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Prepared Statement of Honorable William A. Reinsch
Under Secretary for Export Administration

Before the Subcommittee on Commerce, Justice, State, the Judiciary and Related Agencies
Committee on Appropriations
House of Representatives
March 6, 1997

Mr. Chairman, and members of the Subcommittee, thank you for the opportunity to testify on behalf of the Bureau of Export Administration's budget request for fiscal year 1998. BXA's mission is to promote U.S. national and economic security and foreign policy interests by managing and enforcing the Department of Commerce's national security related trade and competitiveness programs.

Let me begin by expressing my appreciation for the Committee's support in FY 1997 and my hope that we will continue to have your confidence this year. We are requesting $43.1 million and 389 positions for FY 1998; an increase of 40 positions and $3.2 million above our FY 1997 enacted level. This request includes funds to:

• Administer a new and complex Presidential initiative to encourage the use of strong encryption in electronic commerce and private communication while protecting the public safety and national security and

• Enable BXA to meet its new responsibilities under the Chemical Weapons Convention Treaty (CWC), which we expect to be ratified this year.

In addition to the above increases, we have two changes to our appropriation language:

• In FY 1997 BXA was appropriated $3.9 million to expand our enforcement efforts in the areas of counterterrorism and non proliferation. These funds will be obligated in FY 1997 and are now included as part of BXA's FY 1998 base.

• The general provisions of the proposed FY 1998 appropriation bill contain language which would grant further forfeiture and seizure authority to BXA's Enforcement program.

Our request continues to be approximately 1% of the Department's budget. It also represents 32 percent fewer positions than Congress authorized in our peak year of FY 1991 -- a decline from 574 to 389. The Bureau has downsized substantially over the past five years, and we have reorganized to achieve greater efficiencies and to reflect changes in the post-Cold War world.

Despite our small size and this small request, BXA's responsibilities lie at the intersection of national security, nonproliferation, export growth, and high technology. Our challenge is to combat the proliferation of weapons of mass destruction while furthering the growth of U.S. exports, which are critical to maintaining our leadership in an increasingly competitive global economy.

BXA's activities include:

• Administering the export licensing system for dual-use items authorized by the Export Administration Act to fight proliferation and to pursue other national security, short supply, and foreign policy goals, such as combating terrorism.

• Enforcing the export control and antiboycott provisions of the EAA through a strong prevention program, as well as the imposition of administrative, civil, and criminal sanctions on violators.

• Analyzing and protecting the defense industrial and technology base, pursuant to the Defense Production Act and other laws. As the Defense Department increases its reliance on dual use high technology goods as part of its cost-cutting efforts, ensuring that we remain competitive in those sectors and sub-sectors is critical to our national security. Specifically we are assisting U.S. defense companies in winning defense contracts overseas, and converting their defense products to commercial use, particularly in states like California, Texas, Pennsylvania, and Florida.

• Ensuring compliance with treaties that impose requirements on U.S. industry. The most important is the Chemical Weapons Convention, which when ratified, will give BXA new enforcement and outreach responsibilities.

• Helping Ukraine, Kazakstan, Belarus, Russia, and other newly emerging countries to develop effective export control systems and to dismantle their defense industries and convert them to civilian production. The effectiveness of U.S. export controls can be severely undercut if other supplier nations are exporting sensitive goods and technology or permitting diversion of our exports.

BXA's two principal operating units, Export Administration and Export Enforcement, as well as its Office of Administration, have undergone significant reorganization and downsizing in recent years in order to meet the President's streamlining goals, as recommended by the National Performance Review (NPR). BXA is also an NPR Reinvention Laboratory.

Accomplishments

These last few years have been busy ones for BXA. The Administration realized early on that rapid technological change and economic globalization compelled comprehensive reform of our export control system, reform which balances the need to keep sensitive goods, technologies and projects of concern out of the hands of rogue regime countries without imposing unnecessary or ineffective constraints on U.S. business. That is precisely why we reformed outdated controls, streamlined our existing export control system, enhanced our enforcement programs, and helped to strengthen multilateral regimes.

In the last three years, we have:

• Substantially liberalized controls on high performance computers, semiconductors and semiconductor manufacturing equipment, Beta-test software, telecommunications equipment, and chemical mixtures, among others;

• Clarified and simplified the Export Administration Regulations through a comprehensive revision and reorganization, making them more user-friendly;

• Improved the license process by broadening agency review opportunities while limiting the time for those reviews, providing an orderly procedure to resolve interagency disputes, and establishing more accountability throughout the interagency process.

