Where Industry and Security Intersect
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The Office of Strategic Trade and Foreign Policy Controls (STFPC) is composed of three divisions: Strategic Trade; Information Technology Controls; and Foreign Policy. STFPC implements multilateral export controls for national security reasons to comply with the Wassenaar Arrangement to control the spread of dual-use goods and related technologies. STFPC is also responsible for U.S. compliance with the bilateral agreement with Japan prescribing export controls for high performance computers. In addition, the office implements U.S. foreign policy controls to ensure that exports are consistent with our national goals relating to human rights, crime control, antiterrorism, and regional stability, and the office is responsible for all consequent policy actions, export licenses, commodity classifications, and advisory opinions for affected commodities. STFPC also represents the Department in international negotiations on export controls and control list development.
The United States maintains national security controls on the export and re-export of strategic commodities and technical data worldwide to prevent the diversion of such strategic items to certain destinations. To achieve this objective, the United States attempts to pursue a multilateral approach and imposes controls in cooperation with other nations participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies.
The Wassenaar Arrangement is a multilateral regime currently consisting of 33 member countries. It contributes to regional and international security and stability by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilizing accumulations of these commodities. The agreement obligates member countries to exchange information on certain dual-use transfer approvals and denials. The members share this information to enhance international security and regional stability.
The United States continues to participate in submissions of export data made by member countries in the regime since the November 1996 implementation in Wassenaar. Wassenaar members make dual-use data submissions on a semiannual basis in April and October.
The Wassenaar Arrangement continues annual reviews of its control lists. Specifically, in April and September 2000, BXA representatives attended Expert Group Meetings to review the Wassenaar Arrangement's controls on conventional arms and dual-use goods and technologies. Nearly 70 proposals were discussed to streamline Wassenaar's dual-use list. The majority of the proposals were in the areas of electronics, computers, sensors and machine tools. Agreement was reached on a number of proposals for liberalization in the areas of electronics and sensors. However, no agreement was reached on proposals regarding controls on microprocessors and computers. Several countries advocate a complete decontrol of general purpose microprocessors accompanied with drastic liberalization of computer controls, based on rapid technology advances and controllability factors.
Also in April 2000, BXA representatives attended the Third Annual Licensing and Enforcement Officers Meeting (LEOM) designed to exchange information on national practices of respective licensing and enforcement procedures. Discussions focused on 15 Plenary mandated agenda items, including intangible transfers of technology and software, catch-all controls, elements of effective enforcement and International Import Certificates. Further discussion of these issues will continue next year.
In May and October 2000, a BXA representative participated at the Arrangement's General Working Group Meetings. The General Working Group addressed ways of reinforcing the general information exchange, outreach activities and procedures, general information exchange regarding regions and projects of concern, specific information exchange on dual-use goods and technologies, and scope of dual-use notification procedures. The U.S. proposal to strengthen dual-use notification procedures by establishing a denial consultation procedure, similar to that of the non-proliferation regimes for sensitive list and very sensitive list items, is still being studied by member countries and will continue to be discussed next year. The United States is committed to working with interested countries in an attempt to bridge the gap between dual-use and arms in order to increase transparency and reduce divergences in licensing practices.
During the past year, an interagency group chaired by the National Security Council and including the Departments of Commerce, Defense, and State reviewed 16 categories of items on the Commerce Control List that contain "space qualified" items. The purpose of the review is to determine whether any of those items should be transferred to the Department of State from the export licensing jurisdiction of the Department of Commerce. To date, the National Security Council has failed to resolve the jurisdictional issues associated with these "space qualified" items. Licensing jurisdiction for these 16 items in question remains with the Department of Commerce until a final decision is made.
Over the past year, considerable discord has developed with regard to the licensing jurisdiction of dual-use night vision equipment (e.g., image intensifiers, camera modules, and focal plane arrays). At issue is whether this commercial equipment should be licensed by the Department of Commerce or whether it should be considered munitions and licensed by the Department of State. The Department of Commerce is working with the Departments of State and Defense to discuss night vision products and capabilities and to attempt to define a distinction between commercial and munitions items in order to determine appropriate licensing jurisdiction.
