of€delivering€weapons€of€massÏdestruction.€€ÌÌà  àMTCR€export€controls€are€based€on€the€Guidelines€and€the€Annex.€€The€Guidelines€provideÏlicensing€policy,€procedures,€and€review€factors,€along€with€standard€government€assurances,€toÏprevent€the€proliferation€or€re„transfer€of€sensitive€technology.€€The€MTCR€Annex€lists€missileÏsystems,€major€subsystems,€production€equipment,€materials,€components,€and€test€equipment€thatÏare€subject€to€controls.€€Each€member€country,€under€its€own€national€laws,€has€agreed€to€abide€byÏthe€provisions€of€the€MTCR€by€implementing€export€controls€on€dual„use€items€identified€in€theÏMTCR€Annex.€€In€the€case€of€the€United€States,€there€are€approximately€120€entries€on€theÏCommerce€Control€List€subject€to€missile€technology€controls.ÌÌòòÌÌÐ h+¸&* ÐMTCR€Transhipment€SeminaróóÐ ° ÐÌà  àIn€July€1996,€BXA€assisted€in€the€development€of€the€first€MTCR€Transshipment€Seminar.€ÏThis€seminar€was€a€ground„breaking€exercise€for€nonproliferation€export€control€regimes.€€For€theÏfirst€time,€MTCR€and€non„MTCR€countries€were€brought€together€to€discuss€the€role€thatÏtransshipment€plays€in€illicit€trade.€€Twelve€MTCR€countries€and€seven€non„MTCR€participants€„„ÏCyprus,€Malta,€Singapore,€South€Korea,€Hong€Kong,€Jordan,€and€the€United€Arab€Emirates€„„€metÏto€discuss€concerns€relating€to€missile€proliferation.€€€ÌÌà  àAt€the€seminar,€BXA€addressed€issues€relating€to€legislation,€regulations,€policy,€licensing,Ïand€enforcement€of€missile„related€exports.€€In€an€effort€to€continue€this€dialogue€between€MTCRÏand€non„MTCR€countries€on€missile€technology€issues€of€mutual€interest,€a€series€of€expert€levelÏworkshops€on€the€various€aspects€of€export€control€implementation€will€be€scheduled€in€the€yearÏahead.Ìò òÓ  ÓÌThe€Enhanced€Proliferation€Control€Initiativeó óÐ „Ô  ÐÓm ÓÓ  ÓÌà  àNMT€continues€to€lead€the€effort€to€clarify€the€Enhanced€Proliferation€Control€InitiativeÏ(EPCI)€and€to€urge€multilateral€implementation€of€similar€measures€by€our€trading€partners.€ÏEPCI€covers€exports€and€reexports€of€otherwise€undcontrolled€goods€and€technology€where€thereÏis€a€risk€of€diversion€to€proliferation€activities.€€EPCI€also€addresses€services€by€persons€subjectÏto€U.S.€jurisdiction€who€may€contribute€to€proliferation€activities.€€These€regulations€areÏdesigned€to€prevent€exports€that€would€make€a€material€contribution€to€proliferation€projects€ofÏconcern,€without€affecting€legitimate€commercial€trade.ÌÌà  àEPCI€began€as€a€unilateral€control,€but€with€U.S.€leadership,€many€of€our€nonproliferationÏregime€partners€have€also€incorporated€end„use€restrictions.€€On€July€1,€1995,€the€EuropeanÏUnion€began€implementing€dual€use€regulations€containing€end„use€restrictions,€and€Japan€beganÏimplementing€its€end„use€controls€on€October€1,€1996.€€Strengthening€EPCI€will€improve€U.S.Ïnonproliferation€efforts€and€reduce€uncertainty€among€U.S.€exporters€regarding€export€controls.ÌÌò òÔ‡¼ »XXveÔÐ  D!” Ð4.€€Office€of€Chemical€and€Biological€Controls€and€Treaty€ComplianceÔ#†XveX»¼ :#Ôó óÐ ° ÐÌà  àThe€Office€of€Chemical€and€Biological€Controls€and€Treaty€Compliance€(CBTC)€is€theÏfocal€point€within€the€U.S.€Government€for€implementing€dual„use€multilateral€export€controls€inÏthe€area€of€chemical€and€biological€weapons€(CBW)€proliferation.€€The€office€carries€out€itsÏresponsibilities€by:€€1)€participating€in€multilateral€export€control€activities€under€the€AustraliaÏGroup€(AG);€2)€administering€compliance€through€export€licensing;€3)€ensuring€that€U.S.Ïindustry's€interests€are€taken€into€consideration€in€the€development€of€export€control€laws€andÏregulations;€and€4)€participating€in€international€negotiations€involving€the€Biological€WeaponsÏConvention€(BWC)€and€the€Chemical€Weapons€Convention€(CWC).€€CBTC€works€closely€withÏU.S.€industry€by€providing€commodity€classifications€and€advisory€opinions€and€participating€inÏrelevant€BXA€Technical€Advisory€Committees.€€The€office€plays€a€strong€role€in€implementingÏpolicies€that€promote€U.S.€nonproliferation€goals€while€protecting€company€proprietaryÏinformation,€including€commercial€technologies.€€ÌÌà  àCBTC€also€administers€Congressionally„mandated€restrictions€on€the€export€ofÏdomestically€produced€petroleum€and€unprocessed€timber.€€This€office€led€in€implementation€ofÏthe€Alaskan€North€Slope€oil€export€liberalization,€revision€of€the€short€supply€crude€oil€exportÏregulations,€and€administration€of€the€state€log€export€ban€mandated€by€the€Forest€ResourcesÏConservation€and€Shortage€Relief€Amendments€Act€of€1993.€€This€office€also€is€responsible€forÏanalyzing€the€impact€of€export€control/economic€policy€options€with€respect€to€the€U.S.€oilÏindustry€€(see€section€on€Short€Supply).ÌÌÓ  Óò òà @ àChemical€and€Biological€Controlsó óÐ  \ ÐÓ}ÓÌà  àThe€United€States€maintains€chemical€and€biological€weapons€(CBW)€controls€on€theÏexport€and€reexport€of€commodities,€equipment,€and€technology€worldwide€to€prevent€theÏdiversion€of€such€items€to€certain€destinations€and€end„users.€€To€achieve€this€objective,€theÏUnited€States€pursues€a€multilateral€approach€and€imposes€controls€in€cooperation€with€otherÏnations€participating€in€the€Australia€Group€(AG).ÌÌÓ  Óò òSanctionsó óÐ l!¼ ÐÓ†ÓÌà  àDuring€FY€1996,€the€U.S.€Government€continued€chemical€and€biological€sanctions€onÏseveral€foreign€firms€and€nationals€pursuant€to€the€Chemical€and€Biological€Weapons€ControlÏand€Warfare€Elimination€Act€of€1991.€€These€sanctions€prohibit€the€U.S.€government€fromÏprocuring€goods€and€services€from€the€sanctioned€entities€and€also€prevent€the€importation€intoÏthe€United€States€of€any€goods€produced€by€them.ÌÌÓ  Óò òAustralia€Group€Regimeó óÐ Ì($' ÐÌÓlÓà  àThe€Australia€Group€(AG)€is€an€informal€forum€of€30€industrialized€countries€that€haveÏagreed€to€cooperate€in€curbing€the€proliferation€of€chemical€and€biological€weapons.