• Completed the transfer of jurisdiction of commercial communication satellites and commercial jet engine hot section technology from the State Department's Munitions List to the Commerce Control List;

• Amended our control list of nuclear items to conform more closely with that of our allies, and expanded the number of countries to which exporters can ship nuclear-controlled items via license exception.

• Liberalized our chemical export regulations, consistent with multilateral agreements, so that exporters can ship chemical mixtures containing controlled chemicals under a license exception to most destinations. We also streamlined controls and reporting requirements on sample chemical shipments;

• Developed the Special Comprehensive License, which allows experienced, high volume exporters to export a broad range of items under this procedure;

• Helped create the Wassenaar Arrangement, which established multilateral controls on exports of conventional arms and sensitive dual use equipment;

• Worked to strengthen other multilateral nonproliferation regimes which, in turn, will enhance U.S. exporters' ability to compete on a level playing field;

• Revitalized and expanded our enforcement programs.

The end of the Cold War has also had significant implications for our own economy, particularly the defense sector. BXA helps defense firms diversify their activities into civilian areas by developing and providing detailed economic and statistical information that helps the government develop policies that ensure our industry and technology base are able to support changing security requirements, as well as develop next generation weapon systems. For industry, we provide information that firms can use to develop new product lines and market existing products both here and abroad. Much of our work is one-on-one with individual companies, and we have a growing stack of success stories as testimony to our efforts.

In addition, we have worked with our embassy defense and commercial officers to provide significant new market information for defense and dual-use companies. These market guides covering Europe, the Pacific-Rim, Western Hemisphere and Middle east are available outside at our booth as well as on the Internet. They explain the procurement process and points of contact in approximately 50 of the major defense and high technology markets around the world.

We also continue to work with the Newly Independent States to help them develop effective export control programs and to assist their defense industries in diversifying into civilian lines of production. We are working with these countries to create new civilian jobs in their own country, while at the same time, matching U.S. firms with potential business opportunities there. Specifically, we have an extensive effort to focus on export control licensing processes and procedures, preventive enforcement mechanisms, industry-to-government relations and electronic automation of the licensing system. The effectiveness of the U.S. export control system is enhanced by our working with these countries to develop strong export control capabilities.

BXA's enforcement programs continue to play a critical role in protecting our national security and foreign policy interests, particularly as we focus more on specific end-users and end-uses. We have conducted hundreds of investigations over the last four years that have led to the criminal prosecution of persons who illegally exported zirconium for Iraqi munitions, unlicensed equipment for India's missile program, brokerage services for Iraqi rocket fuel, and gas masks to suspected Aum Shinrikyo terrorists in Japan, just to name a few. These investigations also included the first civil charges and penalties for alleged unlicensed exports of biotoxins which are controlled to prevent proliferation. Select BXA Performance Measures, as reflected in our budget include the following outputs:

OUTPUT	1996	1997	1998
Number of licensing decisions/inquiries	8,801	10,137	10,100
Commodity Classifications	3,596	4,200	4,700
Import Certificates analyzed/processed	1,935	2,000	2,000
EPCI end-user inquiries	45	40	40
Advisory opinions	104	110	110
Applications processed within statutory time frames	95%	98%	98%
Approved licensing decisions ($ Billions)	$8.6	$8.5	$10.0
Counseling: Licensing	953	1,000	1,000
Counseling: Enforcement	706	750	800
Completed investigations	1,193	1,200	1,300
Defense advocacy: Facilitated exports ($Billions)	$2.5	$5.0	$5.0

1998 Priorities

For the Export Administration activity we are requesting $19,395,000 and 211 permanent positions. The request includes program changes totaling 40 positions and $3,226,000, although some of this will be allocated to the Export Enforcement activity. This activity also reflects, between FY 1997 and the FY 1998 base, the absorption of $1.9 million in BXA wide adjustments-to-base, which reflects our contribution to the Administration's commitment to keep Federal spending in check. We hope to absorb this amount through program efficiencies and other management savings. However, in order to fund new program mandates, the following changes are requested:

• Chemical Weapons Convention (38 Positions and $2,300,000). Administer and enforce the new and complex declaration, inspection and reporting requirements imposed on commercial chemical manufacturing facilities under the Chemical Weapons Convention (CWC), once it is ratified. This increase includes resources for both the Export Administration and Export Enforcement budget activities.

