Where Industry and Security Intersect
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For
Immediate Release: October 4, 2004 Contact - BIS Public Affairs 202-482-2721 |
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Good morning ladies and gentlemen. It is a great pleasure to welcome you to the Bureau of Industry and Security’s annual Conference on Export Controls and Policy – known as Update 2004. We have with us today representatives from companies that operate all over the world. I am also pleased that we have with us a number of officials from other parts of the U.S. Government who are involved in export controls. And I would like to extend a special welcome to representatives from over 15 countries that work with us on issues of strategic trade and export controls.
The Update Conference is our flagship outreach event to the domestic and international business community. The purpose of this Conference is to assist each of you in understanding the various procedures, requirements, and policies administered and enforced by our Bureau. This Conference provides a forum for you to ask us questions about issues that you are confronting as you deal with export controls on a daily basis. It also gives us an opportunity to hear from you as to how export controls can be improved. Indeed, the plenary sessions and breakout groups scheduled for the next two days are dedicated to exploring in detail a number of topics of concern to exporters, including sessions on licensing and regulatory policy, knowledge controls and deemed exports, and enforcement issues.
I want to add that we are especially fortunate this year to have Deputy Secretary of Commerce Ted Kassinger give our keynote address on trade and security at today’s luncheon. During this Conference, you will also have an opportunity to hear from our two Assistant Secretaries – Peter Lichtenbaum for Export Administration and Julie Myers for Export Enforcement – as well as from our Deputy Under Secretary, Mark Foulon, who will be speaking at the closing plenary session.
This is actually the seventeenth annual Update Conference, and my fourth as Under Secretary. It has been a great privilege for me to lead this Bureau through times of major transformation in the landscape of international trade and commerce. I know that all of us here today seek cooperative approaches to expanding trade and economic relations, while still bolstering the security that must underpin a stable international trading system. I would therefore like to take the opportunity this morning to review some of our recent activities and initiatives, and place them in the context of our vision for the future of strategic trade relations in a world of new challenges and opportunities.
As many of you know, I was confirmed to lead the Bureau of Export Administration. But I quickly learned that our mission had outgrown our name. Our core mission is administering the U.S. dual-use export control system, but our responsibilities lead us to handle a broad array of issues at the intersection of business, trade, and security. We therefore changed our name to the Bureau of Industry and Security, or BIS. As BIS, we play a critical role in a wide range of arenas that extend beyond export controls. For example:
● We play the lead role for U.S. industrial compliance with the Chemical Weapons Convention (CWC). The CWC is a cornerstone of the effort to control the proliferation of these deadly and illegal weapons. Our objectives are to ensure that we meet our treaty obligations while minimizing burdens on legitimate business operations and maximizing the protection of confidential business information. We appreciate the cooperation that we receive from American companies as we do this important work.
● We also expect to play a comparable lead role for U.S. industry compliance with the International Atomic Energy Agency’s (IAEA) Additional Protocol, which will extend nuclear-related verification activities to the entire fuel-cycle. The Additional Protocol is a major step forward in advancing President Bush’s efforts to stem nuclear proliferation, and we are pleased that it has gained broad bipartisan support, as reflected in the Senate’s consent to its ratification. We are prepared to move forward once Congress has acted on the legislation needed for program implementation.
● The Bureau of Industry and Security continues to work successfully with other U.S. Government agencies to help U.S. companies compete and win in the highly competitive international defense market. In Fiscal Year 2004, working with U.S. Government partners, the Bureau successfully assisted U.S. companies to obtain contracts to supply foreign governments with defense articles worth approximately $7.2 billion, including naval combat systems to Australia, security and chemical protection equipment to Greece for the Olympics, and maritime helicopters to Canada. These sales help maintain the U.S. defense industrial and technological base and create well-paid high-technology jobs.
