Where Industry and Security Intersect
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The Missile Technology Control Regime (MTCR) was created on April 16, 1987 by the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom to limit the proliferation of missiles capable of delivering nuclear weapons. The MTCR was expanded in 1993 to include missile delivery systems for all types of weapons of mass destruction (WMD) and now has 33 member countries. (See Appendix II for a complete list of MTCR member countries.) There also are several countries, including Israel and Romania, that have announced unilateral adherence to the MTCR Guidelines.
The MTCR Guidelines and the Equipment and Technology Annex form the basis for U.S. missile technology controls. The MTCR Guidelines provide licensing policy, procedures, review factors, and standard assurances on missile technology exports. The Annex is the list of missile-related items and is divided into two categories. Category I items include missile systems and major subsystems, production facilities, and production equipment for missile systems capable of delivering a 500 kg payload to at least a 300 km range. Category II items include materials, components, and production and test equipment associated with Category I items, as well as missile subsystems, production facilities, and production equipment for missile systems with a 300 km range, regardless of payload.
The Department of Commerce is responsible for administering controls on manufacturing equipment for Category I items, and all dual-use items in Category II. There are approximately 120 entries on the Commerce Control List (CCL) that are subject to missile technology controls. Category I items have a strong presumption of denial, and the transfer of production facilities for Category I items is prohibited. The Department of Commerce will approve the export of Category II items only after a case-by-case review. The United States observes the multilateral commitment to honor the denial of licenses by other members and to support such denials through a "no undercut" policy. This policy enhances efforts to prevent missile proliferation and prevents unfair commercial advantage among regime members.
MTCR member countries seek to foster the cooperation of non-member countries in limiting the spread of delivery systems for WMD and have focused such efforts in an MTCR-sponsored series of workshops and seminars. This effort - begun in 1996 - allows MTCR members and invited non-members to explore different approaches to improve export controls and prevent missile proliferation.
In summary, the licensing requirements and policy for missile technology controls described in Parts 742.5 and 744.3 of the EAR are as follows:
A. The U.S. Government requires a license for the export or reexport to all destinations (except Canada) of those dual-use items specifically identified on the CCL as controlled for missile technology reasons. This exclusion for Canada is currently under review. An Advance Notice of Proposed Rulemaking was published in the Federal Register on December 20, 2001 seeking public comment on how the removal of the exemption would affect exporters. The overwhelming majority of the comments received were against enactment of the rule. The Department of Commerce also met with the Canadian government to discuss the proposed policy change.
The U.S. Government also controls items subject to the Export Administration Regulations (EAR) due to missile-related end-use or end-user concerns. These controls are part of the Enhanced Proliferation Control Initiative (EPCI), announced by the President on
December 13, 1990.
B. The Department of Commerce will review applications for licenses on a case-by-case basis to determine whether the export would make a material contribution to the proliferation of missiles. When the Department of Commerce determines that an export will make such a contribution, the application will be denied.
These controls curtail the availability of goods and technology and other support that could contribute to missile proliferation. U.S. export controls on specific types of missile-related equipment and technology, in coordination with other supplier countries, limits the proliferation of missile systems and related technology. These controls complement U.S. and international nuclear, chemical, and biological nonproliferation efforts by blocking the development of unmanned delivery systems for WMD. These controls lend clear U.S. support to the collective effort of the MTCR to address mounting international concern regarding missile proliferation.
1. Probability of Achieving the Intended Foreign Policy Purpose. The Secretary has determined that these controls are likely to achieve the intended foreign policy purpose. Although some controlled items are available from other countries, cooperation among the United States, its MTCR partners, and other like-minded countries, many of which are major producers of the items under control, has hindered the efforts of proliferators to develop or acquire militarily-effective missiles. The Secretary has determined that extending these controls is likely to limit the spread of missile delivery systems.
2. Compatibility with Foreign Policy Objectives. The Secretary has determined that these controls are compatible with U.S. foreign policy objectives. Halting the spread of missiles and related equipment and technology worldwide is a key U.S. national security and nonproliferation objective. Missile technology export controls are consistent with, and contribute to, achieving this objective. U.S. membership in the MTCR complements existing nuclear, chemical, and biological nonproliferation policies by curbing the spread of missile technology and equipment for the delivery of WMD.
3. Reaction of Other Countries. The Secretary has determined that any adverse reaction to these controls is not likely to render the controls ineffective. The United States is confident that other members of and adherents to the MTCR, many of whom are also the leading suppliers of missile-related technology, will continue to support and strengthen this control regime. MTCR partners share information regarding denials of Annex items and are committed to a "no undercut policy." MTCR partners also share information about potential activities of proliferation concern, and have cooperated to interdict certain transactions. The number of MTCR members and other countries willing to cooperate with the regime has increased over the past few years. Finally, the United States and its MTCR partners are actively engaged in an outreach program to encourage additional countries to adhere to the Guidelines and implement effective export controls on MTCR items.
4. Economic Impact on U.S. Industry. The Secretary has determined that any adverse effect of these controls on the U.S. economy, including on the competitive position of the United States in the international economy, does not exceed the benefit to U.S. foreign policy objectives. Only a narrow list of items are subject to missile controls and the effect on overall U.S. exports is limited. The commitment by MTCR to a "no undercut policy" helps ensure that no member obtains an unfair commercial advantage in the international marketplace.
