Prepared Testimony of
James J. Jochum
Assistant Secretary of Commerce
for Export Administration
Before the House
Permanent Select Committee on Intelligence
February 12, 2002
Chairman Goss, Representative Pelosi and Members of the Committee:
Thank you for the opportunity to present the Administration's views on the Export Administration Act
of 2001.
The Administration believes that an effective export control system is critical to our national and
economic security. This is particularly true as we continue to face threats from terrorists and rogue
states developing weapons of mass destruction. We must ensure that our adversaries and potential
adversaries do not obtain goods or technologies that could be used for weapons that might ultimately
be directed against us. Equally important is an export control system that affords American exporters
the opportunity to compete on an equal footing with their foreign competitors in the global
marketplace. The challenge for policy makers is to construct a tough-minded, yet common-sense
export control regime that enhances legitimate, commercial trade while at the same time prevents the
diversion of sensitive goods and technologies that could jeopardize our national security.
In my remarks today, I first will discuss the need for a new Export Administration Act. I will then
describe how both the Senate bill and H.R. 2581, as introduced in the House, represent a significant
improvement over current authorities in terms of protecting national security and facilitating commerce.
Finally, I will explain why the Administration opposes the bill reported by the House International
Relations Committee (HIRC).
I. The Need for a New Export Administration Act
For the most part, over the past 23 years U.S. export controls have been authorized under the Export
Administration Act of 1979. The 1979 Act has expired on six occasions during that time frame; it most
recently expired in August of last year. It has not been re-authorized to date.
To maintain our system of export controls the President was forced to declare a national emergency
under the International Emergency Economic Powers Act (IEEPA). Operating under this emergency
authority raises serious legal and political complications. It also greatly weakens our enforcement
efforts by, among other things, significantly lowering the penalties for export control violations.
Moreover, operating under emergency authority sends the wrong message -- at home and abroad --
about our commitment to export controls. It is hard to persuade other countries about the importance
of establishing a sound and workable export control system if we are unable to enact an export control
statute ourselves.
In the past, the remedy to operating under IEEPA has been simply to extend the 1979 Act. This is no
longer sufficient. The 1979 Act is a Cold War statute that does not reflect current economic and
political realities. The basic national security control authority of this law is predicated on the existence
of a multilateral regime -- the Coordinating Committee on Multilateral Export Controls (CoCom) --
that ended eight years ago.
In addition, the penalty levels in the 1979 Act have been substantially eroded by inflation. Ideally, we
rely on the deterrent effect of stiff penalties for export control violations. But under the 1979 Act, this
deterrent effect has largely eroded, because the low level of penalties could be viewed merely as a
cost of doing business.
Finally, the repeated shifting back and forth between IEEPA authorities and the 1979 Act has
hampered our enforcement efforts. A coherent, modern statutory basis for U.S. export control law will
enhance our ability to bring enforcement actions against alleged violators.
II. Improvements Over Current Law
Enactment of a new Export Administration Act that reflects current global realities is thus imperative.
In early 2001, the Administration conducted a thorough interagency review, led by the National
Security Council, of the bill then pending in the Senate, S.149. As a result of its review, the
Administration proposed a number of changes to the bill, which the Secretaries of State, Defense, and
Commerce, and the National Security Advisor all agreed would strengthen the President's national
security and foreign policy authorities to control dual-use exports. The Senate incorporated these
proposed changes into S. 149 and, as a result, the Administration strongly supported the bill approved
by the Senate last summer by a vote of 85-14.
In the House, Representative Gilman introduced H.R. 2581, a bill that largely incorporated the
provisions supported by the Administration in the Senate-passed bill. Unfortunately, the Gilman bill
was modified significantly by the House International Relations Committee. I will come back to the
Administration's opposition to the HIRC-passed bill later in my testimony, but first I would like to take
a moment to discuss several provisions of the Gilman bill, as introduced, and explain how these
provisions enhance national security and promote legitimate, commercial trade.
A. Export Control Authorities
In general, H.R. 2581, as introduced, eliminates the Cold War structure of the existing law, provides
greater opportunities for exporters to seek revision of ineffective controls and, importantly, gives the
President broad authority to protect national security. For example, national security controls are
authorized for three distinct purposes:
First, to restrict the export of items that would contribute to the military potential of countries to the
detriment of the United States and its allies;
Second, to stem the proliferation of weapons of mass destruction; and
Third, to deter terrorist acts.
In addition, the bill provides, for the first time in explicit statutory provisions, several additional
important authorities. For example, "catch-all controls" are authorized for the first time in statute.
Catch-all controls ensure that no exports, even of otherwise uncontrolled items, are made to weapons
of mass destruction programs.
The bill also contains a new provision known as "enhanced controls." Enhanced controls allow the
President to exempt, for reasons of national security, items from the foreign availability, mass market,
and parts and components provisions of the bill. Thus, the President can prevent, at the outset,
sensitive technologies from being considered under those provisions that would otherwise limit
controls.
