72–639PS
2001
THE EXPORT ADMINISTRATION
ACT: THE CASE FOR ITS RENEWAL
ONE HUNDRED SEVENTH CONGRESS
- FIRST SESSION
MAY 23, JUNE 12 AND JULY 11,
2001
Serial No. 107–27
Printed for the use of the
Committee on International Relations
Available via the World Wide
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COMMITTEE ON INTERNATIONAL
RELATIONS
HENRY J. HYDE, Illinois,
Chairman
BENJAMIN A. GILMAN, New York
JAMES A. LEACH, Iowa
DOUG BEREUTER, Nebraska
CHRISTOPHER H. SMITH, New
Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North
Carolina
DANA ROHRABACHER, California
EDWARD R. ROYCE, California
PETER T. KING, New York
STEVE CHABOT, Ohio
AMO HOUGHTON, New York
JOHN M. McHUGH, New York
RICHARD BURR, North Carolina
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
RON PAUL, Texas
NICK SMITH, Michigan
JOSEPH R. PITTS, Pennsylvania
DARRELL E. ISSA, California
ERIC CANTOR, Virginia
JEFF FLAKE, Arizona
BRIAN D. KERNS, Indiana
JO ANN DAVIS, Virginia
TOM LANTOS, California
HOWARD L. BERMAN, California
GARY L. ACKERMAN, New York
ENI F.H. FALEOMAVAEGA,
American Samoa
DONALD M. PAYNE, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
EARL F. HILLIARD, Alabama
BRAD SHERMAN, California
ROBERT WEXLER, Florida
JIM DAVIS, Florida
ELIOT L. ENGEL, New York
WILLIAM D. DELAHUNT,
Massachusetts
GREGORY W. MEEKS, New York
BARBARA LEE, California
JOSEPH CROWLEY, New York
JOSEPH M. HOEFFEL,
Pennsylvania
EARL BLUMENAUER, Oregon
SHELLEY BERKLEY, Nevada
GRACE NAPOLITANO, California
ADAM B. SCHIFF, California
DIANE E. WATSON, California
THOMAS E. MOONEY, SR., Staff
Director/General Counsel
ROBERT R. KING, Democratic Staff
Director
FRANK RECORD, Professional
Staff Member
LIBERTY DUNN, Staff Associate
C O N T E N T S
DATES
May 23, 2001
June 12, 2001
July 11, 2001
WITNESSES
The Honorable Kenneth I. Juster, Undersecretary, Bureau of
Export Administration, U.S. Department of Commerce
The Honorable Phil Gramm, a U.S. Senator from the State of
Texas
The Honorable Fred Thompson, a U.S. Senator from the State of
Tennessee
The Honorable Christopher Cox, a Representative in Congress
from the State of California
Richard T. Cupitt, Associate Director, Center for International
Trade and Security, University of Georgia
Paul Freedenberg, Director of Government Relations,
Representing Association of Manufacturing Technology
Dan Hoydysh, Washington Director, UNISYS, Representing Computer
Coalition for Responsible Exports
The Honorable Mike Enzi, a U.S. Senator from the State of
Wyoming
The Honorable John R. Bolton, Under Secretary for Arms Control
and International Security, U.S. Department of State
David Tarbell, Deputy Under Secretary for Technology Security
Policy, U.S. Department of Defense
Page 6 PREV PAGE TOP OF DOC Segment 1 Of 3
Stephen Bryen, Managing Partner, Aurora Marketing and Business
Development
Larry E. Christensen, Vice President, Vastera, Inc.
LETTERS, STATEMENTS, ETC.,
SUBMITTED FOR THE HEARING
The Honorable Henry J.
Hyde, a Representative in Congress from the State of Illinois, and Chairman,
Committee on International Relations:
Prepared statementsL2, 37, 89
The Honorable Kenneth I. Juster: Prepared statement
The Honorable Phil Gramm: Prepared statement
The Honorable Christopher Cox: Prepared statement
Richard T. Cupitt: Prepared statement
Paul Freedenberg: Prepared statement
Dan Hoydysh: Prepared statement
The Honorable Mike Enzi: Prepared statement
The Honorable John R. Bolton: Prepared statement
David Tarbell: Prepared statement
Stephen Bryen: Prepared statement
Larry E. Christensen: Prepared statement
APPENDIX
Material Submitted for the Hearing Record
THE EXPORT ADMINISTRATION
ACT:
THE CASE FOR ITS RENEWAL
WEDNESDAY, MAY 23, 2001
House of Representatives,
Committee on International
Relations,
Washington, DC.
The Committee met, pursuant to call, at
10:12 a.m. in Room 2172, Rayburn House Office Building, Hon. Henry J. Hyde
(Chairman of the
Committee)
presiding.
Chairman HYDE. The Committee will come to
order. I am very pleased to welcome the newly confirmed Undersecretary of
Commerce for Export Administration, Mr. Kenneth I. Juster, in the first in a
series of hearings on the Export Administration Act and the nation's export
controls system. As many of my colleagues are aware, the Export Administration
Act, commonly referred to by its acronym as the ''EAA,'' expired in 1994 and
was reauthorized on a stop-gap basis in the 106th Congress by this Committee
through August 20, 2001.
It is my understanding that the Commerce
Department has in place a series of regulations providing for the control and
monitoring of the export of sensitive commodities, including high-performance
computers, software, machine tools, and other items. Among the 2,400 items on
the
so-called
''commerce-control list,'' exports are currently restricted by item, country,
and end user.
Today, we will begin to examine this
control system and the case for the reauthorization of the EAA. We will ask our
distinguished witness today to discuss the plans of the Bush Administration to
do its own review of the strength and weaknesses of the current system of
controls, which dates from the Cold War period.
Mindful that the Senate might soon
consider a bill providing a comprehensive rewrite of the EAA, our Committee
expects to play a key role in the debate shaping our export control policies.
In light of its significance to our economic and national security interests,
we will give this legislation all the time and attention it deserves, ensuring
that it receives a thorough review and vetting. It is my fondest hope that in
doing so, we will spend considerably less than the 3 years the Senate did on
its bill.
Maintaining our position in the global
economy should, in my view, not come at the expense of shortchanging our
obligations to international peace and our respect for human rights—in short,
our national security interests. This is a very complex, public-policy area
requiring a delicate balance between competing—and often
conflicting—national-security and competitive issues.
The deliberations on the EAA in the Senate
clearly demonstrate that, on the one hand, there is a strong bipartisan support
for the reform measure, and on the other hand, there is a committed group of
influential Senators who continue to voice their concerns about this measure
and its long-range impact on our security.
Sympathetic to many of the issues they are
raising, I will want to take a careful look at any EAA reform measure to ensure
that it reflects the thinking from all the participants and interest groups
involved in shaping our export control policy. First however, we need to step
back to examine the origins of the current policy framework.
Under the provisions of the Export
Administration Act of 1979, national security export controls sought to prevent
exports of dual-use goods, services, and technologies to the Soviet bloc from
the United States or its allies in close cooperation through the Coordinating
Committee on Multilateral Export Controls, otherwise known as ''CoCom.''
While this act has been amended and
updated in piecemeal fashion over the past 22 years, its provisions have barely
kept pace with the dizzying changes in the international landscape. The Soviet
Union has disappeared into the ash heap of history, dragging with it all the
countries of the Warsaw Pact. Unfortunately, the rationale for a strong and
effective multilateral control system disappeared as well.
This system, where the U.S. made frequent
use of its veto authority on dual-use goods and services finally dissolved in
1994 and a new, much less stringent multilateral framework, the Wassenaar
Arrangement, was created with Russia as a member country. It requires only post
export notification of sales of items controlled by its member countries and
largely serves as a forum to debate and discuss export trends.
As we join the export control debate, we
are reminded that an effective and comprehensive multilateral export system
needs to be put back at the center of our policy framework. I look forward to
discussing this critical issue and the full range of export control policy
concerns with Undersecretary Juster. By all accounts, his distinguished public
and private service will help him meet many of the challenges and opportunities
posed by his new position. Before turning to our witness, I would ask the
Ranking Member, Mr. Lantos, if he cares to deliver an opening
statement.
[The attachment to Chairman Hyde's
statement follows:]
PREPARED
STATEMENT OF THE HONORABLE HENRY J. HYDE, A REPRESENTATIVE IN CONGRESS FROM THE
STATE OF ILLINOIS, AND CHAIRMAN, COMMITTEE ON INTERNATIONAL RELATIONS
I am very pleased to welcome the
newly-confirmed Undersecretary of Commerce for Export Administration, Mr.
Kenneth I. Juster, before our Committee this morning in the first in a series
of hearings on the Export Administration Act and the nation's export control
system.
As many of my colleagues are aware, the
Export Administration Act, commonly referred to by its acronym as the EAA, expired
in 1994 and was reauthorized on a stop-gap basis in the 106th Congress by this
Committee through August 20, 2001.
It is my understanding that the Commerce
Department has in place a series of regulations providing for the control and
monitoring of the export of sensitive commodities, including high performance
computers, software, machine tools and other items. Among the 2,400 items on
the so-called ''Commerce Control List,'' exports are currently restricted by
item, country, and end-user.
Today we will begin to examine this
control system and the case for the reauthorization of the EAA. We will ask our
distinguished witness today to discuss the plans of the Bush Administration to do
its own review of the strengths and weaknesses of the current system of
controls which dates from the Cold War period.
Mindful that the Senate might soon
consider a bill providing a comprehensive rewrite of the EAA, our Committee
expects to play a key role in the debate shaping our export control policies.
In light of its significance to our
economic and national security interests, we will give this legislation all the
time and attention it deserves ensuring that it receives a thorough review and
vetting. It is my fondest hope that in doing so, we will spend considerably
less than the three years the Senate did on its bill.
Maintaining our position in the global
economy should, in my view, not come at the expense of shortchanging our obligations
to international peace and our respect for human rights.
This is a very complex public policy area
requiring a delicate balance between competing—and often conflicting—national
security and competitiveness issues.
The deliberations on the EAA in the Senate
clearly demonstrate that, on the one hand, there is strong bipartisan support
for the reform measure and that, on the other hand, there is a committed group
of influential Senators who continue to voice their concerns about this measure
and its long-range impact on our security.
Sympathetic to many of the issues they are
raising, I will want to take a careful look at any EAA reform measure to ensure
that it reflects the thinking from all the participants and interest groups
involved in shaping our export control policy.
First, however, we need to step back to
examine the origins of the current policy framework.
Under the provisions of the Export
Administration Act of 1979, national security export controls sought to prevent
exports of dual-use goods, services and technologies to the Soviet bloc from
the United States or its allies in close cooperation through the Coordinating
Committee on Multilateral Export Controls, otherwise known as ''CoCom.''
While this act has been amended and
updated in piecemeal fashion over the past 22 years, its provisions have barely
kept pace with the dizzying changes in the international landscape. The Soviet
Union has disappeared into the ash heap of history, dragging with it all the
countries of the Warsaw Pact. Unfortunately, the rationale for a strong and
effective multilateral control system disappeared as well.
