The Department of Commerce’s Bureau of Industry and Security (BIS) requested public comments on existing foreign policy-based export controls maintained under Section 6 of the Export Administration Act (EAA) through a Federal Register notice published October 21, 2003. Comments were solicited from all six of the Department’s Technical Advisory Committees (TACs), which advise BIS, as well as from the President’s Export Council Subcommittee on Export Administration. Comments also were solicited from the public via the BIS webpage. BIS requested comments on how existing foreign policy controls have affected exporters and the overall public. The notice invited public comments about issues such as the effectiveness of controls when foreign availability exists; whether the goals of the controls can be achieved through other means such as negotiations; the compatibility of the controls with the overall U.S. policy toward a country in question; the effect of controls on U.S. economic performance; and the ability to enforce the controls.
BIS received eight responses from the following organizations: Analog Devices, Inc.; Federal Express Corporation; Industry Coalition on Technology Transfer (ICOTT); Jupiter Aluminum Corp.; National Chamber of Industries & Commerce, U.P. India; Sandia National Laboratories; the Sensors and Instrumentation Technical Advisory Committee (SITAC); and Sun Microsystems. BIS has made all comments received available for review in the BIS Freedom of Information Act Reading Room available on the BIS webpage. BIS also makes the comments available for public review upon request. This Appendix summarizes the comments received.
On November 24, 2003, Analog Devices, Inc., (ADI) submitted the following comments relating to its items controlled in Categories 3, 4, and 5 of the Commerce Control List (CCL) for national security reasons: “It is extremely difficult for ADI to know if their equipment will ‘make a significant contribution’ to the military potential of the customer country because the control parameters are of necessity subjective and not well defined.” ADI further commented that the subjective nature of reviews, and the interagency consultation process, have led to delays of two to three years in receiving a license, which is detrimental to both to long-term planning and customer relations. ADI estimates that in a particular market segment, they lose $15-$20 million a year to foreign competition that can obtain approvals faster from their own governments. ADI foresees a general risk of U.S. industry losing its competitive and technological edge by not being able to access export markets.
On November 19, 2003, Federal Express Corporation submitted comments proposing the elimination of Part 736.2(b)(8) (General Prohibition Eight) of the EAR, which requires a license or license exception for exports or reexports through or transit through a number of countries. Federal Express states this regulation was put in place during the Cold War and most of the countries that fall under the jurisdiction of this regulation now have very friendly relations with the United States. Some are even members of multilateral export control regimes. A number of states subject to U.S. unilateral embargoes, however, are not on this list. This requirement places a large burden on Federal Express given the nature of its business.
Second, Federal Express recommends “smart” sanctions that target only specific activities of concern rather than the broad embargos that are currently in place for a number of countries. This would level the playing field for U.S. companies with their worldwide competition. Lastly, Federal Express cites confusion between BIS regulations and those of the Department of the Treasury’s Office of Foreign Assets Control (OFAC). The requirements in the Iran provisions of the EAR conflict with those of OFAC’s regulations. Of particular concern are the EAR regulatory provisions for Sudan, which are silent with regard to the U.S. embargo.
On November 17, 2003, the Industry Coalition on Technology Transfer (ICOTT) wrote to express concern over foreign policy-based export controls which ICOTT described as unilateral and, therefore, largely ineffective. ICOTT recommended that unilateral controls should only be used when the symbolism of the act of imposing controls outweighs the injury to American workers and businesses. If unilateral controls are to be imposed while the U.S. Government negotiates with its trading partners to seek multilateral support, those unilateral controls should be of limited duration.
On November 21, 2003, Jupiter Aluminum expressed concern over the ability of Chinese scrap aluminum purchasers to acquire United States scrap and export it to China. Jupiter asserts that China’s ability to acquire U.S. scrap stems from unfair trade practice including currency manipulation and fake shipping documents. The large scale purchase of U.S. scrap by the Chinese is driving up the costs of doing business in the United States and in the future, the United States may not have a scrap industry. Jupiter would like the U.S. Government to use existing export regulations to stop the export of scrap to China.
On October 24, 2003, the National Chamber of Industries and Commerce, U.P. (NCIC) expressed concern about the continued U.S. requirement for an export license for EAR99 items to India. NCIC asserts that news reports indicate that the U.S. Government is no longer asking India to sign the Nuclear Nonproliferation Treaty to promote better trade relations. Therefore, the export license requirement for EAR99 items, even to listed nuclear entities, should be removed since EAR99 items do not directly contribute to a nuclear or missile program. NCIC notes that if it is not possible to waive the EAR99 licensing requirement completely, then several possibilities to streamline exporting should be examined, including bulk licences, licence exceptions for shipment value, or expedited processing of license applications.
