Where Industry and Security Intersect
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The U.S. Government maintains export controls on certain chemicals, equipment, materials, software, technology, and entire plants to further U.S. foreign policy opposing the proliferation and use of chemical weapons. The U.S. Government implements these controls in coordination with the Australia Group (AG), an informal forum of 33 nations that cooperate to halt the proliferation of chemical and biological weapons. (See Appendix II for complete list of AG members.) The United States fulfills its obligations under the Chemical Weapons Convention (CWC) by maintaining controls on certain chemicals.11
Australia Group Controls
The AG formed in 1985 when the United States and 15 other nations agreed to impose export controls on a number of chemicals that could be used to produce chemical weapons. Since then, the AG has expanded its membership and has expanded its export control list to cover other chemical and biological weapons-related items. AG member countries use the AG control list and guidelines as a basis for developing and imposing their national export controls.
License Requirements and Licensing Policy for AG Controls
The licensing requirements for chemicals, equipment, materials, software, technology, and entire plants imposed in accordance with AG commitments are as follows:
A. The U.S. Government requires a license for the export to all destinations outside AG member countries of AG-controlled precursor and intermediate chemicals, which are capable of being used in the production of toxic chemical warfare agents, as well as relevant process control software, technology for the use, production and/or disposal of such items, and the facilities designed to produce them.
The U.S. Government requires a license for the export to specified destinations of certain chemical manufacturing facilities and equipment, toxic gas monitoring systems and detectors that can be used in the production of chemical warfare agents, and the technology for the use of such items. The countries to which these licensing requirements apply are listed in Column CB:3 of the Commerce Country Chart, Part 738, Supplement No. 1 of the Export Administration Regulations (EAR).12 These licensing requirements also apply for the export of these items to designated terrorist-supporting countries.
On June 10, 2003, the Department of Commerce published a rule reflecting decisions reached by the AG in intersessional agreement and at the June 2002 AG Plenary. At the urging of the United States, the control thresholds in Export Control Classification Number (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 (68 FR 34526) added eight biological toxins to the list of controlled items on the EAR; this action is referenced in Chapter 7 of this report. Additionally, editorial corrections were made to some chemical-related entries to clarify the scope of AG controls. This rule updated the list of State Parties to the CWC to add Andorra, Guatemala, Palau, Saint Vincent and the Grenadines, Samoa and Thailand. Since June 2003, Timor Leste, Tong, Sao Tome, Afghanistan, Kyrgyzstan, Cape Verde, and Belize have become state parties to the CWC.
On December 1, 2003, the Department of Commerce issued a revision to the rule issued on June 10, 2003 (68 FR 34526), amending the EAR to implement the understandings reached at the June 2002 plenary meeting of the Australia Group (AG). The June 10, 2003, final rule contained errors in the List of Items Controlled for Export Control Classification Numbers (ECCNs) 2E001 and 2E002 on the Commerce Control List (CCL), but also contained an error in the licensing policy provisions of the EAR that apply to items identified on the AG lists. The December 1 revision corrected those errors.
The U.S. Government also controls items subject to the EAR because of chemical or biological end use or end user concerns. These controls are part of the Enhanced Proliferation Control Initiative (EPCI), announced by the President on December 13, 1990.
• The U.S. Government requires a license for the export of any commodity, technology, or software when the exporter knows that it will be used in the design, development, production, stockpiling, or use of chemical weapons in, or by, specific countries (Country Group D:3, EAR, Part 740, Supplement No. 1). In addition, the U.S. Government may inform an exporter or reexporter that a license is required due to an unacceptable risk that the items will be used in, or diverted to, chemical weapons proliferation activities anywhere in the world.
• No U.S. person may knowingly support such an export, reexport, or transfer without a license. “Support” is defined as any action, including financing, transportation, or freight forwarding, that facilitates the export, reexport, or transfer of these items.
• In addition, no U.S. person may, without a license, perform any contract, service, or employment knowing that it will directly assist in the design, development, production, stockpiling, or use of chemical weapons in, or by, a country listed in Country Group D:3.