This system where the U.S. made frequent
use of its veto authority on dual-use goods and services finally dissolved in
1994 and a new, much less stringent multilateral framework, the Wassenaar
Arrangement, was created with Russia as a member country. It requires only post
export notification of sales of items controlled by its member countries and
largely serves as a forum to debate and discuss export trends.
As we join the export control debate, we
are reminded that an effective and comprehensive multilateral export system
needs to be put back at the center of our policy framework.
I look forward to discussing this critical
issue and the full range of export control policy concerns with Undersecretary
Juster. By all accounts, his distinguished public and private service will help
him meet many of the challenges and opportunities posed by his new position.
Before turning to our witness, I would ask
if the Ranking Member, Mr. Lantos, has an opening statement.
Mr. LANTOS. Thank you very much, Mr.
Chairman. Let me first apologize to you and our guest. I was on the Floor welcoming
both the President of Taiwan, the democratically elected leader of his nation,
and His Holiness, the Dalai Lama, who today is honoring us with his presence.
Mr. Chairman, I am pleased to welcome
Undersecretary Juster to his first hearing on the possible reauthorization of
the Export Administration
Act.
This is an extremely important and complex set of issues upon which we could
easily spend many months. The details of the specific
provisions
and directives are complicated enough, but there are also much larger issues
that we must address. What are the purposes of U.S.
export
controls, and how do we measure their success? Should all export controls be
derived from multilateral arrangements, thereby risking the
race
to the lowest common denominator of export control standards among the many
countries that engage in export controls, or should there be
some
area in which the U.S. ought to be willing to lead with unilateral controls?
What is the best administrative structure for an efficient and
effective
export control system?
I believe that we must be extremely
careful in deciding whether or not to alter the current structure of export
controls of militarily useful
commodities
and technologies. Yes, maintaining and enhancing the competitive position of
American corporations in an increasingly integrated
global
economy is very important. Yes, our system of export controls must be able to
be updated to be responsive to the global marketplace as
well
as to the changing nature of the global security threat. But we must be clear,
Mr. Chairman.
The national-security interests of the
United States in protecting American service men and service women on the
battlefield must always take
precedence
over economic, commercial, and profit considerations. In a future conflict or
crisis I do not want to see the wreckage of American
barracks,
struck by missiles with the components stamped with the inscription, ''made in
America.''
I welcome Secretary Juster to the
Committee today, and before we listen to his testimony, let me just indicate a
chronological item, Mr.
Chairman.
As I recall, the Senate dealt with this issue for the past 3 years, and unless
my information is inaccurate, the bill the Senate has been
working
on for a number of years now has not yet come to the Floor of the Senate. When
it reaches this body, I think we will have to take
reasonable
time to explore all of the ramifications.
This is not a piece of legislation to be
rushed through the Congress of the United States. There are many ramifications,
many implications, and
potentially
American lives at stake. So I am determined, as I am sure you are, Mr.
Chairman, to take all the time necessary to explore all of the
ramifications
of this important issue, and I thank you for your kindness.
Chairman HYDE. Thank you. Does anyone else
have an opening statement?
Mr. MENENDEZ. Yes.
Chairman HYDE. Mr. Menendez.
Mr. MENENDEZ. Thank you, Mr. Chairman. I
want to congratulate you for holding the hearings on this issue relatively
early in this Congress.
As
someone who in the last Congress was the Ranking Democrat on the Subcommittee
on International Economic Policy and Trade, I spent a fair
amount
of time on this issue. I think it is one of the most important undertakings the
Committee can pursue in this Congress, and I believe it is high
time
that we did.
As things stand, the United States may
have the leading edge in technology these days, but we are far from basking in
the winner's circle when
it
comes to passing an export control bill that both protects our national
security and promotes our economy. I think that those goals are
reconcilable
in our efforts, and I take a back seat to no one in terms of the interests of
the United States in promoting its national security. But I
believe,
Mr. Chairman, that if we measure technological obsolescence these days in
months, we are well past due in the context of this legislation.
And finally, Mr. Chairman, I look at this
issue almost as an iceberg, and I think of it in terms of what is at the tip of
that iceberg. What is at the
tip
of the iceberg is that which we uniquely possess as a country that is not
available out there in the world. That is what we should clearly control
in
the national security interests of the United States.
But to suggest that everything that is
below the tip of the iceberg that can be found in the world marketplace and not
be able to export that
abroad
not only hampers our economic productivity, but in my mind, does not put that
technology, which is American made, out there. To the
extent
that it is going to be widely available as it is, I would rather have access to
technology that was made in the USA than that was made
abroad.
So I look forward to the Undersecretary's
testimony and then working on this issue, and I ask unanimous consent that my
full statement be
entered
into the record.
Chairman HYDE. Without objection, so
ordered. Mr. Sherman.
Mr. SHERMAN. Thank you, Mr. Chairman, for
holding these hearings on an important area, and I want to associate myself
with the prior
speakers,
including Mr. Lantos's discussion of how important it is to look both
multilaterally and unilaterally. This is a balancing of our economic
and
our national security issues. The importance of national security is obvious
with these sensitive exports, but the economic importance is
multifaceted.
Not only do we need to be concerned about
the balance of payments and jobs, as we are concerned with all of our exports,
but it is a national
security
concern that our high-tech companies remain in the lead in technology, and
exports can finance those companies and their research
programs.
In contrast, it is adverse to our national
security interests to have other countries with lower standards, some of them
even hostile to the United
States,
get an order that could have been filled by the United States, only to see that
country develop technology and then perhaps make exports
that
we would not have even considered.
But this choice is not always a balancing
choice of yes or no. If that was the situation, it would be easier. The biggest
problem that I have been
told
about is speed, and even if a no must be issued as often as a yes, this ought
to be the fastest agency in the Federal Government. Whether it is
financed
by user fees or financed by general revenue, there ought to be teams of experts
sitting around waiting for the application.
It may be in our national interest to have
people that work with Secretary Juster sitting around reading back issues of
technical journals, just
waiting
for the application to come in. There are reasons not to say yes to every
application. There are reasons to say yes to every application, but
there
are no reasons for anything but the fastest possible treatment, and that is not
just an economic issue; that is a national security issue. I yield
back.
Chairman HYDE. The gentleman from Arizona,
Mr. Flake.
Mr. FLAKE. Thank you, Mr. Chairman. I
would like to congratulate the Chairman for including within the State
Department authorization bill
language
an increase in the dollar amounts for transactions that require congressional
notification for NATO and NATO-plus countries. I have
introduced
a bill, H.R. 1898, the International Commerce Enhancement Act, that goes a bit
further in a couple of areas and I will be glad to
explain
those at the appropriate point.
I also think that we need to go further in
some areas. I have introduced H.R. 1553 with Congressman Dreier. This will lift
the measure, the
current
MTOPS standard for millions of theoretical operations per second, the standard
by which we judge some computer exports. It has been
deemed
outdated by the industries that deal with it and also the Bush Administration,
and we look forward to moving ahead on these issues. I
thank
the Chairman for scheduling this hearing.
Chairman HYDE. Thank you. Any further
opening statements? Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I
view what you're doing here today as sort of a metaphor for a lot of the
challenges we
face
in the international arena, and I do believe that if we are not careful, we
will end up engaged in a self-defeating process. I guess I err on the
side
of being realistic and being multilateral to deal with trying to accelerate the
problem, I think we put an impossible burden many time on a
number
of our bureaucratic agencies now.
It is not just with the economic impact
that we lose potential business, but I really do believe in the long run we are
retarding the development of
new
technology in this country while we are encouraging it in others. And so I am
hopeful that we can work cooperatively to be able to look at
what
is our best interest, even though it may be a little difficult to explain to
some of the folks back home. Thank you.
Chairman HYDE. We will now commence the
questioning period, and Mr. Lantos, do you want to ask questions?
Mr. LANTOS. No.
Chairman HYDE. I am sorry. We missed your
statement. We have nothing to question you about. I thought you would
appreciate that.
Mr. SHERMAN. Do you have anything else to
add?
Chairman HYDE. Please proceed, Mr.
Secretary. Forgive the oversight.
STATEMENT
OF THE HONORABLE KENNETH I. JUSTER, UNDERSECRETARY, BUREAU OF EXPORT
ADMINISTRATION,
U.S.
DEPARTMENT OF COMMERCE
Mr. JUSTER. Thank you very much, Mr.
Chairman, Congressman Lantos, and Members of the Committee. I appreciate very
much the
opportunity
to testify about export controls and the proposed Export Administration Act of
2001, which is now pending in the Senate. I would
like
to summarize my written statement and submit that statement for the record, if
that is all right.
Chairman HYDE. Without objection, so
ordered.
Mr. JUSTER. Thank you. The Administration
believes that an effective export control system is important to our national
and economic
security.
It is critical that we protect this country's national security by ensuring
that our sensitive goods and technologies do not fall into the wrong
hands.
Equally important, as many Members have recognized, is an export control system
that affords business the opportunity to compete
effectively
in today's increasingly global marketplace.
The challenge for all of us in government
and in the private sector is to have a tough-minded yet common-sense export
control system that
strikes
the proper balance between sharing our technology with friends and protecting
against the transfer of sensitive technology to potential
adversaries.
In my remarks this morning I first will
discuss the elements that I believe are necessary for an effective export
control system, I then will address
the
need for a new Export Administration Act. Finally, I will explain why the
Administration strongly supports Senate Bill 149, the Export
Administration
Act of 2001.
As I have noted, an effective export
control system is essential for national and economic security. Given my own
background, which includes
almost
4 years at the U.S. Department of State, I can assure you that I fully
appreciate the critical importance of protecting this country's national
security.
To do so, an effective system should
provide for controls on the exports of goods and technologies that could make a
significant contribution to
conventional
arms or weapons of mass destruction. An effective system also should provide
for the control of goods and technologies to further
foreign-policy
objectives, such as the promotion of human rights. In addition, an effective
system must provide adequate and timely opportunity
for
those agencies with national security and foreign-policy expertise to review
and comment upon proposed exports of controlled items.
As many of you have mentioned, export
controls are most effective when they are implemented in concert with the
controls of other supplier
nations.
One of my own priorities on behalf of the Administration will be to work
closely with our allies and regime partners in further developing
multilateral
cooperation and strengthening the contribution of our multilateral regimes to
our overall nonproliferation goals.
Another important element of an effective
system is vigorous enforcement. There must be sufficient authority to conduct a
wide range of
enforcement
activities, and penalties must be set at a level sufficiently high to
appropriately punish violators and deter would-be violators.
Finally, the cooperation of exporters is
also essential. It is incumbent upon government to create a system that is
rational and transparent so that
exporters
can comply with it. The system should not adversely affect U.S. companies from
competing equally with their foreign competitors unless
there
is an overriding national security or foreign-policy interest at stake.
Having outlined what I view to be the
essential elements of an effective export control system, let me briefly
explain why we need a new Export
Administration
Act. We need a new act because the existing law, as the Chairman mentioned, is
significantly out of date. It was enacted in 1979.
It
is a Cold War statute that simply does not reflect current economic and
political realities.
The basic national security control
authority of this law is predicated on the existence of a multilateral regime
known as CoCom that ended 7
years
ago. In addition, the level of penalties in the 1979 act has been substantially
eroded over time by inflation.
