Where Industry and Security Intersect
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The Bureau of Export Administration (BXA) administers and enforces laws and regulations that govern exports of dual-use commodities, technology and software from the United States and its territories and reexports of such items to third countries. In addition, BXA regulates certain activities of U.S. persons related to proliferation concerns. BXA has the responsibility of implementing the U.S. encryption policy and is responsible for compliance by the U.S. business community with the Chemical Weapons Convention. BXA investigates violations of export controls and implements the antiboycott provisions of the Export Administration Act and Export Administration Regulations. BXA is responsible for a variety of programs related to maintaining a strong U.S. defense industrial base. BXA also participates in the efforts of the U.S. Government to assist many of the newly independent states of the former Soviet Union, the Baltics, and Central Europe in developing effective export control systems.
BXA's export control agenda for the 21st century is focused on maintaining our national security by reducing the proliferation of weapons of mass destruction while seeking to facilitate U.S. competitiveness in the global marketplace. BXA recognizes that U.S. industry cannot successfully compete internationally if its export control system is significantly misaligned with the systems of competing nations. It also recognizes that economic globalization and the end of the Cold War have changed the nature of U.S. Defense procurement and increased the role of the civilian high-technology sector in defense and intelligence research, development and acquisition. More than ever before, our ability to stay ahead of our adversaries technologically rests on our ability to keep our high-technology companies healthy. This increasingly means facilitating more exports, which in turn, support additional research and development and the creation of new products and technologies that enhance our national security.
The Administration continues to take important actions to remove unnecessary obstacles to exporting and strengthening multilateral regimes. The Administration has actively involved industry as part of its public-private partnership effort.
The Clinton Administration continues to make progress in eliminating unnecessary and ineffective export controls and streamlining the export control process. It has simultaneously strengthened the implementation and enforcement of those export controls, which are still required to combat proliferation and protect other U.S. national security and foreign policy interests while easing or eliminating unnecessary controls. These actions have greatly reduced obstacles for exporters while maintaining our security interests.
BXA made a number of regulatory changes during FY 99. It published a rule that raised the performance level of microprocessors that may be exported under a license exception to civil end-users in former East Bloc countries and the People's Republic of China. It also published a rule liberalizing controls on exports of High Performance Computers (HPCs), raising the performance level of HPCs that may be exported under a license exception. Another published rule implemented the Wassenaar Arrangement's revisions to its control list. This eased controls on many telecommunications products. BXA also published a rule relaxing controls on commercial products containing small amounts of controlled explosives, such as automotive air bag activators.
Other regulatory actions included imposition of broad restrictions on exports to Serbia, and the retransfer of commercial communications satellites from the Commerce Control List to the State Department's Munitions List.
In December 1998, the Wassenaar members agreed to move encryption items from the Sensitive List to the Basic List and make other revisions to encryption controls. This agreement was the result of a two-year effort to modernize and improve multilateral export controls on encryption. Wassenaar member countries also agreed that the General Software Note (GSN) should not apply to encryption and replaced it with a new cryptography note that, among other things, closed loopholes that allowed the uncontrolled export of encryption with unlimited key length.
On September 16, 1999, the Administration announced a new approach to encryption policy that simplified export controls. This approach comprises three elements: information security and privacy, a new framework for export controls, and updated tools for law enforcement. The encryption export controls element rests on three principles: a one-time technical review in advance of sale; a streamlined post export reporting system; and a process that permits the government to review the exports of strong encryption to foreign government and military organizations and to nations of concern. The White House has directed that a regulation implementing the changes be published by December 15, 1999.
On October 21, 1998, the Congress passed Chemical Weapons Convention (CWC) implementing legislation that the President subsequently signed into law. BXA is implementing the Commerce Department's lead agency responsibilities for compiling data declaration forms and hosting Organization for the Prohibition of Chemical Weapons (OPCW) inspections at U.S. companies covered by the CWC. To fulfill its responsibilities under the treaty, BXA published proposed regulations and is publishing the final regulations in the first quarter of FY 2000. BXA has completed the creation of an information management system to comply with the treaty's reporting requirements, and has begun industry outreach activities. It will manage international inspections at U.S. commercial facilities which will begin in FY 2000.
The Administration continued to work with interested parties toward achieving meaningful sanctions reform. The Administration remains committed to a sanctions policy that is carefully targeted, truly advances our foreign policy goals, and avoids damaging other U.S. interests. BXA has participated in Departmental and interagency working groups looking at sanction reforms, reviewing legislation and developing proposals to rationalize the process.
