Where Industry and Security Intersect
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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 September 28, 2004. Comments were solicited from all six of the Department’s Technical Advisory Committees (TACs), which advise the Department, as well as from the President’s Export Council Subcommittee on Export Administration. Comments also were solicited from the public through the BIS Web page. The Department 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.
The comment period closed on November 19. The Department received 12 responses from the following organizations: Cordin Company; Crescent Carpets; GE Fanuc Automation North America, Inc.; Industry Coalition on Technology Transfer (ICOTT); InterAction; Jackson T. Marlow; National Chamber of Industries & Commerce U.P. India; National Foreign Trade Council; Sartomer Company; Sensors and Instruments Technical Advisory Committee 2004; United Testing Systems; and William Root. The Department has made all comments received available for review in the BIS Freedom of Information Act Reading Room available on the BIS Web page. The Department also makes the comments available for public review upon request. This Appendix summarizes the comments received.
On November 18, 2004, Cordin Company, Inc., submitted the following comments relating to ultra high-speed scientific imaging equipment. Cordin is the only U.S. manufacturer among the five in the world that compete for 25-40 sales per year worldwide. Cordin stated that U.S. export control regulations significantly more restrictive than those faced by its competitors threaten this company’s ability to stay competitive. According to the commentator, other countries have less restrictive controls on high-speed cameras. The company provided specific examples of lost sales due to export control disparities. The company noted that there is significant foreign availability for high-speed scientific imagery equipment. The technology required to make rotating mirror film cameras has been public for 50 years, and was first published in the review of Scientific Instruments in 1959. The lenses for many of the company’s systems are purchased in Beijing. Surplus film camera systems, some over 40 years old, are being sold in the global marketplace for $2,000-$5,000 by governments, labs, private companies, and universities unaware or unwilling to adhere to U.S. export controls. The company stated that many customers do not wish to make the effort to obtain a U.S. export license; therefore, sales go to foreign competitors.
On November 11, 2004, Crescent Carpet Importers wrote to express concern over the impact customs delays have had on his importing business. The company indicated the delays force them to incur costs that make it a very difficult business environment.
On November 19, 2004, GE Fanuc Automation North America, Inc., wrote to express concern that controls on five-axis machine tools prevent U.S. manufacturers from exporting to growing markets like China. These tools are controlled under ECCN 2B001 for NS and AT reasons and, although subject to Wassenaar controls, can be exported by non-U.S. companies from other countries without significant restrictions. As a result, U.S. machine tool manufacturers have been going out of business while China has been gaining technical knowledge from international competition.
On November 18, 2004, 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. ICOTT further recommended that License Exception RPL be made available for commercial aircraft in need of emergency services, including to all sanctioned countries.
On November 16, 2004, InterAction wrote to express concern about the restrictions the EAR places on humanitarian nonprofit organizations when exporting their equipment for their own internal use to countries subject to U.S. sanctions. InterAction expressed concern that such restrictions do little to further U.S. foreign policy interests in the sanctioned country, inhibit humanitarian organizations from responding effectively when humanitarian aid is needed, and force humanitarian groups to purchase non-U.S. equipment.
InterAction suggested narrowing and/or updating ECCN descriptions to only capture those items that pose a risk to U.S. interests. InterAction also suggested that a new license exception be created for humanitarian items that will be used by aid groups to provide aid. This license exception would be similar to the License Exception TMP, which addresses “tools of the trade.” Finally, InterAction requested that overlapping BIS and OFAC license requirements for a single transaction be eliminated since two licenses for the same activity is an unnecessary burden.
On October 18, 2004, Mr. Jackson T. Marlow submitted comments relating to crime controls. Mr. Marlow supported the use of these controls, but also advocated that future development of the controls should focus on gaining international support for such controls. Mr. Marlow advocated finding ways of focusing the controls, rather than imposing for new controls. Mr. Marlow argued that without international support, U.S. industries would suffer and human rights violations could still escalate throughout the world.
On November 6, 2004, 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. The export license requirement for EAR99 items should be removed since EAR99 items do not directly contribute to a nuclear or missile program and are typically available from other countries. This competition will eventually result in the United States losing market share in India. NCIC further noted India has a no first-use policy for nuclear weapons and asserts that in India there are no longer controls on trade for export or import.