● In addition, our Office of Strategic Industries and Economic Security implements a wide range of programs designed to ensure that the U.S. industrial base is able to meet national security requirements. Using our Defense Priorities and Allocations System (DPAS), we have continued to work closely with U.S. industry and the Department of Defense to expedite the delivery of a variety of defense articles needed to provide critical communications equipment to help facilitate elections in Afghanistan, and to support operations in Iraq, including key materials for body and vehicle armor. As a result of these efforts, lives have been saved in Afghanistan and Iraq.● The Bureau is also responsible for determining whether it is necessary to restrict the export of commodities in short supply to protect our domestic economy from the excessive drain of such materials and to mitigate the inflationary impact of excessive foreign demand. During the past year, we reviewed a petition to impose export controls on copper scrap and copper alloy scrap. We determined that neither export controls nor a system of formalized monitoring would be necessary or appropriate. This finding was based on an economic evaluation of all the pertinent facts, which did not support the statutory basis for imposing additional regulatory requirements. But it is important to note that we are always vigilant regarding the need to maintain equitable economic conditions for U.S. companies. And so we will collaborate with the U.S. Trade Representative’s Office to identify any foreign practices that may be distorting trade in this area.
● In addition, we are tasked with the responsibility for ensuring that U.S. companies do not participate in illegal economic boycotts. During the past year, our Office of Antiboycott Compliance has been active in monitoring requests made of U.S. exporters to participate in illegal boycotts and in educating the public regarding trends in boycott activity. We are proud of the important role our office has played in advising U.S. companies how to comply with the law and in investigating transactions involving possible violations. We will continue to enforce our antiboycott laws and regulations vigorously.
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As even this brief review makes clear, we have had a very productive year working at the intersection of industry and security. Thanks to the dedication and hard work of the men and women I am privileged to lead, we have been able to accomplish all of these goals while also strengthening our core function – the development, implementation, and enforcement of export controls on dual-use commodities, technology, and software. This has been a year of enormous activity. Take licensing, the most visible part of the system. We processed over 15,000 license applications, an increase of almost 25 percent over the previous fiscal year. Of these applications, approximately 84 percent were approved, with the remainder either denied or returned without action. Because American companies operate in an increasingly competitive world market, we know that they require prompt and equitable licensing decisions in order to be considered as reliable suppliers. Recognizing this, we are constantly striving to further improve our licensing process, and I think we are largely succeeding. |
Licensing decisions, of course, are only the tip of the iceberg. They are the “downstream” part of a process that begins with policy. And in the past year we have seen unprecedented changes in our overall trade and security policies, with the Bureau of Industry and Security ensuring that dual-use export controls have adapted to these changes.
Our policy objective is to control exactly what is necessary to protect national security and foreign policy interests – no more and no less. Toward this end, we have diligently sought to assist the exporting community by streamlining our export controls. For example:
● The Bureau has prepared a draft rule that would allow U.S. companies to release higher levels of computer technology and software to eligible foreign nationals working in the United States. We expect to publish this rule soon. Moreover, if the Wassenaar Expert Group agrees to raise the threshold for actual exports of computer technology, the Bureau is prepared to publish a second rule covering such exports.
● The Bureau has also drafted a rule to raise the current microprocessor technology license requirement threshold level for foreign nationals working in the United States on the design, development, and production of general purpose microprocessors. Because microprocessor technology accounts for well over 20 percent of all deemed export licenses annually, increasing this threshold level will provide a measure of relief from licensing requirements. Again, if the Wassenaar Expert Group agrees to raise the threshold for actual exports of microprocessor technology, the Bureau is prepared to publish a rule covering such exports.● The Bureau has also obtained interagency agreement for our proposal to implement a number of process improvements for deemed export licensing renewals. We are now granting automatic six-month extensions for existing deemed export licenses if an exporter has submitted both a renewal license application and a written request for extension of the existing license. We have also reached agreement for expediting requests for technology upgrades of existing deemed export licenses by having the agencies agree to make their best efforts to process such applications in 20 days.