In July 2000, BXA published changes to the EAR to implement changes in the Commerce Control List (CCL) agreed to in 1999 to the Wassenaar Arrangement's List of Dual-Use Goods and Technologies. The most significant changes streamlined controls for electronics consistent with relaxations agreed to in Wassenaar.
In June 2000, to reflect technological advances, BXA raised License Exception CIV's eligibility level for microprocessors from 3,500 MTOPS to 4,500 MTOPS. In addition, BXA also expanded License Exception CIV eligibility level for graphic accelerators by raising the control threshold from 75 million vectors per second to 100 million vectors per second.
On January 14, 2000, BXA published regulations implementing the Administration's September 16, 1999, announcement to simplify the export of cryptography. The U.S. encryption policy rests on three tenets: a review of encryption products in advance of sale a streamlined post-export reporting system and a license process that preserves the United States government's ability to review the sale of strong encryption to foreign governments, military organizations, and nations of concern. Just as the market for information security products has grown and changed, this policy continues to evolve, consistent with the national interest in areas such as electronic commerce, national security, and support to law enforcement.
Under the January 14 regulations, any encryption commodity or software, regardless of key length, can now be exported under a license exception after a technical review to any non-government end-user worldwide, except for sanctioned or embargoed countries. To ensure streamlined exports to non-government end users, companies may export products under this provision 30 days after submitting the products for technical review. Moreover, a new category of products called "retail encryption commodities and software" may now be exported after technical review to any end user, including government end users, under this same license exception. Retail encryption commodities and software are those generally available to the public, easy to install, and which implement cryptography that cannot be easily changed, modified, or customized by the customer. Certain restrictions apply to telecommunications and Internet service providers, and network infrastructure products such as high end routers and switches may not be exported under these retail provisions. Previous liberalizations for banks, financial institutions and other approved sectors are subsumed under this license exception. The licensing of commercial encryption source code, toolkits, and technology continues to be considered on a case-by-case basis. Foreign nationals working for U.S. companies in the United States no longer need an export license to work on encryption.
Post-export reporting under this encryption license exception ensures compliance with U.S. regulations, and has allowed the Administration to reduce licensing requirements for non-embargoed and terrorist destinations. This streamlined export policy assures the continuing competitiveness of U.S. companies in international markets, while maintaining the balance between national security, public safety, commercial and privacy interests.
On July 17, 2000, the Administration announced further updates to U.S. encryption to track with regulations adopted by the European Union. The most significant change is that U.S. companies are now able to export encryption products and technology under license exception to any end user in the 15 nations of the European Union as well as Australia, the Czech Republic, Hungary, Japan, New Zealand, Norway, Poland, and Switzerland immediately upon notifying BXA of intent to export. Companies will no longer need to wait 30 days before exporting to these destinations. Even sophisticated encryption items such as source code, general purpose toolkits, and high-end routers and switches will be exported under these new procedures. To facilitate next generation development and market flexibility, products that enable U.S. and non-U.S. sourced products to operate together may also be immediately exported. Licenses will only be required for "cryptanalytic items," which are a specialized class of tools not normally used in commercial environments. The regulation implementing these changes was published in October 2000.
Other policy initiatives implemented in these new regulations include streamlined export provisions for beta test software, products which are compiled from "open" source, and products which implement short-range wireless encryption technologies such as HomeRF and Bluetooth. Post-export reporting is also further streamlined under the new regulations. Reporting is no longer required for products exported by U.S.-owned subsidiaries overseas, or for retail operating systems or desktop applications (such as e-mail programs and browsers) designed for, bundled with, or pre-loaded on single CPU devices such as personal computers, laptops, or hand held devices.