If we do not pass a new Export
Administration Act, it is possible, as the Chairman mentioned, that the 1979
act will expire in August of this
year
without being renewed. Under those circumstances, we would operate our export
control system, as we have intermittently over the past
several
years, under the International Emergency Economic Powers Act. Operating under
this authority raises an increasing number of legal and
political
complications.
Moreover, operating under emergency
authority, in my view, sends the wrong message at home and abroad about our
commitment to export
controls.
It is hard to persuade other countries about the importance of establishing a
sound and workable export control system if we are unable
to
do so ourselves.
Enactment of a new Export Administration
Act that reflects current global realities is, therefore, in my view,
imperative. As you know, the
Administration
carefully reviewed the bill being considered in the Senate. As a result of its
review, the Administration proposed a number of
changes
to the bill which the secretaries of state, defense, and commerce, as well as
the national security adviser, agreed would strengthen the
President's
national security and foreign-policy authorities to control dual-use exports in
a balanced manner.
The Administration's proposed changes were
incorporated into Senate Bill 149. As a result, the Administration strongly
supports the legislation
now
pending in the Senate. Recently, in a speech, the President reiterated the
Administration's strong support for S. 149, and he added, and I
quote,
''It is time to pass it in the House so I can sign it into law.''
The Administration believes that S. 149
provides appropriate authorities to address two major interests: one, the
protection of U.S. national
security
and foreign-policy interests; and two, the promotion of U.S. trade and
industry. Contrary to the impression that some may have, it is
important,
in my view, to note that S. 149 gives the President broad authority to protect
national security.
S. 149 authorizes national security
controls for three distinct purposes: first, to restrict the export of items that
would contribute to the military
potential
of countries to the detriment of the United States and its allies; second, to
stem the proliferation of weapons of mass destruction; and
third,
to deter terrorists.
In addition, Senate Bill 149 provides for
the first time, in explicit statutory provisions, several additional, important
authorities. One such
authority
is known as ''catch-all controls.'' Catch-all controls ensure that items otherwise
uncontrolled are not exported to users involved in
weapons-of-mass-destruction
programs.
Another important authority is known as
''enhanced controls.'' Enhanced controls allow the President to exempt, for
reasons of national
security,
items from what are known as the foreign availability, mass market, and parts
and components provisions of the bill. Thus, the most
sensitive
items will not be subject to those provisions that would otherwise limit
controls.
A third authority that appears for the
first time in statute allows the President to continue indefinitely controls on
the export of items found to be
readily
available from foreign sources if the United States has committed to control
such items through one of the four multilateral, export control
regimes.
This provision, therefore, ensures that the most sensitive items, namely, those
that are controlled by agreement with our allies in a
multilateral
forum, will remain controlled regardless of whether they might be available
overseas.
The bill has other significant provisions
that focus on national security. For example, the bill allows the President to
continue indefinitely, for
reasons
of national security or due to adherence to multilateral regimes, controls on
the export of items notwithstanding their mass-market status.
The bill also retains the definition of
the term ''export'' that encompasses what is known as ''deemed exports,''
thereby authorizing the
continuation
of existing controls on transfers of know-how and technology to foreign
nationals residing in the United States.
And the bill enhances the statutory role of the Defense Department and
other relevant departments in the export control process in several
important
ways. First, the bill requires that the secretary of commerce refer all license
applications to the secretaries of defense and state and to
other
agencies as the secretary of commerce deems appropriate for their review and
recommendation. Second, the bill authorizes each of these
reviewing
departments to escalate a proposed license decision to the secretarial and
presidential levels. Third, the bill requires the Commerce
Department
to notify the Defense Department of all commodity-classification requests.
S. 149 also provides authority necessary
to further significant foreign-policy interests. In this regard, the bill
authorizes controls to promote
international
peace, stability, and respect for fundamental human rights. In addition, the
bill provides for strict controls on exports that could assist
terrorist
countries.
In terms of enforcement, which is also, in
my view, a critical component of any export control system, S. 149
significantly raises the penalties
for
export control violations and contains other important provisions that enhance
the U.S. Government's ability to enforce the law effectively. For
example,
penalties on corporations are raised to $5 million per violation or to 10 times
the value of the export, whichever is greater. This
represents
a substantial increase over the current level of penalties. Criminal penalties
on individuals also are raised, from $250,000 to $1 million,
and
civil penalties increase under the bill from $10,000 to $500,000. In addition,
the bill authorizes the Commerce Department to conduct
undercover
operations and to station attaches abroad to ensure that U.S. items are not
diverted.
The bill also contains many important
features for exporters. For example, the bill authorizes exporters to formally
seek government review of
items
subject to control. It does this by creating the foreign-availability and
mass-market provisions. Under the foreign-availability provision, an
exporter
can request that the U.S. Government determine if a product is readily
available to foreign countries from foreign sources. Under the
mass-market
provision, an exporter can request that the U.S. Government determine if a
product is widely available and, therefore, cannot
effectively
be controlled for export.
If a product is found to be readily
available to foreign countries from sources outside the United States, or if
the product is found to be widely
available
in the United States—and there is a rigorous test that must be applied in
reaching these determinations—the government would remove
controls
on the product, unless doing so would be inconsistent with our international
commitments, such as our commitments to multilateral export
control
regimes, or would threaten our national security. So we want to avoid what was
termed ''a race to the bottom,'' and we do not
automatically
export items if they pass these tests.
It is worth noting, as I just said, that
the applicability of the mass-market and foreign-availability provisions is
limited when national security
concerns
are raised. The President can exempt any item from these provisions by
exercising his authority to invoke enhanced controls. In addition,
the
President can set aside, for reasons of national security, any mass-market or
foreign-availability determination.
Another important feature of the bill,
that was alluded to earlier, is the time-limit provision for government
decisions. The bill requires decisions
on
license applications within 39 days of submission unless the application
requires higher-level review. Historically, only about 5 percent of
license
applications require such review.
In conclusion, we believe that Senate Bill
149 provides the framework necessary for an effective export control system. It
provides broad
control
authority and appropriate enforcement authority in order to protect our
national security. It also provides transparency, predictability, and
time
limits for the benefit of our exporters.
Passage of the Export Administration Act
of 2001 is a vital step in the Administration's effort to meet the new
challenges that today's global
environment
presents for our U.S. national security and economic health, and it is an
important component of our overall concerns with
nonproliferation.
In particular, this legislation will help
strengthen the Commerce Department's Administration of National-Security and
Nonproliferation
Controls.
My goal is to ensure that the United States has an effective and efficient
export control system, and I look forward very much to
working
with this Committee on that important task. Thank you.
[The prepared statement of Mr. Juster
follows:]
PREPARED
STATEMENT OF THE HONORABLE KENNETH I. JUSTER, UNDERSECRETARY, BUREAU OF EXPORT
ADMINISTRATION,
U.S. DEPARTMENT OF COMMERCE
Chairman Hyde, Congressman Lantos, and
Members of the Committee:
Thank you for the opportunity to testify
about export controls and the proposed Export Administration Act of 2001, now
pending in the
Senate.
The Administration believes that an effective export control system is
important to our national and economic security. It is critical that we
protect
this country's national security by ensuring that our sensitive goods and
technologies do not fall into the wrong hands. Equally important is
an
export control system that affords business the opportunity to compete
effectively in today's increasingly competitive global marketplace. It is
essential
to the health of our nation's industrial and technological base that U.S.
companies be able to export their goods, services, and technology
without
being hindered by arbitrary and unnecessary regulation. The challenge for all
of us—in government and in the private sector—is to have a
tough-minded,
yet common-sense export control regime that strikes the proper balance between
sharing our technology with friends and
protecting
against the transfer of sensitive technology to potential adversaries.
In my remarks today, I first will discuss
the elements necessary for an effective export control system. I then will
address the need for a new
Export
Administration Act. Finally, I will explain why the Administration strongly
supports S. 149—the Export Administration Act of 2001.
I.
Elements of an Effective Export Control System
An effective export control system is
essential for national and economic security. We must ensure that our
adversaries, or potential
adversaries,
do not obtain goods or technologies that could be used for weapons that might
ultimately be directed against us. Given my own
background,
which includes almost four years at the U.S. Department of State, I can assure
you that I fully appreciate the critical importance of
protecting
this country's national security.
At the same time, we also must ensure that
U.S. exporters are not arbitrarily excluded from foreign markets. The ability
of many U.S. exporters
to
produce state-of-the-art goods and technologies for our national security is in
part dependent on the revenue stream they can generate from
export
sales. Indeed, America's economic well-being increasingly depends on exports.
To protect national security, an effective
system should provide for controls on the export of goods and technologies that
could make a
significant
contribution to conventional arms or weapons of mass destruction. An effective
system also should provide for the control of goods and
technologies
to further foreign policy objectives, such as the promotion of human rights. In
addition, an effective system must provide adequate
opportunity
for those agencies with national security and foreign policy expertise to
review and comment upon proposed exports of controlled
items.
Export controls are most effective, of
course, when they are implemented in concert with the controls of other
supplier nations. To this end, the
majority
of the items subject to export controls in the United States are controlled by
most of the other supplier nations through the four
multilateral
export control regimes—the Wassenaar Arrangement (which relates to arms and
dual-use items useful for conventional arms
purposes);
the Nuclear Suppliers Group; the Missile Technology Control Regime; and the
Australia Group (which relates to items useful for
chemical
and biological weapons). These four regimes form the multilateral basis for
export controls, and they are an important element for
effective
nonproliferation. One of my priorities on behalf of the Administration will be
to work closely with our allies and regime partners in further
developing
multilateral cooperation and strengthening the contribution of these regimes to
our nonproliferation goals.
Another element of an effective system is
vigorous enforcement. There must be sufficient authority to conduct a wide
range of enforcement
activities,
and penalties should be set at a level high enough to appropriately punish
violators and deter would-be violators.
Control authority and vigorous enforcement
alone, however, are not sufficient for an effective system. The cooperation of
exporters also is
essential.
It is incumbent upon the government to create a system that is rational and
transparent, so that exporters can comply with it. The system
should
not adversely affect U.S. companies from competing equally with their foreign
competitors, unless there is an overriding national security or
foreign
policy interest at stake. The system also should be predictable, so that
exporters can safely plan their business activities.
Having outlined what I believe to be the
essential elements of an effective export control system, let me now explain
why we need a new Export
Administration
Act.
II.
The Need for a New Export Administration Act
We need a new Export Administration Act
because the existing law—the Export Administration Act of 1979—is significantly
out of date. It is
a
Cold War statute that simply does not reflect current economic and political
realities. The basic national security control authority of this law is
predicated
on the existence of a multilateral regime—the Coordinating Committee on
Multilateral Export Controls (CoCom)—that ended seven
years
ago. In addition, the level of the penalties in the 1979 Act has been
substantially eroded by inflation. Ideally, we rely on the deterrent effect
of
stiff penalties for export control violations. But under the 1979 Act, this
deterrent effect has largely eroded, because the low level of penalties
could
be viewed merely as a cost of doing business.
If
we do not pass a new Export Administration Act, it is possible that the 1979
Act will expire in August of this year without being renewed.
