Where Industry and Security Intersect
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I am deeply honored that you asked me to give today’s keynote address. As a fellow lawyer I appreciate the very valuable role that associations such as yours play in counseling and advising clients to comply with the law. Compliance with the export control laws is the first line of defense in protecting our national security. So, as an enforcement official, I want to extend to you my sincere thanks for your efforts in that regard.
Your organization has quite a distinguished history. I understand that it was founded in 1926. That was a very interesting year. Calvin Coolidge was President and Herbert Hoover was the Secretary of Commerce. As you know, the Department of Commerce building, which is just across Pennsylvania Avenue, is named in Herbert Hoover’s honor. Nineteen twenty-six was also the same year that Queen Elizabeth -- and Fidel Castro -- were born. So, it was an interesting year, indeed.
Innovation, Globalization and the Growth of Technology
Of course, a lot has changed since Coolidge was President in 1926. Innovation and entrepreneurship have fueled waves of industrial advancements. We see this most recently in the establishment and growth of the technology industry, which has firmly taken root and blossomed in Silicon Valley. Globalization is also a considerable force today. It affects industry in a variety of ways, and continues to open markets around the world.
As our technological progress continues, we should remain mindful that, as a general matter, technology is neutral. That is to say, it can be used for good – but there is often a dark side to it as well. The technology that can be used to treat illnesses, including cancer, can also kill millions in nuclear warfare. The same Internet that we use to streamline commercial transactions can also be used by terrorists to communicate with each other and to broadcast their threats. It can also be used by them to obtain the goods and technology they seek to perpetrate their attacks.
Commerce also shares that same neutrality. One can engage in trade with good intentions and for good purposes. Among the results of such trade will be strengthened nations and a strengthened global economy. By contrast, one can also trade negligently, recklessly and in a short-sighted manner that jeopardizes the future for today’s short-term profits. Indeed, one can even engage in trade for immoral purposes. A recently published book, Vermeer’s Hat, by Timothy Brook, reminds us that we can trace the roots of globalization back to at least the 17th Century, and that one of the staples of global trade at that time was slaves.
Several Important Export Controls Questions
Accordingly, as we continue to make technological progress and engage in the commercial trade that results from it, it is important that we ask ourselves a number of questions. Those questions include, “With whom am I trading?” -- as well as -- “To what use will they put the technology and goods I am selling?”
Questions such as those lie at the heart of dual-use export controls. And the answers to those questions are no longer as clear-cut as they might have been in the past. That is especially true in the post-9/11 world. The time when there were simply “bad nations” has passed. To be sure, there are still bad nations, including state-sponsors of terror and other rogue states. But in today’s world of stateless warfare against terrorist organizations, we have to acknowledge that even in “good nations,” there are bad people who would do us harm if given the opportunity. Conversely, there are good people in bad places. As we continue to expand trade among nations, it is important that we also protect our national security. In order to do so effectively, our export controls must take into account such realities.
Recent Developments in Export Controls
The move to do so is afoot in a number of ways. Indeed, it is a very exciting and dynamic time in the world of export controls. Among other things:
I understand that your organization took steps today to establish an export controls subcommittee. As you can see, your efforts are very well-timed.
In continuing, let me discuss next the importance of a few of those matters that are on the enforcement side, along with the work we are doing in Export Enforcement (EE) at the Bureau of Industry and Security (BIS). Then, we will also talk more specifically about trade with China and the Validated End-User process.
The Mission of Export Enforcement at BIS
Today, Export Enforcement at BIS works to ensure that U.S. goods and technology – which are widely-recognized to be the best in the world – are not used against us or our allies by terrorists or other enemies. In addition to that formidable challenge, Export Enforcement also confronts a range of others posed by rogue states and by the unauthorized diversions of dual-use goods to military end-uses. Accordingly, we describe our mission as “Keeping the most sensitive goods and technology out of the most dangerous hands.”