€€The€AG€isÐ +à&* Ðmeeting€this€objective€through€the€harmonization€of€export€controls€and€the€exchange€ofÏinformation€on€CBW„related€activities€of€concern.€€Since€1985,€the€AG€has€expanded€its€controlÏlist€to€cover€a€variety€of€CBW„related€items,€including€€chemical€weapons€precursors,€dual„useÏchemical€and€biological€manufacturing€facilities,€equipment,€and€related€technology,€andÏbiological€agents€including€plant,€animal€and€human€pathogens,€and€toxins.€€The€key€criteria€forÏmembership€in€the€Australia€group€are€that€a€country€must€have€an€export€control€system€in€placeÏthat€includes€an€enforcement€mechanism,€and€a€country€must€not€have€a€CBW€program€or€assistÏother€countries€that€are€developing€such€programs.€ÌÌÓ  Óò òà @ àExport€Control€Liberalization€ó óÐ ü L  ÐÓSÓÌà  àOn€October€19,€1995,€BXA€issued€the€final€rule€to€implement€the€Australia€Group's€(AG)Ïthree„tiered€approach€on€chemical€mixtures€containing€an€AG„controlled€chemical€weapon€(CW)Ïprecursor.€€This€regulation€provided€relief€to€the€chemical€industry€from€the€previous€zeroÏtolerance€for€chemical€mixtures€and€streamlined€controls€and€reporting€requirements€on€sampleÏchemical€shipments.€€An€exporter€can€now€export€these€types€of€mixtures€containing€an€AG„¼controlled€chemical€precursor€under€a€general€license€to€most€destinations€if€the€precursor€meetsÏthe€de€minimis€threshold€concentration€on€a€solvent„free€basis.Ì€Ìà  àDuring€FY€1996,€BXA€updated€the€biological€control€list€for€the€first€time€in€three€years.€ÏBXA€published€the€changes€in€the€Federal€Register€on€March€25,€1996.€€These€changes€includedÏimplementing€new€nomenclatures€for€several€pathogens,€modifying€the€wording€and€clarificationÏof€terms€for€biological€items,€liberalizing€BW€export€controls€on€vaccines€and€immunotoxins,Ïand€revising€technical€parameters€for€fermenters,€cross„flow€filtration€equipment,€and€chambers.€ÌÌà  àIn€FY€1996,€BXA€initiated€and€cleared€a€draft€regulation€which€would€permit€the€exportÏof€solvents€containing€trace€quantities€of€controlled€chemical€precursors€under€the€provisions€of€aÏlicense€exception€for€consideration€by€the€AG€members.€€At€present,€for€example,€items€such€asÏdry€cleaning€agents€which€contain€trace€quantities€require€a€validated€license.€€This€proposalÏwould€relieve€the€U.S.€chemical€industry€from€some€licensing€requirements.€€At€the€OctoberÏ1996€Australia€Group€Plenary€session,€AG€members€reviewed€the€issue€of€using€a€solvent€freeÏbasis€to€compute€the€percentage€of€CW€precursor€and€agreed€to€hold€an€Intersessional€expertsÏmeeting€to€discuss€member€country€proposals€to€modify€the€solvents€rule.€€If€the€AG€agrees€toÏmodify€the€solvents€rule,€BXA€may€revisit€the€proposed€exemption€for€trace€quantities€ofÏprecursors.€€During€the€coming€year,€BXA€will€provide€analytical€and€technical€support€to€theÏIntersessional€experts€group.Ìò òÌÓ  Óà @ àChemical€Weapons€ConventionÌÓß'Óó óÌà  àOn€January€13,€1993,€the€United€States€signed€The€Convention€on€the€Prohibition€of€theÏDevelopment,€Production,€Stockpiling€and€Use€of€Chemical€Weapons€and€on€their€DestructionÏ(CWC).€€The€purpose€of€the€CWC€is€to€ban€the€use,€development,€production,€or€stockpiling€ofÏChemical€Weapons.€€The€CWC€is€a€comprehensive€arms€control€agreement€that€bans€an€entireÐ h+¸&* Ðclass€of€weapons€and€affects€the€operations€of€the€chemical€industry.€€The€CWC€requires€affectedÏindustries€to€submit€initial€and€annual€declarations€on€their€production,€use,€stockpiling,€andÏtrade€in:€€1)€Schedule€1€CW€agents;€2)€Schedule€2€other€CW€Agents€and€Precursors;€and€3)ÏPrecursor€Chemicals€with€Industrial€Uses.€€Affected€industries€are€subject€to€routine€andÏchallenge€inspections€from€a€team€of€inspectors€from€the€Organization€for€the€Prohibition€ofÏChemical€Weapons.€€In€addition,€the€trade€restriction€provisions€of€the€CWC€are€compatible€withÏthe€existing€AG„related€export€licensing€regulations€administered€by€BXA.ÌÌà  àOn€September€12,€1996,€the€Senate€›canceledœ€the€scheduled€vote€on€providing€its€adviceÏand€consent€to€ratification€of€the€CWC.€€Further€consideration€of€the€CWC€is€anticipated€duringÏthe€105th€Congress.ÌÌÓ  Óò òà @ àBiological€Weapons€Conventionó óÐ À  ÐÓ-ÓÌà  àThe€Biological€Weapons€Convention€of€1972€(BWC),€an€international€arms€controlÏagreement€ratified€by€the€U.S.€and€136€other€countries,€bans€the€development,€production,Ïstockpile,€or€acquisition€of€biological€agents€or€toxins€that€have€no€peaceful€uses.€€An€Ad€HocÏGroup€was€established€in€1994€to€consider€measures€to€strengthen€the€BWC€and€incorporateÏthem€into€a€legally€binding€protocol.€€During€FY€1996,€BXA€participated€fully€in€U.S.Ïdelegations€to€all€BWC€international€negotiations.€€The€4th€Biological€Weapons€ReviewÏConference€took€place€in€November€1996.€€BXA€worked€within€the€interagency€policyÏformulation€process€to€devise€and€evaluate€measures€to€enhance€compliance,€and€to€developÏguidance€to€help€negotiators€effectively€promote€U.S.€protocol€objectives.€€BXA's€objective€is€toÏensure€that€the€protocol€that€will€be€developed€enhances€confidence€in€the€BWC€withoutÏendangering€U.S.€industry€interests.ÌÌÓ  Óò òà @ àBiological€Terrorismó óÐ ¨ø ÐÓ 1ÓÌà  àDuring€FY€1996,€BXA€participated€in€the€interagency€Culture€Collection€CommitteeÏformed€to€address€potential€threats€of€biological€terrorism.€€The€Center€for€Disease€ControlÏwithin€the€U.S.€Department€of€Health€and€Human€Services€led€the€interagency€group€to€developÏplans€that€would€ensure€that€public€safety€is€protected€without€encumbering€legitimate€scientificÏand€medical€research€in€the€United€States.€€ÌÌà  àOn€June€10,€1996,€the€Committee€published€in€the€Federal€Register€a€proposed€ruleÏwhich€places€additional€shipping€and€handling€requirements€on€facilities€involved€in€interstateÏcommerce€that€transfer€or€receive€selected€agents€capable€of€causing€substantial€harm€to€humanÏhealth.