We are also adapting our controls to geopolitical realities and policy priorities. The Middle East has been a particular area of focus:
Iraq. For example, now that Iraq no longer suffers from the tyranny of Saddam Hussein, we have modified our export controls to suit the dramatically changed situation there. Export licensing jurisdiction has transferred from the Treasury Department to our Bureau, and a wide range of items are now eligible for export to Iraq that previously were off limits. Our export policy seeks to open doors toward Iraq where it is prudent to do so, while retaining controls where necessary to ensure security.
Libya. The Libyan government wisely concluded last year that supporting terrorism and developing weapons of mass destruction had led only to economic isolation. No doubt, the U.S. Government’s firm resolve to stand against terrorist regimes and weapons proliferators helped persuade Colonel Qadhafi that it was in his best interest to pursue a more responsible course.
And so, as we gain confidence that Libya is in fact acting to become a member in good standing in the community of nations, we are embarking on a gradual process of export control liberalization. Although the State Department still officially designates Libya as a terrorist supporting state, Libya is no longer a pariah. As a result, and in line with these developments, we have promulgated an important regulation that generally permits the resumption of trade in lower technology items, and we are open to possible further trade control modifications depending on Libya’s performance.
It should thus be clear that the Administration is prepared to respond positively to improved behavior, even by the most isolated of countries. The United States has always demonstrated that it has no permanent adversarial relationship with any country. On the contrary, just as it has been throughout the history of our nation, we seek peaceful and productive relations with all who abide by the norms of civilized behavior.
Of course, we are also prepared to take tough action to defend our security and foreign policy interests when the situation calls for it.
Syria. Unfortunately, Syria presents us with just such a case. The Syrian government continues to support terrorism at a time when the civilized world is engaged in a war on terrorism. It also continues to occupy the sovereign state of Lebanon. Accordingly, the Congress enacted new sanctions legislation against Syria, and the Bureau has modified its export controls in line with this legislation. Although Syria had already been designated by the State Department as a terrorist supporting country, the recent sanctions legislation further tightens controls. It used to be that unlisted items subject to Commerce Department licensing jurisdiction, known in our regulations as EAR 99 items, could generally be exported to Syria without a license. With few exceptions, this is no longer the case. Most EAR 99 items now require a license for export to Syria, and there is a general presumption of denial for most of these transactions. This situation will not change unless and until Syria decides to make fundamental modifications in its national policy.
In addition to responding to changes in the geopolitical environment, the Administration has worked over the past year to combat proliferation by strengthening the four multilateral export control regimes. The Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group, and the Wassenaar Arrangement represent the foundation of our strategic trade control agenda. The memberships of these regimes agree on the lists of items and technologies subject to control and the guidelines for implementing those controls. Then we write the regulations to make this happen.
During the past year, we have sought to strengthen both the control lists and the guidelines to reflect current world security realities. For example:
● The Nuclear Suppliers Group (NSG) joined other nonproliferation regimes by adding a "catch-all" control to its guidelines. The United States has also been seeking to tighten the NSG guidelines so as to control the production of fissile materials by denying enrichment technology to countries that do not already possess it. Fissile material is the principal choke point for the development of nuclear weapons. Thus, by restricting the availability of enrichment technology, we hope to limit the availability of the fissile material that makes nuclear weapons possible.
● In the Missile Technology Control Regime, members agreed to add controls on Unmanned Aerial Vehicles in light of their possible use by terrorists and pariah nations as platforms for weapons delivery systems.
● The Australia Group agreed to expand the list of biological agents that it controls, given the growing concerns about the possible use of such agents in a terrorist or military operation.