By conducting end use-checks, we continue to facilitate trade as well as security. Our pre-license checks and post-shipment verifications help ensure that goods being exported actually go where intended, and that they are being used consistent with the purposes for which they were exported.
In addition, our Office of Antiboycott Compliance (OAC) ensures compliance with the antiboycott provisions of the Export Administration Regulations (EAR). OAC continues to work with U.S. businesses against unsanctioned boycotts. The economies of the U.S. and our trading partners worldwide benefit from those efforts.
Export Enforcement’s Priorities
The Special Agents our Office of Export Enforcement (OEE) at BIS focus the bulk of their active investigative efforts upon countering weapons of mass destruction proliferation, terrorism and terrorist-support, and unauthorized military end use. Indeed, more than 75% of our active investigative efforts are focused on those three priority areas. Eighty percent of the criminal convictions in our cases for the past fiscal year fell within those priorities, as did 91 percent of the Final Orders entered in our administrative cases.
As I mentioned earlier, compliance is the first line of defense in protecting our national security. Accordingly, in addition to our enforcement efforts, BIS is continually working to raise awareness of the importance of compliance with the export regulations. Toward that end, we conduct outreach to industry and participate in various programs and seminars. We want exporters to be aware of the export regulations so that they can be vigilant about what they are sending and to whom. Such awareness helps keep sensitive goods and technology out of dangerous hands.
Holding Export Violators Accountable
Despite our best efforts, however, there are some individuals who disregard the export control laws. It is very important that they be held accountable. Holding violators accountable is important to foster respect for the law, to protect our national security, and to ensure that there is a level playing field for all.
Those who adhere to the law, such as your clients, should not feel that they are unfairly disadvantaged in the marketplace by those who disregard the law. Moreover, in today’s world, we simply cannot countenance those who seek to make a quick profit at the expense of our national security.
The Department of Justice’s Export Enforcement Initiative
Toward that end, we welcome the Department of Justice’s new Export Enforcement Initiative. The Initiative was announced in October of 2007, by the Department of Justice’s National Security Division, which is headed by Assistant Attorney General Kenneth L. Wainstein. It is an important recognition of the significant impact that export control violations have on our national security.
The Initiative will devote greater prosecutorial resources to cases around the country that involve export control violations and technology transfers. Indeed, you have already seen news reports of some of the cases that have resulted from the Initiative. Through the Initiative, the Department of Justice is partnering with BIS, the Department of Homeland Security’s Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation’s (FBI) Counterintelligence Division, the State Department’s Political Military Affairs Office and the Defense Criminal Investigative Service (DCIS). We look forward to continuing to work with our fellow law enforcement agencies on these important investigations.
A Renewed EAA is Critical
Ensuring that BIS’s Special Agents have the law enforcement tools and authorities that they need to do their jobs effectively in today’s world is critical to our ongoing mission to advance the national security, foreign policy and economic interests of the United States. Toward that end, it is important for Congress to pass a law enforcement-focused renewal of the Export Administration Act (EAA).
As you know the EAA has been in lapse for much of the past 30 years. As a result, it is out of date, which causes problems that law enforcement should not encounter, especially in national security cases. A law enforcement-focused renewal of the EAA will correct these long-standing issues. It would allow our Special Agents to carry out their mission with greater efficiency and productivity.
Some of the provisions BIS would like to see in a renewed version of the EAA are the elimination of the “sunset provision” regarding our law enforcement authorities. We would also like enhanced law enforcement authorities, such as wiretap authority for export offenses, explicit authority for foreign investigations, and expanded undercover authority. We also need increased criminal and civil penalties. Let me discuss the major provisions we need with you and tell you why we need them.
The first order of business in renewing the EAA would be to eliminate the sunset provisions as they relate to BIS’s law enforcement authorities. Our Special Agents’ law enforcement authorities need to rest firmly upon a permanent statutory foundation. There is no valid reason for our law enforcement authorities to lapse with the rest of the EAA. Doing so requires that we implement repetitive administrative stop-gap measures to continue to provide our Special Agents with basic law enforcement authorities, such as the ability to execute search warrants in order to gather evidence, and also the ability to arrest violators. Eliminating the sunset provisions on the EAA’s law enforcement authorities will help ensure that our Special Agents always have the full authority they need to act promptly and decisively to protect our national security.