On November 18, 2004, the National Foreign Trade Council (NFTC) wrote to express the need for increased multilateral rather than unilateral controls. Generally the NFTC stated that unilateral controls disadvantage U.S. exporters unless the United States is the only supplier of a given commodity. The NFTC expressed particular concern about the so called “installed base” issue, which requires verification of the origin of U.S. goods currently found in Libya. Under current rules, the NFTC stated, verifying the origin of U.S. goods in Libya, after years of a U.S. embargo, requires a huge expenditure of time and money for each transaction. Foreign companies do not need to expend this time and money, and so are more competitive in Libya. In addition, delays in licensing replacement parts to previously licensed goods also adversely affect the United States’ competitive position.
On November 17, 2004, the Sartomer Company wrote to express concerns about controls on resins listed in ECCN 1C111.b(2), which are controlled for MT and AT reasons. Sartomer stated these controls have a significant negative impact on that company’s ability to compete in the global marketplace. The uncertainty and inherent delays in the licensing process have a negative impact on Sartomer. Such uncertainty and delay has led customers to seek the materials from other sources, including countries that are not MTCR members like China. As evidence of this impact, Sartomer cited as evidence the negative impact of these controls, the growth in the past 30 years of a number of facilities around the world that can produce items in this ECCN. Sartomer suggested a number or ways to reduce this impact including decontrol, streamlining the review process, broadening the MTCR “no undercut” policy, and offering distribution licenses.
On November 19, 2004, the Sensors and Instruments Technical Advisory Committee (SITAC) submitted the following comments relating to uncooled thermal imaging products, and the Regional Stability (RS) controls applying to commodities under ECCNs 6A002, 6A003, 6E001, and 6E002 for commercial night vision and thermal imaging equipment. SITAC questioned the legitimacy of RS controls and said that the RS:1 country list (which includes the NATO countries) has little to do with regional stability concerns and is a significant disadvantage for U.S. companies. SITAC argued that these U.S. export controls have not stopped the proliferation of these devices. In fact, these devices have significant foreign availability. A slightly different type of infrared sensor, amorphous silicon, with comparable performance specifications, became provisionally controlled under the Wassenaar Arrangement only in December 2004. French cameras are being sold throughout the world (over 8,000 in 2004), according to SITAC. In 2003, Japan also launched commercial production of these cameras. In response to U.S. export controls, one U.S. company has incorporated French-made sensors into its cameras and established manufacturing capability outside the United States. Opgal in Israel and five Chinese companies also produce cameras using the French sensors. This world-wide availability license-free, stimulation of competitive production, and loss of market share for U.S. companies, must be regarded as a failure to achieve the foreign policy objective. As a first step, the SITAC argued that controls should be moved to the RS:2 list, which would level the playing field for European companies with respect to European competitors for sales to the EU and the United States’ closest allies.
On November 19, 2004, United Testing Systems submitted a comment arguing that policy-based export controls unfairly penalize American industry, and do not achieve the foreign policy purposes because they are applicable exclusively to U.S. companies. Governments like Japan, France, and Germany maintain practices that strongly support their industry. UTS argued that the complexity of U.S. export control rules and regulations, which are administered by multiple Departments, make it expensive for exporters to comply, and make it unaffordable for small and medium-size companies to survive. In addition, UTS argued that it is unacceptable for the Department of Commerce to be actively promoting exports while the Bureau of Industry and Security uses what UTS views as intimidation and entrapment operations to enforce export policies that damage the reputation of American products. The company estimates that about 5 percent of total business is lost because of export controls. UTS suggested that the Department measure the impact of foreign policy-based export controls with a comprehensive survey of the export community.
On November 2, 2004, Mr. William Root wrote to address multilateral control regimes, asserting that the language in the EAR differs significantly from that in the multilateral texts and, therefore, these are properly considered unilateral controls rather then multilateral ones. He suggested numerous changes to bring the EAR into compliance with the various multilateral texts to eliminate these unilateral controls and make sure that the U.S. controls conform with commitments made to multilateral organizations. He also argued that greater compliance by members of multilateral regimes could be achieved if the United States were to demonstrate a greater commitment to work cooperatively with other countries to reduce WMD.
Mr. Root further suggested that a number of actions could be undertaken to strengthen international cooperation on the multilateral control regimes, including ratification of the nuclear test ban treaty, an international accord on biological weapons enforcement, and avoidance of the development of new nuclear weapons. Finally he suggested that the rise of Airbus be studied as an example of the consequences of unilateral U.S. sanctions.