● And, last but not least, the Wassenaar Plenary in 2003 approved a number of major initiatives that break important new ground and make significant contributions to the fight against terrorism. These included tightening controls over Man Portable Air Defense Systems (MANPADS); agreeing to enhance transparency of small arms and light weapons (SALW) transfers; establishing elements for national legislation on arms brokering; and adopting “catch-all” controls that encourage member governments to impose export restrictions on certain unlisted items when necessary to support United Nations or regional arms embargoes.
Our work with our regime partners is important, but in today’s world, the proliferation of weapons of mass destruction and their means of delivery is everyone’s problem. The acquisition and use of such weapons by terrorists or pariah countries is one of the principal threats to world security, not just U.S. security. Because the problem is global, the only effective means to attack it must be global as well.
Export controls are one important layer in our multi-layered global approach to nonproliferation. But, as we all know, the international system of export controls is only as strong as its weakest link. So we must work with our partners to strengthen export controls worldwide. This effort took a major step forward in April of this year, when the world community followed our lead by adopting U.N. Security Council Resolution 1540, which calls on members to establish and maintain effective export controls and comply with international arms control agreements. This landmark Resolution sets forth a critical framework for global compliance with acceptable norms of international behavior. It supports the export control measures we have been implementing within the four multilateral regimes, as well as the cooperative activities we have been undertaking with countries outside the regimes, including those that serve as major transshipment hubs for sensitive commodities.
U.N. Security Council Resolution 1540 is also a call more broadly for international cooperation to enhance trade security. Here, too, we have been active. For example, during the past year, our Office of International Programs has conducted over 80 technical exchanges with foreign delegations, both in the United States and abroad. The focus of our exchanges has ranged from the basic elements of developing an export control system to the more complex issues related to identifying possible illicit shipments in international commerce. The good news is that these programs are working. Take the countries of the former Warsaw Pact, which initially were a principal focus of our technical cooperation program. Now, many of these countries are members of one or more of the multilateral export control regimes. Romania, for instance, is taking a leadership role in the Wassenaar regime by chairing a task force on Export Control Documentation.
We are also securing successes elsewhere beyond our borders. Indeed, my colleagues and I are pleased to have had the opportunity to meet with each of the foreign governments represented here today on a broad range of trade and security issues. For example:
● We are cooperating with Russia in efforts to dismantle nuclear weapons facilities and to expedite the items needed for such operations. Since the end of the Cold War, our cooperative work with Russia and other newly independent States of the former Soviet Union has expanded enormously, and so has our level of trade.
● The Bureau also leads the Commerce Department’s Transshipment Country Export Control Initiative, which we developed to reach out to the major shipping hubs around the world, such as Hong Kong, Singapore, Thailand, Malaysia, Taiwan, the United Arab Emirates, Jordan, Panama, Cyprus, and Malta. The authorities in these countries want to deny their seaports, airports, and territory to illegal trade that transits their countries, and they are working actively with us to accomplish that objective.
● This year we have also continued our government-to-government dialogue with Israel on high-technology and strategic trade issues, including discussions on encryption policy and regulations. We will continue to work with Israel on a wide array of trade and security issues.
● We are also engaging with Pakistan in a serious effort to forge closer cooperation in the area of export controls and strategic trade. Pakistan has become a key partner in the war on terrorism, and we are also developing a broad partnership in the security arena.● Most recently, I met with the Unification Minister of the Republic of Korea to discuss the plans for a major industrial complex that will be constructed just across the border in North Korea. This industrial complex is a major priority for the Republic of Korea, because it will be beneficial in trying to ease relations between North and South. We are prepared to work constructively with our colleagues in the interagency community to identify the control status of U.S.-origin items that might be intended for export to this complex.
● And, of course, we continue to work closely with long-time members of the multilateral regimes, such as the United Kingdom, Germany, Japan, Canada, France, and Switzerland, to make these regimes more effective as well as reach out to non-regime countries on export control issues.