If enhanced controls are not invoked, and an item is found to be readily available from foreign sources
or has mass market status, the President still can continue controls on these items indefinitely for
reasons of national security or adherence to our commitments under one of the four multilateral export
control regimes. This provision ensures that items controlled by agreement with our allies in a
multilateral forum will remain controlled.
The bill defines the term "export" so that it encompasses "deemed exports," thereby authorizing the
continuation of existing controls on transfers of intangible technology to foreign nationals.
In addition, the Gilman bill provides a statutory role for the Department ofDefense and other relevant
departments in the export control process in several important ways:
First, the Secretary of Commerce is required to refer all license applications to the Secretaries of
Defense and State, and to other relevant agencies for their review and recommendations;
Second, all reviewing departments are authorized to escalate a proposed licensing decision to the
President;
Third, the Department of Commerce is required to notify the Department of Defense of all commodity
classification requests; and
Finally, as it relates to this Committee's jurisdiction, the bill provides a formal advisory role for the
intelligence community in the licensing process. Intelligence information is a critical component of the
export license decision-making process and the intelligence community's role in this process should be
formally defined in the authorizing statute.
It is important to note that, although licenses are referred to several agencies, the bill requires that
decisions on license applications be made within 90 days of referral. Agencies can, however, "stop the
clock" if additional information is needed from the applicant. These transparent and specific deadlines
give exporters increased certainty when developing marketing and production plans. Of course,
prompt licensing decisions are essential for doing business abroad.
B. Enhanced Enforcement
In the area of enforcement, the Gilman bill - like S. 149 - significantly raises the penalties for export
control violations and contains other provisions that enhance the U.S. government's enforcement
authorities, thereby deterring those who might otherwise endanger U.S. national security through illicit
exports. For example, penalties on corporations are raised to $5 million per violation, or ten times the
value of the export, whichever is greater. Criminal penalties on individuals are raised to $1 million, and
civil penalties increase to $500,000. By way of comparison, under IEEPA the maximum criminal
penalty is $50,000 and civil penalties are capped at $12,000.
In addition, the bill authorizes the Commerce Department to conduct undercover operations and
enables wiretaps based on violations of export control law. Furthermore, Commerce is authorized to
station additional attachéés abroad to ensure that U.S. items are not diverted or misused.
III. H.R. 2581 as Reported by the House International Relations Committee
In August, the House International Relations Committee ordered reported H.R.2581. The HIRC bill
retained many of the provisions of the Gilman bill that I have just mentioned, but also added
approximately 30 amendments to the framework of that carefully constructed bill. Consequently, the
Administration strongly opposes the bill as reported by the House International Relations Committee.
That said, we would welcome the opportunity to continue to work with Members of that Committee
as the bill progresses in the House.
I would like to provide three examples of the concerns that the Administration has with the HIRC
amendments. I would emphasize, however, that the Administration continues to carefully review the
amendments and to formulate a comprehensive Administration position.
First, several provisions in the HIRC bill would limit the flexibility of the President to conduct foreign
policy and implement export controls. For example, one amendment would require the President to
wait 30 days prior to removing those foreign policy control not imposed by law. This provision could
constrain the President from acting promptly to protect national security. You will recall that following
September 11, the Administration removed certain sanctions on India and Pakistan, in part, to build a
coalition for the war in Afghanistan. Under the bill reported by HIRC, the President would have been
unable to have acted so promptly and effectively.
Second, several provisions would change the focus of export controls from protecting national security
to other non-security related areas. For example, two amendments would require export controls on
pesticides, agricultural chemicals and test articles intended for clinical investigations for purposes of
public health and environmental protection. These amendments would result in the diversion of our
resources devoted to stemming the proliferation of weapons of mass destruction and preventing
terrorist acts. We believe the issues raised by these amendments are best addressed under authorities
outside the context of the Export Administration Act.
Third, certain provisions of the HIRC bill would actually roll back existing authority to protect national
security.For example, the amendment to the definition of "export" appears to limit our ability to control
the transfer of intangible technology to foreign nationals outside the United States, as we do today. So
this amendment would appear to roll back existing control authorities, to the detriment of our national
security.
IV. Conclusion
In conclusion, the Administration strongly believes that S. 149 and H.R. 2581, as introduced, provide
the authority needed to prevent terrorists and other potential adversaries from obtaining sensitive items
that could be used to threaten our national security. The bills also provide transparency and
predictability in the licensing process that will benefit U.S. exporters. Although the Administration does
not support H.R. 2581 as reported by the House International Relations Committee, we look forward
to working with this Committee and others in the House to pass a new Export Administration Act this
year.
Thank you for the opportunity to testify. I look forward to your questions. |