Export controls maintained for foreign policy purposes require annual extension according to the provisions of Section 6 of the Export Administration Act of 1979, as amended (the Act). Section 6(f) of the Act requires the President to submit a report to Congress to extend the controls. Such authority has been delegated to the Secretary of Commerce. Sections 6(b) and 6(f) of the Act require the report to include certain considerations1 and determinations2 with respect to the criteria established in that section. This report complies with all of the requirements set out in the Act for extending, amending, or imposing foreign policy controls.
The Department of Commerce is acting under the authority conferred by Executive Order 13222 of August 17, 2001 (Executive Order), as extended by the Notice of August 7, 2003. Therein, the President, by reason of the expiration of the Act, invoked his authority, including authority under the International Emergency Economic Powers Act (IEEPA), to continue in effect the system of controls that had been maintained under the Act. Under a policy of conforming actions under the Executive Order to those under the Act, the Department of Commerce, insofar as appropriate, is following the provisions of Section 6 of the Act with regard to extending foreign policy controls.
With this report, all foreign policy export controls discussed herein are hereby extended for the period from January 21, 2004, to January 20, 2005. The Bureau of Industry and Security (BIS) (formerly known as the Bureau of Export Administration) of the Department of Commerce is taking this action at the recommendation of the Secretary of State. As further authorized by the Act, foreign policy export controls remain in effect for replacement parts and for parts contained in goods subject to such controls. The controls administered in accordance with procedures established pursuant to Section 309(c) of the Nuclear Nonproliferation Act of 1978 similarly remain in effect.
Each chapter of this report describes a particular category of foreign policy controls and delineates modifications that have taken place over the past year. Although this report covers the 2003 calendar year, most of the statistical data presented in the report are based on fiscal year 2003 export licensing statistics, unless otherwise noted. BIS generates this data from the computer automated system it uses to process and track export license activity. Due to the tabulating procedures used by the system in accounting for occasional license applications that list more than one country or destination, the system has certain limitations as a means of gathering data. In addition, BIS bases the data in this report on values contained in issued export licenses. Such values may not represent the values of actual shipments made against those licenses, because in some cases an exporter may ship only a portion of the value of an approved license or may not ship at all.
Certain goods, technology, and software described in this report also may require a license for national security purposes for export to certain destinations in accordance with Section 5 of the Act.
On April 3, 2003, the Department of Commerce published an amendment to the Export Administration Regulations (EAR) that expands the scope of controls on explosives detection equipment, now classified under Export Control Classification Number (ECCN) 2A983. The Department also imposed new license requirements for the export and reexport of related software and technology, under newly created ECCNs 2D983 and 2E983. With this amendment, the Department of Commerce imposed new license requirements for RS reasons for explosives detection equipment, software, and technology to all destinations except members of the North Atlantic Treaty Organization (NATO), Australia, Japan, and New Zealand.
On June 6, 2003, the Department of Commerce amended the EAR by imposing sanctions on transactions involving Specially Designated Global Terrorists (SDGTs), Specially Designated Terrorists (SDTs), and Foreign Terrorist Organizations (FTOs). SDGTs, SDTs and FTOs, as well as certain other designated persons, are subject to licensing requirements maintained by the Department of the Treasury and are identified on a list of designated persons maintained in Appendix A to 31 CFR Chapter V. The controls maintained by the Department of the Treasury, including those with respect to SDGTs, SDTs and FTOs, are not discussed in this report.
On May 22, 2003, the United Nations Security Council (UNSC) issued Resolution 1483 that lifted the comprehensive UNSC trade sanctions on Iraq, while retaining restrictions on the sale or supply to Iraq of arms and related matériel. Resolution 1483 also reiterated certain provisions of related UNSC Resolutions 707 of August 15, 1991, and 687 of April 3, 1991. In particular, those provisions require that Iraq eliminate its nuclear weapons program and restrict its nuclear activities to the use of isotopes for medical, industrial, or agricultural purposes. Such provisions further mandate the elimination of Iraq’s chemical and biological weapons programs as well as its ballistic missile program. The Department of Commerce is presently in the process of amending the EAR to reflect Iraq’s significantly changed status. At present, the Department of the Treasury continues to require a license for the export to Iraq of most items on the Commerce Control List, other than items controlled for anti-terrorism reasons only.
On December 12, 2003, the President signed the Syria Accountability and Lebanese Sovereignty Restoration Act (SAA) (Pub. L. 108-175). The Department of Commerce has responsibility for implementing Section 5 of the SAA, insofar as it affects the EAR.