We understand the value of having sunset provisions regarding the export control sections of a renewed EAA. Such sunset provisions help foster a Government-private sector dialog that ensures export controls will continue to reflect changing global economic and political security concerns. But there is no value in sun-setting enforcement’s legal authorities, which involve preventing and deterring violations, and bringing violators to justice.
Providing BIS with enhanced investigative tools will strengthen our Special Agents’ ability to investigate and combat export crimes. Such tools would include explicit authority to conduct overseas investigations, expanding our ability to conduct undercover investigations and permitting the use of wiretaps to investigate export violations. Let me discuss each one in turn.
Providing BIS with explicit authority for foreign investigations will clarify BIS’s authority to pursue evidence of export crimes around the globe, in partnership with its U.S. and foreign law enforcement colleagues. This will reduce the risk that violators beyond our shores will evade justice and continue their illegal activities.
To enable our Special Agents to effectively combat and penetrate the highest levels of proliferation and diversion networks, they need statutory undercover authority identical to other federal agents who have similar missions. Providing our Special Agents with the authority to engage in a variety of undercover activities, including financial transactions, will allow them to develop valuable evidence that shows the culpability of the conspirators.
Wiretaps are commonly used to penetrate other types of criminal conspiracies. Providing wiretap authority for export offenses will give law enforcement access to the inner-workings of export control conspiracies as they are taking place. That will provide very important evidence to a jury about the knowledge and intention of the alleged violators. Such access will also allow law enforcement to use other investigative means in real-time to disrupt the conspirators’ plans.
Many other federal law enforcement agencies have these investigative powers, including those that investigate more routine crimes. BIS Special Agents, who investigate significant national security threats facing our country, should also have such powers.
Next, we need to deter potential violators. Deterrence is one of the most important goals of law enforcement legislation. To achieve deterrence, Congress must ensure that the penalties prescribed by law are of such severity that the potential punishment becomes an unacceptable risk. To do so, the penalties must amount to more than a mere “cost of doing business.”
It is more important to achieve deterrence in export enforcement than in many other areas of enforcement because there may be no second chance if terrorists launch a WMD attack on U.S. soil. As President Bush said in his Commencement Address at the Coast Guard Academy in 2006, “To strike our country, the terrorists only have to be right once; to protect our country, we have to be right 100 percent of the time.” Accordingly, we need increased criminal and civil penalties for export violations.
BIS believes that we need increased penalty provisions that are in keeping with the seriousness of export violations. Increased penalties will also provide the incentive for violators to cooperate with law enforcement in investigating and prosecuting co-conspirators. Such penalties will also provide more effective deterrence by narrowing the gap between the possible profit and the consequences imposed upon violators. The increased penalties given to us by the USA PATRIOT Act (PATRIOT Act) renewal, and more recently by the IEEPA Enhancement Act help, but they still are not enough. Thus, higher penalty amounts should be a part of a renewal of the EAA.
In sum, a law enforcement-focused EAA renewal just makes common sense. Given the significant periods during which the EAA has been in lapse and the dramatically changed circumstances in today’s world, some of which we have discussed today, renewing the EAA in such a manner truly amounts to a “good government” measure. Moreover, it would help law enforcement by modernizing the tools available to our Special Agents in these national security cases. In doing so, it would help ensure that legitimate businesses do not operate at a disadvantage with their less scrupulous competitors. BIS will continue to work for such a law enforcement-focused renewal of the EAA. We sincerely hope that it will pass during this Congress, so that our Special Agents can conduct these national security investigations on the footing they properly deserve.
