Where Industry and Security Intersect
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Good Morning Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the Commerce Department's prospective role in the implementation of the Chemical Weapons Convention (CWC). The Bureau of Export Administration (BXA) is expected to have a key role for industry liaison, and I am here to assure you, that taking into account the need for full and effective implementation of the convention's verification regime, we are committed to minimizing costs to industry and to maximizing protections of company confidential information in the two major areas that will affect the U.S. commercial sector -- data declarations and inspections.
Commerce has developed user-friendly draft data declaration forms and instructions to complete them. No information is requested that is not specifically required by the CWC. These materials have been field tested and refined based on comments from industry, including the Chemical Manufacturers Association (CMA). Copies of these forms have also been provided to the Committee's staff. I am pleased to note that we have consistently received positive feedback from those who have reviewed the forms and their instructions.
The Administration estimates that about 2000 plant sites will be required to file data declarations. Of these 2000, we estimate that over 90% belong to a category called "Unscheduled Discrete Organic Chemicals" (DOCs). The DOC data declaration is a very simple form that asks the company to specify the location of the plant site and its general range of production (e.g., this plant site produced over 10,000 metric tons of DOCs last year). No specific chemical identification, product mix or other substantive information is requested, and the declaration can therefore be completed quickly and without revealing sensitive data. I want to stress that the DOC declaration does not ask for any information on acquisition, processing, imports, or exports.
To ensure that the treaty remains focused on the most relevant industries, certain other industries have been exempted from the CWC data declaration process. For example, these exemptions apply to plant sites that produce explosives exclusively, produce hydrocarbons exclusively, refine sulphur-containing crude oil, produce oligimers (o lig i mers) and polymers (such as plastics and synthetic fibers) and produce unscheduled chemicals via a biological or bio-mediated process (such as beer and wine).
About 10% of the data declarations focus on the CWC's scheduled chemicals. These declarations are more involved but still do not constitute a heavy and complicated reporting burden for the 140 or so firms that will be asked to comply. Most of these are larger companies and members of CMA who are likely to have accumulated much of the needed information for other purposes.
In any event, I want to assure you that Commerce will provide substantial assistance to industry in the data declaration process if it turns out to be needed. We will help firms determine if they have a reporting requirement. We will develop a commodity classification program similar to the one we have for export licensing. If a company doesn't know if its chemicals are covered by the CWC, it can ask Commerce for a determination. If firms do have a reporting requirement, Commerce technical staff will assist them in filing their declarations. In short, we do not believe that firms will be required to hire outside consultants to complete the CWC forms. We will also seek to put in place a system that enables firms to complete and file data declarations electronically.
Firms also want this data to be fully protected from unauthorized disclosure. We fully understand that concern and have substantial experience in protecting company confidential information as part of our current export licensing responsibilities. I want to assure you that our CWC Information Management System will be in a secure location and will be only accessible to and operated by staff with appropriate clearances. I also want to stress that the Administration's draft CWC implementing legislation provides strong protections for company confidential information, and I hope this legislation will be taken up as soon as possible after the Senate's vote on ratification.
The Commerce Department will be charged with managing the CWC inspection process of US commercial facilities. There will be two types of inspections -- routine and challenge.
Routine inspections are conducted to confirm the validity of data declarations and the absence of Schedule 1 chemicals. They are not based on any suspicion or allegation of non-compliance with the CWC. Inspectors will not be permitted unrestricted access to US facilities under this regime because the inspection may not exceed the limited purpose for which it is authorized. I can assure you that no "fishing expeditions" will be permitted as part of the CWC inspection process, because the Commerce Department will not permit it to happen.