Under
those circumstances, we would operate our export control system under the
International Emergency Economic Powers Act. Operating
under
this emergency authority raises an increasing number of legal and political
complications. Moreover, operating under emergency authority
sends
the wrong message—at home and abroad—about our commitment to export controls.
It is hard to persuade other countries about the
importance
of establishing a sound and workable export control system if we are unable to
do that ourselves.
III.
Export Administration Act of 2001 (S. 149)
Enactment of a new Export Administration
Act that reflects current global realities is thus imperative. Operating under
either the 1979 Act or
the
authority of the International Emergency Economic Powers Act is simply not
appropriate. As you know, the Administration carefully reviewed
S.
149. As a result of its review, the Administration proposed a number of changes
to the bill, which the Secretaries of State, Defense, and
Commerce,
and the National Security Advisor agreed would strengthen the President's
national security and foreign policy authorities to control
dual-use
exports in a balanced manner. The Administration's proposed changes were
incorporated into S. 149 and, as a result, the Administration
strongly
supports the legislation now pending in the Senate. Recently, in a speech to
the Electronics Industries Alliance, the President reiterated his
Administration's
''strong support'' for S. 149. He added that ''[i]t's time to pass it [in] the
House, so I can sign it into law.''
A.
Export Control Authorities
The Administration believes S. 149
provides appropriate authorities to address two major interests—the protection
of U.S. national security
and
foreign policy interests, and the promotion of U.S. trade and industry. The
bill eliminates the Cold War structure of the existing law and
provides
greater opportunities for exporters to seek revision of ineffective controls.
Contrary to the impression that some may
have, it is important to note that S. 149 gives the President broad authority
to protect national
security.
For example, S. 149 authorizes national security controls for three distinct
purposes:
First, to restrict the export of items that
would contribute to the military potential of countries to the detriment of the
United States and its allies;
Second, to stem the proliferation of weapons
of mass destruction; and
Third, to deter terrorist acts.
In addition, S. 149 provides, for the
first time in explicit statutory provisions, several additional important
authorities. One such authority is
known
as ''catch-all controls.'' Catch-all controls ensure that items otherwise
uncontrolled are not exported to weapons of mass destruction
programs.
Another such authority is known as
''enhanced controls.'' Enhanced controls allow the President to exempt, for
reasons of national security,
items
from the foreign availability, mass market, and parts and components provisions
of the bill. Thus, the most sensitive items will not be subject
to
those provisions that would otherwise limit controls.
A third authority that appears for the
first time in statute allows the President to continue indefinitely controls on
the export of items found to be
readily
available from foreign sources if the United States has committed to control
such items through one of the four multilateral export control
regimes.
This provision ensures that the most sensitive items—those controlled by
agreement with our allies in a multilateral forum—will remain
controlled.
The bill has other significant provisions
that focus on national security. For example, the bill allows the President to
continue indefinitely, for
reasons
of national security or adherence to multilateral regimes, controls on the
export of items notwithstanding their mass market status. The bill
also
defines the term ''export'' so that it encompasses ''deemed exports,'' thereby
authorizing the continuation of existing controls on transfers of
technology
to foreign nationals in the United States. And the bill enhances the statutory
role of the Department of Defense and other relevant
departments
in the export control process in several ways:
First, the bill requires the Secretary of
Commerce to refer all license applications to the Secretaries of Defense and
State, and to other agencies
as
the Secretary deems appropriate, for their review and recommendations;
Second, the bill authorizes all reviewing
departments to escalate a proposed licensing decision to the President; and
Third, the bill requires the Department of
Commerce to notify the Department of Defense of all commodity classification
requests.
S.
149 also provides the authority necessary to further significant foreign policy
interests. In this regard, the bill authorizes controls to promote
international
peace, stability, and respect for fundamental human rights. In addition, the
bill provides for strict controls on exports that could assist
terrorist
countries.
B.
Enhanced Enforcement
S. 149 significantly raises the penalties
for export control violations and contains other provisions that enhance the
U.S. government's ability to
enforce
the law effectively. Higher penalties and increased enforcement authority will
deter those who might otherwise endanger U.S. national
security
through illicit exports. For example, penalties on corporations are raised to
$5 million per violation, or ten times the value of the export,
whichever
is greater. This represents a substantial increase over the current level of penalties.
Criminal penalties on individuals are raised from
$250,000
to $1 million, and civil penalties increase under the bill from $10,000 to
$500,000. In addition, the Commerce Department is
authorized
to conduct undercover operations and station attaches abroad to ensure that
U.S. items are not diverted.
C.
Industry
The bill also contains many important
features for exporters. First, it provides broad authorization for exporters to
formally seek government
review
of items subject to control. It does this by creating foreign availability and
mass market provisions. Under the foreign availability provision,
an
exporter can request that the U.S. government determine if a product is readily
available to foreign countries from foreign sources. Under the
mass
market provision, an exporter can request that the U.S. government determine if
a product is widely available and therefore cannot be
effectively
controlled for export. If the product is found to be readily available to
foreign countries from sources outside the United States or if the
product
is found to be widely available in the United States, the government must
remove controls on the product, unless doing so would be
inconsistent
with our international commitments, such as our commitments in the multilateral
export control regimes, or threaten our national
security.
A second important feature of the bill is
its treatment of parts and components. The bill limits, with certain
exceptions, controls on the export or
reexport
of dual-use parts and components incorporated into a final product based solely
on the nature of the incorporated part or component.
These
provisions ensure that U.S. exports are not subject to more restrictive
treatment than is necessary simply because they contain a controlled
part.
This also reduces the incentive for foreign producers to design products so as
to omit U.S. components.
It is worth noting that the applicability
of the mass market, foreign availability, and parts and components provisions
is limited when national
security
concerns are raised. As I stated earlier, the President can exempt any item
from these provisions by exercising his authority to invoke
''enhanced
controls.'' The President also can set aside for reasons of national security
any mass market or foreign availability determination.
A third important feature of the bill is
the time limit provision for government decisions. The bill requires decisions
on license applications within
39
days of submission unless the application requires higher level review.
Historically, only about 5 percent of license applications require such
review.
The bill also establishes short time limits for the government to respond to
formal classification requests and opinions from exporters.
Prompt
responses are essential for doing business abroad.
IV.
Conclusion
In conclusion, we believe that S. 149
provides the authority necessary for an effective export control system. It
provides broad control
authority
and appropriate enforcement authority in order to protect our national
security. And it provides transparency, predictability, and time
limits
for the benefit of our exporters.
Passage of the Export Administration Act
of 2001 is a vital step in the Administration's effort to meet the new
challenges that today's global
environment
presents for U.S. national security and economic health. In particular, this
legislation will help strengthen the Commerce Department's
administration
of national security and nonproliferation controls. My goal is to ensure that
the United States has an effective and efficient export
control
system, and I look forward to working with the Committee on this important
task.
Chairman HYDE. Thank you, Mr. Secretary,
and before we do go into the questions, I owe you a warm introduction, which I
deprived you
of.
So let me welcome Kenneth Juster, ex post facto, who was sworn in May 14th,
2001 as Undersecretary of Commerce for Export
Administration.
Before joining the Administration, Mr.
Juster was a senior partner at the law firm of Arnold & Porter, where he
concentrated on international
trade
issues and dispute resolution. His previous government service includes service
as counselor of the U.S. Department of State from 1992 to
'93
and as the senior adviser to Deputy Secretary of State Lawrence Eagleburger
from 1989 to 1992, and Mr. Juster is the recipient of the
Secretary
of State's Distinguished Service Award and Medal, the State Department's
highest honor. Undersecretary Juster has published
extensively
on international economic and legal issues. So I wanted to thank you for your
excellent testimony, and now, at long last, we will go to
the
questions. Mr. Lantos.
Mr. JUSTER. Thank you.
Mr. LANTOS. Thank you very much, Mr.
Chairman. And I want to join you in commending Secretary Juster not only for
his stellar academic
record,
but his public service, and particularly his service under our much-admired
friend and colleague, Secretary Eagleburger.
It
is hard enough, Secretary Juster, for us to follow all of the ins and outs of
legislative proceedings on our side of the Hill. It is even more
difficult,
since we do not have unlimited time, to follow things on the other side. So
correct me if my facts are not quite accurate, but I believe they
are.
After a protracted period, over 2 years, 2
1/2 years, almost 3 years, my understanding is that an attempt was made to
bring the Senate bill to
the
Floor earlier this month, and four Committee Chairmen, plus a number of other
distinguished Senators, have objected to that. As I recall, the
Chairman
of the Senate Foreign Relations Committee, Senator Helms; the Chairman of the
Senate Armed Service Committee, Senator Warner;
the
Chairman of the Senate Intelligence Committee, Senator Shelby; the Chairman of
the Senate Government Operations Committee, Senator
Thompson;
plus Senator John McCain and Senator Kyl, an old colleague who follows these
things closely, all objected. Am I correct in this?
Mr. JUSTER. I share your understanding
that the bill was brought to the Senate Floor and then was pulled back. I am
not aware of all the
inner
workings as to why that occurred, but I know that there are several Senators
who have voiced some concerns about the legislation.
Mr. LANTOS. Well, my understanding is that
these are not just several Senators; these are four respected Chairman of the
four key
Committees
that are relevant to what we are talking about, plus Senator McCain and Senator
Kyl, both of whom have considerable credentials.
Share
with us what your understanding is of their objections.
Mr. JUSTER. I did not mean to suggest that these were not important
Senators who Chair important Committees. My understanding is that
they
have expressed concerns about the national security provisions and safeguards
in the legislation. I have been in office for only 1 week, and I
have
not yet had a chance to meet with them individually but look forward to that
opportunity to hear their concerns.
The Administration itself has tried to
make sure that the bill does have adequate safeguards for the protection of
this country's national security.
We
believe that we have established in the legislation a framework for doing so,
as I mentioned in my testimony. But, again, I do look forward to
the
opportunity to meet with those Senators and hear their concerns as well.
Mr. LANTOS. Well, Secretary Juster, what
does your staff tell you? I am not blaming you for anything. You have been in
the job a few days,
but
this set of events I have just described came to your attention.
Mr. JUSTER. Right.
Mr. LANTOS. And it came to your attention
with some commentary from members of your staff. Now, you will get along very
well with us if
you
level with us and if you are candid with us. But if you give evasive answers,
we will be less than pleased. So what did you learn from your
staff,
who have been here more than a week, with respect to the objections?
Mr. JUSTER. Let me characterize the
objections in several ways. I think one is a concern as to whether the Defense
Department and the
State
Department have sufficient input on export control decisions. Another
objection, as I understand it, is whether the President has too onerous
a
burden in making a national security determination either to set aside a
mass-market or foreign-availability determination under the legislation or
to
exempt an item from undergoing those determinations in the first place.
Another concern, as I understand it, is
whether deemed exports, which, again, are exports of technological know-how to
foreign nationals in
the
United States, are covered by the legislation. As I recall, those were some of
the main concerns expressed by these Senators.
Mr. LANTOS. Now, Secretary Juster, in your
prepared statement you placed considerable emphasis on the expiration date of
this legislation,
which
as I understand it, is in August.
