Where Industry and Security Intersect
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Washington, DC 20230
25 July 2006
The SITAC meeting was held at the Department of Commerce in Room 3884 from 9:30 am to 12:30 pm. The meeting began with a brief introduction of the attendees. Mr. Goodrich (Fluke Inc.), chair of the SITAC, provided several handouts including an agenda and the membership roster for the meeting.
The open session was structured to cover the following topics which will be discussed later:
1. Introductions
2. Remarks from the Bureau of Industry and Security Management
3. Industry Presentations
4. New Business
5. Closed Session
6. Meeting adjournment
Introductions and Opening Remarks.
Mr. Goodrich called the meeting to order at 9:30 am and asked for everyone present to introduce themselves. After the brief introductions, Matthew Borman, Assistant Secretary of the Bureau of Industry and Security, addressed the meeting attendees. He began by stating that Christopher Padilla was nominated as the Deputy Under Secretary of the Bureau. He also announced the formation of the Office of Technology Foreign Availability which will be lead by Kevin Kurland as its first Director. This Office will have a few government full time employees (FTEs) but will be able to use contract support mechanisms to perform its mission. Mr. Borman also thanked the respondents to the Office of Strategic Industries and Economic Security (SIES) survey for their efforts. Finally, he acknowledged those who participated in the Wassenaar Expert’s Group meetings on low light camera and laser which were held during the July 4th week.
Remarks from the Bureau of Industry and Security Management.
Mr. Bernie Kritzer summarized some licensing statistics for the Bureau. For the first 9 months of the fiscal year, the Bureau processed 2090 night vision related license applications. Five were returned without action. Extrapolating this trend, Mr. Kritzer believes that the Bureau will license approximately 2,600 to 2,700 vision cases for the 2006 fiscal year. Licensing times were unchanged from last year at about 32-33 days processing times. Mr. Kritzer noted that for fiscal year 2003, the licensing volume for exports of category 6 items peaked at 3,100. This decline he attributes to the emergence of France and China as exporters of this type of equipment.
John Goodrich noted that since the international markets are growing, that the decline in US marketshare is worse than what the decline in actual export licenses reflect.
Mr. Don Weadon asked which countries were responsible for the rejections. Bernie explained that the rejections were distributed among many countries, not just the PRC.
Mr. Vallese asked if there was an increase in bulk licenses being granted which might account for this drop in the number of export applications. This did not appear to be the case according to Chris Costanzo, SITAC DFO.
Kamil Agi, K&A Wireless, asked if the recent changes in the amorphous silicon controls accounted for any significant increase in licenses.
ÿ Mr. Borman discussed the proposed the new China rule which had a 120 day comment period from U.S. industry. This rule was proposed to make licensing to certain PRC end-users easier who had transparent export policies while making it more difficult to for those end-users who supported military end-users for even certain AT types of commodities. These commodities were identified under 47 export control classification numbers (ECCNs).
Industry Presentations.
Kamil Agi gave a PowerPoint presentation on his understanding of the proposed China rule. Mr. Agi asked what was the difference between a validated end-user and applying for a Special Comprehensive Export License (SCL).
Mr. Borman explained that a valid end-user applies for only a specific applicant under a SCL. A validate end-user under the proposed China rule means that once that end-user is published in the EAR, that any company can export to them without obtaining an export license. Certain items remain unable to be exported to the PRC without an export license regardless of the end-user and end-use. These items are those which are designated as crime control and missile technology. A validated end-user would be validated based on a given ECCN.
Sam Gilston asked how the Shippers Export Documents would be filled out. Mr. Borman explained that these details have not been finalized.
Mr. Chuckla asked if this makes the PRC in some sense more exportable than the EU. Mr. Borman explained that he hoped the proposed regional stability changes would address this issue.
Mr. Posner, representing Mikron Infrared, asked Mr. Borman how a company would be able to get listed. Mr. Borman thought that a process similar to that of an advisory opinion would be possible. Obtaining such a status would be difficult and that would likely entail the development of and inventory control plan as well as allowing on site visits. Mr. Posner thought that the loss of competitive advantage would be problematic for many of the exporters of Category 6 items.
Mr. Borman also explained that he thought that companies in India would ultimately be eligible for this kind of treatment.
Mr. Goodrich asked what DTSA thought about this proposed rule. Mr. Borman explained that he believed that DTSA would be supportive since being listed as a validated end-user would go through a regulatory process which would require interagency review. This process might take 31 days.
Sam Gilson asked about the need for a MOFTEC certificate. Mr. Borman stated that MOFTEC certificates will still need to be obtained as that is a required document to allow for Pre-license checks.
End-users, as well as exporters, can request an entity be listed.
Mr. Goodrich stated that the SITAC will be able to submit a response to the proposal by 3 November and that he asked all members to provide their responses by that time.
New Business.
Don Weadon asked if the new office would be doing a foreign availability assessment and why should the answer be different given that 3 years ago the SITAC did submit a foreign availability assessment.
Mr. Borman explained that when the SITAC submitted their request to do the assessment 3 years ago, that DoC determined that it did not meet the requirements at that time.
M. Borman commented that he did not believe that export controls significantly affected the trade imbalance of approximately $200 Billion USD given that there was only a $12.5 million USD worth of denials during that time period.
Kamil Agi noted that it is important that U.S. industry does not lose worldwide marketshare otherwise it risks the ability to reinvest in developing new military systems for the Department of Defense.
Mr. Tribble and Don Weadon discussed the idea of tamper-proofing systems as a way to support certain decontrols. Mr. Tribble explained that DoD was no longer concerned about individuals removing the focal plane array from the camera.
Dr. Wells asked if anyone could comment on what has been done at Wassenaar on laser related controls. Jim Harrington from the Department of State commented that he believed that significant progress had been made and believed approval of the proposed changes would be done this year. The most contentious issue in the laser area had to do with fiber lasers. Some members did not believe that such lasers were controlled while others did.
Mr. Goodrich than concluded the open session and after a brief break, brought to order the closed session.