[House Document 107-235]
[From the U.S. Government Publishing Office]
107th Congress, 2d Session - - - - - - - - - - - House Document 107-235
PERIODIC REPORT ON THE NATIONAL EMERGENCY CAUSED BY THE LAPSE OF THE
EXPORT ADMINISTRATION ACT OF 1979
__________
MESSAGE
from
THE PRESIDENT OF THE UNITED STATES
transmitting
A SIX MONTH PERIODIC REPORT ON THE NATIONAL EMERGENCY DECLARED BY
EXECUTIVE ORDER 13222 OF AUGUST 17, 2001 TO DEAL WITH THE THREAT TO THE
NATIONAL SECURITY, FOREIGN POLICY, AND ECONOMY OF THE UNITED STATES
CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION ACT OF 1979, PURSUANT
TO 50 U.S.C. 1641(c) AND 50 U.S.C. 1703(c)
June 26, 2002.--Message and accompanying papers referred to the
Committee on International Relations and ordered to be printed
__________
U.S. GOVERNMENT PRINTING OFFICE
99-011 WASHINGTON : 2002
To the Congress of the United States:
As required by section 204(c) of the International
Emergency Economic Powers Act (50 U.S.C. 1703(c)) and section
401(c) of the National Emergencies Act (50 U.S.C. 1641(c)), I
transmit herewith a 6-month report prepared by my
Administration, on the national emergency declared by Executive
Order 13222 of August 17, 2001, to deal with the threat to the
national security, foreign policy, and economy of the United
States caused by the lapse of the Export Administration Act of
1979.
George W. Bush.
The White House, June 25, 2002.
Periodic Report on the National Emergency Caused by the Lapse of the
Export Administration Act of 1979 for August 19, 2001 to February 19,
2002
On August 17, 2001, in Executive Order 13222, I declared a
national emergency under the International Emergency Economic
Powers Act (50 U.S.C. 1701 et seq.) to deal with the threat to
the national security, foreign policy, and economy of the
United States caused by the lapse of the Export Administration
Act of 1979, as amended (EAA) (50 U.S.C. App. 2401 et seq.),
and the systems of controls maintained under that Act. In that
order, I continued in effect, to the extent permitted by law,
the provisions of the EAA, the Export Administrations
Regulations (EAR) (15 C.F.R. et seq.), and the delegations of
authority set forth in Executive Order 12002 of July 7, 1977
(as amended by Executive Order 12755 of March 12, 1991, and
Executive Order 13026 of November 15, 1996), Executive Order
12214 of May 2, 1980, Executive Order 12851 of June 11, 1993,
and Executive Order 12938 of November 14, 1994, as amended.
I issued Executive Order 13222 pursuant to the authority
vested in me as President of the Constitution and laws of the
United States, including, but not limited to, IEEPA. I also
submitted a report to Congress pursuant to section 204(b) of
IEEPA (50 U.S.C. 1703(b)). Section 204 of IEEPA requires
follow-up reports, with respect to actions and changes, to be
submitted every 6 months. Additionally, section 401(c) of the
National Emergencies Act (50 U.S.C. 1641(c)) requires that the
President, within 90 days after the end of each 6-month period
following a declaration of a national emergency, to report to
the Congress on the total expenditures directly attributable to
that declaration. To comply with these requirements, I am
submitting the following combined activities and expenditures
report for the 6-month period from August 19, 2001, to February
19, 2002. Detailed information on export control activities is
contained in the most recent Export Administration Annual
Report for Fiscal Year 2001 and the January 2002 Report on
Foreign Policy Export Controls, required by section 14 and
section 6(f) of the EAA, respectively, which the Department of
Commerce continues to submit to Congress under a policy of
conforming actions under the Executive Order to the provisions
of the EAA, as appropriate.