• In addition, if the Senate ratifies the CWC as we expect, BXA will need roughly $900,000 in FY 1997 in order to comply with the timetable established for data collection and data entry responsibilities. These funds would reflect one-time costs in FY 1997, and would have no impact upon our FY 1998 budget increase, which is primarily for salary costs of new hires.

• Encryption (2 Positions and $926,000). Administer a new and complex Presidential initiative to encourage the use of strong encryption in electronic commerce and private communication while protecting the public safety and national security. This initiative is the result of a 1997 transfer of the function from the Department of State to Commerce. We anticipate a level workload associated with this initiative in FY 1997 and beyond, and do not foresee changes in resources in funding requirements beyond those being requested at this time.

• I would note that the Committee currently has before it an FY 1997 Departmental reprogramming proposal to reallocate an additional $834,000 to BXA to fund Encryption work beginning in FY 1997. Our FY 1998 request is based on the assumption that this request will be approved.

For the Export Enforcement activity we are requesting $20,384,000 and 155 permanent positions. Although no program changes are shown in the budget, a portion of the Chemical Weapons Convention increase, requested under the Export Administration budget activity, will be allocated to Export Enforcement.

In addition, the General Provisions of the Department's appropriation bill includes language that would give BXA permanent authority to seize and forfeit goods resulting from a violation of exporting laws and regulations. This authority would make BXA eligible to apply to become a "friend" of the Department of Justice Asset Forfeiture Fund. We have met with Department of Justice fund managers, and been informed that federal law enforcement agencies may only use the fund for very limited purposes -- for expenses related to the actual detention and seizure (transportation and seizure costs) and certain training activities. I would further note that BXA would have to "compete" with other "friends of the fund" for funding every year. Because of the restrictive nature of the fund and the competition for resources, we estimate that the maximum yearly usage for BXA would be $50,000 or less.

Finally, in FY 1997, BXA was appropriated $39,900,000. Of this amount, $3,900,000 was specifically set aside for counterterrorism related activities, which were defined as "nonproliferation efforts to prevent illegal exports of chemical weapon precursors, biological agents, nuclear weapons and missile development equipment." These funds will be obligated in FY 1997 and are now included as part of BXA's FY 1998 base of $39.9 million.

For the record, I would note that we have authorized Enforcement to fund 26 criminal investigators using these monies and Export Administration to fund 2 individuals to perform activities related to counterterrorism. More than half of the Enforcement investigators are now on board and the rest will be soon. By the end of the fiscal year, we expect to have all counterterrorism agents on board. In addition, our entire Enforcement on-board agent and intelligence analytical staffs are devoting substantial portions of their time to counterterrorism enforcement issues. In April and May 1997, EE will hold two week-long counterterrorism training courses for all of its agents and intelligence analysts. Throughout the second half of FY 1997, we will hold additional training and counterterrorism-related enforcement activities. BXA and EE are also working closely with Department of Commerce legal staff to revise the Export Administration Regulations to further sharpen BXA's ability to halt counterterrorism activities. We anticipate that the full $3.9 million earmarked for these activities will be obligated by the end of the year.

In summary, BXA seeks to balance legitimate security needs with those of our economic well-being. And we seek to expand the partnership between government and industry. We are partners in the pursuit of exports and economic growth -- the Commerce Department in particularly has been exceptionally aggressive and effective in helping business market its products overseas -- and we must also be partners in the effort to stop the spread of dangerous technology to countries of concern.

We believe our policy and our actions accommodate the changes that have occurred in the world and look ahead to the next century, grounded firmly in the recognition that we must remain viable global competitors, while neither contributing to the spread of weapons of mass destruction, nor to the military capabilities of pariah states. If we can maintain these principles and implement them consistently, I am confident that we can meet the challenges of the future. I appreciate the Committee's past support of our activities. I hope that this support will not be cut off in mid stream, and that BXA will be given the opportunity to continue the work we have started.

I will be happy to respond to any questions you may have at this time.

Note

In April of 2002 the Bureau of Export Administration (BXA) changed its name to the Bureau of Industry and Security(BIS). For historical purposes we have not changed the references to BXA in the legacy documents found in the Archived Press and Public Information.

  

                          

 

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