€€It€designed€the€rule€to:€1)€collect€and€provide€information€on€biological€facilities€whereÏagents€are€transferred,€2)€track€the€domestic€transfer€of€these€specific€agents,€and€3)€establish€aÏprocess€for€alerting€appropriate€authorities€if€an€unauthorized€attempt€is€made€to€acquire€theseÏagents.ÌÌÓ  Óò òÐ h+¸&* Ðà @ àEuropean€Union€Harmonization€Effortó óÐ ° ÐÓW5ÓÌà  àDuring€FY€1996,€CBTC€renumbered€the€chemical€and€biological€commodities,Ïequipment,€and€technology€on€the€Commerce€Control€List€to€conform€with€the€numbering€systemÏof€the€European€Union.€€The€harmonized€control€list€for€CB€items€simplifies€comparisonsÏbetween€the€U.S.€and€foreign€numbering€systems€for€Customs€and€enforcement€officials.€ÌÌÓ  Óò òà @ àExporter€Outreachó óÐ $ t ÐÓ47ÓÌà  àAs€part€of€its€outreach€program,€BXA€conducted€special€seminars€on€CBW€regulations.€ÏBXA€also€designed€special€half„day€seminars€for€academia€and€those€companies€involved€inÏresearch,€sales,€and€service€of€chemical€and€biological€products.€€The€seminars€provided€anÏoverview€of€BXA's€role€in€the€area€of€CBW€export€control€regulations€and€nonproliferationÏconcerns.€€Other€appropriate€agencies€also€made€presentations€on€their€regulations€as€they€pertainÏto€CBW€products.€€ÌÌÓ  Óò òShort€Supply€Controlsó óÐ pÀ ÐÓp9ÓÌà  àSections€3(2)(c)€and€7€of€the€Export€Administration€Act€of€1979,€as€amended,€(the€Act)Ïauthorize€the€President€to€prohibit€or€curtail€the€export€of€goods€"where€necessary€to€protect€theÏdomestic€economy€from€the€excessive€drain€of€scarce€materials€and€to€reduce€the€seriousÏinflationary€impact€of€foreign€demand".€€In€support€of€this€objective,€Section€7€also€authorizesÏthe€President€to€monitor€exports€of€certain€goods€to€determine€the€impact€of€such€exports€on€theÏdomestic€supply€and€whether€this€impact€has€an€adverse€effect€on€the€U.S.€economy.ÌÌà  àBXA€also€administers€export€controls€under€the€Energy€Policy€and€Conservation€Act,€theÏMineral€Leasing€Act,€the€Naval€Petroleum€Reserves€Production€Act,€the€Outer€Continental€ShelfÏLands€Act,€and€the€Forest€Resources€Conservation€and€Shortage€Relief€Act€(FRCSRA)of€1990,Ïas€amended€during€FY€1996.€BXA€continued€to€conduct€economic,€policy,€regulatory,€andÏtechnical€analyses€of€short€supply€controls€for€domestically€produced€petroleum,€minerals€andÏunprocessed€timber.€ÌÌòòActions€related€to€these€controls€includedóó:Ð 0"€  ÐÌà0  àòòAlaskan€North€Slope€(ANS)€Crude€Oil€Exports:óó€€During€FY€1996,€BXA€chaired€anÐ $X" Ðinteragency€review€of€the€economic€and€environmental€effects€of€lifting€the€ban€on€theÏexport€of€Alaskan€North€Slope€oil€pursuant€to€Public€Law€104„58.€€The€President€usedÏthis€review€as€the€basis€for€his€decision€that€ANS€oil€exports€are€in€the€national€interest.€ÏHe€directed€BXA€to€establish€a€license€exception€with€conditions€for€the€export€of€thisÏoil.€€On€May€31,€1996,€BXA€established€License€Exception€TAPS€(Trans„AlaskaÏâ âPipeline)€which€allows€for€exports€of€ANS€crude€oil€under€certain€conditions.€€This€tradeÐ)à$((#(# Ðà  àliberalization€measure€provides€U.S.€exporters€with€the€opportunity€to€develop€a€$500€¼à  àmillion€annual€foreign€market€for€ANS€crude€oil.€€During€FY€1996,€U.S.€firms€exported€¼à  àfive€cargoes€of€ANS€€crude€oil€totaling€approximately€5.3€million€barrels.Ìâ âÌà0  àòòCalifornia€Heavy€Crude€Oil€Exports:óó€€During€FY€1996,€BXA€issued€five€licenses€for€theÐ `° Ðexport€of€California€heavy€crude.€€U.S.€companies€are€exporting€this€oil€to€foreign€tankersÏas€part€of€bunker€fuel€blends.Ð (#(# ÐÌòòRegulatory€ReformóóÐ  ` ÐÌ€€On€March€25,€1996,€as€part€of€the€comprehensive€revision€of€the€Export€AdministrationÏRegulations,€€the€Department€published€in€the€Federal€Register€revisions€to€the€short€supplyÏexport€control€regulations.€€These€changes€included:ÌÌà0  àEstablishing€license€exceptions€for€certain€sample€shipments€of€crude€oil€and€certainÏshipments€of€oil€from€the€Strategic€Petroleum€Reserve.Ð (#(# ÐÌà0  àClarifying€the€language€and€simplifying€application€of€the€Export€AdministrationÏRegulations€(EAR).Ð (#(# ÐÌÌà  àDuring€FY€1996,€as€authorized€by€Section€7€of€the€Export€Administration€Act€of€1979Ï(the€Act),€the€Department€of€Commerce€controlled€certain€domestically€produced€crude€oil€andÏunprocessed€Western€Red€Cedar€timber€harvested€from€Federal€and€state€lands.€€ÌÌà  àSection€7(k)€of€the€Act€specifies€that€for€pur‚poses€of€export€controls€imposed€under€thisÏAct,€the€shipment€of€crude€oil,€refined€petroleum€pro‚ducts,€or€partially€refined€petroleumÏproducts€from€the€United€States€for€use€by€the€Department€of€Defense€or€United€States-supportedÏinstallations€or€facilities€should€not€be€considered€as€exports.ÌÌà  àSection€14(a)(l3)€of€the€Act€requires€a€report€on€any€monitoring€program€conductedÏpursuant€to€this€Act€or€Section€812€of€the€Agricultural€Act€of€1970.€€Therefore,€this€chapterÏincludes€a€report€by€the€U.S.€Department€of€Agriculture€(USDA)€on€its€moni‚toring€activitiesÏduring€FY€1996.ÌÌòòCrude€Oil€and€Refined€Petroleum€ProductsóóÐ ô$D # ÐÌà  àExports€of€most€domestically€produced€crude€oil€continued€to€be€subject€to€statutoryÏrestrictions€in€FY€1996.€€Four€separate€statutes€require€the€Department€to€administer€variousÏrestrictions€on€the€export€of€domestically€produced€crude€oil.€€ÌÌà  àÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦4JÝð"ðà0 ` àÝ  ÝThe€Energy€Policy€and€Conservation€Act€(EPCA)€requires€the€President€toÐ |*Ì%) Ðprohibit€the€export€of€domestically€produced€crude€oil€(Section€103).݃+‡¦4JOJÝŒÐh+¸&*` (#` (# ÐŒÝ  ÝÌà  àÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦nKÝð"ðà0 ` àÝ  ÝThe€Mineral€Leasing€Act€(MLA)€prohibits€exports€of€domestic€crude€oilÐ œì Ðtransported€by€pipeline€over€Federal€rights„of„way€granted€under€Section€28(u).