Mr. JUSTER. That is correct.
Mr. LANTOS. Am I wrong in assuming that
this is purely an arbitrary date, and there is nothing that prevents Congress
from extending the
current
act?
Mr. JUSTER. That is the current date that
exists in terms of the expiration of the law, but there is obviously nothing
that would prevent the
Congress
from extending the current statute, or if it is not extended, from the
Administration operating under the International Emergency
Economic
Powers Act. That is correct.
Mr. LANTOS. So if, in fact, the Senate has
taken some 3 years, and the issue has not yet been brought to the Floor of the
Senate, presumably
it
will not be brought to the Floor during the course of this week, which is the
last week before the break, then comes June. We go out for Fourth
of
July. So we will get this presumably sometime in June or sometime in July.
If the Senate has taken 3 years on this
matter, I think it would be inappropriate for the House to feel rushed to
judgment on a matter of such
great
importance. And I would like to ask you, what, in your view, would be the
negative consequences of extending the current act for some
time?
Mr. JUSTER. Well, as I indicated in my
statement, I think there are some important, new authorities that are in the
legislation now pending in
the
Senate. One relates to the enforcement of export controls. Penalties are
significantly increased in the legislation, as are our enforcement
authorities
to undertake undercover operations and to station attaches abroad.
In addition, the bill pending in the
Senate contains new authorities for national security purposes. These include
what are known as ''enhanced
controls,''
that is, the ability of the President simply to exempt a sensitive item from
undergoing a foreign-availability analysis. Also, there is the
set-aside
authority for the President, which allows him to set aside any determination as
to whether an item should be decontrolled and to keep
the
item controlled for national security purposes.
So I do believe that there are some
important, new authorities in both the enforcement and the export-licensing
area that we would not be with
if
we continue the current legislation.
Chairman HYDE. The gentleman's time has
expired.
Mr. LANTOS. Thank you, Mr. Chairman.
Mr. JUSTER. Thank you.
Mr. LANTOS. And I look forward to working
with Secretary Juster.
Chairman HYDE. Thank you. Mr. Bereuter.
Mr. BEREUTER. Thank you, Mr. Chairman. I
want to commend you for holding these hearings on the Export Administration
Act. I wanted
to
welcome and congratulate Mr. Juster. I think he is extremely well-qualified to
take on the task before him, which is a difficult one, and I
appreciate
the fact that he has come to visit with me about his new responsibilities
before this hearing.
Thinking back, I have spent more time on
this legislative area in my time in Congress than anything else. I recall a
conference that went on for
over
1 year. Staff members met, were married, and had children during the course of
that conference. I remember well then-Congressman
Hamilton
and I trying to work out differences between then-Congressman Gejdenson and
Members of the then-House National Security
Committee
about a previous attempt to extend and revise the Export Administration Act.
Probably, I have no larger interest in
this Congress and what I do here than in exports, but I think the national
security consideration always
must
have a pre-eminent role in our decisions. I have looked at this, as a Member of
the International Relations Committee and as a Member of
the
House Permanent Select Committee on Intelligence, and I think this is a
difficult decision and a difficult process that is not going to be well
understood
by most of our colleagues. It, therefore, places on us a very special
responsibility as we prepare to react and reauthorize the Export
Administration
Act.
My colleagues will know, or should know,
that along with the April 2 report of the Senate Committee on Banking, there
were additional views
filed
by Senator Shelby, who is Chairman of the Senate Select Committee on
Intelligence. I am not sure that I would agree with all of his
concerns,
but he has a list of concerns about the Senate bill that I think would be a
good place to start in asking you some questions, Mr. Juster.
Congressman
Lantos already moved into that area a few minutes ago.
Senator Shelby said that at that time he
had been working with Dr. Rice, Vice President Cheney, and Secretary Rumsfeld
and that they were in
the
process of drafting an Executive order that would, among other things,
establish an interagency dispute-settlement mechanism. Now, I am not
sure
if that has happened or not, and I am not certain, of course, whether he would
find what they did or what they are proposing to do to be
adequate.
But let me mention some of the points of
concern. If you could answer briefly, any kind of comment you might like to
make, Mr. Juster. I will
move
from one to the other as long as my time permits.
Senator Shelby is concerned about a broad,
national security exemption. He lists that first. He indicates, and I must say,
I agree, that the
President
should have complete, unqualified discretion to override the mass-market,
foreign availability, overseas production, or incorporated
parts
provisions of the bill if he finds that the export of a product would threaten
the national security. Do you have any reaction to that most basic
concern
of Chairman Shelby?
Mr. JUSTER. The bill does provide for what
is known as a set-aside by the President if he deems that a mass-market or
parts-and-components
determination nonetheless runs afoul of national security interests.
Mr. BEREUTER. Would that include foreign
availability——
Mr. JUSTER. It does include foreign
availability. In that case the set-aside would last for 18 months while the
President and the Administration
seek
to negotiate with a foreign government to stop making the products available.
However, it would be an indefinite set-aside if the item is
actually
listed on a multilateral regime's control list. So, again, there would be a
national security override unless it turns out the product is not listed
on
the multilateral regime control lists, and the product truly cannot be controlled
even after an extended negotiation period.
Mr. BEREUTER. Thank you. Would it include
overseas production?
Mr. JUSTER. Excuse me?
Mr. BEREUTER. Would it include overseas
production? If, in fact, we can demonstrate there is an overseas production of
components that
are
sent abroad, would he still have that discretion?
Mr. JUSTER. The President still has the
set-aside authority on parts and components. Exactly.
Mr. BEREUTER. And would you say that it
meets his test of having complete, unqualified discretion to the extent that
you have not already
identified
an exception to that matter?
Mr. JUSTER. As I read the proposed
legislation, it does provide for the President, if he deems it important to our
national security, to be able
to
make that set-aside in his discretion.
Mr. BEREUTER. Am I out of time?
Chairman HYDE. You are out of time. Do you
wish additional time?
Mr. BEREUTER. I will come back at an
additional round if you would like to do it that way.
Chairman HYDE. Surely. Very well. Mr.
Menendez.
Mr. MENENDEZ. Well, thank you, Mr.
Chairman.
Mr. Secretary, let me ask you, with
reference to those who criticize the foreign availability and mass-market
exemptions approach, they say
that
expanding those exemptions would, in essence, defeat the whole U.S. controlled
regime by decontrolling any item that would meet these
criteria
and without due regard to its potential to enhance an enemy's military
capability. They assert that virtually any product, including dual-use
items
used for proliferation purposes, would qualify for a mass-market status and,
therefore, require the United States to allow the sale of
practically
anything, even to countries of concern. How would you respond to those
concerns?
Mr. JUSTER. As I tried to indicate, there
are some competing concerns at stake. On the one hand, in the post-Cold War
world, with rapid
globalization
and expanding technology, items that one day might be sensitive and ought to be
controlled may turn out over time to be widely
available
and uncontrollable, and, indeed, one could walk into a Radio Shack store and
purchase such an item. We have seen this phenomenon
occur
over time with computers.
If the controls stay in place in this
country, we are not preventing an importer from obtaining the item; we are
really penalizing our exporters.
Nevertheless,
if U.S. technology is at the cutting edge, as you indicated in your own
statement, and an item might be found overseas, or there may
be
some way of getting hold of it otherwise, first we would have to meet the
rigorous test to see if the item is truly mass-market available on a
widely
distributed basis. But even if it is, the President retains the authority,
first, under enhanced controls, to exempt those mass-market and
foreign-availability
determinations from even being made. In other words, he can say at the outset,
this item is sufficiently sensitive so that it is not
even
going to be subject to a mass-market or foreign-availability determination.
Second, if the item is subject to those determinations and found
to be available overseas, the President nonetheless can say, for reasons of
national
security, that he is going to set aside that determination and protect the item
for national security reasons.
So there is a national security safeguard
and override, in our view. Yet, at the same time, we want to have the framework
in place and the
flexibility
necessary, so that if technological changes are occurring rapidly, and the
global marketplace is changing, we can adapt to those events
without
unfairly penalizing our exporters in ways that do not enhance our national
security.
Mr. MENENDEZ. And, therefore, in your
view, the safeguard that lies with the President is also a vehicle in which all
of those departments
who
may have concerns—the Department of Defense, the Department of State—would be
able to make their concerns known to the President in
terms
of having him potentially use that trigger that he might have?
Mr. JUSTER. That is my belief. At the end
of the day, you cannot, in my view, write into law every single issue that
might occur under an
export
control system. The world simply changes too quickly. You can have in place a
framework for making those decisions. Then you must
have
officials who properly implement matters under that framework. That is what we
believe this bill provides.
Mr. MENENDEZ. Let me ask you a different
question. The Cox Commission talked about China's diversion of
U.S-manufactured,
high-performance
computers for military operations and talked about post-shipment verifications.
Do you believe that post-shipment verifications
can
be effective? Or should the United States approve of technology transfers based
on the assumption that a country's military security and
intelligence
services will have access to it?
Mr. JUSTER. You have to look at these
issues on a case-by-case basis. I certainly think there is an important role
both for pre-
license
checks, where one goes to check out an end user to see if, in fact, we believe
the end use would be as stated in the license application,
and
for post-shipment verifications to see if the product is being used as provided
for in the license application. At the same time, we need always
to
be accumulating our intelligence in terms of what is going on overseas and
whether diversion is a serious risk, and that should play a role in any
license
application decision. What is important to note about the legislation pending
in the Senate is it expressly provides for a role for the
intelligence
agencies in the license-application process.
Chairman HYDE. The gentleman's time has expired.
Mr. MENENDEZ. Thank you, Mr. Chairman.
Chairman HYDE. The gentleman from Arizona,
Mr. Flake.
Mr. FLAKE. The legislation, H.R. 1553—this
is on the MTOPS standard—is now part of a Senate bill. Is the Administration
supportive of
that
provision, eliminating the MTOPS standard?
Mr. JUSTER. The Administration did support
the provision in S. 149 that eliminates the MTOPS requirement.
Mr. FLAKE. Given the concerns that the
Senators noted and given that the Administration has now had time to look at
the Senate bill, are you
insisting
on additional amendments or are you supportive of additional amendments to the
Senate bill? Are you still supportive as it stands?
Mr. JUSTER. Currently, we support the bill
as it stands. As I indicated earlier in responding to Congressman Lantos, I
have not had an
opportunity
to meet with Senators and others who might have particular concerns about the
legislation, and I certainly want to have that
opportunity.
Mr. FLAKE. If H.R. 1553, if that provision
on the MTOPS standard does go into effect, does that represent total decontrol
on computers
subject
to it. In terms of the congressional role, simply leave it up to the President,
using his discretion, to move in if he needs to?
Mr. JUSTER. That would eliminate the statutory requirement for there to
be an MTOPS control mechanism on computers, but it would leave
the
Administration with the discretion to control computers in the way it saw fit.
As I am sure you well know, the MTOPS measurements have
changed
radically over time, and this is exactly the problem we face in trying to codify
in statute certain technology metrics for export controls. We
believe
it is better to have in place a framework that then allows the Administration
to adapt to changes that are occurring in the environment.
