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On April 16, 1987, the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom created the Missile Technology Control Regime (MTCR) to limit the proliferation of missiles capable of delivering nuclear weapons. Member countries agreed to further expand the MTCR controls in 1993 to include missile delivery systems for all types of weapons of mass destruction (WMD). The MTCR now has 34 member countries (see Appendix II for a complete list of MTCR member countries). In addition, several countries, including Israel, Romania, and Slovakia, unilaterally adhere to the MTCR Guidelines.
The MTCR Guidelines and the Equipment, Software, 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 kilogram (kg) payload to at least a 300 kilometer (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 range equal to or greater than 300 km, 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 are subject to 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 a 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 Sections 742.5 and 744.3 of the Export Administration Regulations (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.
With respect to the Canada exclusion, on May 24, 2005, the Department published in the Federal Register a proposed rule that would require a license for missile technology items to Canada (70 FR 29660). This proposed rule is consistent with a recommendation made by the Government Accountability Office (GAO), which stated that BIS should either amend the EAR to require a license for exports and reexports to Canada based on Section 6(l) of the EAA of 1979, as amended, or seek a statutory change from Congress. The period of comment for this proposed rule was open until June 23, 2005.
BIS received over 100 comments on the proposed rule. These comments were generally negative, and the airline parts industry in particular was extremely vocal on the negative effect this rule would have.
BIS determined that without a statutory change, BIS had to follow GAO’s recommendation that BIS amend the EAR to require a license for exports and reexports to Canada, despite industry protests.
Currently, BIS is in the process of developing the final version of this rule.
On March 10, 2005, the Department of Commerce published a rule in the Federal Register revising the EAR to implement changes to the MTCR Annex that the member countries agreed to at the October 2004 Plenary in Seoul, South Korea (70 FR 11858). The rule added a new missile technology control for radial ball bearings. The rule also expanded controls to capture additional frequency bandwidth for ceramic composite materials used for radomes. In addition, this rule clarified definitions and an exemption from the licensing requirement for rocket systems in NATO countries that are declared nuclear weapons states; modified existing controls on solid oxidizers to capture additional chemicals; and clarified parameters on numerous entries to consistently use the phrase “equal to or greater than.”
The March 10, 2005, rule also amended the EAR by adding four Syrian entities to the Entity List (Supplement 4 to Part 744 of the EAR): the Higher Institute of Applied Science and Technology, the Industrial Establishment of Defense, the National Standards and Calibration Laboratory, and the Scientific Studies and Research Center (70 FR 11858). The Department of Commerce had previously determined that the entities presented an unacceptable risk of using or diverting certain items to activities related to weapons of mass destruction, and took the action in the context of the Enhanced Proliferation Control Initiative. In the rule, the Department clarified that license applications for items destined to these entities will be reviewed under a general policy of denial.
The U.S. Government also controls items subject to the EAR due to missile-related end-use or end-user concerns. These controls are part of the Enhanced Proliferation Control Initiative (EPCI), announced by President George H. W. Bush on December 13, 1990. The U.S. missile catch-all policy meets U.S. nonproliferation objectives and is consistent with the MTCR Guidelines.
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 Department will deny the application.
