U.S. Export Policy Toward the PRC
Enhanced Proliferation Control Initiative
In December 1990, President Bush approved the Enhanced Proliferation Control Initiative. This initiative was established to control items █
- When the exporter knows that the export will be used in the design, development, production, or stockpiling of missiles or chemical or biological weapons; or
- When the exporter is informed by the Department of Commerce that there is a serious risk of diversion.
Earlier, President Bush had issued Executive Order 12735 (Chemical and Biological Weapons Proliferation, November 16, 1990), which directed the imposition of additional controls on items used in the design, development, production, delivery, stockpiling, or use of missiles and chemical and biological weapons.41
In December 1993, the Department of Commerce published additional guidance for exporters on the "knows or is informed" licensing requirement of the Enhanced Proliferation Control Initiative.42
In February 1997, the Department of Commerce began publishing an "Entity List" to inform exporters of some of the organizations and companies that may be involved in proliferation activities. The "Entity List" appears in Supplement No. 4 to part 744 of the Export Administration Regulations, and is revised and updated on a periodic basis.43 This "Entity List" does not, however, include all of the organizations, companies, or individuals that are on the "watch lists" maintained by the Office of Export Enforcement at the Department of Commerce or by the Nonproliferation Center at the Central Intelligence Agency.
The Enhanced Proliferation Control Initiative╠s "knows or is informed" provision is known as a "catch-all" provision. This control imposes a licensing requirement in those cases where the exporter has "knowledge" of the end use or end user relating to missile and chemical or biological weapons activities.
A Department of Commerce Fiscal Year 1999 budget proposal document for the implementation of a Bureau of Export Administration internal compliance program stated:
Significant easing of the U.S. and multilateral export controls on West-East trade since the early 1990╠s; the implementation of the Enhanced Proliferation Control Initiative (EPCI) in 1991; and, the simplification of the Export Administration Regulations (EAR) which resulted in a conversion from general licenses to license exceptions have shifted the burden of screening many export transactions to the exporter.
Unfortunately, many companies have not established adequate procedures to ensure transactions no longer requiring export licenses are properly screened for proscribed end-uses and end users.44
The Enhanced Proliferation Control Initiative does not apply to items controlled under the Wassenaar Arrangement, according to Goldman.45 However, the United States has obtained agreement from other member countries (except Canada) under the Australia Group, the Missile Technology Control Regime, and the Nuclear Suppliers Group to implement "catch-all" controls to some extent regarding controlled items.
Export Administration Regulations
The Export Administration Regulations are designed to implement the 1979 Act and control certain exports, reexports, and other activities.46 They are issued and administered by the Bureau of Export Administration of the Department of Commerce.47
The Export Administration Regulations control "dual-use" commodities █ that is, technology that can be used in military and other strategic uses, as well as in commercial applications.48 However, the Export Administration Regulations also include some items that have solely civil uses.49
On May 11, 1995, the Bureau of Export Administration published a comprehensive revision and reorganization of the Export Administration Regulations after a two and one-half year effort. The revision made changes in the types of export licenses, eliminating the "general license" categories and replacing them with "License Exceptions." Also, the "special license" provisions (for example, Project License, Distribution License, Service Supply Procedure, Humanitarian License, Aircraft and Vessel Repair Station Procedure, and Special Chemical License) were removed and replaced by a "Special Comprehensive License." 50
The Commerce Control List specifies the commodities, software, and technology that are subject to the Export Administration Regulations.51 In addition, the General Technology and Software Notes provide guidance relevant to these items.52 Prior to the dissolution of COCOM in March 1994, the Commerce Control List was closely related to the COCOM Industrial List.53
The Commerce Control List is organized into ten categories:
- Category 0: Nuclear Materials, Facilities, and Equipment
- Category 1: Materials, Chemicals, Microorganisms, and Toxins
- Category 2: Materials Processing
- Category 3: Electronics
- Category 4: Computers
- Category 5: Telecommunications and Information Security
- Category 6: Sensors and Lasers
- Category 7: Navigation and Avionics
- Category 8: Marine
- Category 9: Propulsion Systems, Space Vehicles and Related Equipment54
The Commerce Country Chart contains licensing requirements based on the proposed country of destination and the "Reason for Control." 55 The Country Chart is designed to be used in conjunction with the Commerce Control List in determining whether a license is required to export a given item to a particular country.56 The Country Chart provides as "Reasons for Control":
- Chemical and biological weapons
- Crime control
- Encryption items
- Missile technology
- National security
- Nuclear nonproliferation
- Regional stability
- Short supply
- Other significant items57
The Export Administration Regulations also identify 14 "License Exceptions." 58 A "License Exception" is an authorization to export or re-export without a Commerce license certain items that are subject to the Export Administration Regulations.59
One of the new 1995 License Exceptions █ "License Exception CIV" 60 █ authorizes the export and re-export of certain items that are controlled for national security reasons, provided the items are destined to civil end-users for civil end-uses in a group of countries that includes the PRC.61
Another License Exception █ "License Exception CTP" █ authorizes export and re-export of computers to various countries, including the PRC, according to criteria provided in the Export Administration Regulations.62
For example, the new 1995 License Exception CTP can be relied upon to export computers having a composite theoretical performance greater than 2,000 MTOPS (millions of theoretical operations per second), but less than or equal to 7,000 MTOPS, to other than military or nuclear, biological, or missile end-users and end-uses in the PRC.63
Arms Export Control Act
The U.S. Government controls the export and import of "defense articles" and "defense services" pursuant to the Arms Export Control Act.64
Section 38 of the Arms Export Control Act authorizes the President to control the export and import of defense articles and defense services.65
The statutory authority of the President to promulgate regulations with respect to exports of defense articles and defense services was delegated to the Secretary of State by Executive Order 11958, as amended.