݃+‡¦nK‰K݌Р` (#` (# ÐŒÝ  ÝÌà  àÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦¨LÝð"ðà0 ` àÝ  ÝNaval€Petroleum€Reserves€Production€Act€(NPRPA)€of€1976€restricts€exports€ofÐ `° Ðpetroleum€(crude€or€refined€products)€produced€from€the€Naval€PetroleumÏReserve.݃+‡¦¨LÃL݌Р` (#` (# ÐŒÝ  ÝÌà  àÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦êMÝð"ðà0 ` àÝ  ÝThe€Outer€Continental€Shelf€Lands€Act€(OCSLA)€restricts€exports€of€crude€oil€orÐ  ` Ðnatural€gas€produced€from€Federally€owned€submerged€lands€of€the€OuterÏContinental€Shelf.݃+‡¦êMN݌Р` (#` (# ÐŒÝ  ÝÌòòLicensing€ActionsóóÐ À  ÐÌà  àAll€of€the€statutes€establish€various€stringent€tests€(e.g.,€consumer€savings€through€lowerÏprices€for€replacement€oils)€a€license€applicant€must€meet€before€BXA€will€approve€the€licenseÏand€authorize€crude€oil€exports.€€BXA€can€waive€these€tests€only€by€a€national€interest€findingÏissued€by€the€President€or€his€delegated€representative.€€The€President€has€retained€the€authorityÏto€make€national€interest€findings€under€three€of€the€statutes,€but€has€delegated€to€the€Secretary€ofÏCommerce€the€authority€to€make€findings€under€EPCA.€€ÌÌà  àSince€the€legislation€came€into€effect,€there€have€been€only€five€national€interest€findingsÏproviding€exemptions€from€the€statutory€prohibitions.€€The€President€issued€two€findings€thatÏallow:€€1)€as€of€1985,€the€export€to€Canada€of€crude€oil€produced€in€the€lower€48€states;€and€2)€asÏof€1989,€the€export€of€50,000€barrels€per€day€(B/D)€of€ANS€crude€pursuant€to€the€U.S.„CanadianÏFree€Trade€Agreement.€€In€1985,€the€Secretary€of€Commerce€issued€a€finding€allowing€the€exportÏof€Alaskan€Cook€Inlet€crude€oil€to€Pacific€Rim€energy€markets.€€On€October€23,€1992,€theÏPresident€authorized€the€export€of€25,000€B/D€of€California€heavy€crude€oil€having€a€gravity€(i.e.,Ïweight)€of€20€degrees€API€or€lower.€€On€April€28,€1996,€the€President€determined€that€exports€ofÏANS€crude€oil€when€transported€on€U.S.„flag€tankers€are€in€the€national€interest.€ÌÌà  àDuring€FY€1996,€BXA€approved€15€licenses€involving€a€total€of€11,620,070€barrels€ofÏcrude€oil€or€approximately€31,840€B/D.€€This€included:ÌÌà  àExports€to€Canada:€€During€FY€1996,€BXA€issued€three€licenses€totaling€more€thanÏ7,062,000€barrels€for€shipment€to€Canada€of€crude€oil€produced€in€the€lower€48€states.€ÌÌà  àCrude€Oil€For€Testing€Purposes:€€The€Department€can€authorize€the€export€of€smallÏquantities€of€domestically€produced€crude€oil€for€testing€purposes€under€an€individual€validatedÏlicense€(IVL).€€In€FY€1996,€BXA€issued€six€such€licenses€amounting€to€slightly€more€than€70Ïbarrels€of€crude€oil.€€On€March€25,€1996,€the€Department€established€a€License€Exception€SS„¼Sample€which€allows€an€exporter€to€ship€up€to€10€barrels€of€crude€oil€to€any€one€end„userÏannually,€up€to€an€annual€cumulative€limitation€of€100€barrels€per€exporter.Ð h+¸&* Їà  àTemporary€Exports€for€Convenience€or€Efficiency€of€Transportation:€€Pursuant€to€SectionÏ7(d)€of€the€Act,€the€Department€permits€Alaskan€North€Slope€(ANS)€crude€oil€to€be€shipped€toÏU.S.€East€Coast,€Gulf€Coast,€and€Caribbean€ports€through€approved€non-U.S.€transshipmentÏterminals€and€approved€temporary€non-U.S.€storage€facilities.€€Participating€companies€reportÏmonthly€to€BXA€on€the€quantities€of€ANS€crude€oil€leaving€Valdez,€Alaska,€the€quantitiesÏentering,€leaving,€or€in€tem‚porary€storage€at€transshipment€terminals;€and€the€quantities€en€routeÏand€discharged€at€various€U.S.€terminals.€€During€FY€1996,€there€was€no€activity€under€thisÏauthority.ÌÌà  àThe€Department€also€authorizes€temporary€exports€to€Canada€and€Mexico€forÏconvenience€and€efficiency€of€transportation.€€During€FY€1996,€BXA€issued€one€license€forÏ550,000€barrels€for€temporary€exports€to€Canada€under€this€authority.€€ÌÌà  àCrude€Oil€from€Cook€Inlet:€€The€Department€au‚thorizes€the€export€of€crude€oil€derivedÏfrom€state-owned€submerged€lands€in€Alaska's€Cook€In‚let€under€an€IVL€unless€the€oil€has€been€orÏwill€be€transported€by€a€pipeline€over€a€Federal€right-of‚„way€granted€pursuant€to€the€MineralÏLeasing€Act€or€the€Trans-Alaska€Pipeline€Authorization€Act.€In€FY€1996,€there€was€no€activityÏunder€this€program.ÌÌà  àExports€of€California€Heavy€Crude€Oil:€€During€FY€1996,€BXA€issued€five€licensesÏpursuant€to€the€California€rule€making€to€export€25,000€B/D€of€California€heavy€crude€oil.€€TheÏfive€licenses€were€for€3.55€million€barrels€of€crude€and€were€valued€at€$55€million.€€The€bulk€ofÏthe€heavy€crude€oil€exported€was€for€use€as€bunker€fuel€for€vessels€in€foreign€trade.€€ÌÌà  àAlaskan€North€Slope€Crude€Oil:€€On€November€28,€1995,€the€President€signed€into€lawÏPublic€Law€104„58€which€created€a€new€Section€28(s)€of€the€Mineral€Leasing€Act€allowingÏexports€of€oil€transported€over€right„of„way€granted€pursuant€to€Section€203€of€the€Trans„AlaskaÏPipeline€Authorization€Act.€€The€law€allowed€exports€of€Alaskan€North€Slope€(ANS)€crude€oilÏunder€certain€conditions,€notably€that€the€oil€be€exported€on€a€U.S.„flag€tanker.€€Prior€toÏenactment€of€Public€Law€104„58,€the€Trans„Alaska€Pipeline€Authorization€Act€of€1973€(TAPS),Ïas€referenced€in€Section€7(d)€of€the€Export€Administration€Act,€was€the€principal€statute€thatÏprohibited€the€export€of€ANS€crude€oil.ÌÌà  àPublic€Law€104„58€required€the€President€to€conduct€a€review€of€the€economic€andÏenvironmental€effects€of€lifting€the€ANS€ban€prior€to€making€a€determination€that€such€exportsÏwere€in€the€national€interest.€€At€the€direction€of€the€National€Economic€Council,€the€DepartmentÏchaired€an€interagency€task€force€to€prepare€the€economic€and€environmental€review.€€TheÏDepartment€conducted€public€hearings€in€Washington,€D.C.,€Seattle,€and€Anchorage€andÏsolicited€public€input€from€interested€parties.€€ÌÌà  àOn€May€31,€1996,€BXA€amended€the€short€supply€provisions€of€the€ExportÏAdministration€Regulations€by€establishing€License€Exception€TAPS€authorizing€such€exportsÏwith€certain€conditions.