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, limit 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 provide 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, in light of other factors, including the limited foreign availability of these MT-controlled items from other countries; and that the foreign policy purpose has been in part achieved through international or multilateral negotiations. 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 and that the extension of these controls will not have any significant adverse foreign policy consequences. 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, nor will any adverse reaction by other countries be counter-productive to U.S. foreign policy interests. The United States is confident that other members of and unilateral adherents to the MTCR, many of which 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 specific shipments of proliferation concern. 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 benefits to U.S. foreign policy objectives. Only a narrow list of items is subject to missile controls, and the effect on overall U.S. trade 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 2005, the Department of Commerce approved 793 applications, valued at $2.1 billion, for the export or reexport of missile-technology controlled items. (Two applications for missile-technology items to the United Kingdom that were worth $1.1 billion account for the bulk of this figure.) In addition, the Department denied 5 applications valued at $649,000, and returned without action 31 applications valued at $48.8 million. Comparatively few licenses for missile technology items are denied because: (1) exporters do not generally pursue transactions they understand will be rejected (based on the applicable licensing policy); and (2) most of the transactions are to countries that do not pose missile proliferation concerns (e.g., MTCR partner countries). Under the missile EPCI control, the Department approved 101 applications, valued at $13.8 million. Additionally, the Department denied 35 licenses valued at $9.4 million, and returned without action 176 EPCI missile cases, valued at $12.9 million. Among the cases returned without action, a significant portion were returned to the applicant because of the September 2004 regulation change that eliminated the need for a license for items classified under EAR99 and Export Control Classification Numbers XX999 for certain Indian Space Research Organization (ISRO) entities, and, in other cases, because a thorough review revealed no proliferation concerns with the transaction.
On August 30, 2005, as the final phase of the U.S.-India Next Steps in Strategic Partnership (NSSP), the Department of Commerce published in the Federal Register a rule that removed three ISRO subordinate entities, specifically, "ISRO Telemetry, Tracking and Command Network (ISTRAC)," "ISRO Inertial Systems Unit (IISU), Thiruvananthapuram," and "Space Applications Center (SAC), Ahmadabad" from the Department of Commerce’s Entity List (70 FR 51251). This final rule implemented the last phase of the NSSP with India. The Department of Commerce anticipates that this change should significantly reduce the number of EPCI missile license applications processed in the future.
5. Effective Enforcement of Controls. The Secretary has determined the United States has the ability to effectively enforce these controls. Multilateral controls on missile technology provide 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 have different standards for “catch-all,” which complicates law enforcement cooperation. Third, identifying illegal exports and reexports of missile-related goods requires significant investigative 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 a risky transaction. 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 fifth Enforcement Experts meeting at the MTCR Plenary in Madrid, Spain, in September 2005.
Among other enforcement activities, the Department of Commerce ensured that penalties were assessed against a number of individuals who committed acts in violation of U.S. missile-technology export controls.
In criminal proceedings related to “knowledge” under the Enhanced Proliferation Control Initiative, Elatec Technology Corporation (Elatec) and its president, William Kovacs, in May 2004, pled guilty to charges that they conspired to violate U.S. export licensing requirements. The charges were in connection with the export of an industrial furnace to an entity of concern in China. Previously, the Department had denied Elatec's export license application for this transaction due to missile technology concerns. Sentencing is pending. In January 2005, employee Stephen Midgley was sentenced to one year probation, 120 hours community service, and a $1,500 fine for charges in connection with the illegal export of an industrial furnace to an entity of concern in the People's Republic of China (PRC). Midgley pled guilty to falsely stating in export documents that the furnace did not require an export license when the goods were shipped to the PRC. The Department of Commerce assessed Midgley a $5,000 ($4,000 suspended) administrative penalty as part of an agreement to settle charges related to this unlicensed export. This guilty plea was the result of the Department of Commerce’s Office of Export Enforcement, Bureau of Industry and Security, and the Department of Homeland Security’s Immigration and Customs Enforcement jointly conducted this investigation.
In May 2005, Valtex International Incorporated (Valtex) and its president and owner, Vladimir Alexanyan, were each sentenced in U.S. District Court for the District of Minnesota in connection with their guilty pleas to criminal charges concerning attempted illegal exports of metallized polymide film to the PRC. Valtex was ordered to pay a $250,000 criminal fine and sentenced to five years probation. Alexanyan was ordered to pay a $12,000 criminal fine, was sentenced to three years probation, and was ordered to refrain from any international activities/trade for the term of his probation. In February 2005, Alexanyan and Valtex pled guilty to export violations and false statements in connection with the attempted export of satellite/missile insulation blankets to the Chinese Academy of Space Technology in Beijing. The Department of Commerce had previously rejected Valtex's application for an export license for these items. The U.S. Government seized the goods in San Francisco before their shipment from the United States. The Department denied Alexanyan and Valtexa’s export privileges to the PRC for five years, and assessed administrative penalties against them of $88,000 and $77,000, respectively as part of agreements to settle charges related to this attempted unlicensed export. Further, Valtex agreed to implement an export management system. The Department of Commerce’s Office of Export Enforcement, Bureau of Industry and Security, and the Department of Homeland Security’s Immigration and Customs Enforcement jointly conducted this investigation.