Since the issuance of Executive Order 13222, the Department
of Commerce has continued to administer and enforce the system
of export controls, including anti-boycott provisions,
containedin the EAR. In administering these controls, the
Department has acted under a policy of conforming actions under
Executive Order 13222 to the provisions of the EAA, insofar as
appropriate.
The expenses incurred by the Federal Government in the 6-
month period from August 19, 2001, to February 19, 2002, that
are directly attributable to the exercise of authorities
conferred by the declaration of a national emergency with
respect to export controls, were largely centered in the
Department of Commerce's Bureau of Industry and Security (BIS).
Expenditures by the Department of Commerce for the reporting
period are anticipated to be $28,648,000, most of which
represents program operating costs, wage and salary costs for
federal personnel, and overhead expenses.
There have been several significant developments in the
area of export controls since the EAA expired in August 2001:
A. MULTILATERAL DEVELOPMENTS
The Wassenaar Arrangement (WA)
The Wassenaar Arrangement is a multilateral regime
currently consisting of 33 member countries. Its purpose is to
contribute to regional and international security and stability
by promoting transparency and greater responsibility in
international transfers of conventional arms and dual-use goods
and technologies.
In October 2001, a Wassenaar General Working Group Meeting
discussed the increase in general information exchange
regarding regions and projects of concern, specific information
exchange on dual-use goods and technologies, and the scope of
dual-use notifications. In light of the events of September 11,
2001, the United States introduced a proposal to ensure that
Wassenaar's focus included combating terrorism; this proposal
was subsequently approved. Discussions also centered around
U.S. proposals for expanded reporting of conventional arms
transfers, strengthening dual-use notification procedures by
establishing a denial consultation procedure, and
implementation of catch-all controls.
In November 2001 and February 2002, WA Expert Group
meetings reviewed Wassenaar controls on conventional arms and
dual-use goods and technologies. The proposals discussed at the
November meeting were in the areas of electronics, computers,
telecommunications, encryption, andmachine tools. Proposals
discussed at the February 2002 meeting focused on electronics,
computers, machine tools, sensors and lasers, navigation and avionics,
the definition of ``specially designed,'' and Wassenaar's munitions
list. Discussions also were held to seek agreement to relax controls on
microprocessors and computers in light of rapid technological advances
and controllability factors. The majority of Wassenaar members
advocated a complete decontrol of general purpose microprocessors and a
drastic liberalization of computer controls. However, members could not
come to consensus on these issues. With a few notable exceptions, there
was little agreement on changes to the dual-use and munitions control
lists. Further discussions in these areas will resume during the April
2002 list review.
In December 2001, a special Expert Group meeting--to
discuss controls on general purpose microprocessors and
computers, and the annual Plenary meeting were held. Members
underlined the importance of strengthening export controls and
reaffirmed their commitment to maintain responsible national
policies in the licensing of exports of arms and sensitive
dual-use items. The Plenary approved the U.S. proposal to add
prevention of the acquisition of conventional arms and dual-use
goods and technologies by terrorist groups as a focus of the
regime. The Plenary approved a revised statement of
understanding on intangible transfers of technology and
software, agreed to subject two additional sub-categories of
military items to mandatory arms export reporting, and agreed
to a number of control list amendments. The Plenary also agreed
to continue the study of options for increasing the efficiency
of export controls, including a catch-all mechanism and a
denial consultation procedure. These measures will be discussed
during the May 2002 General Working Group Meeting.
The United States also continues to participate in
submissions of export data made by regime members. Wassenaar
members make dual-use data submissions on a semi-annual basis
in April and October.
The Missile Technology Control Regime (MTCR)
The MTCR is an informal multilateral nonproliferation
regime of 33 countries that have agreed to coordinate their
national export controls for the prevention of missile
proliferation. Each member, under its own laws and practices,
adheres to the export licensing policy reflectedin the MTCR
Guidelines for items found on the MTCR Equipment and Technology Annex.
