Where Industry and Security Intersect
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The Office of Chemical and Biological Controls and Treaty Compliance (CBTC) administers BXA's statutory and regulatory requirements governing the export of items controlled for chemical and biological warfare purposes. CBTC implements export controls to prevent the proliferation of chemical and biological weapons in accord with the 31-nation Australia Group. CBTC also has the major role of overseeing U.S. industry compliance with the Chemical Weapons Convention (CWC) and has developed programs to implement the provisions of the CWC pertaining to U.S. industry compliance, including: collecting, validating, and aggregating data declarations; educating industry on their treaty rights and obligations; escorting international inspectors on inspections of U.S. business facilities; and implementing CWC trade restrictions. In addition, CBTC administers requirements related to technology transfers to foreign nationals in the United States and materials subject to short supply restrictions. The Office consists of the Chemical and Biological Controls Division, the Treaty Compliance Division, and the Foreign Nationals and Short Supply Program.
The Australia Group (AG) is an informal multilateral forum that cooperates to impede the proliferation of chemical and biological weapons through the harmonization of export controls, the exchange of information, and other diplomatic means. The group was formed in 1985 when, in response to the use of chemical weapons during the Iran-Iraq War, Australia called for a meeting of like-minded countries to consider harmonizing export controls on chemical weapons precursor chemicals. The AG later expanded its focus to include chemical production equipment and technologies. In 1990, the scope was expanded further to include measures to prevent the proliferation of biological weapons. Today, the AG remains a viable, effective mechanism through which participating governments demonstrate their commitment to international nonproliferation objectives.
Thirty-one countries currently participate in the AG. The group's primary focus is the coordination of export controls on an agreed list of dual-use items that could be applicable to the production of chemical and biological weapons. In accordance with the AG agreed control list, BXA maintains export licensing requirements for relevant precursor chemicals, microorganisms and toxins, equipment, whole plants, and technology.
BXA participated in the U.S. delegation to the annual AG meeting held October 4-8, 1999, in Paris. The annual discussions include technical consideration of specific items on the control list, the sharing of information on implementation and enforcement measures and reports of outreach activities and experiences. The October 1999 session continued discussion of several control list items, such as heat exchangers, protective suits, and genetically modified biological agents.
All AG participants are States Parties to the Chemical Weapons Convention (CWC) and the Biological and Toxin Weapons Convention (BTWC). At the 1999 plenary session, members reaffirmed their support for the CWC. In conjunction with CWC obligations, members committed to review their national export licensing policies to ensure that they promote the object and purpose of the convention. They also welcomed the efforts of the Ad Hoc Group of States Parties to strengthen the effectiveness of the Biological and Toxin Weapons Convention (BTWC).
The AG maintains a denial notification procedure by which members agree to notify the group when a license for a controlled item is denied. This procedure is coupled with a "No Undercut Policy" whereby members agree not to approve an identical sale without first consulting the member issuing the denial notification. This process helps to prevent the undercutting of a member's denial.
The AG continues to consider potential new members. The group engages in a wide range of contacts to promote greater awareness and understanding of the important role that national export licensing measures play in preventing the proliferation of chemical and biological weapons. These activities include a program of regional seminars and briefings for nonparticipating countries on export licensing practices.
At the October 1998 session, participants agreed to revise the control list entry for toxic gas monitoring systems and dedicated detectors, ECCN 2B351 on the Commerce Control List (CCL), to read as follows:
"a. Designed for continuous operation and usable for the detection of chemical warfare agents or chemicals controlled by 1C350 (AG-controlled precursors) at concentrations of less than 0.3mg/m3."
This change clarifies the scope of the entry. The previous text included the phrase "organic compounds containing phosphorus, sulphur, fluorine or chlorine." This phrase was removed because it did not specifically include inorganic compounds. Consequently, this CCL entry has been revised.
The Chemical Weapons Convention (CWC), open for signature and signed by more than 150 countries, bans the development, production, acquisition, stockpiling, retention, use, and direct or indirect transfer of chemical weapons. The Convention has been ratified by 126 states. The CWC entered into force on April 29, 1997.
The CWC, which is administered by the Organization for the Prohibition of Chemical Weapons (OPCW), is the first major arms control treaty to have a significant impact on the private sector. Certain commercial chemical production, consumption, and processing facilities will be required to submit data declarations and to permit international inspections. On October 21, 1998, U.S. implementing legislation was enacted to compel domestic industry compliance with the Convention.
BXA will implement the Department of Commerce's lead agency responsibilities for compelling data declarations from and hosting OPCW inspections at U.S. companies engaged in chemical activities covered by the CWC. OPCW inspections are anticipated to begin in FY00. CBTC activities include: (1) designing secure hardware and software to receive and process declarations; (2) training staff to perform chemical determinations; (3) maintaining a dedicated CWC Web site that contains necessary forms and information on CWC requirements; (4) hiring, training, and certifying staff to host inspections; (5) conducting mock inspections; (6) conducting site assistance visits to prepare facilities for OPCW inspections; and (7) holding seminars in cooperation with the Chemical Manufacturers Association, the Synthetic Organic Chemical Manufacturers Association, BXA's Office of Exporter Services, the Federal Bureau of Investigation, the Department of State, and the Defense Threat Reduction Agency, to inform industry of its CWC obligations.