The UNSC imposed an arms embargo on Rwanda on May 17, 1994. In 1995, the UNSC suspended the application of the arms embargo to the Government of Rwanda if items were shipped through specified points of entry, and later terminated (effective September 1, 1996) the application of these restrictions on sales or supplies to the Government of Rwanda. The sale or supply of such arms and arms-related materiél to non-governmental forces in Rwanda remains prohibited.
On July 30, 2003, the Department of State implemented the partial lifting of the arms embargo for those items subject to the International Traffic in Arms Regulations (ITAR) destined for the Government of Rwanda. The Department of Commerce will be implementing a comparable partial lifting of the arms embargo by amending the EAR.
Pursuant to Executive Order 13304, the Department of Commerce maintains controls on exports to persons who threaten international stabilization efforts in the Western Balkans, including Slobodan Milosevic, certain family members and close associates, and persons under open indictment by the International Tribunal for the Former Yugoslavia. The U.S. Government modified these restrictions in 2003 and the Department of Commerce will publish changes to the EAR to reflect these modifications.
The President declared a national emergency relating to UNITA by Executive Order 12865 on September 26, 1993, in coordination with international sanctions adopted by the UNSC. The U.S. sanctions were further tightened by Executive Order 13069 of December 12, 1997, and Executive Order 13098 of August 18, 1998. The United States took these actions in accordance with United Nations Security Council Resolutions 1127 of August 28, 1997, Resolution 1173 of June 12, 1998, and Resolution 1176 of June 26, 1998.
Executive Order 13298 of May 6, 2003, lifted all sanctions imposed on UNITA in these earlier Executive Orders. With the successful implementation of the Lusaka Protocol and the demilitarization of UNITA, the President determined that the circumstances that led to the declaration of a national emergency on September 26, 1993, no longer exist. The lifting of sanctions was consistent with United Nations Security Council Resolution 1448, which lifted the measures imposed pursuant to prior Security Council resolutions related to UNITA. The Department of Commerce will publish an amendment to the EAR, which will remove references to the sanctions administered by the Department of the Treasury.
On June 10, 2003, the Department of Commerce published a rule reflecting decisions reached by the Australia Group (AG) in intersessional agreement and at the June 2002 AG Plenary. At the urging of the United States, the control thresholds in ECCN 2B352 for fermenters and cross flow filtration equipment were lowered to capture additional equipment that could be used in the production of chemical weapons. The rule added eight biological toxins to the list of controlled items on the CCL. Additionally, editorial corrections were made to some chemical-related entries to clarify the scope of AG controls.
After several years of debate, agreement was reached in the Missile Technology Control Regime (MTCR) to define missile range and payload, key determinants of the level of control applicable to rocket and unmanned aerial vehicle systems. In summary, payload is now defined as that portion of a rocket system or unmanned aerial vehicle that is not used to maintain flight; range is defined as the maximum distance that a rocket system or unmanned aerial vehicle is capable of traveling in stable flight as measured by the projection of its trajectory over the surface of the Earth. Clarifying amendments to the scope and jurisdiction of controls on global navigation satellite receiving equipment were also accepted by MTCR members. On September 22, 2003, the Department of Commerce published a rule incorporating these revisions in the EAR.
On January 14, 2003, the Department of Commerce amended the EAR to implement revisions that were agreed upon in the February 2002 meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). This rule removed license requirements for exports and reexports of general purpose microprocessors to most destinations to conform with changes in the List of Dual-Use Goods and Technologies maintained and agreed to by governments participating in the Wassenaar Arrangement. This rule retained license requirements for exports and reexports to designated terrorist-supporting countries. In addition, this rule established a new license requirement for the export or reexport of general purpose microprocessors if, at the time of the export or reexport, the exporter or reexporter knows, has reason to know, or is informed by BIS that the item will be or is intended to be used for a military end-use in a country that is of concern for national security reasons or by a military end-user in such a country.
On June 17, 2003, the Department of Commerce published a rule to implement changes to the Wassenaar Arrangement List of dual-use items (finalized in December 2002) and clarify U.S. export controls on certain limited uses of encryption. This update clarifies when encryption commodities and software may be given de minimis treatment, when short-range wireless devices incorporating encryption may be given mass market or retail treatment, and that specially designed medical equipment and software are not controlled as encryption or “information security” items under the EAR. The rule also expands the authorizations according to which most travelers departing the United States may take encryption for their personal use. Finally, this rule implements the 2002 Wassenaar Arrangement agreement to eliminate national security-based controls on certain types of “personalized smart cards” and equipment controlling access to copyright protected data.
On October 22, 2003, the Department of Commerce published a rule in response to an agreement among the Nuclear Suppliers Group (NSG) member countries to establish export licensing procedures for the transfer of items identified on the Annex to the “Nuclear-Related Dual-Use Equipment, Materials, and Related Technology List,” which is published by the International Atomic Energy Agency.
