Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION III.8: EXPORT CONTROLS

U.S. export control policy seeks to promote and protect U.S. national security. To do so effectively, U.S. export controls must be modernized to adapt to technological and global changes, promote U.S. technological and competitive leadership and operate more transparently and efficiently.

The free flow of technology, capital, ideas, and goods in the global economy has made broad and unilateral export controls increasingly ineffective and out of step with technological and commercial reality. As well, harm to the international competitiveness of the high-technology sector and other U.S. industries has serious implications for U.S. national security. With the level of technological innovation growing exponentially in the private sector, along with diminished federal spending for research and development, the United States military relies increasingly on the high-technology sector for development of advanced technologies for weapons systems and other defense needs. If export revenues in the high-tech sector decline, it will mean that the sector will not have sufficient resources to support the research and development necessary to develop the next generation of advanced technologies.

Maintaining the international competitiveness of the U.S. high-technology sector is also critical to sustaining the growth of the national economy. For the United States, high-technology industries are one of our core strengths. The production of information and communication technology goods and services has been responsible for approximately one-third of the acceleration in U.S. productivity over the last decade. High-technology industries employ more than 4 million workers in the United States and accounted for approximately 37 percent of all U.S. exports of manufactured goods in 2006. These industries produce much of the leading-edge technology and innovation in the world, but continue to face growing competitive pressures. Export control policy has a major impact on the U.S. high-technology sector, as well as other key U.S. industries.

To protect national-security interests, which includes promoting the international competitiveness of U.S. high-technology and other industries, U.S. export control policy should focus on those technologies that are critical to protecting U.S. national security as opposed to attempting to control a wide range of commercial products. It should target those areas of technology that are not readily available in global markets and on which there is consensus within multilateral export-control regimes on the need for controls. In the short term, these goals can be achieved by ensuring that the export-control thresholds for high-performance computers keep in step with the rapid advances in computer technology. In the long term, efforts must continue to build a bipartisan consensus among the Congress, the Administration, and business community in support of meaningful reform of the U.S. export-control system. Any effort to renew and reform the Export Administration Act should codify the recent liberalization in export controls; it should not become a vehicle for turning back the clock to a system of stringent unilateral controls which lacks the support of U.S. trading partners, undermines U.S. international competitiveness, and ultimately harms U.S. national security.

This section examines the major high-technology U.S. export control policy issues for ECAT companies involving dual-use controls, deemed-export rules, high-performance computers, encryption, microprocessors, reauthorization of the Export Administration Act, the 2008 Export Control Directive and the Wassenaar Arrangement.

Dual-Use Export Control Policy

Dual-use export controls were modified in several respects in 2007 and the beginning of 2008.

On June 15, 2007, BIS announced new rules for licensing dual-use exports to China that remove license requirements for certain authorized customers in China while imposing new licensing requirements on a specified list of items that BIS believes could contribute to the modernization of China’s military. On October 2, 2007, BIS extended this dual-use framework to India.

Key provisions of the new rules include the following:

Validated End-User (VEU) Program. The VEU program seeks to facilitate exports of controlled items to trusted companies in China and India. The regulations establish a process for companies to submit information and seek to qualify as a VEU. A U.S. Government established End-User Review Committee would review the information and made decisions on the companies to certify. Once qualified, such companies in China and India would be authorized to receive certain U.S.-controlled items without individual export licenses. The Commerce Department published the first list of five Validated End-Users for China in October 2007. Sectors likely to benefit from VEU include electronics, semiconductor equipment, and chemicals.
New Controls. The regulations impose controls on a targeted list of items if they are destined for military end-uses in China, could enhance military modernization and are not otherwise widely available. The list identifies 20 product categories and associated technologies and software, and include aircraft and aircraft engines, avionics and inertial navigation systems, lasers, depleted uranium, underwater cameras and propulsion systems, certain composite materials, and some telecommunications equipment for space communications or air defense.
End-User Statements. The regulations also require exporters to obtain an End-User Statement from the Chinese or Indian government for certain licensed exports in order to facilitate the U.S. government’s reviews. The dollar threshold for requiring such Statements for most controlled items was increased in this regulation from $5,000 to $50,000 to help reduce administrative burdens.
On January 22, 2008, the President announced a new dual-use export control initiative to address new security challenges, while also addressing the economic challenges posed by the global diffusion of high-technology products. In particular, the President directed the following steps to be taken:
Foreign End-Users. U.S. dual-use policy will increasingly focus on foreign end-users of U.S. high-technology products, while facilitating trade with reliable foreign customers. These steps include the VEU programs discussed above, as the expansion of the Commerce Department’s Entity List, which will ensure additional scrutiny of exports to foreign parties that raise national-security concerns.
U.S. Competitiveness. Recognizing that technological and economic competitiveness are vital to the U.S.’s long- term national security, U.S. dual-use policy will be continually reevaluated to ensure that the most sensitive items are controlled. Steps will include a regular process for review of the Commerce’s control list of controlled dual-use items, revised controls on intra-company transfers and encryption products and a review of reexport controls.
Transparency. The United States will increase the transparency of its dual-use policies, through the publication of advisory opinions on the Department of Commerce’s website, as well as lists of foreign parties warranting higher scrutiny.