International Traffic in Arms Regulations
The Arms Export Control Act is implemented by the International Traffic in Arms Regulations (ITAR), which are administered by the State Department╠s Office of Defense Trade Controls within the Bureau of Political-Military Affairs. These regulations are found at 22 CFR parts 120-130.
The Arms Export Control Act provides that the President shall designate the articles and services that are deemed to be "defense articles" and "defense services." 66 These items, as determined by the State Department with the concurrence of the Department of Defense, are included on the U.S. Munitions List.67
No items may be removed from the U.S. Munitions List without the approval of the Secretary of Defense, and there must be 30 days advance notice to Congress.68
In addition to unilateral U.S. controls, the U.S. Munitions List includes controls on missile technology that are based on the multilateral Missile Technology Control Regime and its Annex.69
Omnibus Trade and Competitiveness Act of 1988
The "Exon-Florio" provision of the Omnibus Trade and Competitiveness Act of 198870 amended the Defense Production Act71 to establish a procedure for the President to investigate the national security effects of proposed mergers, acquisitions, and takeovers of U.S. companies by foreign interests. If there is credible evidence that the foreign interest exercising control might take action that threatens to impair the national security, the President may suspend or prohibit the transaction.72
The Exon-Florio provision allows a maximum of 90 days to complete a review of a proposed transaction.73 The determination whether an investigation should be undertaken must be completed in 30 days. An investigation, if undertaken, must be completed in 45 days. The decision whether action is to be taken to block the transaction must be made within another 15 days.74
President Reagan designated the interagency Committee on Foreign Investment in the United States to administer the Exon-Florio provision in Executive Order 12661 (Implementing the Omnibus Trade and Competitiveness Act of 1988 and Related International Trade Matters, December 27, 1988). Under that Executive Order, the Secretary of the Treasury chairs the interagency committee.
Economic Espionage Act of 1996
The Economic Espionage Act of 1996 (P.L. 104-294, October 11, 1996) was enacted for two purposes:
- To thwart attempts by foreign entities to steal the trade secrets of U.S. companies
- To authorize the U.S. Government to investigate and prosecute persons, including domestic American companies, who are engaged in economic espionage75
The Economic Espionage Act was a response to an appeal by the Director of the Federal Bureau of Investigation for Congress to enact new legislation to criminalize the theft of trade secrets.76
Under the Economic Espionage Act, penalties for economic espionage by a foreign government or its agent include:
- Fines for an individual of up to $500,000
- Jail sentences of up to 15 years
- Fines for an organization of up to $10 million77
The Economic Espionage Act applies extraterritorially to activities of non-U.S. citizens abroad, if such activities conducted abroad are illegal under the Act, and if they are connected to an act in the United States that furthered the activity abroad.78
Economic espionage is defined as:
foreign power-sponsored or coordinated intelligence activity directed at the U.S. government or U.S. corporations, establishments or persons, designed to obtain unlawfully or clandestinely sensitive financial, trade, or economic policy information, proprietary economic information, or critical technologies, or, to influence unlawfully or clandestinely sensitive economic policy decisions.79
Countries identified publicly by the U.S. Government as being involved in economic espionage include the People╠s Republic of China, which is reported to be enhancing its collection efforts in this area.80
Export Licenses for Militarily Sensitive Technology: Department of Commerce
The Bureau of Export Administration within the Department of Commerce processes export license applications pursuant to the 1979 Act and the Export Administration Regulations.
The Bureau of Export Administration conducts a complete review of the license application, including any documentation submitted along with the application. This review includes an examination of the item to be exported, the proposed end use of the item, and all parties to the transaction.
Export License Processing Until December 1995
Prior to the issuance of Executive Order 12981 (Administration of Export Controls, December 5, 1995), Commerce╠s Bureau of Export Administration routinely referred certain license applications to:
- The Department of State
- The Department of Defense
- The Department of Energy
- The Arms Control and Disarmament Agency
Whether the Commerce Department made a referral to one of these other agencies depended upon the item to be exported and the country of destination. The protocol for these referrals evolved over the years. It was subject to change as items were controlled or decontrolled, and as concerns regarding destination countries changed.
For example, applications to export items controlled for national security purposes to end users in the People╠s Republic of China or Russia were routinely referred to the Department of Defense for review. License applications for items controlled for foreign policy purposes (such as regional stability, anti-terrorism, and crime control) to specific countries were referred to the State Department for review. The Department of Energy would receive referrals of license applications for items controlled by the Nuclear Suppliers Group as nuclear nonproliferation commodities.
If the reviewing departments and agencies differed regarding a specific license application, further consultation would occur in the structure of the Advisory Committee on Export Policy (ACEP). This consultation could also occur in any special groups that had been established to address specific types of items (for example, the Subgroup on Nuclear Export Coordination), or in less formal discussions between the particular departments or agencies.
Back | Forward