B. The Department of Commerce reviews applications for licenses on a case-by-case basis to determine whether the export would make a material contribution to the design, development, production, stockpiling, or use of chemical weapons. When the Department of Commerce determines that an export will make such a contribution, the license will be denied.
Trade Restrictions under the Chemical Weapons Convention
The Chemical Weapons Convention (CWC or Convention), which entered into force in April 1997, bans the development, production, stockpiling, retention, use or transfer of chemical weapons and establishes an extensive verification regime. The CWC Annex on Chemicals groups specified chemicals, which include both toxic chemicals and chemical precursors, into three “Schedules” based on factors specified in the Convention, such as the level of toxicity and other properties that enable their use in chemical weapons. The toxic chemicals and precursors on Schedule 1 pose the highest level of risk in light of the dangers identified in the Convention and have few, if any, commercial applications; the toxic chemicals and precursors on Schedule 2 pose a significant risk in light of the dangers identified in the CWC and are not produced in large commercial quantities; and the toxic chemicals and precursors on Schedule 3 pose a risk in light of the dangers identified in the CWC and may be produced in large commercial quantities. Chemical warfare agents deemed to have military application, which by their ordinary and direct chemical action produce a powerful physiological effect, are controlled by the Department of State under the International Traffic in Arms Regulations.
The export restrictions and licensing requirements for chemicals and technology imposed in fulfillment of CWC treaty obligations are as follows:
A. Exports of Schedule 1 chemicals subject to Department of Commerce jurisdiction are banned to destinations that are not in countries that have ratified or acceded to the CWC, identified as States not Party to the Convention. A license and prior notification of a planned export is required for exports of Schedule 1 chemicals to all States Parties, including Canada. Licenses are required for the shipment of Schedule 2 chemicals to States not Party to the CWC. Shipments of certain Schedule 3 chemicals require a license to States Parties. End-use certificates from the governments of importing countries are required for exports of Schedule 3 chemicals to States not Party to the CWC.
In addition, the U.S. Government has unilaterally imposed a license requirement for chemical weapons reasons for the export of technology to produce PFIB, phosgene, cyanogen chloride, and hydrogen cyanide to all States not Party to the CWC, except Israel and Taiwan.13 This requirement is the result of interagency discussions stemming from concerns by agencies of the U.S. Government over the potential chemical weapons use of the four chemicals.
B. The Department of Commerce policy is to review export license applications for Schedule 1 chemicals to State Parties on a case-by-case basis. Exports may be approved only to State Parties and only for purposes not prohibited by the treaty. The Department of Commerce has a policy of denial for the export of Schedule 1 chemicals to States that are not a Party to the CWC.
The Department of Commerce has a general policy of denial for applications to export Schedule 2 chemicals to States not Party to the CWC. The Department of Commerce also will generally deny applications to export Schedule 3 chemicals to States not Party to the CWC, unless an end-use certificate from the importing country has been obtained.
The U.S. Government reviews exports and reexports of technology related to the development and production of four chemicals – PFIB, phosgene, cyanogen chloride, and hydrogen cyanide – on a case-by-case basis to most destinations for which a license is required. However, there is a policy of denial for Cuba, Iran, Iraq, Libya, Sudan, and North Korea. The recently enacted Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 prohibits the export of all items on the CCL to Syria, unless the President exercises the waiver authority provided. The Department of Commerce will implement this prohibition, consistent with the President’s constitutional authority to conduct foreign policy. The impact of this prohibition is likely to be significant.
The purpose of these controls is to support the efforts of the AG to halt the proliferation of chemical weapons and to comply with international obligations under the CWC. In addition, these controls implement certain measures specified in Executive Order 12735 of November 16, 1990, its successor, Executive Order 12938 of November 14, 1994, and EPCI. In so doing, the controls provide the U.S. Government with the authority to control the export of any item from the United States when there is a significant risk that it will be used for chemical weapon proliferation purposes.