ECAT welcomes the new policy approaches to dual-use export controls. ECAT agrees that a VEU process can promote national security and expedite exports to foreign consumers with strong compliance programs that have been validated. ECAT would like to see this program expanded to other appropriate countries and made more transparent by including clear eligibility criteria and requirements for end-user compliance programs, as well as specific time periods for the review and approval/denial of VEU status.

ECAT also supports work to create a license exception for intra-company transfers of controlled technologies and commodities that would otherwise be subject to U.S. export controls, require individual export licenses or be considered “deemed exports” to company employees in the United States. Currently, license applications are required and most are approved, given the recognition that U.S. companies have strong incentives and programs to maintain effective controls over sensitive technology. Nevertheless, the current process results in extensive delays and costs that put U.S. companies at a competitive disadvantage. ECAT strongly supports therefore the creation of a streamlined process like the VEU to authorize a license exception for intra-company transfers, including deemed exports. As noted in the President’s dual-use export control initiative discussed below, further BIS reform of company transfers is under consideration and expected to be proposed in 2008.

ECAT Position: ECAT welcomes the adoption of the Validated End-User program with China and India. ECAT will review carefully the implementation of this new program and support its extension to other key countries and its improvement through provisions providing greater transparency and predictability. ECAT also strongly supports the creation of a streamlined process like the Validated End-User program to authorize a license exception for intra-company transfers of dual-use technologies, including deemed exports.

Deemed-Export Rules

With the adoption of the Export Administration Act of 1979, dual-use technology or source code (except encryption source code) is "deemed" to be exported when it is released to a foreign national within the United States. In 1985, the rules were clarified to provide that certain research activities fell outside these rules. Nevertheless, for commercial firms and universities that do not fall under that exception, the deemed-export rules operate to require such firms and universities to obtain export licensees before sharing controlled information or technology with a foreign national or, if the license application is denied, to deny access to that person.

On December 20, 2007, the Deemed Export Advisory Committee, established on October 2006 by the Department of Commerce, transmitted its report, “Deemed Exports in the Era of Globalization,” to the Secretary of Commerce. The report’s primary conclusion was that the current deemed-export regulatory regime no longer serves effectively its purpose, particularly given the rapid development of new technologies, the global movement of research and innovation (including with the increased mobility of researchers and innovators), much greater flows of information, growth of other economies and the changes in the threats to U.S. national security. The Committee concluded that the United States could not successfully erect walls to protect the United States’ scientific and engineering knowledge base. The Committee recommended greater balance in the deemed-export regulatory regime through replacing the current regime with a new process that will:

Expand protections of certain information and technology that have the greatest consequences for U.S. security, while eliminating from the control list those that do not have such consequences;
Establish “trusted entities” from the private sector and academia that could obtain streamlined processing if eligibility criteria were met;
Eliminate the exception for “ordinarily published” research and explicitly allow government agencies to prohibit the publication of certain research; and
Modify the selection of technologies that require greatest scrutiny, including recognition of foreign availability of such technology.
While the full report remains under interagency scrutiny, on February, 6, 2008, BIS announced that it was taking two related actions:
Establishing an Emerging Technologies Advisory Committee, composed of representatives from leading research universities, government research labs, and industry to make regular recommendations to BIS regarding emerging technologies; and
Improving outreach efforts with the academic and technology communities about deemed-export policy efforts.

