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107th Congress, 1st Session - - - - - - - - - - - - - House Document 107-38 PERIODIC REPORT ON THE NATIONAL EMERGENCY CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION ACT OF 1979 FOR AUGUST 19, 2000 TO NOVEMBER 13, 2000 __________ COMMUNICATION FROM THE PRESIDENT OF THE UNITED STATES transmitting THE FINAL REPORT ON THE NATIONAL EMERGENCY DECLARED BY EXECUTIVE ORDER 12924 OF AUGUST 19, 1994, TO DEAL WITH THE THREAT TO THE NATIONAL SECURITY, FOREIGN POLICY, AND ECONOMY OF THE UNITED STATES CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION ACT OF 1979, PURSUANT TO 50 U.S.C. 1641(c) <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> February 6, 2001.--Referred to the Committee on International Relations and ordered to be printed The White House, Washington, February 1, 2001. Hon. J. Dennis Hastert, Speaker of the House of Representatives, Washington, DC. Dear Mr. Speaker: As required by section 204(c) of the International Emergency Economic Powers Act (50 U.S.C. 1703(c)) and section 401(c) of the National Emergencies Act (50 U.S.C. 1641(c)), I transmit herewith the final report on the national emergency declared by Executive Order 12924 of August 19, 1994, to deal with the threat to the national security, foreign policy, and economy of the United States caused by the lapse of the Export Administration Act of 1979. Sincerely, George Bush. President's Periodic Report on the National Emergency Caused by the Lapse of the Export Administration Act of 1979--for August 19, 2000 to November 13, 2000 On August 19, 1994 former President Clinton issued Executive Order No. 12924, declaring a national emergency under the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. 1701 et seq.) to address the threat to the national security, foreign policy, and economy of the United States caused by the lapse of the Export Administration Act of 1979, as amended (50 U.S.C. App. 2401 et seq.) (EAA) and the system of controls maintained under that Act. In Executive Order No. 12924, he continued in effect, to the extent permitted by law, the provisions of the Export Administration Act of 1979, as amended, the Export Administration Regulations (15 CFR 730 et seq.), and the delegations of authority set forth in Executive Order No. 12002 of July 7, 1977 (as amended by Executive Order No. 12755 of March 12, 1991), Executive Order No. 12214 of May 2, 1980, Executive Order No. 12735 of November 16, 1990 (subsequently revoked by Executive Order No. 12938 of November 14, 1994), and Executive Order No. 12851 of June 11, 1993. As required by the National Emergencies Act (50 U.S.C. 1622(d)), former President Clinton issued notices on August 15, 1995, August 14, 1996, August 13, 1997, August 13, 1998, August 10, 1999, and August 3, 2000, continuing the emergency declared in Executive Order No. 12924. In 1996, then President Clinton issued two Executive Orders concerning the transfer of items from the United States Munitions List to the Commerce Control List. On October 12, 1996, he issued Executive Order No. 13020 (regarding hot- section technologies for commercial aircraft engines) and on November 15, 1996, then President Clinton issued Executive Order No. 13026 (regarding encryption products). On December 5, 1995, he issued Executive Order No. 12981 setting forth the application review process. On March 31, 1999, he issued Executive Order No. 13117 deleting the reference to Arms Control and Disarmament Agency (ACDA). Then President Clinton issued Executive Order No. 12924 pursuant to the authority vested in him as President by the Constitution and laws of the United States, including, but not limited to, IEEPA. At that time, he also submitted a report to the Congress pursuant to section 204(b) of IEEPA (50 U.S.C. 1703(b)). Section 204 of IEEPA requires follow-up reports, with respect to actions or changes, to be submitted every six months. Additionally, section 401(c) of the National Emergencies Act (50 U.S.C. 1641(c)) requires that the President, within 90 days after the end of each six-month period following a declaration of a national emergency, report to the Congress on the total expenditures directly attributable to that declaration. To comply with these requirements, then President Clinton submitted combined activities and expenditure reports for the six-month periods ending February 19, 1995, August 19, 1995, February 19, 1996, August 19, 1996, February 19, 1997, August 19, 1997, February 19, 1998, August 19, 1998, February 19, 1999, August 19, 1999, and February 19, 2000 and August 19, 2000. On November 13, 2000, then President Clinton signed into law H.R. 5239 providing for the extension of the EAA until August 20, 2001 (P.L. 106-508). The following report, submitted pursuant to section 204 of IEEPA and section 401(c) of the National Emergencies Act, provides information on the activities and expenditures during the final three-month period, from August 19, 2000 to November 13, 2000 of the national emergency former President Clinton declared in Executive Order No. 12924. Detailed information on export control activities