In FY 2002, the Department of Commerce approved 775 applications, valued at $1.57 billion, for the export or reexport of missile-related items. Of these, 413 applications valued at $1.51 billion were for exports destined to Wassenaar member countries. In addition, the Department of Commerce denied 93 applications valued at $9.2 million, and returned without action 193 applications valued at $43.1 million. The significant dollar value reflects the expensive nature of aircraft inertial navigation units. Comparatively few licenses for missile technology items are denied because: (1) exporters do not generally pursue transactions they understand (based on the applicable licensing policy) will be rejected; and (2) many of the approved transactions are to countries that do not pose missile proliferation concerns (e.g., MTCR member-nations).
5. Effective Enforcement of Control. The Secretary has determined the United States has the ability to effectively enforce these controls. Multilateral controls on missile technology provides a strong framework for cooperative enforcement efforts overseas. However, there are challenges for the enforcement of controls on dual-use goods related to missile development. First, it is difficult to detect and investigate cases under the "knowledge" standard set by the EPCI "catch-all" provision. Second, some countries do not yet have "catch-all" laws or have different standards for "catch-all," which complicates law enforcement cooperation. Third, identifying illegal exports and reexports of missile-related goods requires a significant resources.
To enforce these controls effectively, the Department of Commerce continues to focus on preventive enforcement, including an outreach program to educate companies about export controls and to increase awareness of "red flags" that may indicate risky transactions. This program is an important component of the Department of Commerce's efforts to prevent companies from illegally exporting dual-use products or equipment that could be used to make missiles. Recognizing the importance of export enforcement, the MTCR held its second Enforcement Experts meeting at the MTCR Plenary in Warsaw, Poland, in September 2002.
The Department of Commerce normally holds discussions with industry representatives on issues involving the MTCR Annex through the Transportation Technical Advisory Committee (TransTAC), and other relevant TACs as appropriate. The Department of Commerce also participates in interagency working groups that review proposed changes to the Annex and engages in discussions of the proposals with companies that have relevant expertise. For example, in FY 2002, the Department of Commerce worked with industry to clarify controls on servo valves, which are an essential component in the flight control of missiles. Export controls on servo valves were clarified to differentiate between servo valves that can be used in missiles versus servo valves that used in general purpose applications.
On September 27, 2002, the Department of Commerce, via the Federal Register and the Bureau of Industry and Security's Web page, solicited comments from industry on the effectiveness of foreign policy-based export controls. The comment period closed on November 29, 2002.
A detailed review of the comments received is available in Appendix I.
Consultation with other MTCR members is a fundamental element of U.S. missile technology control policy. Consultations with non-MTCR countries also are essential to U.S. missile nonproliferation policy. The U.S. Government shares information about activities of concern with other countries and seeks to prevent or stop certain transactions. The United States also shares denial information with its MTCR partners.
On May 20, 2002, the EAR were revised to reflect changes agreed upon at the September 2001 MTCR Plenary. Accordingly, Export Commodity Control Number (ECCN) 1C107 was revised to clarify what shapes and sizes (of graphic or ceramic materials) are considered usable for rocket nozzles and reentry vehicle nose tips. ECCN 9A101 also was revised to expand the scope of turbofan and turbojet engines usable in missiles and subject to the export restrictions, and establish fuel consumption criteria for items controlled in this ECCN.
On September 18, 2002, language in several ECCNs was revised to confirm that all missile technology production equipment and facilities are controlled on the CCL. This revision clarifies which items are subject to Department of Commerce jurisdiction and are subject to the Department of State's International Trafficking in Arms Regulations. Exporters were advised in the Federal Register that additional clarifications regarding agency jurisdiction for missile-related items may be announced in the future.
The missile sanction provisions in Section 73 of the Arms Export Control Act and Section 11B of the Export Administration Act provide for the imposition of export, import, and procurement sanctions on foreign entities engaged in certain kinds of activities relating to the transfer of MTCR Annex items to non-MTCR adherent countries. In the past, the United States has imposed sanctions on entities in China, India, Iran, North Korea, Pakistan, and Russia. Missile sanctions are used to encourage the governments of the sanctioned entities to adopt responsible nonproliferation behavior.
Diplomatic efforts by the United States and MTCR partners to encourage additional countries to abide by the MTCR Guidelines are ongoing. Such efforts are aimed at encouraging non-MTCR members to adhere unilaterally to the MTCR Guidelines and to implement effective missile technology export controls.
Possible suppliers of missile technology that are not MTCR members include, but are not limited to, China (PRC), Egypt, India, Israel, and Taiwan. Some of these countries, such as Israel, abide by the MTCR Guidelines and apply MTCR-type controls. The United States continues to approach other nations that produce MTCR Annex-controlled items to urge vigilance in reviewing requests to export such items and to apply MTCR Guidelines to help prevent missile proliferation.
1. As of December 2002, the countries in Country Group D:4 included Bahrain, China (PRC), Egypt, India, Iran, Iraq, Israel, Jordan, North Korea, Kuwait, Lebanon, Libya, Macau, Oman, Pakistan, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and Yemen.
2. A license also is required to export this technology for antiterrorism (AT) reasons.