From our perspective, while all of these international cooperative activities are important in security terms, they also benefit industry. They help create a level playing field for companies with international business operations, while enhancing the security environment for those operations. Moreover, as we gain confidence that countries are implementing export controls in a manner consistent with international standards, we are better able to accord them favorable treatment in the realm of strategic trade. In short, we want to see sound security practices as an underlying and necessary feature of the international trading system. Such security measures should be viewed by those who enact them as a competitive asset rather than a competitive liability, and as a way to enable trade.
Nowhere is the reinforcing relationship between trade and security more evident than in the activities of our export control attachés. The attachés help us ensure that we are supporting American exports abroad, as well as working with our foreign counterparts to prevent export violations. In Fiscal Year 2004, we added new attachés in Hong Kong and Moscow to those already in Beijing and Abu Dhabi, and one will be starting in New Delhi later this month.
These five attachés play a key role in our system of end-use verification visits, which are designed to facilitate trade within the context of security requirements. Pre-license visits verify the bona fides of end-users to receive controlled commodities and technology. They are often needed when there is doubt regarding the substance of the end-user’s business activities. And post-shipment verifications are often useful to certify that items have arrived at their authorized destination and are being used for their intended purpose. Both of these are critical elements in the administration of credible export controls, and thereby promote exports.
Indeed, our position is simple and clear: When countries permit us the access we need to gain the assurance provided by end-use checks, we are in a position to be more flexible in our export licensing policy. When such access is denied or made excessively difficult to achieve, we are unable to offer such flexibility. During the past fiscal year, we have completed approximately 600 end-use visits in close to 100 different countries. These visits have helped both to support decisions to approve export licenses as well as to uncover inappropriate end-users.
The final piece of the process is enforcement. An effective enforcement program is a cornerstone of any credible export control system. Without penalties sufficient to deter would-be violators, export controls have no credibility.
During Fiscal Year 2004, Export Enforcement continued its trend of significant accomplishments in enforcement actions and penalties. Specifically, in Fiscal Year 2004:
● Investigations by Export Enforcement agents led to the conviction of over 30 individuals and companies in criminal cases.
● Export Enforcement also completed over 60 administrative settlements and imposed civil penalties for export violations totaling over $6 million.
As a matter of policy, Export Enforcement seeks to target the most sensitive commodities and the end users of greatest concern. For example:
● Export Enforcement’s increased emphasis on biological toxins resulted in an investigation of Maine Biological Labs of Winslow, Maine, and guilty pleas by seven individuals involved in a conspiracy to smuggle live viruses into the United States. Another investigation led to a jury verdict in the Northern District of Texas that found the defendant guilty on 47 criminal counts, including illegally exporting the Bubonic Plague to Tanzania.
● An Export Enforcement investigation also led to the indictment of two individuals on charges relating to material support of terrorism, in part for attempting to export controlled night vision equipment to Hizballah in Lebanon.
● And in July of this year, a jury in the Northern District of Texas found Infocom Corporation and five of its members guilty of export violations involving the shipment of computers and related equipment to Syria and Libya.
We have had a good year, but we need to continue to staff up for success. To that end, Export Enforcement opened in Houston its first Resident Agent Office, to address strategic trade in that area. The office is staffed with one Resident Agent-in-Charge and three Special Agents. We are also on track to hire a new Deputy Assistant Secretary for Export Enforcement and a new Director of our Office of Export Enforcement.
As you can see, we have been busy. But we can only do so much by ourselves. For the system to work, we need your assistance. So we put great emphasis on helping industry to understand and comply with our regulations. Indeed, this past year, we have conducted close to 200 outreach events, both in the United States and abroad. And today, of course, we launch our number one outreach event for Fiscal Year 2005, our Update Conference.
It is always a great pleasure to review our Bureau’s accomplishments. But it is equally important to step back and place these activities in a broader context. The more we can appreciate why we take the actions we do, the more effective those actions can be. I hope it will also help deepen your understanding of the presentations you will hear today and tomorrow.
