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 those sections. 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 6, 2004. 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, 2005, to January 20, 2006. The Bureau of Industry and Security (BIS) 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 2004 calendar year, most of the statistical data presented in the report are based on fiscal year 2004 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.
Certain crime control and detection instruments, equipment, related technology, and software may be exported to Australia, Japan, New Zealand, and members of the North Atlantic Treaty Organization (NATO) without a specific license, consistent with Section 6(n) of the Export Administration Act. On June 28, 2004, the Department of Commerce published an amendment to the Export Administration Regulations to reflect Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia joining NATO. The Department no longer requires a license for most crime control items proposed for export or reexport to these seven countries.
The Department of Commerce controls certain tear gas formulations on the Commerce Control List (CCL) for crime control reasons. Other tear gas formulations were controlled by the Department of State on the United States Munitions List (USML). As a result of an ongoing review of the USML as part of the Defense Trade Security Initiative, the Department of State decontrolled liquid pepper, a tear gas, from the USML and transferred export licensing jurisdiction to the Department of Commerce for this chemical. On July 19, 2004, the Department published an amendment to the Export Administration Regulations to add liquid pepper to the Commerce Control List. The addition was a new foreign policy control, for which the Department of Commerce submitted a report to Congress on July 2, 2004.
On September 15, 2004, the Secretary of State, acting under the authority of the President, designated eight countries as “countries of particular concern” under the International Religious Freedom Act of 1998 (IRFA) Act for having engaged in or tolerated particularly severe violations of religious freedom. The Secretary’s decision included re-designation of five countries that he designated last year: Burma, China, Iran, North Korea, and Sudan. He had designated Iraq last year but removed it from this year’s list since the new transitional government is working to protect religious freedom. The Secretary’s decision included designating three new countries to the list: Eritrea, Saudi Arabia, and Vietnam. These designations are explained in the most recent Department of State International Religious Freedom Report to the Congress dated the same day as the Secretary’s announcement, September 15, 2004. The Department of Commerce has not added additional items to the CCL pursuant to IRFA, but it reviews license applications for crime control items to these destinations by applying the most restrictive licensing policy applicable to such countries.
On March 30, 2004, the Department of Commerce published an amendment to the Export Administration Regulations (EAR) that removed National Security (NS) controls and imposed Regional Stability (RS) controls on certain searchlights, bayonets, and marine boilers. On June 28, 2004, the Department published an amendment to the EAR that removed the license requirements for certain regional stability items and for certain crime control items destined to Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia. This change was undertaken to reflect the accession of those countries to the North Atlantic Treaty Organization (NATO).
In May of 2004, the Commission for Assistance to a Free Cuba released its Report to the President. The Commission was chaired by Secretary of State Colin L. Powell. Secretary of Commerce Donald L. Evans was a Commission member. In the Report, the Commission made certain recommendations regarding plans and procedures to hasten and ease Cuba’s transition to democracy. The President adopted these recommendations, and tasked U.S. Government agencies with implementing them. The recommendations cover a broad range of activities, including meeting the Cuban population's basic human needs, the establishment of democratic institutions, and the modernization of Cuba's infrastructure after a transition, as well as measures to hasten the end of the dictatorship. The Commission recommended certain changes to the EAR to further deny financial and other resources to the Cuban Government. The changes suggested to meet this goal included: modifying the list of items authorized for inclusion in gift parcels sent to the island, revising the definition of "eligible recipient family" for gift parcels, and limiting the issuance of licenses authorizing the temporary sojourn of private planes and vessels. Commerce published a new regulation on June 22, 2004, implementing these changes (69 FR 34565) and continues to review its regulations and policies to ensure full implementation of the President’s decision.
On July 30, 2004, the President signed Executive Order 13350, terminating the national emergency declared in Executive Order 12722, and, thereby, revoking it and certain related Executive Orders. Among other things, the termination of the national emergency ended the Department of the Treasury's authority to maintain export controls pursuant to the related Executive Orders. By virtue of this action, export licensing jurisdiction reverted from the Department of the Treasury’s Office of Foreign Assets Control (OFAC) to the Department of Commerce. On July 30, 2004, the Department published a rule defining the new licensing policy and requirements for Iraq. Iraq was formally removed from the list of designated state sponsors of terrorism on October 7, 2004. At this time, pursuant to Section 6(a) of the Act, the Department continues to require a license for export or reexport to Iraq, or transfer within Iraq, of certain items for AT reasons.