The AG works to further nonproliferation objectives through the harmonization of export controls, the exchange of information, and other diplomatic means. In addition to furthering the objectives of the AG, these controls support U.S. compliance efforts with the CWC. To ensure that State Parties do not transfer chemicals that could assist States not Party to the CWC in acquiring chemical weapons, the CWC requires that State Parties restrict the export of certain chemicals listed in the CWC’s Annex on Chemicals. The controls also support the goals of the 1925 Geneva Protocol for the Prohibition of the Use in War of Asphyxiating, Poisonous or other Gases, and of Bacteriological Methods of Warfare, which prohibits the use in wartime of chemical or biological weapons.
1. Probability of Achieving the Intended Foreign Policy Purpose. The Secretary has determined that these controls are likely to achieve the intended foreign policy purpose, in light of other factors, including foreign availability from other countries and that the foreign policy purpose has been supported through negotiations with other countries. Many of the items covered by these controls have commercial uses and are widely available from foreign sources. Some of the major sources of these items are located in industrialized countries that are members of the AG and are State Parties to the CWC. Although it is not expected that export controls alone can prevent the proliferation of chemical weapons, these controls strengthen U.S. efforts to stem the spread of such weapons and continue to be a significant part of the overall nonproliferation strategy of the United States.
2. Compatibility with Foreign Policy Objectives. The Secretary has determined that these controls are compatible with U.S. foreign policy objectives and will not have any significant adverse foreign policy consequences with the extension of these controls. The U.S. Government has a strong interest in remaining at the forefront of international efforts to stem the proliferation of chemical weapons. These controls are compatible with the multilateral export controls for chemicals and related equipment and technology agreed to by the AG. Moreover, the U.S. Government has a binding international obligation under the CWC to prohibit and eliminate chemical weapons, not to assist anyone, in any way, in chemical weapons activities, and to control certain chemical exports.
3. Reaction of Other Countries. The Secretary has determined that any adverse reaction to these controls is not likely to render the controls ineffective nor will any adverse reaction by other countries be counter-productive to U.S. foreign policy interests. The U.S. Government continues to discuss chemical export controls with countries outside of the AG to advance the goals of nonproliferation. The governments of some developing countries claim that AG export controls discriminate against less industrialized nations by depriving them of goods and assistance in the field of chemical technology. The United States believes these assertions are false. In fact, in international fora, the U.S. Government has sought to dispel this perception by clarifying the purpose of the controls and by demonstrating that the U.S. Government denies few export license requests for shipment to developing countries.
4. Economic Impact on United States Industry. The Secretary has determined that any adverse effect of these controls on the economy of the United States, including on the competitive position of the United States in the international economy, does not exceed the benefit to United States foreign policy objectives. In FY 2003, the Department of Commerce approved 779 license applications, valued at $646.9 million, for the export or reexport of controlled chemical precursors and equipment. The majority of the value of these approvals (more than 90 percent) was for precursor chemicals controlled in ECCN 1C350; these chemicals have many commercial uses. Sixteen license applications valued at $232,626 were denied, and 85 applications worth $59.2 million were returned without action. The actual trade in these controlled commodities is significantly greater than the value of the license applications because exporters may export many of these commodities to selected AG member countries without a license.
5. Effective Enforcement of Control. The Secretary has determined the United States has the ability to effectively enforce these controls. The size, dispersion, diversity, and specialized nature of the dual-use chemical industry make detecting and investigating potential violations difficult for enforcement personnel. Challenges include distinguishing commercial procurement from chemical weapons-related transactions, and establishing appropriate commodity thresholds for targeting and tracking exports and reexports for verification of end use and end users. In addition, enforcement officers may be exposed to personal safety risks when seizing and inspecting chemical materials.
To meet the challenge of effective enforcement of these controls, the Department of Commerce has directed resources toward preventive enforcement, in addition to continued efforts to pursue all leads provided by intelligence, industry, and other sources on activities of concern. Analysis of Shipper’s Export Declarations helps ensure that the shipments labeled “No License Required” are in fact eligible for such treatment. Also, the Department of Commerce’s extensive outreach program educates companies about export controls related to chemical products and helps prevent the illegal export of dual-use products that can be used to make chemical weapons.