Chapters 2-12 of this report describe the various export control programs maintained by the Department of Commerce for foreign policy reasons. Each of these programs is extended for another year. The analysis required for such an extension is presented in each chapter in the format described below.
Export Control Program Description and Licensing Policy
This section defines the export controls maintained for a particular foreign policy purpose that are imposed or extended for the year 2004. Each of the following chapters describes the licensing requirements and policy applicable to a particular control.
Analysis of Control as Required by Section 6(f) of the Act
Section 6(f)(2) of the Act requires that the Secretary of Commerce describe the purpose of the controls and consider or determine whether to impose or extend foreign policy controls based on specified criteria, including consultation efforts, economic impact, alternative means, and foreign availability. For each control program, the Department of Commerce’s conclusions are based on the following required criteria:
This section provides the foreign policy purpose and rationale for each particular control.
This section describes the Secretary’s determinations or considerations with respect to the following criteria:
1. Probability of Achieving the Intended Foreign Policy Purpose. Whether such controls are likely to achieve the intended foreign policy purpose in light of other factors, including the availability from other countries of the goods or technology subject to control, and whether the foreign policy purpose can be achieved through negotiations or other alternative means.
2. Compatibility with Foreign Policy Objectives. Whether the controls are compatible with the foreign policy objectives of the United States and with overall U.S. policy toward the country or the proscribed end-use subject to the controls.
3. Reaction of Other Countries. Whether the reaction of other countries to the extension of such export controls by the United States is likely to render the controls ineffective in achieving the intended foreign policy purpose or to be counterproductive to other U.S. foreign policy interests.
4. Economic Impact on United States Industry. Whether the effect of the controls on the export performance of the United States, its competitive position in the international economy, the international reputation of the United States as a reliable supplier of goods and technology, or the economic well-being of individual U.S. companies exceeds the benefit to U.S. foreign policy objectives.3
5. Effective Enforcement of Control. Whether the United States has the ability to enforce the controls. Some enforcement problems are common to all foreign policy controls.4 Other enforcement problems are associated with only one or a few controls. Each control has been assessed to determine if it has presented, or is expected to present, an uncharacteristic enforcement problem.
This section discusses the results of consultations with industry leading to the extension or imposition of controls. In a October 21, 2003, Federal Register notice, the Department of Commerce solicited comments from industry on the effectiveness of U.S. foreign policy-based export controls. Comments were solicited from all six of the Department’s Technical Advisory Committees (TACs) that 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. The comment period closed on November 21, 2003. Eight comments were received from the following companies and 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’ Cooperative Monitoring Center; the Sensors and Instrumentation Technical Advisory Committee (SITAC); and Sun Microsystems. A detailed review of the comments received is available in Appendix I.
This section reflects consultations on the controls with countries that cooperate with the United States on multilateral controls and with other countries as appropriate.
This section specifies the nature and results of any alternative means attempted to accomplish the foreign policy purpose, or the reasons for extending the controls without attempting any such alternative means.
This section considers the availability from other countries of goods or technology comparable to those subject to the proposed export control. It also describes the nature and results of the efforts made pursuant to Section 6(h) of the Act to secure the cooperation of foreign governments in controlling the foreign availability of such comparable goods or technology. In accordance with the Act, foreign availability considerations do not apply to export controls in effect prior to June 12, 1985, to controls maintained for human rights and anti-terrorism reasons, or to controls in support of the international obligations of the United States.
1 Section 6(b)(2) requires the Secretary to consider the criteria set forth in Section 6(b)(1) when extending controls in effect prior to July 12, 1985. In addition, the report must include the elements set forth in Sections 6(f)(2)(A) (purpose of the controls); 6(f)(2)(C) (consultation with industry and other countries); 6(f)(2)(D) (alternative means attempted); and 6(f)(2)(E) (foreign availability).
2 Section 6(b)(1) requires the Secretary to make determinations regarding the criteria set forth therein when imposing, extending, or expanding controls. The report must also contain the additional information required in Section 6(f)(2)(A), (C)-(E) (as set forth in footnote 1, supra).
3 Limitations exist when assessing the economic impact of certain controls because of the unavailability of data or because of the prevalence of other factors, e.g., currency values, foreign economic activity, or foreign political regimes, which may restrict imports of U.S. products more stringently than the United States restricts exports.
4 When the United States implements controls without the imposition of corresponding restrictions by other countries, it is difficult to guard against reexports from third countries to the target country, to secure third country cooperation in enforcement efforts, and to detect violations abroad and initiate proper enforcement action. The relative ease or difficulty of items that are small, inexpensive, easy to transport or conceal, or that have many producers and end-users, are harder to enforce.