On April 23, 2004, the U.S. Government suspended some of its economic sanctions against Libya in response to Libya's continued efforts to dismantle its weapons of mass destruction and MTCR-class missile programs, and to adhere to its renunciation of terrorism. Modification of sanctions under IEEPA allowed resumption of most commercial activities between the United States and Libya. As a result of these actions, licensing jurisdiction for both the export and reexport of items subject to the EAR returned to the Department of Commerce from the Department of the Treasury. Also on April 23, 2004, the President's termination of the applicability of the Iran-Libya Sanctions Act (ILSA) with respect to Libya eliminated sanctions under that Act against third-country firms contributing to Libya's WMD programs, petroleum activities, and aviation capabilities. On April 29, 2004, the Department published an amendment to the EAR revising the licensing requirements and policies for the export and reexport of items subject to the EAR to Libya. On September 20, 2004, the President signed an Executive Order terminating the national emergency with respect to Libya and revoked all IEEPA-based sanctions.
On December 12, 2003, the President signed the Syria Accountability and Lebanese Sovereignty Restoration Act (SAA) (Public Law 108-175). Congress passed the SAA to sanction Syria for its support for terrorism, occupation of Lebanon, weapons of mass destruction programs, illegal imports of Iraqi oil, and its role in the ongoing security problems in the Middle East. The President signed Executive Order 13338 of May 11, 2004, to implement the SAA. The Department revised its licensing policy and requirements for Syria, consistent with E.O. 13338, to restrict all exports or reexports to Syria of items subject to the EAR, with exceptions as specified in General Order No. 2 to Supplement No. 1 to Part 736 of the EAR, which was published in the Federal Register on May 14, 2004.
During the past year, the Department added 9 new precursor chemicals, 14 new viruses and 5 new bacteria to the Australia Group Control List and the CCL. In addition, the Department added new national security, anti-terrorism, and chemical and biological controls to address protective and detection equipment related to chemical and biological agents and warfare. The Department updated the EAR to include new members of the Australia Group and the Chemical Weapons Convention, and made other regulatory changes to rationalize the lists of chemicals controlled under the CCL and United States Munitions Control List.
On May 4, 2004, the Department of Commerce published a rule reflecting agreements made by the Missile Technology Control Regime (MTCR) at the Buenos Aires, Argentina Plenary in September 2003. These changes included adding a new control on unmanned aerial vehicles designed or modified for aerosol delivery. Partners also expanded controls to capture an additional missile oxidizer. They also made clarifying amendments to controls on telemetry, propellant mixers, and launch support equipment. On November 8, 2004, the Department of Commerce published a rule expanding the missile catch-all rule.
Following extensive interagency consultations and discussions with Technical Advisory Committees and industry representatives, the Department drafted regulations to simplify and strengthen the U.S. export policy for encryption items, including License Exception ENC, the European Union’s “License-Free Zone” requesting additional information after the 30-day review period, and changes to source code that we would consider “publicly available.” The Department published this rule in the Federal Register on December 9, 2004 (69 FR 71356).
In September 2004, Ebara International Corporation (EIC) of Sparks, Nevada, agreed to a $121,000 civil penalty and to the imposition of a three-year suspended denial of export privileges to settle charges arising from the transfer, and actions taken to conceal the illegal transfer, of certain pumps to Iran. EIC is a wholly owned subsidiary of Ebara Corporation, which is headquartered in Tokyo, Japan. In a related criminal case, EIC pled guilty on September 23, 2004, to seven felonies, including conspiracy, unauthorized exports in violation of the International Emergency Economic Powers Act, and money laundering. EIC agreed to pay a $6.3 million criminal fine and to three years of corporate probation for its role in the illegal sales and exports to Iran. In addition, Everett Hylton, EIC's founder and former Chief Executive Officer, agreed to a $99,000 civil penalty and the imposition of a three-year suspended denial of export privileges to settle administrative charges brought against him by the Department in connection with EIC's exports to Iran. In a related criminal case, Hylton pled guilty to conspiracy to make false statements and agreed to a $10,000 criminal fine, and three years of probation.
The Department of Commerce charged that EIC and Hylton violated the EAR by conspiring with others to export cryogenic in-tank submersible pumps to Iran without the required U.S. Government authorization and evading the requirements of the EAR by participating in actions to conceal the illegal exports. Specifically, EIC, Hylton, and their co-conspirators devised and employed a scheme under which EIC sold the pumps to a co-conspirator in France, who then forwarded the pumps to Iran. The Department further charged that to conceal the illegal exports, EIC and Hylton participated in the falsification of documents showing the pumps were destined for Iran, created documents stating the ultimate destination was in France, and failed to mark parts for the pump with EIC identification stamps.
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 provided in each chapter in the format described below.
This section defines the export controls maintained for a particular foreign policy purpose that are imposed or extended for the year 2005. Each of the following chapters describes the licensing requirements and policy applicable to a particular control.
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 Controls. 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 September 28, 2004, 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), which advise the Department, as well as from the President’s Export Council Subcommittee on Export Administration. Comments also were solicited from the public via the BIS Web page. The comment period closed on November 19, and 12 comments were received.
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 influence 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 prevent 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 identifying the movement of controlled goods or technical data is also a factor. Controls on items that are small, inexpensive, easy to transport or conceal, or that have many producers and end-users, are harder to enforce.