On April 28, 1999, the President announced that the United States would exempt commercial sales of food, medicine, and medical equipment from future unilateral economic sanctions regimes where it had the authority to do so and would apply that policy immediately, with appropriate safeguards, to currently embargoed countries. BXA assisted in developing the list of items that could be exported under the new policy. On August 2, 1999, the Department of The Treasury's Office of Foreign Assets Control issued regulations amending the sanctions regimes for Iran, Libya, and Sudan to implement this policy change. Existing BXA regulations already authorized approval of such exports to Cuba, North Korea, and Syria. The U.N. "Oil for Food" program authorized approval of such exports to Iraq.
In November 1998, BXA participated in a U.S. delegation to India and Pakistan, whose goal was to urge India and Pakistan to adopt the multilateral non-proliferation guidelines and export control lists of the various international nonproliferation regimes. The meetings were largely informational with the United States explaining the various regime controls. Both countries expressed their commitment to nonproliferation, but stated that their governments were not anxious to join the international regimes, which they consider discriminatory. In March 1999, BXA again participated in export control talks with Indian and Pakistani officials. The U.S. goal was to determine what steps each country had taken to strengthen its export controls; to encourage the adoption of the multilateral control lists; and to urge each country to adopt controls on intangible exports of technology. Pakistan clarified certain aspects of its missile controls and agreed to consider U.S. recommendations on controlling production equipment and technology. India planned to review its export control policies for nuclear and missile-related items.
In May, the United States published a rule in the Federal Register that added Macau to the Export Administration Regulations (EAR) as a distinct destination on the Commerce Country Chart for export licensing purposes in preparation for the colony's return to the sovereignty of the People's Republic of China on December 20, 1999.
In September, the President announced his decision to ease sanctions against North Korea administered under the Trading with the Enemy Act and other authorities. This decision will permit the export and re-export of many nonsensitive goods and services and the transport of approved cargoes to and from North Korea by U.S. commercial ships and aircraft, subject to normal regulatory requirements. Nonproliferation restrictions associated with North Korea's designation as a terrorist-supporting state will remain in place.
On July 1, 1999, President Clinton unveiled new export controls on HPCs and semiconductors. This new policy includes changes critical to maintaining the strong, vibrant high technology industry which is critical to America's national security interests. The revised controls announced by the President maintain the four country groups announced in 1995, but amend the countries in, and control levels for, three of those groups. At the same time, the President committed the Administration to review HPC export control policy every six months in order to ensure a realistic export control regime in this rapidly changing high technology industry. Following this announcement, on July 23, 1999, the President notified Congress, pursuant to the National Defense Authorization Act for Fiscal Year 1998, of his decision to establish a new performance level to which the notification procedure for computers will apply.
On August 3, 1999, the regulation implementing the President's announcement was published. It moved Brazil, the Czech Republic, Hungary, and Poland from Country Tier II to Tier I, thus allowing a license exception for all computer exports to those countries. It raised the control level for Tier II countries from 10,000 to 20,000 MTOPS (Million Theoretical Operations Per Second) with the expectation that it will be raised again in six months to the 32,000-36,000 MTOPS range. It maintained the distinction between civilian and military end-users in Tier III countries. License levels for Tier III civilian end-users were immediately raised from 7,000 to 12,300 MTOPS. License levels for Tier III military end-users were retained at 2,000 MTOPS until the conclusion of the six-month Congressional review mandated by the NDAA, at which time it will be raised to 6,500 MTOPS. Proliferation end-users will still require a license for any HPC export. The denial policy for Tier IV remains unchanged.
BXA requires U.S. companies and other organizations to obtain prior approval before foreign nationals from certain countries are allowed to work on projects involving controlled technology. An export license is required because the EAR considers release of controlled technology or software to a foreign national to be a "deemed export" to the home country of the foreign national. 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 employee.
During FY98, there was a substantial increase in "deemed export" license applications, with BXA processing approximately 800 "deemed export" cases. During that year, the average license processing time was about 54 days. 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.