Export Controls Developments Regarding China
For our final topic for today, let us discuss BIS’s recent export control developments regarding trade with China. At the outset, it is important to realize that these developments continue to support what has been U.S. foreign policy throughout several prior Administrations of both political parties. The effort has been to foster the political and economic integration of China with the rest of the globe.
We share important goals with China. In greeting China’s President Hu Jintao at the White House last year, President Bush said, “Our two nations share an interest in expanding free and fair trade, which has increased the prosperity of both the American people and the Chinese people.” He went on to discuss how trade between our nations has grown. And if we look at the picture more recently, for 2007, China was the third-largest export market for U.S. goods, at $65.2 billion, up 18 percent. It ranked behind only Canada and Mexico, and ahead of Japan. In that same speech, President Bush said that “Prosperity depends on security – so the United States and China share a strategic interest in enhancing security for both our peoples.” The president went on to discuss enhancing our cooperation with China concerning terrorism, rogue states and other threats to global security.
We are, of course, mindful of the various signs indicating a rapid military buildup and modernization by China. The causes for those concerns are reflected in a number of venues. In 2006, China issued a white paper. Therein, China said it wanted to be “capable of winning informationized wars by the mid-21st century.” More recently, the 2007 U.S.-China Economic and Security Review Commission (CESRC) report to Congress observes that China is currently in the process of a widespread military modernization. In 2006, China temporarily blinded a U.S. satellite. In January of 2007, China destroyed one of its own weather satellites, without prior announcement, by using a missile.
Almost a year ago today, Vice President Cheney expressed his concern for the latter incident in his remarks to the Australian-American Leadership Dialogue. In doing so, however, he too noted the common interests that we have with China. He said China had played an especially important role in the Six Party talks because China understood that a nuclear North Korea would be a threat to China’s own security. He hoped that China would join us in our efforts to prevent the deployment and the proliferation of deadly technologies, whether in Asia or in the Middle East. He went on to state that, “Other actions by the Chinese government send a different message.” He said that the “anti-satellite test and China’s continued fast-paced military buildup are less constructive and are not consistent with China’s stated goal of a ‘peaceful rise.’”
China Rule and the Validated End User Process
With China – as elsewhere – our goal is to engage in legitimate civilian trade, and avoid unauthorized diversions of dual use goods to military end uses. After extensive engagement with the public, in June of 2007, BIS took additional steps to achieve both of those goals, and modified U.S. dual-use export licensing policy toward China. Those regulatory changes remove the individual license requirements for certain authorized customers in China – Validated End-Users (VEU) – so that they can receive certain high-tech goods. Doing so will help expedite trade.
BIS also identified a list of sensitive dual-use items that could be used for China’s militarization and implemented new licensing requirements as to them.
The VEU process is a rigorous one. Among other things, the candidates undergo a national security review and take on mandatory compliance obligations. It is important to note that they otherwise could obtain these goods by obtaining individual licenses. Thus far, five companies have been granted VEU status. The VEU process is new, and we look forward to its continued development. BIS’s Under Secretary, Mario Mancuso, has spoken and written about the VEU process and trade with China, and will continue to do so in the future.
Conclusion
In closing, let me say that the Department of Commerce is constantly working to ensure that the U.S. maintains the right trade relationship with China. In December of 2007, Commerce Secretary Carlos Gutierrez and Under Secretary Mancuso visited China for the 18th Joint Commission on Commerce and Trade (JCCT). While there, BIS Under Secretary Mancuso signed the “Guidelines for U.S.-China High Technology and Strategic Trade Development” with Vice Minister Wei Jiangguo of China’s Ministry of Commerce. Secretary Gutierrez had this to say about the guidelines: “These Guidelines are a positive step forward for bilateral, civilian high-technology trade. The Guidelines recognize China’s status as the fastest growing export market for U.S. exports and memorialize our respective commitment to communicate and cooperate, through such forums as the JCCT, to promote the development of safe, secure high-technology and strategic trade between our two countries.”
“Safe, secure high-technology and strategic trade” is the right approach when it comes to U.S. trade with China. Thank you so much for having me today.