€€The€License€Exception€TAPS€was€based€on:€€1)€Public€Law€104„58,Ð h+¸&* Ðwhich€allows€for€the€export€of€crude€oil€transported€by€pipeline€over€right„of„way€grantedÏpursuant€to€Section€203€of€the€Trans„Alaska€Pipeline€Authorization€Act€(TAPS);€2)€theÏPresident's€April€28,€1996,€determination€that€such€exports€are€in€the€national€interest;€and€3)€theÏPresident's€direction€to€the€Secretary€of€Commerce€to€issue€a€license€exception€with€conditionsÏfor€the€export€of€TAPS€crude€oil.€€During€FY€1996,€U.S.€firms€exported€five€cargoes€of€ANSÏcrude€oil€totaling€approximately€5.3€million€barrels.€ÌòòÌWood€Productsóóò òÐ $ t Ðó óÌà  àBXA€administers€short€supply€export€controls€on€Western€Red€Cedar,€as€mandated€byÏSection€7(i)€of€the€Act.€€BXA€also€administers€the€ban€on€exports€of€unprocessed€timberÏoriginating€from€public€lands€in€all€or€parts€of€17€western€states€pursuant€to€FRCSRA.€€Ì€Ìà  àWestern€Red€Cedar:€€Section€7(i)€of€the€EAA€prohibits€the€export€of€unprocessedÏWestern€Red€Cedar€(WRC)€harvested€from€state€or€Federal€lands.€€This€prohibition€applies€toÏthose€contracts€entered€into€after€September€30,€1979.€€However,€exports€of€unprocessed€WRCÏharvested€from€state€or€Federal€lands€under€contracts€entered€into€before€October€1,€1979,€areÏpermitted€under€an€Individual€Validated€License.€€During€FY€1996,€BXA€did€not€issue€anyÏexport€licenses€for€WRC.€ÌÌà  àFRCSRA:€€Under€FRCSRA,€the€Department€of€Commerce€is€responsible€forÏadministering€the€ban€on€the€export€of€unprocessed€timber€originating€from€public€lands€in€17Ïwestern€states.€€In€the€alternative,€the€affected€states€can€request€the€Secretary€of€Commerce€toÏauthorize€them€to€administer€their€own€programs.€€BXA€has€undertaken€the€following€actionsÏimplementing€FRCSRA:€ÌÌÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦ƒkÝð"ðà0  àÝ  ÝFirst€Log€Export€Order:€€On€August€23,€1993,€the€Secretary€of€Commerce€signed€aÐ ¨ø ÐGeneral€Order€(Order)€prohibiting€the€export€of€unprocessed€timber€originating€from€non„¼Federal€public€lands€located€west€of€the€100th€meridian€in€the€contiguous€United€States.€€Ýƒ+‡¦ƒkžk݌Р(#(# ÐŒÝ  ÝÌÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦mÝð"ðà0  àÝ  ÝAdvance€Notice€of€Proposed€Rule€making:€€On€June€7,€1995,€BXA€published€in€theÐ X ¨ ÐFederal€Register€an€advance€notice€of€proposed€rule€making€requesting€comments€onÏregulations€the€Department€is€considering€to€administer€FRCSRA.€€BXA€will€issue€a€finalÏrule€making€during€FY€1997.€Ýƒ+‡¦m:m݌Р(#(# ÐŒÝ  ÝÌÝ‚+‡¦ÿÝÝ  ÝÝ‚+‡¦ÍnÝð"ðà0  àÝ  ÝSecond€Log€Export€Order:€On€September€29,€1995,€the€Secretary€of€Commerce€issued€aÐ ô$D # Ðsecond€Order,€as€required€by€Section€491(b)(2)(B)€of€FRCSRA.€€The€Order€applies€toÏstates€with€annual€unprocessed€timber€sales€greater€than€400€million€board€feet.€€ItÏprohibits€the€export€of€the€lesser€€of€400€million€board€feet€or€that€Stateððs€annual€salesÏvolume€of€any€unprocessed€timber€originating€from€public€lands.€€The€Order€becameÏeffective€January€1,€1996.€€Washington€State€is€currently€the€only€state€with€over€400Ïmillion€board€feet€in€annual€timber€sales.݃+‡¦Ínèn݌Р(#(# ÐŒÝ  ÝÐ h+¸&* Ðà  àCongressional€Action:€On€September€30,€1996,€Congress€passed€and€the€President€signedÏPublic€Law€104„208.€€Section€319€of€Title€III€of€Section€101(d)€of€Title€I€of€P.L.€104„208Ïrequired€the€Secretary€of€Commerce€to€extend€until€September€30,€1997,€the€order€issued€underÏSection€491(b)(2)(A)€of€the€FRCSRA€prohibiting€the€export€of€non„Federal€timber€originatingÏfrom€public€lands€in€states€with€annual€sales€greater€than€400,000,000€board€feet€(i.e;,ÏWashington€state).€€Section€319€also€requires€the€Secretary€of€Commerce€to€make€effective€onÏOctober€1,€1997,€the€prohibition€of€section€491(b)(2)(B)€of€FRCSRA€on€the€export€of€only€theÏlesser€of€400,000,000€board€feet€or€the€annual€sales€volume€of€unprocessed€timber€originationÏfrom€public€lands€in€states€west€of€the€100th€meridian€in€the€contiguous€48€states€with€more€thanÏ400,000,000€board€feet€of€annual€sales€volume€of€such€timber.€€Effective€October€1,€1997,Ïtherefore,€the€export€of€such€timber€that€is€in€excess€of€400,000,000€board€feet€is€permitted,Ïunless€prohibited€by€any€other€provision€of€law.€€As€the€Secretary€of€Commerce€has€delegated€theÏauthority€for€carrying€out€the€policies€and€programs€necessary€to€administer€laws€regarding€theÏcontrol€of€U.S.€exports€to€the€Under€Secretary,€the€Undersecretary€issued€the€order€requiredÏunder€P.L.€104„208€on€October€18,€1996.ÌÌÔ#†X»ØXXXveA#ÔÔ‡(XveXXX»ØÔÔ‡(¼ »X(XveÔò òÓ  ÓÌAGRICULTURAL€COMMODITIESó óÔ#†(XveX»(¼ 2w#ÔÐ „Ô ÐÓTwÓÌÌò òWheató óÐ pÀ ÐÌòòDomestic€SituationóóÐ H˜ ÐÌà  àThe€United€Statesðð€Number€2€Hard€Red€Winter€wheat€achieved€a€record„high€price€ofÏ$262€(f.o.b.€Gulf)€per€ton€in€1995/96,€considerably€more€than€the€average€$156€per€ton€inÏ1994/95.€€The€season€average€farm€price€is€estimated€to€have€been€$4.55€per€bushel,€up€$1.10€perÏbushel€over€the€previous€year.€€Despite€the€high€price,€U.S.€wheat€exports€rose€to€33.6€millionÏmetric€tons€(mmt),€an€annual€increase€of€four€percent.€€The€pace€of€exports€remained€strongÏthroughout€the€year€as€the€United€States€capitalized€on€its€reputation€as€a€reliable€supplier€and€itsÏability€to€provide€a€wide€selection€consisting€of€every€class€of€wheat.€€Production€dropped€3.7Ïmmt€to€59.5€mmt€from€1994/95€and€although€consumption€also€declined€by€an€almost„equal€3.9Ïmmt,€the€increase€in€exports€was€enough€to€send€ending€stocks€down€to€10.2€mmt,€second€only€toÏ1973/74€as€the€lowest€level€on€record.ÌÌòòWorld€Supply€and€TradeóóÐ D%” # ÐÌà  àThe€price€of€wheat€rose€to€record€levels€in€the€international€market€during€1995/96€asÏglobal€consumption€exceeded€production€for€the€third€consecutive€year.