While the Committee’s report identified many of the problems with the current deemed-export regulatory regime and correctly identified the need to focus on fewer, more sensitive technologies, the recommendations for improvement also raise serious questions. In particular, ECAT is concerned that the recommendations will be difficult to implement, since little progress has been made in narrowing the list of controlled technologies and, as a result, the new restraints will be applied to a broader list of items than is appropriate, unnecessarily placing greater burdens on high-technology industries and leading to greater delays in license processing. ECAT is also concerned that the proposals on clearing foreign nationals are likely to increase unnecessarily processing and delays.

ECAT Position: ECAT supports efforts to reform the deemed-export regulatory regime to promote more effectively U.S. national security in a manner that reflects technological and market changes and does not undermine U.S. competitiveness. In particular, ECAT supports efforts to narrow the list of controlled technologies, provide a license exception for intra-company transfers and provide streamlined processes to expedite authorizations for certified entities.

Computer and Software Export Restrictions

The 1998 National Defense Authorization Act imposed pre-shipment notification and licensing and post-shipment verification requirements on exports and re-exports of high-performance computers to countries that are known proliferation risks. Over the past few years there have been adjustments to the level of performance of computers allowed for export, rising from a performance threshold of 2000 MTOPS (millions of theoretical operations per second) to 190,000 MTOPS to the current level of 0.75 Weighted Teraflops.

There are 48 countries regarded as proliferation risks, comprising the list of Tier 3 countries in the U.S. export regulations. Tier 3 countries include China, Russia, India, Pakistan, Vietnam and all countries of the Middle East, except Turkey. Adjustments to high-performance computer control levels can be proposed by the Administration following a determination that the adjustment will not harm national security. Any decision to adjust high-performance computer controls for Tier 3 countries had been subject to a 180-day Congressional review period. This requirement was modified to a 60-day review period in 2000.

In December 2003, the Administration amended the Export Administration Regulations (EAR) to implement the December 2002 revisions to the Wassenaar List of Dual-Use Goods and Technologies. As a result, computers with a composite theoretical performance (CTP) not exceeding 190,000 MTOPS and related software may now be exported and reexported without a license, except to embargoed or sanctioned destinations. High-performance computers with a CTP greater than 190,000 MTOPS to computer Tier 1 destinations remain authorized under a license exception. In March of 2001, the Administration also combined Tier 1 and Tier 2 countries, so that computers of any MTOPS level being shipped to formerly Tier 2 countries will no longer require licenses. (Tier 2 countries are those classified as a low risk for proliferation and include many Asian, Latin American and African countries). On November 5, 2004, the Bureau of Industry and Security of the Department of Commerce (BIS) finalized new rules to expand license exceptions for the export of computer technology and software, including for certain deemed exports of computer technology and source code.

In December 2005, the Wassenaar Arrangement, discussed in more detail below, replaced the MTOPS metric with the so-called Weighted Teraflop (WT) metric, which measures how fast a computer performs trillions of floating point operations that involve mathematical calculations involving figures extending to multiple decimal places. While the WT system is not based on a theoretical calculation like MTOPS, it is still a performance-based control. Yet it represents a significant improvement because it removes extraneous factors from the calculation of performance for a high-performance computer system. On February 6, 2006, the Administration notified Congress of changes to high-performance computer controls, triggering the 60-day review period. On April 24, 2006, BIS amended the EAR to implement the December 2005 Wassenaar decision.

While ECAT welcomes this modification, ECAT continues to be concerned that performance-based systems fail to adequately recognize the technological realities of the marketplace, putting U.S. companies at a competitive disadvantage compared to foreign competitors, without advancing U.S. national-security interests. As found in a December 2000 report by the General Accounting Office (GAO) – Export Controls: System for Controlling Exports of High Performance Computing is Ineffective – MTOP performance-based controls are largely ineffective. There have been multiple subsequent reports from the Defense Department and the security community that have reached similar conclusions about the ineffectiveness of performance-based controls.

ECAT Position: ECAT urges Congress to repeal the 1998 National Defense Authorization Act requirements related to computers and give the President the flexibility to develop effective controls in this area, as he has in all other product categories. In the short term, ECAT welcomes the decision of the Wassenaar Arrangement and the Administration to modify the metric for measure of high-performance computers from the outdated MTOPS threshold to the Weighted Teraflop metric.