Normally, the Department of Commerce holds discussions with industry representatives on issues related to the MTCR Annex through the Transportation Technical Advisory Committee (TransTAC), and other relevant TACs as appropriate. Further, the Department of Commerce 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.
The Department received extensive input and industry advice that led to a significant revision to the MTCR controls on accelerometers that the MTCR accepted at the Madrid, Spain Plenary in September 2005. The Department expects to incorporate these revisions into the EAR before January 2006.
In an October 13, 2005, Federal Register notice, the Department of Commerce solicited comments from industry on the effectiveness of U.S. foreign policy-based export controls (70 FR 59678). Comments were solicited from all six of the Department’s TACs, as well as from the President’s Export Council Subcommittee on Export Administration. Comments also were solicited from the public via the BIS website. The comment period closed on November 14, 2005, and four comments were received.
One comment addressed end-use controls associated with the Enhanced Proliferation Control Initiative (EPCI), the Presidential initiative announced in December 1990, upon which many Commerce non-proliferation controls are based. EPCI controls focus specifically on missile technology and chemical, biological, and nuclear weapons. Although the 1990 EPCI announcement addressed both controls on items and end-use controls, the term is often used informally to specify the EPCI provision that requires an export license based upon what the exporter "knows" of the end-user or end-use, or upon what the exporter is "informed" (see EAR Part 744). The commentator expressed concern that the “catch-all” controls in place pursuant to EPCI are too broad, fail to implement the intent of EPCI, and impose substantial compliance costs for U.S. companies. The commentator advocated for a review of the EPCI end-use controls in order to narrow their scope to certain geographical areas and certain technological parameters. Additionally, the commentator opposed the extension of “catch-all” controls to other end-uses, such as conventional military end-use.
A detailed review of all comments received can be found 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 of missile proliferation concern. The United States also shares denial information with its MTCR partners, who honor the “no-undercut” commitment.
As cited earlier, the Department of Commerce published an amendment to the EAR on March 10, 2005, to implement changes to the MTCR Annex that the United States and its MTCR partners agreed to at the October 2004 Plenary meeting.
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 missile sanctions on entities in Egypt, India, Iran, Macedonia, Moldova, North Korea, Pakistan, the PRC, Russia, South Africa, and Syria. Missile sanctions are used to encourage the governments of the sanctioned entities to adopt responsible nonproliferation behavior and to send a clear message about the United States’ strong commitment to missile nonproliferation.
The United States and its MTCR Partners are continuing their diplomatic efforts to encourage additional countries to adhere unilaterally to the MTCR Guidelines. Such efforts are aimed at encouraging non-MTCR members to implement and enforce effective missile technology export controls. Although the United States has an obligation to maintain and renew its export controls based on its membership in the MTCR, it also has pursued alternative means to achieve the purposes of the controls through its consultations with non-MTCR countries.
Possible suppliers of missile technology that are not MTCR members include, but are not limited to, the PRC, North Korea, Egypt, India, Israel, and Taiwan. Some of these countries, such as Israel, adhere unilaterally to the MTCR Guidelines and apply MTCR-type controls. The United States continues to approach other nations that produce MTCR Annex-controlled items to secure their cooperation in controlling the foreign availability of these items and to urge their vigilance in applying MTCR Guidelines to help prevent missile proliferation. The U.S. Government has imposed sanctions on entities in a number of countries when those entities have not altered their proliferation behavior.
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.