Export administration: regulating the flow of U.S. exports

Export Administration

REGULATING THE FLOW OF U.S. EXPORTS

The Commerce Department controls exports under the authority of the Export Administration Act. Commodities and technologies are controlled for three reasons: national security, short supply, and foreign policy. The Act gives the Office of Export Administration the power to regulate the flow of high-technology commodities, services, and technical data which are "dual use'-- that is, which are applicable to both civilian and military uses. By contrast, the State Department's Office of Munitions Control controls exports of arms and munitions and other items whose sole use is military. Other agencies exercise more limited controls over a variety of other items.

Prior to 1977, export controls were limited to exports and reexports of U.S. commodities or technology. In 1977, Congress expanded the export controls to include any commodities and technology exported by any person subject to the jurisdiction of the United States. Accordingly, the Commerce Department can exercise control over foreign-origin commodities and technical data exported by U.S.-owned or controlled companies abroad, and foreign commodities produced from U.S. components and/or technical data.

The Act states that export trade should be given a high priority and controls should be exercised only when necessary to clearly further fundamental national security, foreign policy, or short supply objectives.

In accordance with the statement of country policy in the Act, the Department maintains different levels of control for several country groups "to which exports are controlled for national security purposes.' At the present time, a near total embargo is maintained on exports to North Korea, Vietnam, Kampuchea, and Cuba. The same kind of embargo was applicable to the People's Republic of China until 1971. In 1972, China was given the same export control status as the U.S.S.R. In 1980, controls over China trade were made less stringent than those with the Soviet Union, and further liberalizations have been made as recently as November 1983. For licensing purposes the PRC is now treated as a friendly, and non-allied country.

With the exception of Canada, the Commerce Department exercises licensing controls on exports and reexports to Free World countries of most commodities that are controlled for export to communist destinations, and on some technical data. Except when controls are imposed for foreign policy or short supply reasons, the purpose of most Free World controls is to prevent the diversion of U.S. commodities and technical data to proscribed destinations.

The Act also requires Commerce to review the foreign availability "in fact' of any exports subject to national security controls on a continuing basis in addition to a case-by-case review of availability. The availability "in fact' test is whether foreign availability is sufficient to defeat the purpose of the control. All feasible steps are to be taken to make the controls multilateral with countries possessing comparable commodities or technology.

The Department's export control policies are developed in consultation with other U.S. government agencies, and certain applications require interagency review. In those instances where a specific license application presents a policy problem, or a concurrence among the reviewing agencies is unattainable, the application is placed in a formal interagency review process. Interagency consultation would then take place within the following structure:

The operating Committee on Export Policy (OCEP), chaired by Commerce, is the staff-level interagency body which considers complex export applications and issues.

The subcommittee of the Advisory Committee on Export Policy (Sub-ACEP), chaired by the Deputy Assistant Secretary for Export Administration and composed of counterparts from other agencies, considers issues which the OCEP leaves unresolved and which require policy guidance.

The Advisory Committee on Export Policy (ACEPe, chaired by the Assistant Secretary for Trade Administration, considers issues which require higher level policy guidance.

The Administration Review Board (EARB), chaired by the Secretary of Commerce and composed of the Secretaries of State and Defense and other agency heads, meets periodically to resolve export control matters of exceptional complexity.

Important to our national security control system is U.S. participation in the international organization called COCOM, which consists of the NATO countries (less Iceland and Spain) plus Japan. That body maintains embargo lists, which are adhered to by the United States. Every three years, a review of the items to be removed, added or amended takes place.

Licensing can either be in the form of a validated export license or a general license. The Export Administration Regulations (EAR) specify those destinations for which a validated license is needed. Validated licenses (VL) may also be in the form of bulk, or multiple exports on a single application.

When a VL is not required, exports may be made under the authority of a "General License,' spelled out in the regulations.

The EAR sets forth the licensing requirements for commodities and technical data and includes a list of commodities known as the Commodity Control List that enumerates all commodities subject to U.S. export controls.

Office of Export Administration

Export controls are administered by a staff of close to 200. The principal operating unit is the Office of Export Administration (OEA). OEA now processes roughly 100,000 applications annually and has an operating budget of $8.1 million. The functions are broken into the broad areas of technical, policy and administrative, and consist of seven divisions, two newly organized.

There are two licensing divisions, with engineering/technical staff to handle export licensing and give support for strategic controls of exports. The two new divisions are the Computer Services Division, which provides design and application support to OEA for automated data processing, and the Foreign Availability Division, which is responsible for collecting data on foreign-produced, hightechnology products and performing analysis to assess comparability of foreign technology.