Encryption

Under BIS regulations, software products containing encryption capabilities must be registered and, depending on the type of encryption used and end-user, submit a review request, license application or notification. While there has been some relaxation in controls for commonly used encryption products, encryption rules impose heavy and non-transparent burdens on low-risk products.

In 2000, BIS (then called BXA) issued regulations permitting the export or re-export of any encryption commodity or software after a technological review by the Government. The major sections of the regulations provide that:

Any encryption commodity or software of any key length can be exported license-free to individuals, commercial firms, and other non-government users in any non-terrorist country, following a one-time technical review;
Retail encryption commodities and software can be exported to any end-users in non-terrorist countries. BIS will determine which encryption products qualify as “retail;” and
Export controls on source code, tool kits, and chips are relaxed.
The revised regulations include a broad definition of retail goods, which encompass web-based products and any functionally equivalent product, and clarify that the definition of government entities does not include telecommunications firms, Internet Service Providers or educational facilities. The regulations contain many of the provisions in the Security and Freedom through Encryption Act, H.R. 850, sponsored by Congressman Goodlatte (R-VA) in the 106th Congress.
On June 6, 2002, the BIS published revised encryption regulations as part of the EAR to reflect changes made to the Wassenaar Arrangement List of dual-use items, and to update and clarify other provisions. These regulations:
Permit the export and reexport (without a license) of “mass-market" encryption commodities and software with symmetric key lengths exceeding 64-bits, following a 30-day review;
Permit the export and reexport of equipment controlled under ECCN 5B002 under License Exception ENC; and
Update and clarify the notification, review, licensing and post-export reporting requirements for publicly available encryption items, including "publicly available" encryption source code and "short range" wireless products.
This rule makes no changes to export or reexports of encryption to countries sponsoring terrorism.
On June 17, 2003, the BIS further clarified its encryption regulations with the following modifications:
Clarifies that all persons (except nationals of Country Group E:1 countries) may take “personal use” encryption commodities and software to any country not listed in Country Group E:1.
Clarifies that medical equipment and software incorporating encryption or other “information security” functions are not controlled as encryption.
Clarifies that “publicly available” ECCN 5D002 encryption source code (and the corresponding object code) is eligible for de minimis treatment, once the notification requirements have been satisfied.
Publishes a checklist to help exporters better identify encryption and other “information security” functions that are subject to U.S. export controls.
Clarifies circumstances when short-range wireless and other encryption commodities and software pre-loaded on laptops, handheld devices, computers and other equipment may be given mass-market or retail treatment.
On December 9, 2004, BIS updated the EAR with respect to encryption by:
Implementing a standard 30-day review for encryption reviews;
Expanding the EU’s license-free zone to account for the EU’s expansion to include Cyprus, Estonia, Latvia, Lithuania, Malta, Slovakia and Slovenia. The seven new countries now belong to the “Supplement 3” list of countries that are allowed to receive non-mass-market encryption items from the United States, provided they register with BIS for review using an encryption license.
(The Czech Republic, Hungary and Poland – the other three countries that were part of the EU enlargement – were already included in the supplement 3 list).
Clarifying the criteria for licensing to “government end-users.”
Eliminating the requirement for separate requests for de minimis eligibility.
Permitting updates or modifications to certain publicly available encryption posted on Internet software without additional notification.
Deleting references to “retail” to eliminate confusion with respect to “mass market” products.

As noted in the President’s dual-use export-control initiative discussed above, further BIS reform of encryption controls is under consideration and expected to be proposed in 2008.

While ECAT welcomes BIS’ efforts to modernize its controls on encryption products, more work is required to make these procedures more transparent, less burdensome and more focused on encryption products that pose actual national-security risks, rather than covering commercial software or open source software that is available on the Internet.

ECAT Position: ECAT supports efforts to modernize controls on encryption products to ensure that they appropriately reflect technological and market changes. In particular, ECAT supports efforts to make these procedures more transparent, less burdensome and more focused on encryption products that pose actual national-security risks, rather than covering commercially available software or open source software that is available on the Internet.