U.S. encryption policy reflects active participation with other nations, such as members of the Wassenaar Arrangement. In December 1998, Wassenaar Arrangement members agreed to move encryption items from the Sensitive List to the Basic List, and to make other revisions to encryption controls. This agreement was the culmination of a two-year effort to modernize and improve multilateral export controls on encryption. The January and October U.S. regulations implement this agreement. For example, 64-bit mass market encryption products, which previously required a review, can now be exported immediately.
The Administration continues to engage in valuable ongoing dialogue with various industry, privacy advocacy, and technical advisory groups. The President's Export Council Subcommittee on Encryption (PECSENC), established in April 1997, met during FY 2000 to advise the President, through the President's Export Council and the Secretary of Commerce, on matters pertinent to implementing an encryption policy that will support the growth of electronic commerce while protecting public safety, foreign policy and national security. The PECSENC consists of 30 members from the exporting community, manufacturers, privacy groups and law enforcement officials with an interest in encryption policy. U.S. policy and regulations also reflect consultation with groups such as the Regulations and Procedures Technical Advisory Committee (RPTAC), Alliance for Network Security (ANS), Americans for Computer Privacy (ACP), and the Computer Systems Policy Project (CSPP).
As part of the President's commitment to review HPC export control policy every six months, on February 1, 2000, and again on August 3, 2000, President Clinton unveiled new export controls on HPCs. These policy revisions include changes critical to maintaining the strong, vibrant high-technology industry, which is critical to America's national security interests. In addition, the changes ensure a realistic export control regime in this rapidly changing high technology industry.
The revised controls announced by the President maintain the four country groups announced in 1995, but amend the list of countries in, and control levels applying to, three of those groups.
In the February HPC policy revision, Romania was moved from Tier III to Tier II. The control level for Tier II countries was raised from 20,000 to 33,000 MTOPS. The individual license level for civilian end users was raised from 12,300 to 20,000 MTOPS. The NDAA notification level was raised from 6,500 to 12,500 MTOPS. On February 16, the President sent a report to Congress justifying the changes to the Tier III country list and NDAA notification level. Commerce published a regulation in the Federal Register implementing the President's announcement on March 10, 2000. However, as stipulated in the FY 1998 National Defense Authorization Act, the movement of Romania from Tier III to Tier II went into effect 120 days from the date the President's Report went to Congress (June 14), and the update of the NDAA notification level went into effect 180 days from the date the President's Report was delivered to Congress (August 14).
On August 3, 2000, the Administration once again announced an update to computer controls. The revision announced raised the Tier II licensing level to 45,000 MTOPS, the Tier III licensing level to 28,000 MTOPS, and the NDAA notification limit to 28,000 MTOPS. Argentina was moved from Tier II to Tier I and Estonia was moved from Tier III to Tier II. Additionally, the prior distinction between military and civilian end-users in Tier III was dropped. Export of any computer to proliferation-related end users still requires a license. The President sent a report to Congress justifying the changes to the Tier III country group and NDAA notification level on August 31, 2000. Commerce published a regulation implementing the Administration's announcement in the Federal Register on October 13, 2000. Again, as stipulated in the FY 1998 National Defense Authorization Act, the movement of Estonia from Tier III to Tier II will go into effect 120 days from the date the President's Report went to Congress (December 29), and the update of the NDAA notification level will go into effect 180 days from the date the President's Report was delivered to Congress (February 27, 2001).
Export controls on high performance computers (HPCs) will continue to be a high priority as improvements in computer technology continue to enhance system performance. In an effort to avoid the continuous review cycles the rapid pace of technology demands and capture only computers of true significance to our national security, the Administration is currently studying alternative control metrics to Composite Theoretical Performance (CTP).
