Executive Summary

This report summarizes the activities of the Department of Commerce's Bureau of Industry and Security (BIS) during Fiscal Year 2004.¹

Highlights of Fiscal Year 2004

In Fiscal Year 2004, BIS continued to advance U.S. national security, foreign policy, and economic interests at the intersection of industry and security. BIS focused on facilitating legitimate trade in controlled dual-use items, while preventing and punishing the illicit transfer of critical enabling technologies for advanced conventional weapons, weapons of mass destruction, and their delivery systems. BIS also continued to carry out its antiboycott, public safety, and treaty compliance responsibilities, worked with the private sector to strengthen the U.S. defense industrial and technological base, and worked with international partners to expand high-technology trade while enhancing nonproliferation.

In the area of export control policy and regulation, BIS strengthened and streamlined controls on exports and reexports of U.S.-origin items to ensure that they met U.S. national security objectives without unnecessarily burdening U.S. industry.

• BIS updated its controls to reflect geopolitical developments by, for example, publishing rules that (i) transferred licensing responsibility for exports to Iraq and Libya to the Department of Commerce, (ii) significantly reduced the level of controls on commercial exports to Iraq, (iii) ended license requirements for the export of low-level items to Libya, and (iv) updated controls for Cuba.
• BIS also published a general order that imposed a license requirement for the exports of all items other than food and medicine to Syria, subject to a general policy of denial.
• As part of the Next Steps in the Strategic Partnership with India, BIS published a rule removing the Indian Space Research Organization (ISRO) headquarters from the Entity List, removing certain license requirements for exports to ISRO subsidiaries on the Entity List, and establishing a presumption of approval for certain exports to the "balance of plant" portion of Indian nuclear facilities subject to International Atomic Energy Agency safeguards.

In the export licensing area, BIS processed an increased number of export license applications in a shorter average time.

• BIS completed the review of 15,534 license applications in Fiscal Year 2004, an increase of nearly 25 percent from the previous year, while reducing the average processing time from 44 days in Fiscal Year 2003 to 36 days in Fiscal Year 2004.
• Of this number, 995 were deemed export license applications, up from 846 in Fiscal Year 2003. As a result of process improvements, the average processing time for these applications declined from 62 days to 42 days.

BIS also continued to enforce U.S. export control laws vigorously and improve compliance with export license conditions.

• BIS investigations led to 28 criminal convictions, up from 27 convictions in Fiscal Year 2003, and the imposition of $2.9 million in fines, compared with $3.4 million in Fiscal Year 2003.
• BIS closed 63 administrative enforcement cases, up from 34 in Fiscal Year 2003, and imposed $6.2 million in fines, up from $4.1 million in Fiscal Year 2003.
• BIS developed the Export Case Emphasis List to help focus its resources on the highest priority cases.

In addition, BIS improved communication with industry and other interested parties. BIS focused on enhancing the role of the President's Export Council Subcommittee on Export Administration (PECSEA) and the Technical Advisory Committees in the formation of policy and on seeking increased input from the public on BIS programs and initiatives.

• BIS partnered with the PECSEA and the six Technical Advisory Committees to receive industry advice on issues such as revisions to multilateral control regime lists, licensing procedures, and foreign availability of controlled products.
• BIS conducted 53 domestic seminars on such topics as export licensing and technology transfer.

BIS also took significant steps, in cooperation with other U.S. Government agencies, to strengthen the multilateral non-proliferation regimes and implement its treaty compliance responsibilities.

• BIS was instrumental in the decision of the Nuclear Suppliers Group to add a "catch-all" control to its guidelines.
• BIS significantly contributed to a draft legislative package presented to the Congress to implement the International Atomic Energy Agency (IAEA) Additional Protocol, which was still pending in Congress at the close of the fiscal year.

On the international stage, BIS was active in promoting trade and bolstering security:

• BIS was instrumental in the design, launch, and conclusion of Phase I of the Next Steps in Strategic Partnership with India, which permitted the liberalization of certain U.S. export control regulations while also enhancing U.S. nonproliferation objectives. In addition, BIS held public and private sector meetings of the U.S.-India High-Technology Cooperation Group to further reduce barriers to U.S.-India high-technology trade while strengthening U.S. security.
• BIS and the Ministry of Commerce of the People's Republic of China reached an agreement on procedures to strengthen end-use visit cooperation and help foster trade in controlled dual-use items by increasing confidence that such items are being used by their intended recipients for their intended purposes.
• BIS managed and coordinated 86 bilateral technical exchanges with 22 countries to strengthen those countries' export control systems.

BIS also monitored and supported the U.S. defense industrial and technological base.

• BIS reviewed a petition to impose export controls or monitoring on copper and copper-alloy scrap. BIS determined that neither export controls nor monitoring were necessary or appropriate.
• BIS exercised its authority under the Defense Priorities and Allocations System to require preferential acceptance and performance of contracts to expedite the delivery of a variety of defense articles needed to provide critical communications equipment to help facilitate elections in Afghanistan and to support operations in Iraq, including key materials for body and vehicle armor.
• BIS assisted U.S. companies in securing $7.2 billion in contracts to supply foreign governments with defense articles, including sales of naval combat systems to Australia, security and chemical protection equipment to Greece for the Olympics, and maritime helicopters to Canada.

¹In accordance with the Department's past practice, this report has been prepared and is being submitted to the Congress pursuant to the annual reporting requirement set forth in Section 14 of the Export Administration Act of 1979 (EAA). It should be noted, however, that this annual reporting requirement, together with the rest of the EAA, has expired, and that the President has continued the U.S. dual-use export control regime under the authority of the International Emergency Economic Powers Act. It should be further noted that some of the information included in this report fulfills reporting requirements in statutes other than the EAA.