BXA continues to work to harmonize multilateral lists and list interpretations to increase transparency and consistency and to maintain a level playing field for U.S. companies. In 1999 the Wassenaar Arrangement's Initial Elements called for the first time for Participating States to assess the overall functioning of this arrangement. This review process provides an opportunity to focus on how the arrangement is meeting its objectives. In 1999, four assessment meetings were held. The U.S. objectives for the 1999 Assessment include: (1) Expanded reporting of conventional arms; (2) Strengthening the Wassenaar Arrangement by adopting a denial notification policy similar to that of the nonproliferation regimes, and (3) Implementing controls on man-portable defense systems (MANPADS). The Wassenaar Arrangement also continues annual reviews of its control lists.
In February 1999, BXA added to its website a web page dedicated to the Wassenaar Arrangement and related BXA developments, intended to serve as a resource for exporters. In July 1999, BXA also published changes to the Export Administration Regulations to implement in the Commerce Control List (CCL) 1998 agreed changes to the Wassenaar Arrangement's List of Dual-Use Goods and Technologies. Changes contained in the July 1999 regulation streamlined controls for telecommunications equipment and technology, consistent with the agreed relaxations in Wassenaar's list.
BXA continued its efforts to establish a "level playing field" for U.S. exporters by proposing that the Nuclear Suppliers Group (NSG) adopt parts and components rules. Under the proposal, certain NSG Dual Use Annex entries will identify the individual parts and components of the controlled items that will also be controlled. The proposal, currently under review in the NSG, will not result in placing a significant number of new items under U.S. control; many are already subject to U.S. controls pursuant to other multilateral control regimes. This proposal will enable U.S. exporters to compete equitably in the international marketplace with their foreign competitors.
The NSG held its annual Plenary Session in Florence, Italy, on May 5-6. Agreement was reached at the Plenary to continue NSG outreach and transparency initiatives; to consider establishing an Internet Web site; to enhance the usefulness of its electronic information sharing efforts among all NSG members; to establish working groups to clarify component controls (in response to the U.S. proposal noted above) and to study improvements in the effectiveness of the regime.
The Missile Technology Control Regime (MTCR) held its annual Reinforced Point-of-Contact meeting where representatives from MTCR member countries met to discuss a limited agenda of issues derived from the monthly MTCR Point-of-Contact meetings. The monthly Point-of-Contact meetings are attended by the MTCR member countries' embassy personnel stationed in Paris, France. This year's annual Reinforced Point-of-Contact meeting was held in Paris on June
3-4, and focused on national approaches to counter regional missile proliferation in South Asia, North Asia and the Middle East.
The MTCR also held an export control workshop on intangible technology transfers in Munich, Germany on June 21-23. The workshop focused on such issues as industrial visits and the employment of foreign nationals, and technology transfers via electronic means, i.e., E-mail and the Internet. BXA gave presentations on U.S. policies and procedures on intangible technology exports, and the applicability of intangible technology controls on scientific, academic, technical and industrial organizations. The U.S.-U.K. proposal to reformat the MTCR Annex -- to conform it with the control lists of the other multilateral regimes and thereby enhance overall compliance with and enforcement of all nonproliferation export controls -- was agreed to by all MTCR members in February 1999. However, a hold on final approval was imposed by one MTCR member pending resolution of a definitional issue. BXA successfully negotiated an acceptable compromise, and the hold was finally lifted effective July 21, 1999. The reformatted Annex has now been fully entered into force by all MTCR members.
During FY99, BXA submitted the fourth annual report of Offsets in Defense Trade to the Congress under authority of section 309 of the Defense Production Act of 1950, as amended. Offsets are mandatory compensation required by foreign governments when purchasing U.S. defense systems. This fourth annual report reviews offset agreements and offset data for the five-year period from 1993 to 1997. BXA also addressed offsets as a trade concern for the first time in the U.S. Trade Representative's (USTR) Title VII Report on Unfair Foreign Government Procurement Practices. The report alerted governments around the world that the United States is seeking a way to conduct defense trade without offsets. Notable progress was also made in the area of international consultations. Negotiations have been pursued on both a multilateral and bilateral basis. Important steps have been taken to address the issue with our European allies, since they are the largest defense trade partners and demand the highest offsets, and preliminary interagency discussions were held with the Canadian and Dutch Governments.
BXA continues its role as an advocate of certain international defense trade advocacy issues. The Department will consider supporting conventional arms transfers if the transfer is in the economic interests of the United States, and the U.S. Government has determined that the transfer will further U.S. national security and foreign policy objectives. In FY99, BXA defense advocacy efforts supported industry-led sales of approximately $4.2 billion which included the $2 billion F-16 fighter aircraft and $1 billion Patriot missile system sales to Greece, and the $1.2 million sale of AH 64 Apache Longbow helicopters to Singapore.