Section 5(b) of the Export Administration Act of 1979, as amended (the Act), requires the President to establish a list of controlled countries for national security purposes. Executive Order 12214 (May 2, 1980) delegated this authority to the Secretary of Commerce. Initially, this list comprised those countries named in Section 620(f) of the Foreign Assistance Act of 1961 (FAA) (22 U.S.C. sec. 2370 (f)) at the time of the enactment of the Export Administration Act in 1979. The Secretary of Commerce, however, may add to or remove countries from the list of controlled countries under criteria provided in Section 5(b). Since 1980, the Secretary has removed from the list of controlled countries the former Federal Republic of Yugoslavia in 1985, Hungary in 1992, and the Czech Republic, Poland, and the Slovak Republic in 1994. Public Law 102-511 (October 24, 1992) amended Section 620(f) of the FAA to delete the former Soviet Bloc countries and certain other nations from the list of Communist countries. Under Section 5(b) of the Act, the United States, however, continues to control exports to some of the countries deleted from the list in Section 620(f) of the FAA.
The countries currently controlled under Section 5(b) are: Albania; Bulgaria; Cuba; Estonia; Latvia; Lithuania; Mongolia; the Newly Independent States of the former Soviet Union; North Korea; the People's Republic of China; Romania, Tibet; and Vietnam. The Department, along with other agencies, provides technical export control development assistance to many of these countries with a view to removing additional nations from the list of Section 5 (b) controlled countries under section 5 (b).
Based on agreements reached in Beijing in October 1997, during the eleventh annual meeting of the Joint Commission on Commerce and Trade (JCCT), U.S. and Chinese representatives initiated export control technical exchanges, two of which were held in 1998, with more planned in 1999. These were postponed by the Chinese as a result of the bombing of the Chinese Embassy in Belgrade in May 1999, and none were held during FY 2000. Cooperative exchanges were scheduled to resume in late 2000.
The United States has maintained an embargo toward Cuba since 1962. Consequently, the export and re-export of virtually all U.S.-origin commodities, technology and software to Cuba require a specific license, coupled with a general license review policy of denial. There are exceptions to the embargo, however, primarily in the field of humanitarian goods. In recent years, a number of steps have been taken to expand the flow of humanitarian assistance to the Cuban people to strengthen civil society there. In May 1998, the United States lifted a two-year ban on direct humanitarian flights to Cuba, streamlined procedures for the sale of medicines and medical equipment to Cuba and allowed an increase in family remittances to close relatives in Cuba. The new provisions for the sale of medical items to Cuba resulted in a notable increase of sales of U.S. products. A U.S. health care goods exhibition was held in Havana in January 2000. BXA issued licenses to more than 60 American firms to display their products during the exhibition.
In May 1999, a new policy on food sales to Cuba was initiated. The policy change has not resulted in a significant increase in sales because the policy restricted sales to only the Cuban private sector. In April 1999, the President announced that the United States would lift restrictions on food and medicines to embargoed countries. This allowed the sale of food and medicines to other embargoed countries such as Libya and Iran. As the fiscal year drew to a close, the U.S. Congress was actively working on legislation that would allow food sales to private and government recipients in Cuba.
In 1998, the Department imposed new foreign policy controls on the Federal Republic of Yugoslavia, also known as the FRY (Serbia/Montenegro), in concert with the Department of State. Implementing United Nations Security Council Resolution 1160 of March 31, 1998, these controls prohibit the sale or supply of arms and arms-related items and the transport by U.S.-registered aircraft and vessels of such items to the FRY.
On April 30, 1999, the President issued Executive Order 13121, which embargoed all trade with the FRY. On May 4, 1999, the United States published in the Federal Register an amendment to the EAR requiring a license for all exports and re-exports to Serbia, including petroleum products, with a presumption that all license applications would be denied except those for basic humanitarian items and other items covered under a limited number of license exceptions for Serbia. With the end of the NATO bombing campaign in June 1999, the United States modified its Serbia sanctions to exempt the province of Kosovo from the comprehensive economic sanctions imposed on Serbia.
The ousting of Slobodan Milosevic and the victory of Vojislav Kostunica in the democratic elections in October 2000 paved the way for the easing of U.S. sanctions on Serbia. The Department of Commerce is presently drafting a regulation to eliminate the broad general economic sanctions on Serbia. This sanctions-easing initiative includes a revision of the export licensing policy for Serbia to allow most commercial goods to be shipped without a license. Multilaterally controlled items on the CCL will remain subject to a licensing requirement but will be treated according to the licensing policy in effect for most other countries. Comprehensive controls will remain on shipments to Milosevic and his close associates.