When the Cold War ended, many thought that the basis for maintaining a vigorous export control system had ended as well. But if the collapse of the Berlin Wall on 11/9/1989 gave the incorrect impression that export controls were no longer needed, the terrorist attacks of 9/11/2001 put that issue to rest. Although, with globalization, our world has become a highly competitive economic environment, it also remains a dangerous place. In the post-9/11 world, we face the multifaceted threats posed not only by countries that seek power through the development of weapons of mass destruction and their means of delivery, but also by stateless enemies that would use our technologies against us. In this environment, export controls will continue to play an important role in international trade. Indeed, in our view, trade and security are more closely intertwined than ever before, and legitimate trade can only flourish if it is built on a foundation of security.
The role of dual-use export controls is to establish the conditions that make trade in sensitive items possible. Given the security implications if these items fall into the wrong hands, they simply could not be exported without oversight. At the same time, we need to make sure that our controls do not impede the flow of legitimate trade. The Bureau of Industry and Security, therefore, is both a facilitator of exports and a vital cog in the U.S. national security structure. Properly understood, these are complementary rather than mutually exclusive mandates.
Export controls should thus be seen not as an obstacle or barrier to trade, but as a pathway to trade, with a fence around the perimeter of that path. If companies and countries abide by the laws, regulations, and procedures that we have established with regard to the use of sensitive U.S. goods and technologies, then we can develop the level of confidence and comfort needed to enable such trade. On the other hand, failure to abide by such laws, regulations, and procedures will have a detrimental effect on the scope and level of trade in sensitive U.S. items. In the end, we want to engage in legitimate civilian and commercial trade, while preventing the wrongful diversion of sensitive items.
Each of us in this audience has a role to play in making that a reality. Indeed, the job today of coordinating trade and security interests cannot be done by government alone. It requires a partnership between government and industry, both within and among countries in the international trading system. In that manner, we can all work together for our common welfare.
I am therefore pleased to say that, in the past year, we have had milestone accomplishments with the world’s two most populous countries – India and China.
● We are engaged in an active and fruitful collaboration with India that has enabled us to liberalize controls. Indeed, this Bureau is playing a key role in the Next Steps in Strategic Partnership initiative with India, and concluded Phase One of that initiative last month. This has involved the implementation of measures to address proliferation issues and to ensure that U.S.-origin items are used in accordance with U.S. export control requirements. Those measures have, in turn, enabled us to modify U.S. export licensing policies to foster increased cooperation in commercial space programs and permit certain exports to power plants at safeguarded nuclear facilities. We look forward to further progress in strengthening our economic ties with India as we also work together as partners in the war on terrorism.
● With respect to China, at the April meeting of the Joint Commission on Commerce and Trade, we reached an understanding with the Chinese on procedures for strengthening end-use visit cooperation. We firmly believe that this move will help facilitate expanded trade in high-technology and other controlled items. We are also pleased to welcome China into the Nuclear Suppliers Group, as a partner against nuclear proliferation.
In sum, the world landscape has changed dramatically since President Bush took the oath of office in January 2001. In these tumultuous times, the Bureau of Industry and Security has been charged with the responsibility of adapting strategic trade policy to meet new challenges and opportunities. This has meant tightening controls when necessary to address emerging threats, liberalizing controls where appropriate, partnering with the private sector to expand trade on a foundation of security, and working extensively with like-minded countries. We are committed to providing the exporting community with the best possible service within the context of our overall responsibilities. I know I am biased, but I think that we are doing a very good job. We will, of course, always strive to do better. We look to you for advice regarding how we can improve our services and the overall way we conduct business. Something tells me I will not have to ask twice.
During the rest of this Conference, you will have the opportunity to hear about the details of all the current policy and program work that I have introduced this morning. My colleagues and I look forward to meeting with you and learning from you.
Thank you again for joining us here today. And thank you for your commitment to make our export control system work better for all of us.