Mr. FLAKE. Thank you.
Mr. JUSTER. Thank you.
Chairman HYDE. Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I
was curious, Mr. Secretary, the extent to which we have the administrative
capacity to
actually
meet this 39-day-turnaround goal. I have not delved into the details of the
budget, but in times past, as you know, we have had little pinch
points
for times that were not quite this ambitious. Do you have a sense of what our
capacity is?
Mr. JUSTER. I clearly want to take a fresh
look at the overall licensing process within the department, but my
understanding is that the
Commerce
Department has done rather well in terms of meeting its time commitments. We
have 9 days under the legislation to make sure that an
export
application is in the appropriate form and then refer it to the appropriate
agencies, including the State Department and the Defense
Department.
Then within 30 days they need to get back with a response, or they would
otherwise be deemed to consent to the application.
I think the times when items get delayed
are when modifications need to be made in the export application, when
questions arise, or when
particular
intelligence may be necessary to gather on the item. But we want to strive very
hard to meet those time constraints, and we will be
looking
closely to see if we need additional resources to do so.
I would note that while the number of
license applications has declined over time, the complexity has increased, in
large part due to new
technologies
and, in part, due to the merging in many respects of commercial applications
and military applications of particular technologies. So
you
are correct that it is a complex process, and we really do need to take a fresh
look to see if we have all of the resources necessary.
Mr. BLUMENAUER. I appreciate that you have
explained that you recently arrived to the position, but this is one that I
would appreciate
getting
a little more elaborate response to in terms of what is going to happen with
Commerce and the other related agencies. How do we
anticipate
that we are going to have the staffing to be able to make this work in a
realistic fashion.
I was curious if you have some evidence
that suggests that the current regime has been effective in keeping sensitive
technology out of the hands
of
potentially hostile governments. We really, in terms of the presentation, have
not gone into how effective this has been. I am wondering if there
has
been an assessment that you are aware of that would help us understand whether
or not this is something that has been particularly
worthwhile.
Mr. JUSTER. I do not know if there is an
overall assessment that has been done that reaches a final judgment on that
issue, but my
understanding
is that the current regime has been pretty effective. In fact, 95 percent of
the applications that come in on export matters are
approved
by interagency consensus at the working level, and we rarely see any problem
with those applications. Occasionally, there is a
high-profile
case, and that is why it is important that we have enhanced enforcement
authorities.
Mr. BLUMENAUER. Let me reframe my
question.
Mr. JUSTER. Sure.
Mr. BLUMENAUER. I think that people of
good faith have been working as hard as they could to administer this 1979 act.
My question is,
do
we have some good evidence that the 1979 act, in its application, has been
particularly successful in keeping sensitive equipment and software
out
of the hands of potentially hostile agencies and forces?
Mr. JUSTER. My sense is that it has been
generally successful.
Mr. BLUMENAUER. Could you supply us with
some information that speaks to the success of this regime?
Mr. JUSTER. I will certainly follow up
with that. One of the problems, though, that I want to point out is not just
the issue of whether items
have
been diverted, but the problem that the interagency process has not operated as
effectively as possible. Applications have run into time
delays,——
Mr. BLUMENAUER. Yes, yes, yes.
Mr. JUSTER [continuing]. And people feel
that they have——
Mr. BLUMENAUER. Right, right. They have
been jacked around, or there have been problems.
Mr. JUSTER. Right.
Mr. BLUMENAUER. I concede that, and I
appreciate——
Mr. JUSTER. But on your other point, I
will get back to you on that.
Mr. BLUMENAUER. Does it work? Are we doing
things that other people cannot really purchase elsewhere, steal elsewhere, or
somehow
cob
together? I think that would be good baseline data.
Mr. JUSTER. Sure.
Mr. BLUMENAUER. My final question is
whether or not there is evidence that because of the inflation eroded penalty
levels, that American
business
is, in fact, ignoring the requirements of the act because the penalties are not
strong enough.
Mr. JUSTER. In the brief time I have been
at the department, I have seen a number of enforcement cases where the penalty
levels are rather
low.
Whether that was a reason why a company did not obey the export control
legislation or whether they were simply ignorant of the
requirements,
I do not know. But certainly, I think the low penalty level overall has created
the sense that if a violation occurs, it is not as serious
an
economic hit to a company as it might otherwise be.
Chairman HYDE. The gentleman's time has expired. The gentleman from
Virginia, Mr. Cantor.
Mr. CANTOR. Thank you, Mr. Chairman. I
want to thank the Undersecretary for being here. I just want to refer back to
your testimony
where
you say if the product is found to be readily available to foreign countries
from sources outside the U.S., or if the product is found to be
widely
available in the U.S., the government must remove controls on the product
unless doing so would be inconsistent with our international
commitments,
such as commitments in the multilateral export control regimes or those that
threaten our national security.
And I ask the question, can you give me a
specific example, specifically referring to a constituent company that is in my
district that
manufactures
a fiber, a fiber that is applicable in military use, and I know is one of these
that is deemed to be somewhat of a threat to the national
security,
although they claim there is widespread availability of a similar product
internationally. So I am just trying to grapple with the sense of
how
can something be widely available in the international market, but yet we deem
it threatening to our national security? So we are not going to
let
our company be in there to compete in the market for this fiber?
Mr. JUSTER. Well, there could be a number
of issues. For example, is it truly the same product, or is the U.S. product
better in terms of
quality?
Are the price levels truly the same, or is our price level much lower, thereby
potentially making it a much more readily available product?
Where
is the product being made available? Do we have a way of controlling the
availability by negotiations with a foreign government? Is it a
country
that is a member of a multilateral control regime and, therefore, has agreed to
control the product, and is there an enforcement issue that
they
have to address?
These issues need to be analyzed to determine whether, in fact, this is
truly an item that is not controllable because it is available through broad
distribution
channels at commercially available prices with applications that would be the same
as we would have in this country (and, therefore,
by
denying a license we would not be penalizing the importer but would be
penalizing the exporter); or are there circumstances that, while the
product
might seem to be widely available, it truly is not, or is a slightly different
product, and for national security reasons, we think we ought to
protect
our technology because it does make a difference? And you have to make these
determinations on a case-by-case basis.
Mr. CANTOR. Sure. I guess it all is very
subjective as far as the Administration is concerned, and obviously the
exporter wanting to increase
that.
Do you see the overall effect of the Senate bill increasing the export of goods
from this country?
Mr. JUSTER. Well, I do not think it can be
stated in that fashion. The goal is that we might be controlling fewer items
but in a tighter way. As
the
saying goes, having higher walls around fewer items, in order to focus on those
items of greatest sensitivity in terms of their ability to affect our
national
security. We need to make sure that we have in place excellent controls on
those items and seek to do so in a multilateral context with
significant
penalties. As to items that really are not controllable, and for which the
technology has long since become widely available, and does
not
threaten our national security, we need to let those items be sold without
diverting our resources in terms of licensing them.
So, on the one hand, the Senate bill might
lead to increased exports of certain items; on the other hand, I would hope
that we would make an
effort
to restrict other items that are of greater sensitivity.
Mr. CANTOR. Do you see the bill that you
support as making the test, if you will, somewhat more objective rather than
subjective?
Mr. JUSTER. There are a number of steps in
the bill that one has to go through in terms of undertaking certain analyses,
whether it be for the
mass-market
determination or the foreign availability determination or on foreign-policy
controls, which are unilateral controls that on a
case-by-case
basis may make sense. There is an analysis that one has to go through in terms
of what is the objective of the control, how readily
achievable
is it, and monitoring whether we are, in fact, achieving that goal over time.
So I think in that regard, these disciplines provide a level of
objectivity
to the licensing process. On the other hand, there are safeguards to ensure
that, if release of an item or decontrol would threaten
national
security, such decontrol should not occur.
Mr. CANTOR. Thank you. Thank you, Mr.
Chairman. I yield back.
Chairman HYDE. The gentleman from Florida,
Mr. Hastings.
Mr. HASTINGS. Thank you very much, Mr.
Chairman. And first, Mr. Chairman, let me thank you for holding this hearing,
and,
Undersecretary
Juster, I thank you for your presentation.
Rather than get into a detailed series of
questions, I would like to pick up where Congressman Bereuter left off, not so
much with questions, but
with
a suggestion that he offered. That is that the complexity of the issues that we
are dealing with is going to cause a significant number of
Members
of the House of Representatives not to be in tune with this matter, which leads
me, then, to offer a recommendation to you. Obviously a
part
of your role in trying to see to it that this act is passed is to have a
political component to it. The political component generally would follow
having
good information.
Generally, those of us that call upon the
various secretaries' good offices get great responses and come to us and give
us appropriate briefings,
and
we go forward. I suggest that you, because of its complexity, that you may wish
to try and learn of those Members that you think are up to
speed,
and the few that may have interests, and seek them out to offer further
briefings and better understandings to them.
I listened to you in response to
Congressman Flake's question on used MTOPS and metric, and, I mean, you know,
by and large, most people
do
not know what the hell you're talking about, Congress people and other people.
So we have to figure out a way to break this down.
I followed the Cox report. I have had some
insight with reference to Mr. Goodling on encryption. Just that subject alone
is enough, as it
pertains
to these things that you have oversight of, to deal with trying to get more
knowledge to more people so that there would be better
understanding.
Now, my only question would be in response
to Congressman Blumenauer, you said that, or seemed to say that, there may be
some situations
where
weak penalties have caused companies—either they did not know what was going on
or there was very little in the way of real
enforcement.
How, then, can the United States persuade
other major exporters to cooperate in controlling exports of dual-use goods and
technology that
threaten
our mutual security, and how can we encourage punitive action against those
individuals or groups or countries that violate international
norms?
I mean, what are we going to do in the multilateral arena? If we are weak
already, how are we going to tell somebody else to be strong?
Mr.
JUSTER. Thank you very much, Congressman. Let me first say that I fully
appreciate your comments about the importance of myself and
my
bureau being available to Members of Congress and to your staffs to try to
explain the complexities of this legislation. I pledge to you that we
are
available and will make ourselves available to do so.
This is most important. We are public
servants. We serve the public, and it is very important that we make every
effort to respond in a timely
and
effective way to any inquiries you have and, in addition, to seek out Members
and their staffs to explain the legislation and respond to your
questions.
I think you make an excellent point that
we have to get our own export system fixed before we can persuasively argue to
others that they need
to
do the same to their export control system. One of the important incentives for
companies to put in place effective compliance systems is to
have
sufficient penalties and enforcement authorities, that they recognize there is
a big downside risk if they do not have a compliance system in
place.
Part of what my bureau does is try to work
with foreign countries, especially some of the new, emerging democracies as
well as countries that
are
important transit points for trade, to help them put in place effective export
control systems and to have technical training for companies in the
emerging
private sectors to develop compliance programs. That is an important function
of what we do in conjunction with the State Department,
and
I think you are 100 percent correct that we have to make sure our own house is
in order to be effectively communicating that message.
Mr. HASTINGS. Thank you very much, Mr.
Chairman. I yield back the balance of my time.
Mr. JUSTER. Thank you.