CBTC cooperates with other U.S. Government agencies in participating in the various meetings and daily operations of the OPCW in The Hague. In FY99, CBTC participated in the Facilitator's, Executive Council, and Conference of States Parties meetings involving industry issues, such as model facility agreements, information security, and inspection procedures. Participation in these sessions affords BXA the opportunity to represent U.S. industry concerns in the inspection planning process as well as to interact with OPCW staff and foreign delegations.
Over the course of FY99, CBTC engaged in a concentrated outreach effort to industry to maintain a dialogue about the impact of CWC requirements and to provide information on industry's rights and obligations, the completion of declarations, and on-site inspection protocols. With the publication of draft CWC regulations, CBTC began implementing a comprehensive outreach plan, which includes seminars, guidance materials, and maintaining a dedicated Web site (www.cwc.gov) to educate industry on its declaration and inspection requirements under the Convention.
CBTC is cooperating with other U.S. Government agencies in the development of a protocol to the BWC that can be supported by industry. Industry's concerns about the protection of confidential business information are a significant consideration in crafting the protocol. CBTC works with industry organizations to coordinate and promote cooperation with government in addressing BWC issues. CBTC provides representation for multilateral and bilateral discussions relevant to the BWC, including an Ad Hoc Group working to develop a protocol to strengthen the treaty. In November 1996, CBTC joined the U.S. Delegation to the Fourth BWC Review Conference (Revcon), which affirmed support for the basic principles of the convention and endorsed the work of the Ad Hoc Group. CBTC attended sessions of the Ad Hoc Group held in 1999 during which work progressed on the development of specific elements of a protocol. In addition, CBTC participated in discussions both bilaterally and multilaterally with small groups of like-minded countries throughout the year.
The Convention on Biological Diversity (CBD) aims to conserve the world's biological diversity by stemming the loss of the earth's species, their habitats, and ecosystems. The United States has signed, but not ratified, the treaty, and, therefore, is not a party. However, as the largest exporter of biotechnology products, the United States actively participates in the development of a Biosafety Protocol.
Since 1995, an international Ad Hoc Working Group has attempted to develop a Biosafety Protocol. The original purpose of this Protocol was the regulation of the movement of any living modified organism that may adversely affect, or be threatening to, the environment of the importing country. The Protocol negotiations became highly controversial with the proposal to require an exporting country to obtain advanced informed agreement from the importing country in order to export products derived from genetically modified organisms. Such a requirement would impact U.S. annual exports valued in excess of $11 billion. The Protocol negotiations were suspended in February 1999 without agreement and are expected to recommence next year. CBTC staff will continue to participate in future interagency discussions and will report on the progress of the negotiations as BXA might receive the implementing responsibilities.
The Department of Commerce requires U.S. companies and other organizations to obtain prior approval from BXA before foreign nationals from certain countries are allowed to work on projects involving controlled technology. An export license is required because the EAR considers any release of controlled technology or software to a foreign national to be a "deemed export" to the home country. BXA reviews license applications under the licensing policies that apply to the actual export of the technology or software in question to the home country or countries of the foreign national. The "deemed export" rule is most often encountered in the employment context where a company will release controlled technology or software to a foreign national.
During FY98, there was a substantial increase in "deemed export" license applications. During this time frame, BXA processed approximately 800 "deemed export" cases, up from 300 cases during FY97. At the same time, the license processing time dropped from approximately 70 days during FY97 to about 54 days last year. In FY99, the licensing workload remained constant with BXA again reviewing approximately 800 applications while managing to further reduce the average processing time from 54 days to 48 days.
Sections 3(2)(c) and 7 of the Export Administration Act of 1979, as amended (the Act), authorize the President to prohibit or curtail the export of goods "where necessary to protect the domestic economy from the excessive drain of scarce materials and to reduce the serious inflationary impact of foreign demand." In support of this objective, Section 7 also authorizes the President to monitor exports of certain goods to determine the impact of such exports on the domestic supply and whether this impact has an adverse effect on the U.S. economy.
BXA also administers export controls under the Energy Policy and Conservation Act, the Mineral Leasing Act, the Naval Petroleum Reserves Production Act, the Outer Continental Shelf Lands Act, and the Forest Resources Conservation and Shortage Relief Act (FRCSRA) of 1990, as amended. BXA continued to conduct economic, policy, regulatory, and technical analyses of Congressionally mandated controls for domestically produced petroleum and unprocessed timber.