Under the Hong Kong Policy Act of 1992, the United States Government will continue its export licensing treatment that was in effect before China regained control, for so long as Hong Kong maintains an effective and autonomous export control program. The Bureau of Export Administration aggressively monitors the status of Hong Kong's post-reversion export control program to ensure that it continues to be effective and autonomous from that of the People's Republic of China. By openly and vigilantly observing Hong Kong's program, BXA supports Hong Kong's efforts to maintain the separation of its export control system from that of the rest of China.
Under an Agreed Minute on Strategic Commodities Trade Controls signed by former Secretary of Commerce William Daley and his Hong Kong counterpart in October 1997, the two agencies hold semiannual meetings to exchange information and enhance cooperation. BXA officials led an inter-agency delegation to Hong Kong March 14-16, 2000, the fifth such round of talks since the signing of the Agreed Minute. U.S. officials briefed their Hong Kong counterparts on developments in the multilateral control regimes; both sides provided updates on licensing and enforcement issues in their respective systems. The U.S. delegation also visited the Hong Kong-China border control point, the Hong Kong Observatory, the Hong Kong airport, and a container terminal. Officials the Departments of State and Defense accompanied Assistant Secretary Majak on the trip. These semiannual meetings assist BXA in monitoring Hong Kong's export controls to determine whether its system continues to be effective and autonomous.
Under a regulation published on November 19, 1998, the United States implemented economic sanctions on India by imposing a policy of denial for the export or re-export of United States origin items controlled for nuclear non-proliferation and missile technology reasons to India and Pakistan as stated in part 742 of the EAR. Prior to the sanctions, the United States reviewed applications for these items on a case-by-case basis with a presumption of approval.
In March 2000, BXA participated in a delegation visit to Delhi, India. The goal of the trip was to advance U.S. commercial interests prior to a visit by President Clinton to the region immediately following the conclusion of the delegation's visit. While in India, the delegation met with numerous cabinet ministers and the prime minister's assistant, as well as U.S. and Indian business associations. During the visit, Indian and U.S. industry representatives expressed dissatisfaction with the dual-use sanctions and estimated millions of dollars in sales have been lost to non-U.S. suppliers. On March 17, the United States removed 51 Indian entities from the Entity List and changed the license review policy for non-sensitive items to a "presumption of approval." This revision freed up some trade and the approval rate for license applications increased from 26 percent before March 17 to 62 percent at the end of the fiscal year. The March revision was driven largely by language in the Defense Appropriations Act of 2000, which urged refinement of the list and by progress in bilateral consultations with the Indian Government on non-proliferation issues.
In April 2000, the United States hosted a delegation from India for expert-level export control talks. Both countries agreed to initiate a series of export control cooperation and technical assistance exchange programs. The United States and India agreed that the programs would initially focus on licensing, internal checks and enforcement, with special emphasis on "training the trainers."
Following on the foundation laid during the April visit, BXA officials concluded successful bilateral talks with the Government of India in New Delhi during the week of August 7 - 11. During the talks, the Indian Government indicated its interest in participating in several of the export control workshops that the U.S. Government proposed. The first of these programs -- an export licensing workshop in Washington, D.C. -- took place in October 2000.
On September 17, 1999, the President announced his decision to ease sanctions against North Korea administered under the Trading with the Enemy Act, the Defense Production Act, and the EAR. On June 19, 2000, the Department of Commerce issued a new regulation implementing this policy change.
Under this new policy, most items subject to the EAR designated as EAR99 may be exported or re-exported to North Korea without a license. In addition, BXA changed the licensing policy for certain items on the Commerce Control List (CCL) destined to North Korean civil end-users from a policy of denial to case-by-case review.
This regulation adds certain categories of items to the CCL for which a license will be required to North Korea. Consequently, this regulation creates certain new Export Control Classification Numbers (ECCNs) that are controlled for antiterrorism (AT) reasons to North Korea only. These new ECCNs do not refer to any column on the Country Chart and therefore exporters are not required to consult the Country Chart in Supplement No. 1 to part 738 to determine licensing requirements for these entries.
