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POLICY ISSUE SECY-03-0028 February 24, 2003
To request Commission review of the proposed issuance of licenses to
SGL Carbon, LLC, (SGL) involving the export of nuclear grade graphite
for non-nuclear end use. The applications (Attachments 1
and 2 The applicant has arranged for graphite suppliers from Europe to temporarily
supply Canadian end-users until SGL receives the necessary NRC export
license to resume direct exports to Canada. However, shipments of graphite
to Canada from Europe by ship have been interrupted by freezing conditions
on the St. Lawrence Seaway, forcing SGL to resort to more expensive air
shipments. Accordingly, SGL has requested expeditious review of its export
request. Congressman John E. Peterson (Pennsylvania) has written to NRC
on SGL’s behalf, noting the urgency caused by the shipping conditions
(Attachment 3 SGL is a member of the SGL Carbon Group, a large manufacturer of carbon graphite and composite materials for industrial and aerospace applications, headquartered in Germany. The Carbon and Graphite Business Unit in America, SGL Carbon, LLC, makes electrodes for the metallurgical industry for electric arc furnace operation to melt scrap steel. On December 16, 2002, SGL made a voluntary self-disclosure of numerous large exports of bulk nuclear gradegraphite for non-nuclear end use that occurred during the period 1998 to October 2002. SGL exported the graphite to several countries without obtaining a specific license from the NRC as required under 10 CFR 110.25(a). The company stopped exporting in October 2002 upon understanding that it was in violation of NRC’s regulations. The Office of International Programs (OIP) is working with the Office of Enforcement (OE) concerning the significance of the violations and potential enforcement actions. While the shipments made by SGL without an NRC license were both numerous and large, at this time, the staff does not believe the violations were willful. The Executive Branch agrees with this assessment, and has advised the staff that it is not aware of any information indicating that the unauthorized exports were inimical to the common defense and security of the United States. Consequently, OIP is continuing to process the license applications SGL submitted for the proposed exports of graphite for non-nuclear end use while the consideration of enforcement is ongoing. On November 20, 2002, SGL applied for a license requesting authority
to export for non-nuclear end use, 869,000.0 kilograms of nuclear grade
graphite to Canada (XMAT0403 at Attachment 1), and an additional license
to export 11,617,833.0 kilograms to the countries of the European Union,
Argentina, Australia, Bolivia, Brazil, Chile, China, Colombia, Czech The graphite produced by SGL is very pure (as is much of the graphite
currently produced in the U.S. and abroad) and meets the definition of
nuclear-grade graphite in 10 CFR 110.2, having a boron equivalent content
of less than five parts per million and density greater than 1.5 grams
per cubic centimeter. Bulk shipments of such graphite are controlled by
the United States and other members of the Nuclear Suppliers Group to
help prevent its use as a moderator or reflector material in an un-safeguarded
reactor. SGL, which produces graphite primarily for commercial non-nuclear
end-uses, was unaware until recently that its graphite products were of
the purity level requiring NRC export licensing controls. The EB has concluded that the proposed exports under the new licenses are consistent with the provisions of the Atomic Energy Act, as amended, if limited to the countries/destinations and quantities as specified above. The EB letter notes that, as parties to the Non-proliferation Treaty (NPT), all of the countries/destinations to be approved under XMAT0403 and XMAT 0404 (Canada, European Union countries, Czech Republic, Japan, New Zealand, Republic of Korea, and Taiwan) have committed to maintaining IAEA safeguards on all of their peaceful nuclear activities and have pledged not to produce or otherwise acquire any nuclear explosive device, therefore, satisfying criteria (1) and (2) of Section 109b of the Atomic Energy Act, as amended, for exports of nuclear components, substances and items. The right of prior consent on the retransfer of U.S. origin nuclear grade graphite has been satisfied and confirmed by the receipt of generic assurances from all the countries/destinations to be authorized under XMAT0403 and XMAT0404. Finally, the proposed exports will not be inimical to the common defense and security of the United States. Security Significance of the Exports The amount of material to be exported to the authorized destinations does not raise any additional security concerns related to transportation, including the domestic shipping portion of the export, beyond those applicable to other past and current licensed exports of nuclear grade graphite from the U.S. under general or specific NRC export licenses. The licensee is prepared to comply fully with current domestic shipping requirements imposed by NRC. Accordingly, the staff does not believe that security considerations warrant denial of the SGL applications. Review of Other Sources of Information The Office of International Programs has reviewed recent Department of State telegrams and other sources of information and found nothing which would preclude issuing the export licenses to the destinations approved by the EB. The staff concurs with the EB judgment that the proposed exports, as
modified, would not be inimical to the common defense and security of
the United States and also meet the three
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are being referred to the Commission in accordance with 10 CFR 110.40(b).