The United States participated in the annual MTCR Plenary
held in Ottawa, Canada on September 24-28, 2001. At the
Plenary, the MTCR Partners shared information about activities
and programs of missile proliferation concern, agreed that the
risk of proliferation of WMD and their means of delivery
remained a major concern for global and regional security, and
considered additional steps they can take, individually and
collectively, to prevent the proliferation of delivery systems
for weapons of mass destruction. To this end, the Partners held
a special meeting for enforcement officers to foster greater
cooperation in stopping and impeding specific shipments of
missile proliferation concern. They also reaffirmed the
important role played by export controls and the need to
strengthen them further and implement them vigorously. The
Partners also discussed ways to promote outreach to non-members
on key controls and the need to strengthen them further and
implement them vigorously in addition to key issues such as the
global missile threat, missile related export controls and
transshipment.
The Nuclear Suppliers Group (NSG)
The NSG, composed of 39 countries and the European
Commission as a permanent observer, is an informal group of
nations concerned with the proliferation of nuclear weapons.
The NSG has established guidelines to assist member nations
in administering national nuclear export control programs.
Controls are focused on certain categories of goods: nuclear
material, equipment and technology unique to the nuclear
industry, and so-called nuclear dual-use items that have both
nuclear and non-nuclear applications.
At the annual NSG Plenary held in May 2001, members agreed
that the two segments of the NSG organization devoted to dual-
use (Commerce Department) and ``trigger list'' (Nuclear
Regulatory Commission for components, and Department of Energy
for technology and services) items would be combined into one
administrative unit. To reflect this new structure, members
agreed to establish a new Consultative Group (CG) that will
meet twice a year to review the guidelines, control lists, and
overall activities of the NSG. The first meeting of the CG,
which replaces the NSGDual Use Regime, the Information Sharing
Working Group, and the Transparency Working Group, occurred in Vienna,
Austria, on November 29, 2001. It was also agreed that the NSG would
consider having an intensified dialogue with non-NPT parties.
At this first CG meeting, it was agreed to limit the number
of items caught by a control on linear displacement measurement
devices through the addition of a technical note of explanation
in the NSG Guidelines. This clarification will limit the
control to those more sophisticated items that are directly
useful in the creation of weapons of mass destruction.
Agreement also was reached to hold the first Export Enforcement
Experts meeting at the 2002 NSG Plenary to be held in Prague,
the Czech Republic in May 2002; to review the NSG Guidelines
for ways to address the nuclear terrorism threat; and to hold
the 2003 NSG Plenary in South Korea.
The Australia Group (AG)
The AG is an informal multilateral nonproliferation regime
that seeks to impede the proliferation of chemical and
biological weapons through the harmonization of export
controls, an exchange of information on global proliferation
activities, and outreach to nonmembers. The 33-member countries
meet annually and communicate intersessionally to review and
refine the list of controlled chemicals, biological agents, and
related equipment and technology.
At the October 2001 AG Plenary Session, the Group
reaffirmed the members' continued collective belief in the AG's
viability, importance and compatibility with the Chemical
Weapons Convention (CWC) and Biological Weapons Convention
(BWC). Responding to the terrorist events of September 11, AG
participants also agreed that strengthening the regime to
better counter CBW proliferation and CBW terrorism should be a
priority. Participants agreed to several proposals aimed at
plugging loopholes in current AG export controls; they also
agreed that export controls, regional nonproliferation and
countering CBW terrorism will be the main focus of the Group
for the foreseeable future. Members also continued to agree
that full adherence to the CWC and Biological Weapons
Convention (BWC) by all governments will be a key to achieving
a permanent global ban on chemical and biological weapons, and
that all states adhering to theseConventions must take steps to
ensure that their national activities support these goals. The Group
welcomed Bulgaria as its newest member and reaffirmed its commitment to
continue its active outreach program of briefings for non-AG countries,
and to promote regional consultations on export controls and
nonproliferation to further awareness and understanding of national
policies in these areas.