This easing of sanctions does not affect U.S. antiterrorism or nonproliferation export controls on North Korea, including end-user and end-use controls maintained under the Enhanced Proliferation Control Initiative.
In late October BXA held an Export Control Seminar in Seoul, South Korea, at which BXA representatives met with a number of firms that expressed interest in marketing in North Korea. BXA representatives also consulted with the South Korean Government on the need to coordinate on trade with North Korea.
In March 2000, BXA officials attended the Asian Export Control Seminar in Tokyo. The conference was sponsored by Japan, the United States, the United Kingdom, and Australia. Among the attendees were representatives from 14 Asian governments and two autonomous regions (Hong Kong and Macau). The purpose of the annual seminar is to provide information on export controls to Asian governments, some of which have just begun to develop comprehensive systems. Seminar participants were particularly interested in transshipment issues and in the development of internal compliance programs for industry.
In September 2000, BXA led a United States delegation to the second Conference on Export Controls in Oxford, England. Delegations representing approximately 30 countries participated in the conference and considered the status of the global export control system, assessed efforts to assist the nations of the former Soviet Union and Central Europe to establish and strengthen national export control programs, and developed recommendations for strengthening the global export control system. Attendees were interested in a number of issues, particularly the transfer of intangible technology and "catch-all" provisions to prevent the export of commodities not controlled on control lists.
On September 17 - 21, BXA participated in a visit to Israel to review bilateral cooperation on export control issues. The delegation was co-hosted by Commerce Assistant Secretary for Export Administration Roger Majak and State Deputy Assistant Secretary for Nonproliferation John Barker. Members of the delegation met with senior officials from the Ministries of Defense and Industry and Trade, and with representatives from Israeli and U.S. defense and high-technology companies. BXA officials conducted a seminar on U.S. export control issues for Israeli industry. During the visit, the Israelis pledged to toughen their own export control practices and to continue to adhere to the principles of multilateral export control regimes.
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 United States interests. BXA has participated in Departmental and interagency working groups looking at sanction reforms, reviewing legislation and developing proposals to rationalize the sanctions process.
On October 28, 2000, the President signed the Agriculture Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act of 2001 which included Title IX, the FAM Act. In general, this Act requires the President to lift all U.S. unilateral sanctions on agricultural and medical commodities while restricting the export of such items to terrorist supporting countries. This change reflects the desire of Congress to expand potential markets for the U.S. agriculture industry and to stop the use of food and medicine export sanctions as a tool of U.S. foreign policy. For terrorist designated countries and entities, however, the Commerce Department is required to establish a licensing system that would allow the denial of agricultural and medical items to terrorist entities, but would not be more burdensome than a license exception for other entities. There are other criteria and certain financial limitations on such exports. The United States Government has 120 days from the enactment of the law to publish the regulations implementing certain provisions of the Act (February 25, 2001). Agency discussions are underway, and we will publish the regulations within the statutory requirement. This legislation impacts U.S. export controls on agricultural exports to Cuba, and on agricultural and medical exports to Iran, Iraq, Libya, North Korea, Sudan and Syria. The legislation also requires termination of controls on such items maintained on the other foreign countries and entities, such as Serbia and the Taliban.
The United States controls a number of items, ranging from shotguns and stun guns, to fingerprint inks and mobile crime science labs, under the category of Crime Control for human rights purposes. In September 2000, the United States made three revisions to the Crime Control category. The first revision imposed a global license requirement, excluding only Canada, on restraint type items such as stun guns, shock batons and handcuffs. The second revision created new CCL entries for saps, police helmets and shields, fingerprint inks and dyes and technology for the restraint type items. The third revision modified the license review policy for all Crime Control items to include a determination of the extent of civil disorder in a given country or region before issuing a license to export to such areas. These revisions make the Crime Control category more transparent and export license activity in this area easier to track.
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.