Since my last report to the Congress, there have been several significant developments in the area of export controls:
Wassenaar Arrangement for Export Controls for Conventional Arms and Dual-Use Goods and Technologies.
The Bureau of Export Administration (BXA) of the Department of Commerce participated in several rounds of negotiations to establish a successor regime to COCOM. On December 19, 1995, 28 countries (former COCOM partners, cooperating countries, Russia, and the Visegrad states) agreed to establish a new regime, called the Wassenaar Arrangement, to control conventional arms and munitions and related dual-use equipment. The Wassenaar Arrangement will be headquartered in Austria. The first plenary meeting of the new regime was held in Vienna in April 1996.
The Australia Group (AG) is an informal multilateral body formed in 1984 to address concerns about proliferation of chemical and biological warfare capabilities. Currently, 29 governments, representing supplier or producer countries, are members. The AG operates by consensus.
-- At the October 1995 plenary meeting, the Biological Weapons Experts conducted a technical review of the AG biological control list, which has been in force for 3 years. There was agreement on tightening the controls on certain microorganisms and equipment (e.g., fermenters) that can be used in the production of biological weapons. Regulations are being drafted to reflect these changes in biological weapons export controls.
-- The AG also agreed at the October 1995 plenary to tighten controls on license-free sample shipments. Accordingly, BXA will monitor its recently revised sample shipments rule to determine if it should be modified.
-- The United States shared its experiences at the October 1995 meeting in implementing its chemical mixtures regulations, and is seeking a comprehensive understanding of how other members implement the AG mixture controls.
-- Members agreed to U.S. proposals at the October 1995 meeting for intensified information exchange and other measures to better address chemical and biological warfare terrorism.
The Nuclear Suppliers Group (NSG), currently composed of 32 member countries, maintains a control list of nuclear related dual-use items and guidelines for their control.
-- NSG member countries have recently completed a technical review of the dual-use control list and are presently engaged in restructuring the present control language to better reflect nuclear proliferation concerns as well as to allow the more effective implementation of export controls for these items.
-- The Department of Commerce continues to issue license denials for NSG-controlled items as part of the `no-undercut' provision. Under this provision, a denial notification received from an NSG member country precludes other member countries from approving similar transactions, thereby assuring that the earlier denial is not `undercut.' There are procedures for member countries to consult on specific denials if they wish to disagree with the original denial.
The Missile Technology Control Regime (MTCR), founded in 1987 and currently comprising 28 member countries, is an informal group whose members coordinate their national export controls to help prevent missile proliferation. Each member country, under its own national laws, has agreed to abide by multilateral MTCR Guidelines for controlling the transfer of items that contribute to missile programs. These items are identified in an MTCR Equipment and Technology Annex to the Guidelines.
-- The Department continues to implement the Enhanced Proliferation Control Initiative (EPCI), which is a `catch-all' control on items that are not on the MTCR Annex, but could be used directly in projects of missile proliferation concern. As a result of U.S. leadership, similar controls have now been adopted by over half of the MTCR members.
-- As a consequence of bilateral missile nonproliferation agreements with Russia and South Africa, those two countries have conformed their national export controls to MTCR standards and were formally admitted to membership in the MTCR in October 1995.
-- The United States also supported Brazil's candidacy for membership in the MTCR, and Brazil was accepted unanimously in October 1995.
As part of the Administration's continuing effort to encourage other countries to strengthen their export control systems, the Department of Commerce and other agencies conducted a wide range of discussions with a number of foreign countries.
In October 1995, BXA hosted a large delegation of senior Russian industry executives and government export control officials. They met in Boston and in Washington, D.C., to discuss industry-government cooperation on export controls. The purpose of this program was to bring together U.S. and Russian business executives and government officials to discuss such issues as the administration of export controls, legal reform, licensing, industry compliance, and enforcement.
In December 1995, BXA participated in an interagency delegation to a briefing hosted by the Russian government on the operation of Russia's export control system. Russian ministries, organizations, and enterprises gave presentations.
In November 1995, BXA participated in an interagency delegation as co-hosts with Turkey in an export control forum for seven Central Asian and Caucasus states (Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan). Presentations were given on legal, legislative, and non proliferation issues, including licensing, enforcement, and industry-government relations.
In late 1994, BXA created the Nonproliferation and Export Control Cooperation (NEC) team to marshal BXA's resources and expertise to support U.S. export control cooperation programs in the former Soviet Union, other newly emerging states in the Central Asian, Transcaucasian, and Baltic regions, and certain central European states. From August to December 1995, the NEC team, with representatives from the Departments of State, Defense, and Energy, and the U.S. Customs Service, coordinated 14 cooperative exchanges with Belarus, Kazakhstan, Ukraine, Lithuania, Bulgaria, Romania, and Poland. These cooperative exchanges focused on the legal bases for export control systems, regulatory procedures, licensing processes, preventive enforcement mechanisms, industry-government relations, and systems automation.