€€The€high€price,Ïaccompanied€by€a€modest€two€percent€increase€in€production€to€535.9€mmt,€combined€to€driveÏworld€trade€down€to€91.9€mmt,€below€the€100€mmt€level€for€the€first€time€in€nine€years.€€A€strongÏeffort€by€the€European€Union€to€actively€discourage€wheat€exports€and€relatively€small€harvestsÏin€most€traditional€exporters€(particularly€in€drought„affected€Argentina)€enabled€the€UnitedÐ ¸+'* ÐStates€to€significantly€increase€its€share€of€the€world€wheat€market.€€Imports€by€China€increasedÏ17€percent€to€12€mmt€even€as€production€achieved€the€second€highest€level€on€record€at€102Ïmmt.€€In€India,€five€straight€years€of€record€harvests€allowed€the€nation€to€emerge€as€a€majorÏexporter€for€the€first€time,€while€Eastern€Europe€took€advantage€of€greater€production€and€strongÏprices€to€increase€its€wheat€exports€as€well€to€4.6€mmt,€the€highest€level€in€several€years.€€EndingÏglobal€stocks€of€104.7€mmt€for€1995/96€resulted€in€a€stocks„to„use€ratio€of€19.1,€the€lowest€levelÏon€record.ÌÌÌò òCoarse€Grainsó óÐ ü L  ÐÌòòDomestic€Situation€óóÐ Ô$  ÐÌà  àU.S.€corn€production€in€1995/96€of€187.3€mmt€was€down€69€mmt€from€the€previous€year.€ÏDomestic€utilization€was€down€about€23€mmt€to€160.7€mmt.€€The€season€average€price€for€cornÏrose€99€cents€to€a€record€$3.25€per€bushel€in€1995/96.€€U.S.€corn€exports€fell€approximately€5Ïmmt€to€about€53.5€mmt€and€stocks€decreased€29€mmt€to€10.4€mmt.ÌÌòòWorld€Supply€and€TradeóóÐ H˜ ÐÌà  àWorld€coarse€grain€production€was€down€73€mmt€to€794€mmt€in€1995/96€with€cornÏproduction€falling€46€mmt€to€513.3€mmt.€€World€coarse€grain€trade€decreased€8.8€mmt€to€88.4Ïmmt,€while€corn€trade€fell€nearly€5€mmt€to€66.2€mmt.€€Competition€for€U.S.€corn€reboundedÏslightly€in€1995/96€as€China€remained€a€net€importer€of€1.35€mmt.€€The€U.S.€corn€was€able€toÏmove€not€only€to€China,€but€to€other€Asian€markets€where€Chinese€corn€had€historicallyÏdisplaced€U.S.€corn€export€opportunities.ÌÌòòÌÌÌActions€Taken€by€Other€CountriesóóÐ X ¨ ÐÌà  àMexico€raised€the€tariff€rate€quota€for€corn€to€record€levels,€allowing€record€exports€ofÏU.S.€corn€to€enter€Mexico€duty„free.€€China,€by€continuing€its€ban€on€corn€exports€(except€forÏcorn€exports€from€surplus€northern€provinces€to€deficit€southern€provinces)€and€establishing€a€netÏimport€position€for€the€second€year€in€a€row,€enabled€U.S.€corn€to€enter€many€Asian€marketsÏvirtually€free€of€competition.€€ÌÌÌÌÌÌò òRiceó óÐ h+¸&* ЇòòDomestic€SituationóóÐ ° ÐÌà  àU.S.€1995/96€rice€production€(rough€basis)€fell€by€1.1€mmt€to€7.9€mmt.€€DomesticÏUtilization€(milled€basis)€reached€3.5€mmt€and€exports€totaled€2.7€mmt,€leaving€carry„out€stocksÏof€816,000€tons,€a€decline€of€200,000€tons.€€ÌÌòòWorld€Supply€and€TradeóóÐ 8 ˆ ÐÌà  àWorld€production€(rough€basis)€increased€9€mmt€to€a€record€550€mmt.€€Stocks€fell€1.3Ïmmt€(milled€basis)€to€48€mmt€or€12.9€percent€of€consumption.€€World€trade€forecasts€of€18.9Ïmmt€for€calendar€year€1996€are€the€second€highest€level€ever,€following€1995's€21€mmt€in€trade.ÏIndia€solidified€its€position€as€the€worldððs€second€largest€exporter€(behind€Thailand)€with€totalÏexports€of€3.25€mmt,€while€Vietnam€displaced€the€United€States€as€the€third€largest€exporter€withÏ2.8€mmt€in€exports.€€While€1995/96€witnessed€no€large€scale€crop€failures€among€major€riceÏconsumers€for€the€first€time€ever,€five€nations€(Bangladesh,€Brazil,€Indonesia,€Iran,€and€theÏPhilippines)€imported€1€mmt€or€more€of€rice.ÌÌòòAction€Taken€By€Other€CountriesóóÐ \¬ ÐÌà  àOpportunities€for€U.S.€rice€sales€increased€markedly€following€the€opening€of€riceÏmarkets€in€South€Korea€and€Japan€under€the€terms€of€the€Uruguay€Round€agreements.€ÌÌÌÒ°Òò òSoybeans€and€Productsó óÐ ä4 ÐÌòòDomestic€SituationóóÐ ¼  ÐÌà  àU.S.€soybean€production€declined€9.9€mmt€in€1995€to€58.6€mmt.€€Soybean€acreageÏincreased€as€wet€weather€forced€some€growers€to€forgo€grain€plantings€and€switch€to€soybeans.€ÏHowever,€yields€declined€16€percent€from€record€levels€in€1994€due€to€more€normal€growing€Ìconditions€and€early€frosts€in€the€upper€Midwest.€€U.S.€soybean€exports€in€1995/96€reached€22.9Ïmmt,€up€less€than€one€percent€from€last€yearððs€good€showing.€€Soybean€crush€declined€3€percent€toÏ37.1€mmt€while€ending€stocks€declined€49€percent€to€4.6€mmt.ÌÌà  àTotal€soybean€meal€consumption€in€the€United€States€rose€1€percent€to€24.4€mmt€as€highÏgrain€prices€helped€maintain€the€demand€for€soybean€meal€in€feed€rations.€€However,€high€mealÏprices€kept€the€increase€to€a€minimum.€€€Exports€of€soybean€meal€declined€14€percent€to€5.3€mmtÏin€1995/96€as€average€prices€rose€nearly€50€percent€over€a€year€earlier.ÌÌà  àU.S.€soybean€prices€for€1995/96€(Central€ILL.€cash,€Sept.„Aug.)€averaged€$266/MT,€a€30Ïpercent€increase€over€the€1994/95€level.€€The€increase€in€soybean€prices€in€1995/96€is€in€responseÏto€an€increased€demand€for€soybeans€and€soybean€meal€resulting€from€tight€feed€grain€supplies€andÏhigher€grain€prices.€€Soybean€meal€prices€rose€48€percent€in€1995/96€(Decatur,€ILL.,€48%€protein)Ð h+¸&* Ðto€$251/MT.€€In€contrast,€soybean€oil€prices€(Decatur,€ILL.)€for€the€same€period€declined€10Ïpercent€to€$549/MT.€€Reduced€export€demand€for€U.S.€soybean€oil,€particularly€in€China,€andÏincreased€competition€from€palm€oil€led€to€this€yearððs€lower€prices.ÌòòÌWorld€Oilseeds€and€Products€Supply€and€TradeóóÐ `° ÐÌà  àTotal€world€oilseed€production€declined€3€percent€in€1995/96€to€254.0€mmt.€€SoybeanÏproduction€at€123.6€mmt,€down€10€percent€from€1994/95,€accounted€for€most€of€this€yearððs€decline,Ïwith€smaller€reductions€in€peanut€and€copra€production.€€Increases€in€cottonseed,€up€4€percent€toÏ34.4€mmt,€sunflowerseed,€up€10€percent€to€25.8€mmt,€and€rapeseed€production,€up€14€percent€toÏ34.6€mmt,€helped€counter€some€of€the€decline€in€soybean€production.€€Higher€rapeseed€productionÏin€Canada,€the€European€Union,€Poland,€and€India€more€than€offset€lower€production€in€China€inÏ1995/96.