In summary, the office has a variety of functions and activities. Those on which OEA has lead agency responsibilities include:

Administering the Export Administration Act,

Maintaining Export Administration Regulations, which include the Commodity Control List (CCL),

Licensing of exports for national security, foreign policy, and short supply reasons,

Maintaining a commodity data base on foreign availability,

Submitting U.S. cases to COCOM,

Chairing Interagency Advisory Committee on Export Policy,

Coordinating Technical Advisory Committee (TAC) program,

Sponsoring President's Export Council Subcommittee on Export Administration, and

Informing exporters of regulations and policy issues.

OEA has a significant supportive role in the following areas:

Implementation of the MCTL (Military Critical Technologies List),

Determining technical control levels through Technical Task Groups,

Cooperation with Office of Export Enforcement,

COCOM list review,

Other COCOM issues: review of other COCOM countries' exceptions requests; highlevel meetings on technical data transfers; harmonization with COCOM allies; and

Involvement with interagency groups on technology transfers.

The second operating unit reporting to the Deputy Assistant Secretary for Export Administration is the Office of Industrial Resource Administration.

Office of Industrial Resource Administration

The mission of the Office of Industrial Resource Administration (OIRA) is to assure the timely availability of industrial resources to meet current national defense needs and those of an emergency mobilization. To fulfill this mission, OIRA assesses the capacity of the industrial base, ensures the allocation of resources to priority needs, plans for industrial mobilization, and controls the export of scarce items.

Industrial evaluation consists of analyzing the capabilities and deficiencies of the industrial base. OIRA identifies industrial facilities important to the national security and determines their capacity to supply essential materials and products.

In some instances, the United States depends upon foreign supplies of strategic materials. Development of an adequate stockpile requires analyses of consumption and supply of critical materials, determination of purchase specifications, storage instructions, and measurement of the market impact of stockpile acquisitions and disposals. As part of an interagency effort, OIRA provides expertise and guidance to the Federal Emergency Management Agency, which sets stockpile goals, and to the General Services Administration, which manages the stockpile on a day-to-day basis.

A third type of assessment involves the effect of imports on the ability of the industrial base to respond to national security requirements. Section 232 of the Trade Expansion Act provides for such investigations, which involve projecting defense requirements for an item in a mobilization, domestic output capacity, labor and raw materials availability, and foreign supplies. Under this statute, a domestic industry may obtain trade relief if it is determined that imports are entering the United States in such quantities or under such conditions as to threaten the national security.

The priorities and allocations system assures that the military canobtain the resources and products needed for the national defense both now and in an emergeyc. Under the system, the order for an item determined to be critical to national security is given preferential treatment over other orders as necessary to meet delivery requirements. Virtually all defense procurement uses our priority system, and each year millions of defense orders are placed with thousands of businesses involved in producing defense items.

Planning is the key to mobilization preparedness. Continuity of government planning ensures operations of the Executive departments and agencies under all conditions of national security emergency.

OIRA's preparedness planning assures the ability of the United States to respond to all types of major national emergencies by developing contingency plans for industrial resources and testing them in federal interagency readiness exercises.

Through the National Defense Executive Reserve, senior business oficials can be recruited to join the federal government as senior managers as soon as the President indicates the need for their help. Each reservist receives annual training consisting of formal presentations, discussions, and case studies.

In order to consult and cooperative with our NATO allies in developing policies and plans that relate to the Alliance's collective security, OIRA represents the United States on the Industrial Planning Committee (IPC). A major component of the overall civil emergency structure of NATO, the IPC plans for cooperating in the management and use of industrial resources for mobilization emergencies.

As previously noted, the Priorities and Allocations System, operational during peacetime, provides a rapidly expandable framework to facilitate delivery of defense items.

The Export Administration Act of 1979 provides for the United States ". . . to restrict the export of goods where necessary to protect the domestic economy from the excessive drain of scarce materials . . .' At present, we administer Short Supply controls for only petroleum and western cedar. The controls are also an essential element for our emergency preparedness program and are maintained to assure that our national security will not be undermined through sales of critical items that will be needed during an emergency.

In December of 1981, the President established the Emergency Mobilization Preparedness Board to oversee U.S. emergency planning activities. The Department of Commerce supports the EMPB through the Industrial Mobilization Working Group chaired by the Assistant Secretary for Trade Administration. In assisting this effort, OIRA will pay special attention to a number of issues:

Ways of improving our ability to assess the industrial base,

Stockpile planning,

Simplification of the Priorities and Allocations System,

Co-production/offset agreements and their consequences for the defense industrial base, and

Coordination of NATO industrial mobilization planning.

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COPYRIGHT 1984 U.S. Government Printing Office
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