is contained in the most recent Export Administration Annual Report for Fiscal year 2000 and the January 2001 Report on Foreign Policy Export Controls, required by section 14 and section 6(f) of the Export Administration Act, respectively. Following the issuance of Executive Order No. 12924, the Department of Commerce continued to administer and enforce the system of export controls, including anti-boycott provisions, contained in the Export Administration Regulations (EAR). In administering these controls, the Department acted under a policy of conforming actions under Executive Orders No. 12924, 13020, 13026, 12981, and 13117 to the provisions of the Export Administration Act, insofar as appropriate. The expenses incurred by the Federal Government in the three-month period from August 19, 2000 to November 13, 2000 that are directly attributable to the exercise of authorities conferred by the declaration of a national emergency with respect to export controls were largely centered in the Department of Commerce, Bureau of Export Administration (BXA). Expenditures by the Department of Commerce for the reporting period are anticipated to be $9,286,000, most of which represents program operating costs, wage and salary costs for Federal personnel, and overhead expenses. Since the last report to the Congress, there have been several significant developments in the area of export controls: A. MULTILATERAL DEVELOPMENTS Wassenaar Arrangement. The Wassenaar Arrangement on Export Controls is a multilateral regime consisting of 33 member countries. Its purpose is to contribute to regional and international security and stability by promoting transparency and greater responsibility in international transfers of conventional arms and dual-use goods and technologies. <bullet> The United States Government has participated in submissions of export data made by member countries in the regime since the November 1996 implementation of the Wassenaar dual-use export control list. The Wassenaar members make dual- use data submissions on a semi-annual basis in April and October. <bullet> The Wassenaar Arrangement continues annual reviews of its control lists. In April and September 2000, BXA representatives attended Experts Group meetings to review the Wassenaar Arrangement's controls on conventional arms and dual- use goods and technologies. Nearly 70 proposals were discussed to modify and streamline Wassenaar's Dual-Use and Munitions Lists, approximately 30 of which were submitted by the United States. The majority of the proposals were in the areas of electronics, computers, sensors, and machine tools. Nearly all proposals discussed during the April meeting required additional study by member countries. During the September Experts Group meeting, agreement was reached on a number of proposals for liberalizations in the area of electronics. However, no agreement was reached on proposals regarding controls on microprocessors and computers. In an attempt to try to resolve the differences in control levels for computers and microprocessors, an extraordinary meeting was held in December. <bullet> In May and October 2000, BXA representatives participated in the Arrangement's General Working Group meetings designed to increase the general information exchange regarding regions and projects of concern to the United States (e.g., Sudan, Ethiopia and Eritrea). The groupdiscussed the specific information exchange on dual-use goods and technologies and the scope of dual-use notifications and procedures associated with cases requiring ``extreme vigilance.'' The group agreed to adopt a ``best practices'' procedure for exercising extreme vigilance for Very Sensitive List items and to establish criteria for effective enforcement. Member countries are still studying U.S. proposals for expanding reporting of conventional arms exports, strengthening dual- use export notification procedures by establishing a denial consultation procedure, and implementing controls on man-portable defense systems (MANPADS). The United States is continuing to work with interested countries to bridge the gap between dual-use items and arms in order to increase transparency and reduce differences in licensing practices. Missile Technology Control Regime (MTCR). The MTCR is a group of 32 countries that have agreed to coordinate their national export controls for the prevention of missile proliferation. Each member, under its own laws and practices, has committed to adhere to the MTCR Guidelines for export licensing policy for items found on the MTCR Equipment and Technology Annex. <bullet> The MTCR held its annual Reinforced Point-of- Contact Meeting September 9-13 in Paris, France. The agenda was dominated by the proposed Global Action Plan (GAP) against missile proliferation, a proposal that would encourage MTCR members and non-members alike to agree to an international missile nonproliferation code of conduct. <bullet> The MTCR Plenary and associated Technical Experts Meeting (TEM) was held October 9-13 in Helsinki, Finland. The outline of the Global Action Plan to limit missile proliferation was established at the