At a February 2002 intercessional meeting, an understanding
was reached on two Department of Commerce proposals that would
create export controls on biotechnology, and change the
criteria for controls on chemical process valves. Three other
Commerce proposals that would expand controls on shipments of
dual-use chemicals, biological agents, and related equipment to
include items useful in terrorist activities were favorably
considered. These proposals were considered in detail at a
Technical Experts Meeting in March 2002. AG export controls
currently focus on items that can support militarily
significant, state-run programs. The United States is seeking
to augment AG controls with measures directed at commodities
and technology that can be used to support terrorist
activities.
The Chemical Weapons Convention (CWC)
The CWC is an international arms control and
nonproliferation treaty that bans chemical weapons and monitors
the legitimate production, processing, consumption, export, and
import of certain toxic chemicals and precursors that could
contribute to the development of weapons of mass destruction.
Certain export control provisions of the Convention are
reflected in the EAR.
B. ENCRYPTION/HIGH PERFORMANCE COMPUTER POLICY
Encryption
To conform with Wassenaar changes, the Administration
conducted a review of encryption policy to revise relevant
provisions of the EAR. The Bureau of Industry and Security
(BIS) also examined its encryption classification and licensing
process to update these processes within the proposed policy
revisions. As part of this policy and process review, BIS
worked with industry representatives, technical advisory
committees, and interagency groups to balance security and
economic concerns. The Regulations and Procedures Technical
Advisory Committee (RPTAC) heldmeetings on September 11 and
December 4, 2001, to seek input from industry.
United States encryption export control policy continues to
rest on a three-prong foundation: technical reviews of
encryption products prior to export; post-export reporting
requirements; and license reviews of certain exports of strong
encryption to foreign government end-users. The proposed
changes to encryption policy continue to support these
foundations and align U.S. policy with multilateral policy
agreed to at Wassenaar.
The charter fulfillment of the President's Export Council
Subcommittee on Encryption (PECSENC) also occurred during the
reporting period. Since the PECSENC's inception on May 16,
1997, it worked to support the growth of electronic commerce
and protect public safety and national security interests. In
two meetings in 2001, the PECSENC reviewed the national
security and business implications of post-export reporting
requirements and provided to BIS a set of recommendations for
possible changes and updates. The PECSENC's charter expired on
September 30, 2001.
High performance computer and microprocessor controls
Export controls on high performance computer (HPCs) and
microprocessor were further revised between August 20, 2001,
and February 19, 2002. On January 2, 2002, the Administration
announced its decision to update controls for HPCs and
microprocessors by raising the HPC control threshold on
Computer Tier 3 countries from 85,000 to 190,000 Millions of
Theoretical Operations per Second (MTOPS) and increasing
microprocessor control levels from 6,500 to 12,000 MTOPS. The
Administration also will move Latvia from Computer Tier 3 to
Computer Tier 1.
As of February 19, 2002, the Administration also had
implemented one revision to Category 4 of the Commerce Control
List (CCL) and the License Exception for computer exports to
conform to Wassenaar changes that removed national security
controls on expert system software as described by Export
Commodity Control Number 4D003.b.
The Administration continues to seek private sector input
on HPC and microprocessor controls through regular discussions
with industry groups, such as the Information Security
Technical Advisory Committee (ISTAC). The ISTAC is comprised of
leading industry experts and has worked with BIS to find
alternative measurement tools for controls on HPCs and microprocessors.
C. BILATERAL COOPERATION/TECHNICAL ASSISTANCE
As part of the Administration's continuing effort to
encourage other countries to strengthen their export control
systems, the Department of Commerce and other agencies
conducted with a wide range of discussions with a number of
countries.
The Middle East
A transshipment initiative in the Middle East included a
delegation to the United Arab Emirates in October 2001. United
States officials made presentations on various aspects of
export controls as part of this initiative.