Chairman HYDE. Thank you. Mr. Rohrabacher?
He did? I am sorry. I have pushed you ahead of Mr. Gilman, which is a cardinal
offense.
Mr. ROHRABACHER. I would never want to
step in line in front of Mr. Gilman.
Chairman HYDE. Well, I share your
sensitivity. Mr. Gilman.
Mr. GILMAN. Thank you, Mr. Chairman. I
want to welcome Undersecretary Juster, and we welcome you to our hearing. We
have had
contact
in the past,——
Mr. JUSTER. Yes.
Mr. GILMAN [continuing]. And we appreciate
all your background. It is suitable certainly and credible for this position
that you are now
assuming.
I note with a great deal of interest,
since we are considering ILSA reenactment, that you wrote some articles about
the myth of the
IRANGATE
and the Libyan sanctions, a national response. I would welcome your thoughts
about the importance of ILSA, since I have been one
of
the sponsors of that measure, along with former Senator D'Amato. We are still
very much concerned about Iran's proliferation of weapons of
mass
destruction and their being classified as a national security threat by our
President. I would welcome your thoughts about ILSA
reauthorization.
Mr. JUSTER. Well, as you have noted,
Congressman, I have over the years looked at the subject of sanctions, both on
a multilateral and
unilateral
basis. Let me step back from ILSA and more broadly discuss my philosophy in
that regard.
I
should note that ILSA is administered by the Department of State, and I know
that they are undertaking a review and examination of that
legislation.
But I think at the outset one would clearly say that having sanctions on a
multilateral basis is the goal, and it is the most effective way to
proceed.
One first wants to strive, whether it relates to Iran, Libya, or elsewhere, to
have multilateral sanctions, and we have done that at times
with
Libya. After Pan Am 103, we were effective in getting other countries to join
us with sanctions.
At the same time, sometimes we need to
apply sanctions unilaterally on a case-by-case basis if it makes sense as an
overall component of our
foreign-policy
goals and objectives. And I do not really want to pre-empt at this point the
Administration's internal review of the ILSA legislation
and
the various options available, but I think it is important to note that one
should not simply say that unilateral sanctions cannot be effective. You
really
have to look at it in the context of individual decisions.
One concern at times with ILSA is its
effect on other countries and the objections we have received from the
Europeans. I think one has to
look
at those objections in the context of the overall goals of the legislation, and
that is what the Administration is doing at this time.
Mr. GILMAN. Mr. Secretary, about a year
ago I sat with one of our major exporters of aircraft, and he had a graphic
illustration of the
amount
of bureaucracy that they were confronted with in order to get licensing and how
the delays were incorrigible. And we have a chart here
indicating
what an entrepreneur has to go through to get licensing. What is the average
length of time, do you know, that it takes to process export
licenses
at the present time?
Mr. JUSTER. As I mentioned, I think 90
percent of export license applications are approved by interagency consensus at
the working level.
Therefore,
the time frame, I believe, is very close to the statutory time frame that is in
the legislation being proposed in the Senate of approximately
30
to 40 days. However, more complex cases take a longer period of time.
Part of the difficulty in this area is
that in a complex case, we want to ensure that the intelligence community has
the opportunity to provide its
input
and that the agencies with national security and foreign-policy concerns, such
as the State Department, the Defense Department, and on
occasion,
the Energy Department, have an opportunity to provide their input, and that
disagreements will be raised to a political level. All of this
will
take some time.
Nonetheless, it is important that we have
time limits and that we push that process along. This is one of the goals that
I have, and I have spoken
informally
with my counterparts at the State Department and the Defense Department, to
make the interagency process work as effectively as
possible
in a timely way, as transparently as possible, so that even if a company will
be told that the license will be denied, they will not just sit
there
waiting indefinitely for a decision; they will have an answer and a reason.
Mr. GILMAN. Well, the example they had
illustrated to us showed it went on for more than a year, and we would hope
that our
manufacturers
are not going to be confronted with that kind of a bureaucratic delay. If there
is a problem, it should be examined but should be
examined
efficiently and expeditiously.
Mr. JUSTER. I share that concern.
Mr. GILMAN. I appreciate that. Mr.
Secretary, do we have a memorandum of understanding or some kind of an
agreement in place with
China
regarding our right to perform post-shipment verifications inside that country,
and are there adequate resources and personnel in place to
monitor
post-shipment verifications in that country and other key markets?
Mr. JUSTER. Yes. We do have an agreement
with the Chinese. It was signed, I believe, in 1998, an end use agreement. I
believe we have
conducted
approximately 150 post-shipment verifications since that time. We have one
attache in Beijing, and we have used what are known as
''safeguard
teams,'' in which teams have traveled to China on a case-by-case basis to
examine different goods.
Right now, under legislation, we are
required to do post-shipment verifications on high-performance computers. If
the amendment that would
take
that requirement out of the current legislation were passed, that has either
been presented in the House or is in the Senate Bill 149, that would
free
up some resources to do other types of post-shipment verifications.
Some of the post-shipment verifications we
do for high-performance computers relate to U.S. subsidiaries operating in
China. These are cases
where
we usually do not have a security concern but are required by law to do these
post-shipment verifications. Without that requirement, we
would
have the flexibility to do post-shipment verifications in cases that we really
thought merited it the most.
Chairman HYDE. The gentleman's——
Mr. GILMAN. Thank you, Mr. Chairman.
Mr. JUSTER. Thank you.
Chairman HYDE. Mr. Crowley.
Mr. CROWLEY. Thank you, Mr. Chairman. Mr.
Secretary, thank you for being here today. I am sorry. I have another hearing
going on at the
Committee
on Financial Services, so I will be going in and out. I was here when Mr. Flake
from Arizona questioned you, and I think he and I are
in
the same line of thought in that questioning, so I will not belabor that.
But what I would ask is, in the whole
debate that we have been having on the issue of MTOP and metric and its
outdatedness. Is not it true, if
we
were to do away with that, that there would still be other controls that would
still be in place dealing with the export of computer technology?
Mr. JUSTER. Yes. First, even though there
might not be a statutory requirement regarding MTOPS, the Administration would
make its own
internal
review as to what, if any, other types of controls we should put on the sale of
high-performance computers. In addition, the framework for
export
controls itself provides a number of safeguards. Items, whether they be
high-performance computers or otherwise, would not be exported
to
terrorist countries. Other locations, such as China, are on a very restricted
list in terms of what they might receive.
We also have, as I mentioned, what is
known as ''catch-all authorities.'' If there was a determination that a
particular end user would not make
proper
use of a computer that we regarded as sensitive, we could control the computer
export. And the legislation pending in the Senate would
provide
enhanced controls as well as set-aside authority for the President to say that,
for national security reasons, regardless of the fact that we
might
not have particular restrictions on high-performance computers, a particular
computer should not be sent to a particular importer.
Mr. CROWLEY. Thank you. I yield back the
balance.
Chairman HYDE. The gentleman from
California, Mr. Rohrabacher. Huntington Beach, to be exact.
Mr. ROHRABACHER. Thank you very much, Mr.
Chairman. First, good luck, Mr. Undersecretary.
Mr. JUSTER. Thank you.
Mr. ROHRABACHER. You have got a very tough
job, and I wish you and your staff and the new Administration success. I hope
you can do
your
job effectively because we have had 8 years of national disgrace concerning the
export controls on deadly technologies during the last
Administration.
As I noted in the meeting that I had with
you in my office, 10 years ago Chinese rockets were relatively ineffective. Mr.
Chairman, nine out of
ten
of their long-range rockets would be launched but would explode, would not be
able to reach their target, and were ineffective. For some
reason,
after a 10-year period, Chinese rockets are now very effective. They carry a
much better payload. Their guidance systems are upgraded
and
are quality guidance systems, and nine out of 10 Chinese rockets now succeed in
the mission that they are intended for once launched, and
they
carry multiple payloads.
Something happened in this last 10 years,
and many of us believe what happened was that American industrialists betrayed
the national security
interests
of the United States and provided America's worst potential enemy technology
that could be used to kill millions of Americans. That is
pretty
damn bad, and it is very serious.
Unfortunately, what happened during the
last Administration, it seems that when we were trying to do business with
friends, there were all kinds
of
problems and delays and systems created in order to create roadblocks in
dealing with friends, but all of the systems that were put in place to
try
to protect us against deadly weapons technology transfers to potential enemies
just collapsed. All of the safeguards just collapsed. Now, is
there
anything that you can tell me that is going to make me more comfortable with
what is going to happen in this Administration as compared to
the
last one?
Mr. JUSTER. Well, as I mentioned when we
met, I myself am fully committed to protecting this nation's national security.
My background at
the
State Department speaks to that concern, and I know that the Administration
also shares that concern. I can only pledge to you that we will
be
trying to implement our own controls in a way that protects national security.
I do note that China is what is known as a
''Tier 3 country.'' It is on the most restrictive list but for those nations
that are deemed to be terrorist
nations.
I cannot speak to individual decisions made previously, but we obviously want
to get the full input from the State Department and the
Defense
Department on these issues and consider each case on the merits in the best way
possible.
Mr. ROHRABACHER. I believe in free trade
between free people. I think that basically between free countries and
democratic countries
that
we need to tear down the impediments between commerce and contacts between our
peoples. Between countries that are run by dictators, it
is
essential that we ensure tyrannical regimes, especially tyrannical regimes that
are belligerent to our interests and to the United States of America
itself,
that trade does not in some way bolster their abilities to have leverage on us.
What are we going to do to make sure—let
us go to the first part of that—what are we going to do to make sure that with
free countries and
countries
like, let us say, Belgium, as compared to Iran, that people are not going to
have to have deals nixed because they have not been
approved
in the time period necessary?
Mr. JUSTER. You put your finger on an
important issue overall. We certainly want to make sure that export-license
applications that do not
raise
issues of national security are dealt with in an expeditious and effective way.
As I indicated in my testimony, one of my own priorities is to try
to
enhance our multilateral controls with our partners and allies in terms of the
export of sensitive technology to countries outside the sphere of our
friends
and allies.
One of the problems that we have to face
and we will have to deal with is that a lot of our allies and partners do not
look at the world the same
way
that we do, and that relates to a variety of countries that may be of more
concern to us than they sometimes are to our partners. The real
issue,
now that CoCom no longer exists, and we do not have the same discipline that we
had under that system, is how can we enhance our trade
with
partners and allies and yet still try to keep in place an effective,
multilateral system that keeps sensitive items from countries of concern?
Chairman HYDE. The gentleman's time has
expired.
Mr. ROHRABACHER. Just one last note, Mr.
Chairman, and that is the last Administration failed miserably to protect our
national security
interests.
Big business, for whatever reason, decided that they could betray our national
security interests and put us in jeopardy. I wish you
success,
as I said in my opening statement, and I look forward to working with the
Chairman and others on this Committee to work with you to
make
sure the system works for our country in all of its elements, so thank you.
Mr. JUSTER. Thank you.
Chairman HYDE. The gentleman from New
Jersey, Mr. Payne.
Mr. PAYNE. Thank you very much. I am sorry
that I also missed your testimony, and I just have a basic question. I hope it
is in line what this
is
all about.