Plenary. Discussions on the specifics of the GAP will continue in future MTCR sessions. At the TEM, while some progress was made, final agreement could not be reached on measures to modify control parameters on certain missile-related items, and differing views also remained on how to define missile range and payload parameters. Participants agreed to continue to meet on these issues early this year. Nuclear Suppliers Group. The Nuclear Suppliers Group (NSG), composed of 38 member countries with the European Commission as a permanent observer, is a group of nations concerned with the proliferation of nuclear weapons. The NSG has established guidelines to assist member nations in administering national nuclear export control programs. Controls are focused on certain categories of goods: nuclear material, equipment and technology unique to the nuclear industry, and so-called nuclear dual-use items that have both nuclear and non-nuclear applications. <bullet> The NSG Implementation Working Group, the Transparency Working Group, and the Dual Use Regime met in Vienna, Austria the week of October 16. The Implementation Working Group worked on a proposal to administratively combine the two branches of the NSG--the ``trigger list'' items under the jurisdiction of the Nuclear Regulatory Commission and the ``dual-use'' items under the jurisdiction of the Commerce Department. While combining the administrative activities of the NSG related to these two branches will provide less duplication of effort on the part of those countries seeking membership, it will have no effect on how the United States controls NSG items. The Transparency Working Group made some progress in developing a proposal for the establishment of an Internet web site; the German Government, with the technical assistance of the European Community, will establish an official NSG web site in 2001. The Dual Use Regime meeting addressed member concerns regarding the proposal by one member to supply nuclear fuel to power plant reactors in India. Thus far, NSG members have refrained from making such exports to India as a result of India's detonation of a nuclear device in May 1998. Members agreed to formally consider the proposal to supply nuclear fuel to India. Australia Group. The Australia Group (AG) is a multilateral export control regime that seeks to impede the proliferation of chemical and biological weapons through the harmonization of export controls, an exchange of information on global proliferation activities, and outreach to nonmembers. The 32 member countries meet annually and communicate between sessions to review and refine the list of controlled chemicals, biological agents, and related equipment and technology. <bullet> Turkey and Cyprus became the newest members of the Australia Group (AG) at the Plenary held in Paris, France, on October 2-5. The U.S. delegation took the opportunity offered by the plenary to present U.S. positions in support of (1) the strengthening of export controls on graphite composite chemical manufacturing equipment, centrifugal separators, and impermeable protective suits; and (2) the removal of controls on medical diagnostic, analytical and food testing kits. At the request of the AG, the United States also presented a paper on export controls on intangible technology for future discussion. B. ENCRYPTION/HIGH PERFORMANCE COMPUTER POLICY Encryption. During the period August 20 to November 13, 2000, BXA carried out a number of activities to implement revisions to the Clinton Administration's encryption policy. These activities included publishing new rules, meeting with industry representative and technical advisory committees, and working with interagency groups on emerging encryption policy initiatives. <bullet> The Administration implemented significant updates to encryption export controls in January and October 2000. The policy continues a balanced approach by streamlining export controls while protecting critical national security interests. The most significant change in the October 19 rule is that a license is no longer required for exports of encryption items and technology to the European Union and several other major trading partners. The update is consistent with recent regulations adopted by the European Union; thus assuring continued competitiveness of U.S. industry in international markets. Other changes include streamlined export provisions for most mass-market products, beta test software, products that implement short-range wireless encryption technologies (e.g., Bluetooth), products that enable non-U.S.-sourced products to operate together and technology for standards development. Additionally, certain U.S.-origin encryption products incorporated into foreign products do not require a U.S. export license. Post-export reporting is no longer required for products exported by U.S.-owned subsidiaries overseas, or for generally available software pre-loaded on computers or handheld devices. <bullet> The October update to encryption policy reflects the invaluable and ongoing dialogue between the Interagency
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