Eastern Europe
In September 2001, the United States participated in the
Third Annual International Conference on Export Controls, which
was held in the United Kingdom, and co-hosted by the United
States and the United Kingdom. Thirty European countries
participated in the conference, which considered the status of
international export control programs, assessed programs geared
toward improving the export control systems of the nations of
the former Soviet Union, and developed recommendations to
improve the international export control system.
Nonproliferation and Export Control International Cooperation Program
From August 20, 2001, through February 19, 2002,
interagency representatives participated in 23 technical
exchanges on export controls. The exchanges included the
``Symposium for International Export Control officials'' in
Washington, DC and the Third Drafting Workshop for the central
Asia and Caucasus region Draft Regional Transit Agreement.
These exchange sought to familiarize participating governments
with the elements of an export control system consistent with
international standards, and to assist these governments to
develop and strengthen their own export control systems.
Firearms convention
The Inter-American Convention Against the Illicit
Manufacturing of and Trafficking in Firearms, Ammunition,
Explosives, and Other Related Materials (Firearms Convention)
is a treaty that Organization of American States (OAS) member
countries signed to control the flow of firearms. The
Convention was signed in 1998 but awaits ratification by a
number of OAS member countries, including the United States.
The Convention requires OAS member states to establish a
program to issue authorizations for the import and export of
firearms. Although BIS has implemented most of the Convention
requirements related to the export of firearms, the United
States has not executed those pertaining to transit and
explosives. An interagency working group was continuing its
work on this issue at the end of the reporting period.
D. REGULATORY ACTIONS: PUBLISHED AND PENDING
Wassenaar Arrangement
On January 3, 2002, BIS published a final rule revising
certain entries controlled for national security reasons in
Categories 1, 2, 3, 5 Part I (Telecommunications), 6, 7, and 9
of the CCL to conform with changes in the Wassenaar Control
List agreed to in December of 2000.
Entity list
On December 21, 2001, BIS published a rule amending the EAR
to remove two Russian Entities from the Entity List found at
Supplement 4 to part 744 of the EAR. The State Department
determined on November 17, 2000, that it was in the foreign
policy and national security interests of the United States to
remove nonproliferation measures on these two entities.
Missile technology
On December 20, 2001, BIS issued an Advance Notice of
Proposed Rulemaking to review the existing license exemption
contained within the EAR for the export of missile technology
(MT)-controlled items to Canada. This action was recommended by
the Government Accounting Office (GAO) in a report entitled:
``Export Controls: Regulatory Change Needed to Comply with
Missile Technology Licensing Requirements'' (GAO-01-530). BIS
sought comments on howremoving the existing licensing exemption
for MT-controlled exports to Canada would affect industry and more
specifically the exporting community. Comments were due by February 19,
2002.
India and Pakistan: Lifting of sanctions
On September 22, 2001, the President waived sanctions
placed on India and Pakistan in May 1998, including those
sanctions implemented by regulations issued on November 19,
1998. On October 1, 2001, BIS published a rule implementing the
waiver of these sanctions by removing the policy of denial for
exports and reexports of items controlled for Nuclear
Proliferation (NP) and MT reasons to India and Pakistan and
restoring the use of license exceptions for these items for
entities not on the Entity List. In addition, this rule removed
a large number of Indian and Pakistani entities from the Entity
List.
Australia Group and Chemical Weapons Convention Controls
On September 28, 2001, BIS published a rule implementing
agreements reached at the October 2000 plenary meeting of the
AG. This final rule amended the CCL and the corresponding
export licensing provisions in the EAR to liberalize controls
and certain medical, analytical, diagnostic, and food testing
kits, implement a new AG policy on mixtures, and clarify
controls on certain chemical manufacturing equipment.