In December 1996, BXA implemented guidelines issued by the National Security Council to streamline the export licensing review process for entities of proliferation concern. The development of a list of entities through the "Is Informed" process arose from the Enhanced Proliferation Control Initiative (EPCI) begun in 1991 to stem the spread of missile technology as well as nuclear, chemical, and biological weapons. This improved process has injected accountability, transparency, and timeliness into the "Is Informed" process. Since February 1997, BXA has published several Commerce Department rules that added names to the "Entity List." Publishing the Entity List allows the U.S. Government to identify for U.S. businesses some of the organizations and companies that may be involved in proliferation activities. Under EPCI, BXA has the authority to inform exporters individually or through published notices that a license is required for exports and reexports of goods and technology that normally do not require an export license to an organization or company on the Entity List, when there is an unacceptable risk of use in or diversion to activities related to nuclear, chemical or biological weapons or missile proliferation by those organizations or companies.
BXA continues its commitment to provide the business community with information regarding the constant changes in export policy and licensing procedures, through counseling, seminars, and workshops. In FY99 BXA hosted 32 export compliance seminars with almost 4,000 participants, and participated in another 84 trade-related events. Through telephone calls, visits, and fax-on-demand requests, BXA provided guidance and information to more than 100,000 people.
During FY99, BXA was involved in four major industrial base projects. Three are projects that continued from the previous year. Research continued on a Navy-sponsored assessment of high performance explosives, a study scheduled for completion in FY 2000. BXA also continued its assessments of the U.S. maritime industry, requested by the U.S. Navy, and of assistive technologies (technologies that enable persons with disabilities to function more fully), a study requested by the Department of Education and the Federal Laboratory Consortium. BXA initiated a new assessment of the U.S. cartridge and propellant actuated device (CAD/PAD) industry at the request of the U.S. Navy. This study is a follow-on to a study conducted for the Navy in 1995. BXA is also conducting a new series of smaller assessments in cooperation with the Army Materiel Command, which entered into a partnership with BXA for industrial base support during FY99.
BXA's Export Administration (EA) comprises five offices under the Office of the Assistant Secretary. Three EA offices have responsibility for addressing a wide range of export control policy and licensing activities, including dual-use nuclear and missile goods and technologies; dual-use chemical and biological goods and technologies; and commercial encryption policy, dual-use goods and technologies related to conventional arms, certain other sensitive dual-use goods and technologies, and foreign policy controls. EA also has an office that focuses on strategic industries and economic security issues, and an office that focuses on EA's administrative, education, and compliance responsibilities. This organizational structure allows BXA to formulate and implement timely policy changes, undertake quality analysis of licensing decisions, focus on issues of international competitiveness, and provide increased customer service.
The Office of Strategic Trade and Foreign Policy Controls (STFPC) is responsible for implementing multilateral export controls under the Wassenaar Arrangement, which deals with conventional arms and related dual-use goods and technology. The office is responsible for policy pertaining to and licensing of encryption and high performance computer exports. STFPC also has the lead for policy issues involving countries like China and India, for unilateral and UN sanctions, and for export controls maintained for antiterrorism, regional stability, and crime control reasons.
The Office of Nuclear and Missile Technology Controls (NMT) administers U.S. multilateral and unilateral export controls on dual-use nuclear and missile goods and technology to prevent the spread of weapons of mass destruction. The office is responsible for all export control policy issues relating to the Nuclear Suppliers Group (NSG) and Missile Technology Control Regime (MTCR) and represents the Department in international negotiations pertaining to the export controls that are shared by member-nations of these regimes. It also has the responsibility for reviewing many proposed exports of items subject to license requirements under the Enhanced Proliferation Control Initiative (EPCI).
The Office of Chemical and Biological Controls and Treaty Compliance has overall responsibility for administering export controls and policy development relating to the Australia Group (e.g., chemical weapons precursors and biological agents). This office will have a major role in overseeing compliance by U.S. industry with the requirements of the Chemical Weapons Convention, the Biological Weapons Convention, and other relevant treaties. The office also carries out the provisions governing deemed exports and executes BXA responsibilities in furtherance of its controls on exports for short supply reasons.