For almost three decades, the EAR have been amended frequently to respond to various national security, nonproliferation, and foreign policy crises. Until recently, the EAR had never been subjected to a systematic and comprehensive review for the purpose of coordinating and restructuring these many amendments to create a set of regulations that is internally consistent and easier to use. Last May, BXA published a proposed rule that included a comprehensive revision and reorganization of the EAR that will, in accordance with the goal set by the Trade Promotion Coordinating Committee, `make the regulations more user-friendly.' The BXA has involved the exporting community in every step of the process, releasing early drafts as `discussion packages,' conducting `town hall'-style-fora in 13 States, and redrafting to incorporate the many industry comments and suggestions received once the proposed rule was published. In November 1995, BXA circulated a draft interim rule for interagency review. The BXA delivered the interim rule to the Federal Register in February for publication in March.
BXA published a final rule on February 14 to expand general license eligibility to most destinations to include certain semiconductor manufacturing equipment: ion implanters, etching systems, chemical vapor deposition equipment, certain `cluster tools,' masks, reticles, and test systems.
On January 25, BXA published a rule that implements the President's October 6, 1995, announcement of a major reform of computer export controls. The rule liberalizes export controls on all computers, and establishes four tiers of countries and a new policy for each tier. This new rule will provide significant benefit to the international competitiveness of the U.S. computer industry. This rule was effective January 22.
On February 1, BXA published an interim rule to amend a number of Export Control Classification Numbers (ECCNs) in order to make the U.S. Nuclear Referral List conform more closely with the items contained in the multi-lateral NSG Annex published by the International Atomic Energy Agency and adhered to by the United States and other subscribing governments in the NSG. In addition, this rule removed Poland from general license General Nuclear Suppliers Group (GNSG) restrictions, and added Argentina, New Zealand, South Africa, and South Korea to the countries that are eligible to receive exports under general license GNSG.
In December, BXA circulated for interagency review a draft rule that will establish foreign policy controls on exports to Sudan. New controls are being published with the comprehensive revision and reorganization of the Export Administration Act. These controls are consistent with the Secretary of State's determination that the Government of Sudan has repeatedly provided support for acts of international terrorism.
On December 20, 1995, BXA published a final rule that expands general license for exports for civil end-users in countries of the former Soviet Union, Romania, and the People's Republic of China (GLX) eligibility to include: microprocessors with a composite theoretical performance not exceeding 500 million theoretical operations per second, memory integrated circuits, certain digital integrated circuits, field programmable gate arrays and logic arrays, portable (personal) or mobile radio telephones not capable of end-to-end encryption, and software to protect against computer viruses. In addition, revisions were made to expand eligibility for general license for technical data (GTDR) with written assurance to include certain virus protection software.
On November 28, 1995, BXA published a final rule that expanded foreign policy controls on specially designed implements of torture. Previously, such implements were controlled as `crime control and detection' commodities in the same category as handcuffs, police helmets, and shields. As such, they did not require a validated license for export to member countries of the North Atlantic Treaty Organization (NATO), Australia, Japan, or New Zealand. This new rule created a control list entry requiring a validated license for export of specially designed implements of torture to all destinations, including Canada. Applications for such exports will continue to be subject to a general policy of denial.
On October 19, 1995, BXA published a final rule that implements the agreement reached by the AG in December 1994 on certain technical revisions in the AG's harmonized controls on chemical weapons precursors. The rule refines and clarifies the scope of controls on exports of sample shipments and mixtures containing controlled precursor and intermediate chemicals. The rule also revised the list of countries eligible to receive AG benefits under U.S. regulations by adding Poland, the Slovak Republic, and Romania.
In late 1994, the National Security Advisor directed that an interagency study be prepared to assess the current and future international market for software products containing encryption (PRD/NSC-48). The directive was in response to industry claims that U.S. export controls on certain powerful encryption technologies were providing no benefit to national security, and were hampering the software industry's ability to compete in the global marketplace. On January 11, the Department of Commerce announced the public release of the study, jointly prepared by BXA and the National Security Agency. The study provides an in-depth evaluation of the international market, reviews the availability of foreign encryption software, and assesses the impact that U.S. export controls for encryption have had on the competitiveness of the software industry. The study found that the U.S. software industry still dominates world markets, but the existence of strong export controls, both in the United States and other major countries, is slowing the growth of the international market. (end excerpt)