The Department of Commerce interacts with the chemical industry in a number of ways, including with individual companies seeking export licenses, through the Technical Advisory Committees (TACs), and through trade associations. The Department consults regularly with exporting firms on proposed export transactions and marketing plans to facilitate the thorough, yet prompt, review of export license applications. Through the TACs, the Department keeps industry representatives abreast of proposals for the review of items on the control list and gives them the opportunity to provide technical input.
The Department of Commerce works with chemical industry associations, including the American Chemistry Council and the Synthetic Organic Chemical Manufacturers Association, and with government agencies such as the Federal Bureau of Investigation and the Department of Defense, to gain valuable input regarding CWC implementation and to meet the United States’ CWC responsibilities. (See Section E, “Alternative Means.”)
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 TACs which advise the Bureau of Industry and Security (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, and eight comments were received.
These controls are consistent with the multilateral export control criteria
of the AG, which includes many of the world’s major chemical producers
and traders. As such, the controls have been agreed through negotiations
with the member countries of the AG. In addition, a number of non-AG countries,
including Russia and Ukraine, have taken steps to adopt AG-type controls.
An important element of the AG’s efforts to curb the proliferation
of chemical weapons is contacting non-members to encourage them to observe
similar export controls. The U.S. Government continues to encourage harmonization
of export control provisions among AG participants to ensure a level playing
field for U.S. exporters.
The U.S. Government continues to address the problem of the proliferation of chemical weapons on a number of fronts. Direct negotiations with countries intent on acquiring chemical weapons are not likely to prevent the use of controlled materials in such activities, nor are such negotiations likely to affect the behavior of these countries.
Alternative means to curtail the acquisition and development of chemical warfare capabilities, such as diplomatic negotiations, do not obviate the need for controls. Examples of additional means that the U.S. Government has used, and will continue to use, in an attempt to curb the use and spread of chemical weapons include:
As part of its CWC implementation activities, the Department of Commerce also collects industry reports regarding the production, processing, consumption, import and export of toxic chemicals and chemical precursors for purposes not prohibited by the CWC (e.g., industrial, agricultural, and other peaceful purposes), which are forwarded to the Organization for the Prohibition of Chemical Weapons (OPCW). The Department of Commerce also escorts inspectors from the OPCW as they inspect certain U.S. chemical facilities to verify that activities are consistent with the information provided in the industry reports and with other treaty provisions.
Past reviews conducted by the Department of Commerce revealed that a wide range of AG chemical precursors and production equipment was available from non-AG countries. Non-AG suppliers of precursors and/or related production equipment include Brazil, Chile, Colombia, India, Mexico, China (PRC), South Africa, the countries of the former Soviet Union, Taiwan, and Thailand. However, most have become Party to the CWC and will take steps under this treaty to prevent chemical weapons proliferation. As such, the U.S. Government has made efforts through its membership in both the AG and CWC to secure the cooperation of foreign governments to control the foreign availability of chemical precursors and production equipment.
10 Chapter 7 of this report addresses U.S. biological controls.
11 The Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (the “Chemical Weapons Convention” or CWC) was ratified by the United States on April 25, 1997, and entered into force on April 29, 1997.
12 As of December 2003, the countries in the Commerce Country Chart CB column 3 included Afghanistan, Armenia, Azerbaijan, Bahrain, Belarus, Bulgaria, Burma, China (PRC), Egypt, Georgia, India, Israel, Jordan, Kazakhstan, North Korea, Kuwait, Kyrgyzstan, Lebanon, Macau, Moldova, Mongolia, Oman, Pakistan, Qatar, Russia, St. Kitts & Nevis, Saudi Arabia, Syria, Taiwan, Tajikistan, Turkmenistan, Ukraine, the United Arab Emirates, Uzbekistan, Vietnam, and Yemen.
13 A license also is required to export this technology for antiterrorism (AT) reasons.