The Office of Strategic Industries and Economic Security (SIES) is the focal point within the Commerce Department for issues relating to the health and competitiveness of the U.S. defense industrial base. As such, SIES plays a leadership role in a wide range of issues that relate to both the national and economic security of the United States. Its efforts include assisting American companies to diversify from defense to commercial production and markets, promoting the sale of U.S. weapons systems to our allies, analyzing the impact of export controls on key industrial sectors, and conducting primary research and analysis on critical technologies and defense-related sectors.
The Office of Exporter Services (OEXS) is responsible for counseling exporters, conducting export control seminars; and developing, drafting, and publishing changes to the EAR. It develops brochures and other written guidance to educate and train exporters, and to ensure compliance with the EAR. It is also responsible for compliance actions relating to the special comprehensive license, for administering the processing of license applications, commodity classifications, and advisory opinions, and for implementing the End-User Verification process through which U.S. exporters are informed of foreign entities of proliferation concern.
BXA's Export Enforcement (EE) arm comprises three offices: The Office of Export Enforcement (OEE), the Office of Enforcement Analysis (OEA), and the Office of Antiboycott Compliance (OAC). OEE has eight field offices located throughout the continental United States. Export Enforcement works to prevent the illegal export of dual-use items, which are controlled for national security and other reasons and investigates alleged illegal export transactions. Export Enforcement works with U.S. Attorneys and BXA's Office of Chief Counsel in seeking appropriate sanctions for violators.
OEE and OEA personnel perform a variety of checks on export transactions that raise proliferation concerns. Special agents spot-check shipments, audit exporters' records, detain or seize suspect shipments, seek temporary denial orders, and carry out pre-license and post- shipment verifications. In cases of suspected or alleged violations, OEE special agents often work with the U.S. Customs Service, the Federal Bureau of Investigation, and the Treasury Department's Office of Foreign Assets Control. OEE, in conjunction with the Department of Justice and the Commerce Department's Office of Chief Counsel, pursues criminal and administrative prosecution of cases.
OEE's mission also involves educating export control personnel and businesses about compliance with U.S. export control regulations, the proliferation threat from rogue nations, and the need for businesses to be more fully aware of their responsibilities under the U.S. export control system. OEE provides export control technical assistance to Foreign Commercial Service personnel and foreign export control officials.
OAC enforces the antiboycott provisions of the EAR, provides advice to the public, and issues reports on foreign boycotts. The EAR prohibits U.S. persons from complying with certain aspects of unsanctioned foreign boycotts against countries friendly to the United States. OAC conducts investigations of alleged violations, prepares cases for settlement, and provides support in criminal prosecution or administrative litigation of cases. OAC also monitors international boycott developments.
The Nonproliferation and Export Control Cooperation (NEC) office coordinates BXA's activities in support of U.S. export control cooperation programs with Russia and the other republics of the former Soviet Union in the Central Asian, Eastern European, and Caucaus regions, and the Baltic and Central European states. NEC's industry-government relations program with Russia significantly expanded the capability of Russian industry to comply with the new Russian export control law. Working with Russian NGO's, BXA assisted in the installation of internal compliance programs in over 207 Russian enterprises, many in the sensitive nuclear and areo space industry sector. NEC technical exchanges supported legal and regulatory activities in six former soviet countries (Bulgaria, Moldova, Romania, Tajikistan, Ukraine and Uzbekistan) in efforts ranging from drafting original export control laws to amending existing laws and drafting implementing regulations.
The technical exchanges make use of the expertise of Export Administration, Export Enforcement, and office of Chief Counsel personnel as well as representatives from other federal agencies (e.g., Departments of State, Defense, and Energy and the Customs Service) and U.S. exporting companies. As a result of NEC License Processing/Control List technical exchanges, four former soviet republics (Georgia, Kazakhstan, Moldova and Ukraine) have agreed to require licenses for items listed on the four nonproliferation regime control lists.
The Critical Infrastructure Assurance Office (CIAO) was created by Presidential Decision Directive 63 (PDD-63) on May 22, 1998 and attached to the Bureau of Export Administration on October 1, 1998. This directive reflected many of the recommendations of the President's Commission on Critical Infrastructure Protection (PCCIP), which recognized and underscored the national security implications of critical infrastructure protection. A major effort of the CIAO during FY99 was the coordination of the National Plan for Information Systems Protection. Even while dependencies on our cyber resources increase, the growing threat of highly organized, systematic cyberattack by hostile powers or terrorist organizations creates new risks for every segment of our Nation. The Plan outlines steps to reduce these risks to a level acceptable to the American people.
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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.