On November 21, 2003, Sandia National Laboratories’ Cooperative Monitoring Center wrote to express concern that human, animal and plant pathogens shipped within the United States require prior approval of the relevant federal agency. However, exporting the same pathogens to another country is regulated by BIS and may or may not require a licence. This gap could contribute to the proliferation of biological weapons. The lab has provided a list of 25 pathogens it recommends be added to the CCL to prevent proliferation.
On October 21, 2003, BIS’s Sensors and Instrumentation Technical Advisory Committee (SITAC) submitted several comments. First, they emphasized their comments from prior years, which they felt have not been addressed, namely that Category 6 commodities related to commercial night vision and thermal imaging equipment (specifically 6A002, 6A003, 6E001, and 6E002), which are controlled for Regional Stability (RS) Column 1, should instead be controlled in RS Column 2 as a first step toward reviewing RS controls. Although RS1 includes all countries except Canada, the imposition of RS2 controls would allow items classified under these ECCNs to be exported to Canada, most European Union member states, Japan, and several other countries without a license.
Due to the development of foreign competition in the United Kingdom, France, Israel, and Japan in recent years, the SITAC stated that “the negative effect on U.S. companies far exceeds the perceived benefit to the foreign policy objective.” SITAC noted the importance of thermal imaging for firefighting, law enforcement, and security organizations worldwide and stated that the U.S. call for building a large international coalition to combat terrorism is undermined when allies’ access to available U.S. technology is restricted. SITAC further stated that treating all regions with the exception of Canada as being potentially unstable “dilutes the focus on regions where stability may truly be in question.” Second, they emphasized that foreign competition to the U.S. focal plane array (FPA) equipment industry has become quite vigorous, suggesting that U.S. regional stability controls are harming U.S. industry without significant regional stability benefits. Finally, they renewed their call for moving six ECCN items from RS1 to RS2 controls since this would “level the playing field” with foreign competition without harm to U.S. interests.
The final public comment received was from Sun Microsystems. Sun Microsystems commented on Section 744 Proliferation Controls, known specifically as the “EPCI” (the Enhanced Proliferation Control Initiative) provisions, and controls on high performance computers (HPCs). The company believes that EPCI catch-all requirements cause substantial unnecessary costs associated with export compliance for global information technology (IT) companies. The burden to IT companies lies in “policies, procedures, and automated systems [that] must be constructed to screen thousands of transactions involving uncontrolled or uncontrollable products, and techniques [that] must be devised to stop transactions for which an exporter has ‘reason to know’ that the ultimate end-use will involve weapons of mass destruction.”
In addition, IT companies spend “substantial money and time on screening shipments of de minimis, irrelevant and uncontrollable items, or attempting to enforce compliance with such a system, [which] detracts from the ability of both companies and enforcement authorities to enforce what really matters.” Sun Microsystems calls for a “complete, authoritative list of entities presenting proliferation concerns, including those end-users to whom exports were previously subject to enhanced controls (i.e., export prohibition or licensing).” The company also suggested the creation of new practices pursuant to which the Department of Commerce: “(1) processes voluntary company requests to screen individual end-users for a particular transaction in no more than 14 days, and (2) permits voluntary one-time end-user reviews and certifications so that companies can export to a given end-user, free of EPCI liability, until the exporter is notified otherwise.” In addition the U.S. Government must publish all denials on some type of an entity list to prevent those entities from seeking the same transaction with another vendor.
With regard to HPCs, the “scope of Tier III controls should be narrowed substantially in order to recognize the realities of the networked world and to discontinue the dangerous and counterproductive pretension that controlling commercial computing power will be either viable or effective in the coming years.” Tier III countries should be those “identified in the CIA’s semiannual WMD report to Congress under Section 721 of the Intelligence Authorization Act for FY 1997” rather than the extensive list of countries currently included in Computer Tier III. Sun is concerned about the proposed regulation on computer transfer since it will essentially reimpose Tier II type controls. Sun feels the U.S. Government should shift its focus from performance metrics to accelerating the advantage the U.S. military already has in exploiting these technologies.