"Catch All" Controls: The United States Perspective
Brian H. Nilsson
Senior Export Policy Analyst
Office of the Assistant Secretary for Export Administration
Department of Commerce
September 28, 2000
- Good morning. I serve as the Special Assistant to Roger Majak, the Assistant
Secretary for Export Administration. Yesterday you heard from Assistant
Secretary DeBusk, who heads our enforcement branch. Our part of the organization
serves as the dual-use licensing operations, which includes our "catch
call" controls.
- The United States has had "catch all" controls in place since
the early 1980s. Let me begin by explaining how these controls first came
into being in the United States, and then follow this with some details
on how we currently define these controls and implement them.
Background
- Beginning in the 1970s, the U.S. Government realized that, although we
had one of the broadest export control systems in the world, we were still
faced with the problem of how to prevent common use items - - those not
normally requiring an export license - - from being used by others to manufacture
weapons of mass destruction (WMD).
- To address this problem, in the early 1980s the United States initiated
"catch all" controls on items intended for nuclear end-uses. These
controls were designed to deny exports to end-users or end-uses directly
or indirectly related to all aspects of the manufacture of nuclear weapons,
reactors and fuels, and so forth.
- During the 1980s we saw significant changes in the world, culminating
in the end of the Cold War. These changes were reflected in our export control
system, as we implemented major decontrols.
- This revamping of our system is reflected in our licensing numbers: in
1980 we processed 175,000 individual validated licenses. Last year, we did
less than 13,000.
During the same time period, however, we saw major negative developments
in the Middle East, beginning with the Iran/Iraq War and ultimately leading
to the Persian Gulf War. Leading up to and during that conflict, we discovered
Iraq's use of low-level dual-use items for the manufacture of chemical and
biological weapons and missiles.
- This development underscored the importance of WMD nonproliferation, in
that the United States found that it needed to create a balance between
U.S. industries' enhanced worldwide competition (because of the decontrols
after the end of the Cold War) and U.S. Government's responsibility to maintain
a strong "national security" and nonproliferation policy on weapons
of mass destruction.
- Our tool to establish this balance is what we call the Enhanced Proliferation
Control Initiative, EPCI, which is our fancy name for "catch all"
controls.
Commerce Controls
- To better explain the basic provisions of EPCI, allow me first to provide
a brief explanation of the Commerce Control List, a major component of the
Export Administration Regulations.
- The Commerce Control List is an ever-changing document, in that we are
frequently refining it, often as the result of agreements reached with our
regime partners. The List is comprised of dual-use commodities, software,
and technology, meaning those that have both commercial and military applications.
- The United States regulates the export and reexport of the commodities,
software and technology on the Commerce Control List to ensure that transactions
are not contrary to our national security, short supply, nonproliferation
and foreign policy interests.
- There are two types of items on the CCL: those controlled multilaterally;
and those controlled unilaterally.
- Multilateral controls stem from our obligations in the multilateral export
control regimes - - the Wassenaar Arrangement, the Missile Technology Control
Regime, the Nuclear Supplier's Group, and the Australia Group.
- At the unilateral level, the United States controls exports and reexports
for crime control, regional stability and anti-terrorism reasons. In addition,
the United States has unilateral embargoes on certain countries, like Cuba.
These unilateral controls are for foreign policy reasons.
- Many items on the Commerce Control List are controlled for more than one
reason - - for example, some types of aircraft navigation systems are controlled
for national security, missile technology, and anti-terrorism reasons. Sophisticated,
high-level items like the aircraft navigation systems I just described tend
to be controlled for both multilateral and unilateral reasons, while low-tech
items are often controlled only on the unilateral level.
- Although still subject to the Export Administration Regulations, many
items exported from the United States do not require a license for export
[meaning a "written authorization" for a license] or are available
for a license exception.
- Additionally, low-level technologies often do not require a license when
exported to specific countries; no license is required for the export of
low-level technologies unless the end-user is in a designated country or
is a national of such a country.
- Additionally, the vast majority of the United States' exports - - over
95 percent of them - - consist of commodities, technologies and software
subject to the Export Administration Regulations but not listed on the Commerce
Control List; we refer to these items as EAR99 items. It is these items,
together with those that are controlled unilaterally, that "catch-all"
controls usually effect.
Purpose of U.S. "Catch-all" Controls
- The purpose of "catch-all" controls is to impede the proliferation
of WMD. We do this by imposing licensing requirements on the export and
reexport of goods and technologies which the exporter "knows"
or "is informed" will be used in connection with WMD activities.