€€€Increased€sunflowerseed€production€in€the€Former€Soviet€Union,€up€41€percent€to€7.4Ïmmt,€and€in€Eastern€Europe€led€to€the€increase€in€total€world€1995/96€production.€€World€oilseedÏexports€for€1995/96€were€2€percent€lower€reflecting€a€reduction€in€soybean€and€rapeseed€exports.€ÏWorld€soybean€exports€were€down€1€percent€to€31.9€mmt.€€The€United€States€captured€a€slightlyÏlarger€share€of€soybeans€exports€as€Brazilððs€exports€declined€due€to€lower€production€and€increasedÏdomestic€use.€World€rapeseed€exports,€primarily€by€Canada,€declined€7€percent€to€5.5€mmt.ÌÌà  àWorld€protein€meal€production€increased€2€percent€in€1995/96€to€145.3€mmt.€€ProductionÏincreases€were€noted€for€most€major€protein€meals€in€1995/96,€with€declines€limited€to€worldÏpeanut,€copra,€and€fishmeal€production.€€World€protein€meal€exports€rose€€slightly€in€1995/96€toÏ48.1€mmt€due€to€a€2„percent€increase€in€soybean€meal€exports.€€Brazil,€Argentina,€and€IndiaÏincreased€soybean€meal€exports€in€1995/96.ÌÌà  àWorld€vegetable€and€marine€oil€production€increased€3€percent€in€1995/96€to€71.3€mmt.€ÏIncreases€were€noted€for€most€major€oils€with€soybean€oil€up€1€percent€to€20.0€mmt€and€palm€oilÏproduction€up€5€percent€to€15.5€mmt.€€Declines€were€limited€to€fish,€olive,€coconut,€and€peanut€oilÏproduction.€€Vegetable€and€marine€oil€trade€declined€in€1995/96€with€lower€soybean€and€rapeseed€Ìoil€trade.€€World€soybean€oil€exports€declined€13€percent€to€5.3€mmt€while€rapeseed€oil€exportsÏdeclined€10€percent€to€2.3€mmt.€€Chinaððs€vegetable€oil€imports€declined€24€percent€from€theÏprevious€yearððs€record€level€to€3€mmt€in€1995/96€with€rapeseed€and€palm€oil€accounting€for€mostÏof€the€decline.ÌÌÒ°Òò òCottonó óÐ $X" ÐÌòòDomestic€SituationÐ à%0!$ ÐóóÌà  àCotton€production€in€MY€1995/96€approached€19.7€million€bales,€down€9€percent€fromÏthe€previous€seasonððs€record.€€The€decline€was€due€to€below€average€yields€in€several€growing€Ìregions.€€Upland€cotton€production,€at€17.5€million€bales,€was€1.8€million€bales€below€theÏ1994/95€level.€€American„Pima€production€totaled€368€thousand€bales,€up€9€percent€fromÏ1994/95.Ð h+¸&* Їà  àThe€area€planted€to€all€cotton€totaled€16.9€million€acres,€a€6€percent€increase€from€theÏprevious€year.€€Harvested€area,€at€16.0€million€acres,€was€up€20€percent€from€the€previous€year.€ÏAbandonment€of€upland€cotton€acreage€during€1995/96€totaled€6€percent,€up€from€3€percent€aÏyear€earlier.€€Upland€yields€averaged€533€pounds€per€acre,€172€pounds€below€yields€realized€theÏprevious€year.ÌÌà  àTotal€cotton€mill€use€during€1995/96€was€10.6€million€bales,€down€from€11.2€million€theÏprevious€year.€€Upland€cotton€use,€at€10.5€million€bales,€was€down€5€percent.€€American„PimaÏconsumption€Ô#†X»ØXX(Xvew#ÔÔ‡)XveXXX»ØÔwas€€estimated€at€100€thousand€bales.€€Total€marketing€year€1995/96€exports€areÐ  ` Ðestimated€at€7.7€million€bales,€down€18€percent€from€the€previous€season.€€According€to€U.S.ÏCensus€data,€the€largest€shipments€during€1995/96€were€to€China,€Japan,€Indonesia,€Korea,€andÏMexico.€€United€States€ending€stocks€for€1995/96€were€estimated€at€2.6€million€bales,€down€50Ïthousand€bales€from€the€previous€year.€ÌÌà  àInternational€cotton€prices€in€1995/96€were€lower€than€the€previous€season,€with€theÏCotton€A„Index€(average€of€5€lowest€c.i.f.€Northern€Europe€quotes)€averaging€85.55€cents€perÏpound.€€The€A„Index€reached€its€highest€level€in€September€1995€with€a€monthly€average€ofÏ91.18€cents€per€pound,€while€the€season's€lowest€prices€were€in€July€1996€when€the€A„IndexÏaveraged€78.80€cents€per€pound.ÌÌòòWorld€Supply€and€TradeóóÐ  p ÐÌà  àWorld€1995/96€cotton€production€is€estimated€at€91.5€million€bales,€up€7€percent€from€theÏprevious€season.€€Foreign€production€is€estimated€at€73.6€million€bales,€up€12€percent.€€TheÏ1995/96€season€was€characterized€by€larger€crops€in€major€producing€countries€including€China,ÏGreece,€India,€Pakistan,€and€Turkey.€€World€consumption€for€1995/96€is€estimated€at€85.0Ïmillion€bales,€up€slightly€from€the€previous€year.€€The€decline€in€U.S.€consumption€was€offset€by€Ìincreases€in€consumption€for€Pakistan€and€India.€€Exports€for€1995/96€totaled€27.6€million€bales,Ïdown€3€percent€from€the€previous€year.€€Increased€exports€from€the€Franc„Zone€Africa,€Australia,Ïand€Pakistan€were€more€than€offset€by€decreased€exports€from€the€United€States€and€Uzbekistan.ÌÌà  àWorld€ending€stocks€for€1995/96€are€estimated€at€34.9€million€bales,€19€percent€higherÏthan€the€previous€year's€estimate.€€Reflecting€the€increase€in€world€production€for€the€second€yearÏin€a€row,€stocks€were€rebuilt€in€China€by€4.7€million€bales€alone.€€Stocks€were€drawn€downÏslightly€in€the€United€States,€Pakistan,€and€the€European€Union€to€meet€strong€world€demand€forÏcotton.€ÌÌò òÌÌHides€and€SkinsÌó óÌòòDomestic€SituationóóÐ |*Ì%) ÐÐ h+¸&* Ðà  àIn€1995,€the€United€States€produced€1.15€mmt€of€raw€cattle€hides€and€skins,Ïapproximately€30€percent€of€total€world€production.€€The€United€States€exported€approximatelyÏ54€percent€of€its€production€to€foreign€markets,€mostly€in€the€form€of€whole€cattle€hides.€€ExportsÏfor€1995€totaled€20€million€whole€hides€valued€at€nearly€$1.22€billion,€up€from€17.9€million€hidesÏvalued€at€$1.06€million€a€year€earlier.€€Strong€prices€and€demand€in€1995€resulted€in€exports€ofÏ5.21€million€pieces€or€$194€million€worth€of€calfskins,€up€from€4.66€million€pieces€or€$182Ïmillion€worth€of€calfskins€the€previous€year.ÌÌà  àIn€1995,€Korea,€Japan,€Taiwan,€and€China€purchased€83€percent€of€total€U.S.€exports€ofÏwhole€cattle€hides.€€Korea€was€the€largest€purchaser€of€U.S.€whole€cattle€hides,€buying€about€8.3Ïmillion€hides€or€41€percent€of€total€U.S.€exports.€€Although€Koreaððs€imports€increased€in€1995,Ïthey€are€still€perceived€as€a€declining€market.€€Nevertheless,€Korea€has€been€a€steady€purchaser,Ïwith€imports€ranging€between€7.5€million€and€10.3€million€whole€cattle€hides€per€year€for€each€ofÏthe€last€nine€years.