There has been a lot of exploration in
Sudan for oil. There has been the building of a massive pipeline. There are
continued exploration and
drilling
and so forth. Are there any indirect ways that the U.S. companies are involved
with this business indirectly through multinationals or with
direct
participation? I know that Sudan is supposed to be on an embargo list, and as
you know, it is probably one of the most pariah governments
in
the world, with the practices that go on there. And I wonder if you could just
tell me how we compare with the Sudan?
Mr. JUSTER. As you indicated, Congressman,
Sudan is among the countries deemed to be a terrorist country and is on the
embargo list. I am
not
aware of any U.S. participation in oil operations in that country. I will look
into that question further and get back to you if I learn anything
otherwise.
But at this point I do not know any information to the contrary.
Mr. PAYNE. Thank you. Okay. One last portion to that. We think that
countries that are pariah countries, that indirectly have access to capital
markets
on Wall Street, I feel that we should not take any further, where there should
be a way to prevent, for example, the Talisman Oil
Company,
which is made up of a Canadian company and PetroChina, but they have access to
capital markets in the U.S. to build a pipeline and
to
drill for oil and to move that government along.
Do you have any thoughts about as not
directly hardware or computers or, you know, the whole evil empire that my
friend from California
always
talks about, how terrible that last, 8-year Administration? Of course, he never
talks about who all of these businessmen were. They are not
Democrats.
They do not live in my district. But anyway, have you looked at that kind of
access to capital markets?
Mr. JUSTER. I personally have not gotten
involved in that issue at this time. The financial controls are administered by
the Treasury
Department's
Office of Foreign Asset Controls, and I know that they do try to monitor these
issues quite closely. But I would be glad to speak to
them
and find out more about that issue as well.
Mr. PAYNE. That would be good. Thank you,
Mr. Chairman. I yield back.
Chairman HYDE. Thank you. Mr. Bereuter.
Mr. BEREUTER. Thank you, Mr. Chairman. I
am going to continue my list of questions based upon Chairman Shelby's
dissenting views. But
I
did want so say something with respect to my service on the Cox Committee. I
think your department has a special burden to bear now and
work
to restore the reputation of the Department of Commerce because it was in
periods of time in previous Administrations so politicized. I think
you
have that burden.
As a Member of the Cox Committee, I do
recall very vividly that we felt, by unanimous decision, that one, perhaps two,
U.S. companies had
conveyed
sensitive and classified information to the Chinese and that potentially now
makes Chinese missiles more accurate and dependable. As
far
as I know, there has been no penalty assessed to that firm or those firms.
Going on with the list, Chairman Shelby
makes the point that while there is a presumption that our national security
concerns throughout should
have
only equal or lesser weight than commercial concerns, that troubles him; it
troubles me. While there is an involvement of the State
Department,
the Defense Department, at least at that time that he wrote the this letter,
their involvement was not required on the appeals board.
Mr. JUSTER. Well, let me describe how the
process would work under Senate Bill——
Mr. BEREUTER. If you could do it fairly
briefly but completely.
Mr. JUSTER. Yes. There is full involvement
by State and Defense, first at the working level in terms of making decisions
on the license
application.
At the next level above the working level—what is called the ''operating
committee''—State, Defense, Commerce, and at times,
Energy,
would meet, and the decision would be made at that point by a Commerce
Department official, with input from the others, as to whether
to
grant a license, and if so, whether to have conditions on it or anything else
of that nature. That decision, however, can then be appealed to the
political
level of the assistant secretary, at which all agencies have an equal voice.
Next is the secretary level, and if need be, the presidential level.
And as I indicated as well, the legislation ultimately provides the
President with the discretion to set aside any decision for national security
reasons
or to exempt the export application from this process in the first place for
national security reasons. So I think that does tip the balance in
favor
of national security in terms of the President's discretion. I also believe
that the other agencies do have a full say in the process.
Mr. BEREUTER. So how, Mr. Juster, does he reach
the conclusion that the State and Defense are not required by the legislation
to have a
placement
on the appeals board?
Mr. JUSTER. I am not 100 percent certain
and would want to chat with Senator Shelby about that.
Mr. BEREUTER. Well, I think we would like
to know that, too.
Mr. JUSTER. I think he may be referring to
the operating-committee level, which is where the Commerce Department makes the
decision,
and
in a sense, that may be viewed as the appeals board from the working level. But
there are then levels above that in which State, Defense, and
Commerce
have an equal vote in the process.
Mr. BEREUTER. He reaches the conclusion
that the regulations may be promulgated without the concurrence of the national
security
agencies,
and that is something that would concern me.
Mr. JUSTER. The regulations would have full interagency clearance. We
would both draft the regulations with input from the State
Department
and Defense Department, and then they would go through the OMB clearance
process, which would require input from those
agencies.
If there were any disagreement, that, again, would be raised to the
presidential level, if necessary. Obviously, we would like to reach
consensus
and avoid that from occurring.
Mr. BEREUTER. He makes further comments
about problematic, mass-market provisions that I will not go into. But on
incorporated parts
and
components, what he calls ''loophole,'' it says this legislation prohibits
export controls on items otherwise controlled if they are incorporated
into
production which the control component comprises 20 percent or less of the
total values or if the controlled item is shipped overseas for final
assembly.
And he says this kind of exemption is simply counterintuitive.
Mr. JUSTER. My understanding is that this
provision is really meant to cover an item such as the Sony Play Station, where
you might have a
microprocessor
incorporated into it, but someone would not be purchasing a Sony Play Station
to obtain a microprocessor.
Mr. BEREUTER. That seems to be a rather
harmless example, but not all examples are so harmless.
Mr. JUSTER. If, in fact, there were a case
where it seemed like someone was purchasing an item solely for the purpose of
obtaining the part
or
component within that item, and it was a part or component that was easily
separable from the item and not integrally a part of it, we have the
authority
under the legislation pending in the Senate both to exempt that item from being
available under the enhanced control provision or to set
aside
a determination that the item would be available based on the President's
decision that national security should preclude us from exporting
the
item.
Mr. BEREUTER. Mr. Chairman, I have two
more points. May I have unanimous consent for two more minutes?
Chairman HYDE. You certainly may. Mr.
Cantor has a question as well.
Mr. BEREUTER. All right. Well, I will
defer to him.
Chairman HYDE. No. We will do you, and
then we will do Mr. Cantor.
Mr. BEREUTER. Two points, and I will hit
them both, Mr. Juster, so you can respond.
Mr. JUSTER. Sure.
Mr. BEREUTER. On foreign availability, his
argument is that the degree to which an item is available from foreign sources
is a factor that
should
be considered but should not automatically result in elimination of the export
control on an item. And the second and final point of his six:
Deemed
exports are not covered. He says that S. 149 does not cover the transfer of
knowledge, information, or know-how of controlled goods
or
technologies to foreign persons or entities, whether to the United States or
abroad. How would you address those two final points?
Mr. JUSTER. Okay. Thank you, Congressman.
Let me address the second point first. On deemed exports, the way I read, and,
I think, the
Administration
reads, the definition of an export, it includes the transfer of technology, so
that a deemed export, which involves the transfer of
technology
and know-how to a foreign national in the United States, would be covered by
the legislation. That is certainly our reading, and we,
therefore,
view deemed exports as fully subject to export controls.
Mr. BEREUTER. But it seems to me that
technology implies something that is physical, whereas information or know-how
is certainly not
physical.
However, it can be just as damaging.
Mr. JUSTER. I take your point. I can only
say that I think both we and the Senate staff, as I have had my conversations
with them, regard
deemed
exports as covered by the legislation. If that is in need of a technical fix,
that is certainly something we would look at.
Mr. BEREUTER. I think so. Could you
address the other one?
Mr. JUSTER. On foreign availability, as I
mentioned, there is a rigorous test and analysis that must be undertaken to
determine whether an
item
is deemed to be foreign available. Then if it is, the item would be
decontrolled unless the President steps in and says, for national security
reasons,
the item should not be, or as I have indicated, before such an analysis even
takes place, exempts the item as too sensitive even to
undergo
a foreign-availability analysis. So the decontrol is not automatic; there are
national security safeguards.
Mr. BEREUTER. It is automatic unless he uses the waiver.
Mr. JUSTER. Either the enhanced control to
exempt the item at the outset or the set-aside authority at the end of the day.
Mr. BEREUTER. Mr. Cantor, I appreciate
your patience. Thank you, Mr. Chairman.
Chairman HYDE. Thank you. Mr. Cantor.
Mr. CANTOR. Thank you, Mr. Chairman. I
just want to lastly follow up on the line of questioning about the timeliness
of response in licensure
approval,
and I want to ask your opinions about a GAO inquiry that is about to be
released shortly, from what I understand.
I think the results of that inquiry find
that it takes longer to get an approval from Commerce than it does from State,
on average, from
Commerce,
50 days, than it does from the State Department's Office of Defense and Trade
Controls. And this is despite the fact that State has
less
than half the staff and that they are reviewing 46,000 licenses, while Commerce
is only reviewing 11,000, and that Commerce has over four
times
the budget. So do you have any reaction, and what are your thoughts about the
GAO inquiry?
Mr. JUSTER. With respect to the GAO
report, we have, in fact, received a draft of that and feel that it
misunderstands in many respects the
licensing
process that goes on in the Commerce Department. Some of the comparisons they
make between Commerce and the State Department
are
inaccurate. We have provided them with extensive comments in that regard. Let
me just mention a few.
A
number of export licenses that the State Department administers under its
munitions controls go to NATO countries. Those require very little
time
and analysis as opposed to exports that might go to non-NATO countries. You
really have to separate out the time frames to make a
comparison
with the Commerce Department. The GAO built into their Commerce Department time
frame periods those instances where we have
referred
a license application to the intelligence community to provide input or have
returned the application to the exporter for clarification. So
there
are a number of time periods incorporated into the GAO's 50-day response figure
that should not be in there in terms of the amount of time
that
the Commerce Department actually reviews the application.
In addition, as I mentioned, we refer all
of our applications to State and Defense, and that time frame has also been
included in there. We have
provided
comments in detail to the GAO, and hope they take them into account, regarding
a number of the differences that we believe exist in the
two
licensing processes and a number of inaccuracies that we think occurred in
terms of measuring our overall time frame.
Mr. CANTOR. Thank you.
Mr. JUSTER. Sure.
Mr. CANTOR. Thank you, Mr. Chairman.
Chairman HYDE. Thank you. And, Mr.
Secretary, we do have some questions that will not be asked at this hearing,
but we will submit them
to
you in writing if we could.
Mr. JUSTER. Thank you. Sure.
Chairman HYDE. And I want to thank you for
your testimony today. You have been very patient and very instructive, and we
look forward to
working
with you in the future, and thanks so much.
Mr. JUSTER. Well, thank you very much, Mr.
Chairman. This is my first visit to the Committee. I am sure I will have many
more, and I greatly
look
forward to working with you and your colleagues and staff on these and other
issues.
Chairman HYDE. You will be most welcome.
Mr. JUSTER. Thank you.
Chairman HYDE. The Committee stands
adjourned.
[Whereupon, at 11:54 p.m. the Committee was adjourned.]