- The fundamental principle of U.S. "catch-all" controls is that
we have export controls on the end-use or end-user, instead of on the capabilities
of the equipment or technology. In this regard, these controls go beyond
the multilateral regime control lists.
- As a result of this principle, our regulations impose responsibility on
an exporter to apply for a license when he/she knows or is informed by the
U.S. Government that the end-use or end-user of a shipment is unauthorized.
- This requirement is formalized in the Export Administration Regulations.
An exporter is subject to this requirement based on three special features
of the U.S. EPCI controls: the "know" standard; the "is informed"
process; and restrictions on U.S. persons and their activities. Let me provide
a brief explanation of each of these features:
- The "know" standard: This is a requirement in our regulations
that a license application must be filed whenever an exporter "knows"
that the end-use or end-user of an item intended for export or reexport
is associated with WMD activities. It does not matter whether the item is
on the CCL or not [note: But must be subject to the EAR. Could either be
publicly available or under the jurisdiction of another agency].
- In addition, the U.S. definition of the "know" standard encompasses
more than positive knowledge; if the exporter has reason to believe that
an export will be used in WMD activities, a license application must be
filed.
- This is what makes our "catch all" controls challenging for
exporters. How does an exporter know or come to have reason to believe that
an export will be used in such activities? We have developed some guidelines,
"Know Your Customer" and "Red Flags," to help our exporters
make these determinations. These guidelines consist of tips on what to look
for in determining whether or not the catch-all provisions will come into
play. They include examples of "red flags" - - signs that the
consignee may not be legitimate - - like an order for a high performance
computer for a small bakery.
- As you heard from Tim Sullivan on Tuesday, we are also developing an on-line
diversion risk screening model that exporters will be able to use to assist
them in their internal company reviews.
- I have copies of some of our guidance available on the table outside.
It is also available on our bureau's webpage and in the Export Administration
Regulations.
- I've talked about the "know" standard, let me now explain what
we mean by the "informed" process. When we first implemented these
regulations, exporters indicated that they did not know what end-users or
end-uses were of U.S. Government concern.
- In response to industry requests, the U.S. Government developed the "informed"
process. It is in essence a subset of the "know" provision, although
it is not codified in our regulations. The U.S. Government set up an interagency
review process to "inform" an exporter when a proposed export
poses an unacceptable risk of diversion to WMD activities, or is intended
to be used for such activities.
- How do we inform exporters? We do this two ways. One is by letter, in
response to an exporter's request for information about the end-use or end-user
associated with a proposed transaction. The other is through our normal
processing of a license application. If we have a concern about an entity,
the name of the entity and the restrictions placed on that entity are published
in the Federal Register, a public document published every work day that
lists all changes in U.S. federal regulations. This information is also
published in the Export Administration Regulations.
- Once an entity's name has been published in a regulatory announcement
or via a letter from Commerce, exporters are considered to be informed.
- The third feature of our EPCI controls is our restrictions on U.S. Persons.
These regulatory requirements impose limitations on the activities of U.S.
persons by restricting "knowing" assistance or support by U.S.
persons for WMD activities. The provision also prohibits U.S. persons from
exporting or transferring an item for use in a proliferation activity, regardless
of the origin of that item.
License Review Standards
- I've briefly explained how we came to impose "catch all" controls
and the criteria that we apply. How do we process an EPCI case?
- The answer is simple: we process it by letter or we process a submitted
license application in the same manner that we process all license applications.
This application process is defined by statute and further refined by a
Presidential Executive Order signed in December 1995 [and implemented in
February 1996].
- All cases are referred to other agencies - - most frequently to the Departments
of Defense, Energy, and State - - for review. We collectively look at a
number of factors - - such as the appropriateness of the item for the stated
end-use, the potential contribution of the item to WMD activities, the availability
or lack thereof of assurances, the applicant's and the end-user's licensing
history, the risk of diversion, and the nonproliferation credentials of
the importing country - - to determine if the license should be approved
or not.
- All agencies with technical expertise or policy knowledge, including the
intelligence community in many instances, participate in the review of the
license application.
Closing
- I've provided a brief history of our "catch all" controls, the
criteria that we use, and our licensing procedures.
- I'd like to close by stating that we have found that the implementation
of "catch all" controls has at times imposed a burden on our government
and industry, but we believe that the adoption of such requirements by all
responsible countries will aid tremendously in stemming the proliferation
of weapons of mass destruction and missiles used to deliver such weapons.
Thank you.
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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