€€Japan€was€the€second€largest€purchaser€of€U.S.€hides,€buying€3.2€millionÏwhole€cattle€hides,€slightly€higher€than€1994's€imports.€€Taiwan€imported€3€million€U.S.€hides,€upÏ21€percent€from€a€year€earlier.ÌÔ#†X»ØXX)Xve}Ÿ#ÔòòÌÔ‡*XveXXX»ØÔWorld€Supply€and€TradeÐ 8ˆ ÐóóÌà  àHides€and€skins€production€for€the€31€major€countries€reported€by€USDA€has€beenÏrelatively€constant€over€the€last€9€years.€€Production€increased€from€1988€to€1990,€then€declinedÌin€1991€through€1994€because€of€a€down€turn€in€Eastern€Europe€and€Russia.€€ProductionÏincreased€in€1995,€because€of€an€upturn€in€output€in€South€America€and€the€United€States€whichÏoffset€the€decline€in€Russian€production.€€In€1996,€production€is€projected€to€continue€its€upwardÏtrend,€as€the€increases€in€South€America€and€the€United€State€continue€to€offset€the€declines€inÏRussia.ÌÌà  àTrade€in€raw€hides€and€skins€between€major€countries€in€1995€increased€7€percentÏcompared€to€1994.€€Increases€in€exports€were€experienced€by€the€United€States,€South€America,Ïthe€European€Union,€and€Australia€offsetting€the€declines€in€Russia.€€Korea€and€Japan,€whichÏtogether€account€for€nearly€35€percent€of€the€worldððs€trade€in€raw€hides,€are€expected€to€continueÏdecreasing€import€levels€in€1996€and€1997.€€Korea€and€Japanððs€declining€share€of€the€world€hideÏtrade€reflects€not€only€pollution€concerns,€but€the€increasing€competition€from€leatherÏmanufactures€in€less€developed€countries,€particularly€China€and€Southeast€Asia.ÌÌò òÌÌÌÌWood€ProductsÌó óÌòòDomestic€SituationóóÐ X*¨%) Ðâ âÐ D+”&* Ðà  àResidential€construction,€which€generally€accounts€for€more€than€one„third€of€theÏâ âsoftwood€lumber€and€plywood€consumed€annually€in€the€United€States,€as€well€as€a€substantialÏportion€of€other€softwood€and€hardwood€products,€was€up€7€percent€on€a€seasonally€adjustedÏannual€basis€in€1996,€to€an€estimated€1.45€million€units.€€Mortgage€rates€averaged€around€8.25Ïpercent€in€late€August,€still€low€by€historical€standards.€€Housing€starts€through€the€first€sevenÏmonths€of€1996€totaled€836,300€units;€80€percent€of€which€was€single„family€housing.€€ÌÌà  àThe€upturn€in€the€construction€sector€pushed€the€prices€of€some€construction„relatedÏwood€products€higher€in€1996.€€In€mid„August,€the€composite€lumber€price€for€framing€lumberÏstood€at€$442€per€thousand€board€feet,€compared€to€$331€per€thousand€board€feet€the€same€timeÏlast€year.€€It€is€expected€that€lumber€prices€will€remain€relatively€high,€given€the€generallyÏfavorable€economic€outlook€and€the€continued€controversy€surrounding€timber€harvesting€onÏnational€forests€in€the€Pacific€Northwest€and€elsewhere.€€Structural€panel€prices,€as€reflected€byÏthe€structural€panel€composite€price,€remained€relatively€stable€in€1996€because€of€a€significantÏincrease€in€new€oriented€strand€board€capacity€in€the€United€States€and€Canada.€€Log€prices€wereÏgenerally€lower€in€1996.ÌÔ‡*ôᤠõX*XveÔÌÔ#†*XveX õ*ôᤸ#Ôà  àU.S.€wood€products€exports,€after€posting€a€modest€gain€in€1995,€declined€in€1996,€to€anÐ 6† Ðestimated€$7€billion.€€Much€of€the€decline€was€in€exports€of€logs€to€Japan.€€Wood€productÏimports€were€an€estimated€record€$9.6€billion€in€1996.€€U.S.€exports€of€softwood€logs€decreasedÏsubstantially€in€1996,€to€an€estimated€9.8€million€cubic€meters€(mòò3óó)€from€11.6€million€mòò3óó€inÐ úJ Ð1995.€€Significant€reductions€were€registered€in€exports€to€both€Japan€and€Canada,€our€largestÏoverseas€markets.€€U.S.€exports€of€softwoodÔ#†X»ØXX*XveN­#ÔÔ‡XveXXX»ØÔ€logs€to€Japan€totaled€an€estimated€7.0€million€mòò3€óóinÐ Ò" Ð1996,€compared€to€13.4€million€mòò3óó€in€1989.€€Despite€the€significant€drop€in€the€volume€of€U.S.Ð ¾ Ðsoftwood€log€exports€to€Japan€over€this€period,€there€has€been€little€change€(less€than€5€percent)Ïin€the€proportion€of€U.S.€softwood€log€exports€to€total€U.S.€wood€products€exports€on€a€valueÏbasis.€€Softwood€logs€still€account€for€over€50€percent€of€U.S.€exports€to€Japan€on€a€value€basis.€ÏDemand€for€U.S.€softwood€logs€in€Japan€is€expected€to€remain€relatively€steady€over€the€near„¼term,€however,€due€to€the€reduced€availability€of€tropical€logs.ÌÌà  àU.S.€hardwood€log€exports€declined€to€slightly€less€than€1.1€million€mòò3óó€in€1996,€from€1.2Ð 2 ‚ Ðmillion€mòò3óó€in€1995,€because€of€continuing€problems€in€several€end„use€markets,€most€notablyÐ !n Ðover€capacity€in€the€furniture€sector€in€Europe.€€Importers€in€several€European€countries€haveÏalso€turned€to€importing€semi„finished€and€finished€products€because€of€rising€production€costs.ÌÌà  àU.S.€imports€of€both€softwood€and€hardwood€logs€increased€in€1996,€but€still€representÏonly€a€small€percentage€of€the€softwood€and€hardwood€logs€consumed€annually€in€the€UnitedÏStates.ÌÌòòWorld€Supply€and€TradeÐ ~(Î#' ÐóóÌà  àIndications€are€that€worldwide€sawlog€and€veneer€log€production€declined€slightly€inÏ1996,€a€reflection€of€increased€environmental€pressure€around€the€world€to€reduce€harvest€levelsÏto€sustainable€levels€and€to€eliminate€harvesting€of€primary€forests.€€Discussions€on€how€toÐ .,~'+ Ðdefine€sustainable€forest€management€and,€equally€important,€how€to€measure€a€country'sÏprogress€toward€sustainable€forest€management€are€ongoing€under€the€auspices€of€the€U.N.ÏCommission€on€Sustainable€Developmentððs€Intergovernmental€Panel€on€Forests.€€The€outcomeÏof€these€discussions€could€have€a€significant€impact€on€harvest€levels,€and,€consequently,€theÏvolume€of€wood€products€that€enters€international€trade.€Ì€ÌòòActions€Taken€by€Other€Nations€in€1995/96óóÐ 8 ˆ ÐÌà  àOn€May€29,€1996,€the€United€States€and€Canada€entered€into€an€agreement€on€the€trade€ofÏsoftwood€lumber.€€This€agreement€caps€Canadian€softwood€lumber€exports€to€the€United€StatesÏat€14.7€billion€board€feet€annually,€9€percent€below€the€record€16.2€billion€board€feet€in€1995.€ÏSof