Commerce will identify firms that are likely to be subject to routine inspection and work with them to develop draft "Facility Agreements" that will protect company confidential information. These Facility Agreements, which must be concluded between the U.S. and the Organization for the Prohibition of Chemical Weapons, will set forth the site-specific ground rules for the conduct of inspections. We estimate that about 40 U.S. commercial plant sites each year will be subject to routine inspections. Commerce's objective is to develop draft Facility Agreements before inspections take place in order to give firms an opportunity to identify their confidential information and processes. In this regard, we will work with firms to determine what constitutes company confidential information and will protect U.S. firms against any unwarranted requests by international inspectors. Under the implementing legislation, firms will participate in the preparations for the negotiation of Facility Agreements and the right to be present when the negotiations take place. This is yet another reason why Congress should take up the implementing legislation as soon as possible after passage of the Resolution of Ratification.
Challenge inspections are conducted based on an allegation of noncompliance. These inspections may only be requested by a State Party to the CWC and can be directed at declared and undeclared facilities. We anticipate few challenge inspections. In the event that there is a challenge inspection of a non-defense U.S. commercial facility, Commerce would have the lead role "managing access" to ensure that the international inspectors obtain by the least intrusive means possible only the information and data that are relevant to the specified noncompliance concerns. Firms would be under no obligation to answer questions unrelated to a possible violation of the Chemical Weapons Convention.
As with routine inspections, Commerce will work closely with firms to determine what constitutes company confidential information and will protect U.S. firms against any unwarranted requests that may be made by international inspectors. Since Commerce will be responsible for "managing access", we will abide no administrative harassment of US companies or ask them to reply to any questions not directly related to CWC compliance.
Mr. Chairman, I also want to stress that the CWC gives us the right to screen the list of inspectors before any foreign national is permitted to conduct verification activities on our soil. We certainly intend to exercise our right to screen that list and to disapprove any individuals we find unsuitable.
With regard to the overall CWC inspection process, I understand there have been concerns raised about Constitutional protections regarding unreasonable search and seizure. No treaty that is inconsistent with the U.S. Constitution has U.S. legal effect, and the CWC involves no such inconsistency. We anticipate that most firms will permit CWC inspections on a voluntary basis, but in cases where access is not granted voluntarily, the U.S. Government would always obtain a search warrant before proceeding.
Mr. Chairman, some critics have expressed concern that the treaty will undermine the existing chemical non-proliferation export controls that have been developed by the "Australia Group". As head of the agency that administers dual-use export controls, I want to assure you that this is not the case. Article I of the CWC commits States Parties to refrain from assisting any chemical weapon program in any way. The Australia Group's regime of export controls is end-user/end-use driven and is fully consistent with our obligations under Article I of the CWC. It is not a regime of trade restrictions aimed at impeding any country's economic development. Rather, the Australia Group's controls focus exclusively on restricting transfers to end-users of concern. Accordingly, we will continue to strongly support the Australia Group after the CWC enters into force, and we will not be required by the CWC to liberalize non-proliferation export controls to rogue nations such as Iran and Libya -- even if they ratify the CWC.
However, when considering export controls, it is important to note that the CWC mandates trade restrictions that affect countries who do not ratify. Therefore, the real concern regarding export controls is that our allies and friends who have ratified the CWC will be required to impose controls on us that will have an adverse impact on US industry if we do not ratify. Further, if we fail to join the CWC as part of the responsible family of nations, our overall leadership role within the non-proliferation community will be severely eroded and our ability to maintain a strong presence within the Australia Group will be lost.
Mr. Chairman, the time has come for us to join the growing consensus to ratify the treaty that we have promoted for so many years under both Republican and Democratic Administrations. I believe that we are far better off with the CWC than without it. The United States has always been the world leader in fighting the proliferation of weapons of mass destruction and we must not shrink from that challenge at this critical juncture. Further, we must not abandon the American chemical industry who worked with us for so many years to develop this treaty and who would be disadvantaged in world markets if we fail to act responsibly. In short, the CWC will not impose unreasonable burdens on US industry, but failure to ratify the CWC will certainly damage our overall international economic and non-proliferation interests.
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.