Furthermore, the rule added Cyprus and Turkey to the countries
that participate in the AG, thereby eliminating license
requirements for exports and reexports of certain AG-controlled
items to these countries. This rule also amended the CWC-
related provisions in the EAR to clarify the export license
requirements and policies for certain toxic chemicals and
precursors listed in the Schedules of Chemicals contained
within the Annex on Chemicals to the CWC. Finally, this rule
updated the list of countries that are currently States Parties
to the CWC by adding the following countries: Azerbaijan,
Colombia, Dominica, Eritrea, Gabon, Jamaica, Kazakhstan,
Kiribati, Liechtenstein, Malaysia, Mozambique, Nicaragua, San
Marino, The United Arab Emirates, Yemen, the Federal Republic
of Yugoslavia (Serbia and Montenegro), and Zambia.
E. EXPORT LICENSE INFORMATION
During the reporting period, BIS continued to receive many
requests for export licensing information through the Freedom
of Information Act and through discovery requests during
enforcement proceedings. Consistent with section 12(c) of the
EAA, BIS continues to withhold from public disclosure
information obtained for the purpose of consideration of, or
concerning, export license applications, unless the release of
such information is determined by the Under Secretary to be in
the national interest, pursuant to Executive Order 13222's
directive to carry out the provisions of the EAA, to the extent
permitted by law.
F. OFFICE OF INSPECTOR GENERAL AND THE GENERAL ACCOUNTING OFFICE
STUDIES
During the reporting period, BIS continued its cooperation
with the Office of Inspector General (OIG) and the GAO.
Specifically, OIG continued two and closed two studies, and GAO
initiated 14, continued 16, and closed three studies.
G. EXPORT ENFORCEMENT
In the reporting period, BIS's Export Enforcement, through
its offices of Enforcement Analysis, Export Enforcement, and
Anti-Boycott Compliance, continued its programs to prevent
diversions of controlled items, investigate and enforce export
control violations, and enforce U.S. anti-boycott rules.
Office of Enforcement Analysis (OEA)
In the reporting period, OEA continued to expand its Visa
Review Program. This program targets visa applications of
foreign nationals who may be entering the United States to
access technology controlled for national security reasons or
to procure items useful for weapons of mass destruction
programs. The Visa Review Program also provided leads to BIS's
Office of Export Enforcement relating to possible terrorist
activities identified subsequent to the terrorist attacks of
September 11, 2001.
OEA prevention activities also include a plan to target and
prioritize pre-license checks (PLCs) and post-shipment
verifications (PSVs) to ensure that such end-use visits reflect
the full range of U.S. export control concerns. PLCs validate
information on export license applications, including end-user
reliability. PSVs strengthen assurancesthat exporters,
shippers, consignees, and end-users comply with the terms of export
licenses. The overall objective for conducting PLCs and PSVs is to
detect and prevent the illegal transfer of controlled U.S.-origin
items.
Another OEA activity is to compile information regarding
parties of concern and to maintain a watch list. Parties on the
watch list are screened against names of license applications
received by BIS to assess diversion risks, identify potential
violations, and determine the reliability of proposed end-users
of controlled U.S. items.
On December 20, 2001, as required by the National Defense
Authorization Act for FY 1998, BIS delivered to the Congress
its fourth annual report on HPC exports to Computer Tier 3
countries.
Office of Export Enforcement (OEE)
During this reporting period, OEE opened 489
investigations, some of which led to both criminal and
administrative sanctions. A total of $4,419,000 in civil
penalties and criminal fines were imposed for violations during
this period. OEE also issued 70 warning letters in cases of
minor violations, informing the recipients that OEE had reason
to believe they had violated the EAR, and that increased
compliance efforts were warranted.
Office of Anti-boycott Compliance (OAC)
OAC implements the anti-boycott provisions of the EAA and
the EAR. OAC performs three main functions: enforcing the EAR,
assisting the public in complying with anti-boycott provisions,
and compiling and analyzing information regarding international
boycotts. During the reporting period, OAC opened nine cases,
closed 13 investigations, and imposed $9,000 in civil
penalties.