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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 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.
On July 31, 2006, the Department published a rule in the Federal Register revising the EAR to implement changes to the MTCR Annex that member countries agreed to at the September 2005 Plenary in Madrid, Spain (71 FR 43043). The rule revised the control parameters on accelerometers, which resulted in a more focused control on accelerometers of concern for “missiles.” It also added a new missile technology control for liquid propellant tanks used in “missiles,” but it should be noted that this item will be controlled by the Department of State under the International Traffic in Arms Regulations (ITAR), 22 C.F.R. §§ 120-130. In addition, this rule clarified controls on bulk graphite and made several other minor editorial changes to the text.
B. The U.S. Government also controls items subject to the EAR due to end-use or end-user concerns related to the proliferation of certain rocket systems and unmanned air vehicles, including missile systems. 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. The Department of Commerce reviews applications for licenses on a case-by-case basis to determine whether the export would make a material contribution to the proliferation of certain rocket systems, or unmanned air vehicles. 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, and that the foreign policy purpose cannot fully be achieved through negotiations or other alternative means. The controls at issue have 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 Fiscal Year 2006, the Department of Commerce approved 770 applications, valued at $925 million, for the export or reexport of missile-technology controlled items. In addition, the Department denied 6 applications valued at $3 million and returned without action 41 applications valued at $8.5 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 applications involve exports to countries and for end uses that do not pose missile proliferation concerns. Under the missile EPCI control, the Department approved 50 applications, valued at $5.6 million. Additionally, the Department denied 31 licenses valued at $5.1 million, and returned without action 107 applications, valued at $14.9 million.
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 sixth Enforcement Experts meeting at the MTCR Plenary in Copenhagen , Denmark , in October 2006.
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 September 2005, Mohammed Farajbakhsh was sentenced to seven months in prison and two years probation in connection with exports of computer equipment to an entity affiliated with Iran ’s ballistic missile program. On February 2, 2005 , the U.S. Attorney for the District of Connecticut announced an indictment charging Farajbakhsh, Hamid Fatholoomy, and their UAE-based companies Diamond Technology and Akeed Trading, with conspiring to illegally export goods to Iran via the UAE. The defendants were alleged to have shipped computer goods from a U.S. supplier to an entity affiliated with Iran ’s ballistic missile program, as well as satellite communications equipment and other goods. In April 2005, Farajbakhsh pled guilty to one count of conspiracy and one count of violating IEEPA. The Bureau of Industry and Security’s (BIS) Office of Export Enforcement, the Defense Criminal Investigative Service, and the Department of Homeland Security’s Immigration and Customs Enforcement jointly conducted this investigation.
On November 18, 2005, Fiber Materials Inc., of Maine; its wholly-owned subsidiary, Materials International of Massachusetts; and the companies’ two top officers, Walter Lachman and Maurice Subilia, were sentenced for consipiracy and export violations related to the unlicensed export to India of equipment used to manufacture carbon-carbon components with applications in ballistic missiles. All four defendants had been convicted of one count of violating the EAA and one count of conspiracy by a federal trial jury on March 31, 1995 . The equipment, a specially designed control panel for operation of a hot isostatic press used to produce carbon-carbon items, was exported to the Defense Research Development Laboratory in India for the Agni program, India’s principal nuclear-capable ballistic missile. Lachman was sentenced to three years probation, the first year of which was to be spent in home detention. Subilia was sentenced to three years probation, the first six months of which was to be spent in community confinement to be followed by one year of home detention. A fine of $250,000 was imposed on Lachman, Subilia, and Fiber Materials; no fine was imposed on Materials International because it is a wholly-owned subsidiary of Fiber Materials. BIS’s Office of Export Enforcement and the Department of Homeland Security’s Immigration and Customs Enforcement jointly conducted this investigation.
On May 18, 2006 , Yueqiang “Bill” Chen, a permanent resident alien, was arrested in San Jose , California pursuant to a criminal complaint that charged Chen with five counts of violating IEEPA and the EAR related to five Data Physics exports to the PRC. On
May 24, 2006 , a federal grand jury in the Northern District of California indicted Chen on five counts, finding that Chen unlawfully aided and abetted the unauthorized exports of vibration test equipment to the PRC in violation of IEEPA. The indictment alleged that, while working as the General Manager for the China Division of Data Physics Corporation, Chen willfully and knowingly sold and arranged for the export of vibration test and shaker equipment for use in the design, development, production, and use of missiles in the PRC without a license from the Department of Commerce.
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 incorporated these revisions into the EAR on July 31, 2006 (71 FR 43043).
In an October 23, 2006 , Federal Register notice (71 FR 62065), the Department of Commerce solicited comments from industry on the effectiveness of U.S. foreign policy-based export controls. In addition, comments were solicited from the public via the BIS website. Comments from the Department’s six TACs and the President’s Export Council Subcommittee on Export Administration are solicited on an ongoing basis and are not specific to this report. The comment period closed on November 22, 2006 , and three comments were received. A detailed review of all public 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
July 31, 2006 to implement changes to the MTCR Annex that the United States and its MTCR partners agreed to at the September 2005 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.