During FY99, the Department of Commerce controlled certain domestically produced crude oil and unprocessed Western Red Cedar timber harvested from Federal and state lands. Section 7(k) of the Act specifies that for purposes of export controls imposed under this Act, the shipment of crude oil, refined petroleum products, or partially refined petroleum products from the United States for use by the Department of Defense or United States-supported installations or facilities should not be considered as exports. Section 14(a)(l3) of the Act requires a report on any monitoring program conducted pursuant to this Act or Section 812 of the Agricultural Act of 1970. Therefore, this chapter includes a report by the U.S. Department of Agriculture (USDA) on its monitoring activities during FY99.
Exports of most domestically produced crude oil continued to be subject to statutory restrictions in FY99. Four separate statutes require the Department to administer various restrictions on the export of domestically produced crude oil.
All of the statutes establish various stringent tests (e.g., consumer savings through lower prices for replacement oils) a license applicant must meet before BXA can authorize crude oil exports. BXA can authorize exports only by a national interest finding issued by the President or his delegated representative. The President has retained the authority to make national interest findings under three of the statutes but has delegated to the Secretary of Commerce the authority to make findings under EPCA.
Since the legislation came into effect, there have been only five national interest findings providing exemptions from the statutory prohibitions. The President issued two findings that allow: 1) as of 1985, the export to Canada of crude oil produced in the lower 48 states; and 2) as of 1989, the export of 50,000 barrels per day (B/D) of Alaskan North Slope (ANS) crude pursuant to the U.S.-Canadian Free Trade Agreement. In 1985, the Secretary of Commerce issued a finding allowing the export of Alaskan Cook Inlet crude oil to Pacific Rim energy markets. On October 23, 1992, the President authorized the export of 25,000 B/D of California heavy crude oil having a gravity (i.e., weight) of 20 degrees API or lower. On April 28, 1996, the President determined that exports of ANS crude oil when transported on U.S.-flag tankers are in the national interest.
During FY99, exports of domestically produced crude oil resulting from exports to Canada, ANS crude oil pursuant to license exception based on the Trans-Alaska Pipeline Authorization Act (TAPS), and exports of California heavy crude oil pursuant to a Presidential determination totaled 74.35 million barrels or 203,700 barrels per day. The discussion below reviews exports from the lower 48 states and exports from Alaska.
During FY99, BXA approved 20 licenses for exports of crude oil originating from the lower 48 states. These licenses involved a total of 48.2 million barrels of crude oil or approximately 132,000 B/D. This included:
The Department also authorizes temporary exports to Canada and Mexico for convenience and efficiency of transportation. During FY99, there was no activity under this authority.
Exports of California Heavy Crude Oil: During FY99, BXA issued 13 licenses pursuant to the California rule-making to export 25,000 B/D of California heavy crude oil. The 13 licenses were for 6.87 million barrels of crude. The bulk of the heavy crude oil exported was for use as bunker fuel for vessels in foreign trade.
Alaskan North Slope Crude Oil: On May 31, 1996, BXA amended the short supply provisions of the Export Administration Regulations by establishing License Exception TAPS authorizing such exports with certain conditions. The License Exception TAPS was based on: 1) Public Law 104-58, which allows for the export of crude oil transported by pipeline over right-of-way granted pursuant to Section 203 of the Trans-Alaska Pipeline Authorization Act (TAPS); 2) the President's April 28, 1996, determination that such exports are in the national interest; and 3) the President's direction to the Secretary of Commerce to issue a license exception with conditions for the export of TAPS crude oil. During FY99, U.S. firms exported 26 cargoes of ANS crude oil totaling approximately 26.2 million barrels (71,700 barrels per day), pursuant to license exemption TAPS. These exports to Japan, China, South Korea, and Taiwan had a market value well in excess of $350 million.
Crude Oil from Cook Inlet: The Department authorizes the export of crude oil derived from state-owned submerged lands in Alaska's Cook Inlet under an individual validated license unless the oil has been or will be transported by a pipeline over a Federal right-of-way granted pursuant to the Mineral Leasing Act or the Trans-Alaska Pipeline Authorization Act. In FY99, there was no activity under this program.
BXA administers short supply export controls on Western Red Cedar, as mandated by Section 7(i) of the Act. BXA also administers the ban on exports of unprocessed timber originating from public lands in all or parts of 17 western states pursuant to FRCSRA.
Western Red Cedar: Section 7(i) of the EAA prohibits the export of unprocessed Western Red Cedar (WRC) harvested from state or Federal lands. This prohibition applies to those contracts entered into after September 30, 1979. However, exports of unprocessed WRC harvested from state or Federal lands under contracts entered into before October 1, 1979, are permitted under an export license. During FY98, BXA did not issue any export licenses for WRC.
FRCSRA: Under FRCSRA, the Department of Commerce is responsible for administering the ban on the export of unprocessed timber originating from public lands in 17 western continental states. In the alternative, the affected states can request the Secretary of Commerce to authorize them to administer their own programs. BXA has undertaken the following actions implementing FRCSRA:
No new Log Export Orders were issued in FY 99.
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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.