Microprocessor Controls

The United States’ proposal to decontrol microprocessor technology used in mass-market computers with multi-media applications was adopted by Wassenaar members in December 2006. The 2006 Wassenaar decision provides that controls would not be required for mass-market computers with multi-media applications. Controls will be focused instead on advanced microprocessor technology used to design and make chips for advanced computers capable of designing conventional weapons, that is, microprocessors of 32 bits or more that can perform more than two 64-bit or larger floating point operation results per cycle.

On November 5, 2007, BIS issued final rules to implement the December 2006 Wassanaar agreement and move the United States away from its long-standing reliance on outdated Composite Theoretical Performance (CTP) values and adopt a new measure, Gigaflops (GFLOPS), to measure microprocessor performance for export purposes.

ECAT Position: ECAT welcomes the Wassenaar and U.S. decisions to revise microprocessor controls to reflect more accurately technological advances.

Export Administration Act Reauthorization

U.S. export-control programs have been administered under the authority of the International Emergency Economic Powers Act (IEEPA) since 1994, when the Export Administration Act (EAA) expired. Since that time, the Administration has sought reauthorization of the EAA because of the legal vulnerabilities of administering export controls under IEEPA. A short-term EAA reauthorization (H.R. 5239) was approved by Congress in 2000 and enacted on November 13, 2000. In addition to reauthorizing EAA until August 20, 2001, the legislation increased entity penalties for EAA violations to the greater of $500,000 or five times the value of the exports for each knowing violation. Individuals would also face fines up to $250,000 or five times the value of the exports and/or imprisonment for up to five years. (Penalties had been $10,000 per violation.) The reauthorization also included provisions to guarantee the protection of confidential business information. Pending enactment of a more fundamental reform of the EAA, President Bush has extended the Export Administration Act under the International Emergency Economic Powers Act through executive order.

Efforts to engage in a more fundamental rewrite of the EAA have been proposed since 2001, but not yet completed. Of particular interest to ECAT are S. 149, the Export Administration Act of 2001 (introduced by Senator Enzi (R-WY) and H.R. 55, the Export Administration Act of 2003 (introduced by then Rules Chairman David Dreier (R-CA), Representative Jeff Flake (R-AZ) and former Representative Robert Menendez (D-NJ)). Notably, these bills proposed several improvements to existing provisions, including:

National Security Controls: The legislation establishes an export control list for sensitive technologies and products and authorizes the imposition of national security controls (1) to restrict items that would contribute to the military potential of countries in a manner detrimental to U.S. national security; (2) to stem the proliferation of weapons of mass destruction; and (3) to deter acts of international terrorism. The legislation also authorizes the development by the Secretary of Commerce, with the concurrence of the Secretary of Defense, of the National Security Control List, based on a series of risk factors, including the effectiveness of controlling the item and taking into account mass-market status, foreign availability and other factors. It establishes a five-tiered system to classify countries.
Mass-Market and Foreign-Availability Provisions: The legislation creates a six-month process for reviewing requests that items be removed from the National Security Control List because they are mass-market products or are available abroad, given that controlling such items does not serve a national-security purpose and undermines U.S. technological competitiveness. An item will be found to have mass-market status if it is: (1) produced and available for sale in large volumes; (2) widely distributed through marketing channels; (3) conducive to shipment by accepted commercial means; and (4) able to be used for its intended purpose without substantial or specialized service. An item will have foreign-availability status if it available from sources outside the United States at prices that are not excessive compared to the U.S. price and in sufficient quantity to render continued U.S. controls ineffective. The President retains the authority not to remove items under certain circumstances and subject to periodic reviews.
Foreign Policy Controls: The legislation tightens the criteria for imposing foreign policy controls and requires the President to announce his intention to impose such controls 45 days before doing so in order to solicit and consider public comments. The President also is required to submit a report to the Senate Banking Committee and the House International Relations Committee on the proposed control. The legislation also requires that controls be terminated after two years, unless specifically renewed by the President after a period of public comment (except for controls targeted against countries designated as supporting international terrorism).
Exemptions: The legislation prohibits the imposition of foreign policy controls on agricultural commodities, medicine, and medical supplies, except for countries subject to the Trading with the Enemy Act (Cuba and North Korea). The legislation would also terminate any existing foreign policy export controls upon enactment, unless specifically reimposed.
Export Licensing and Dispute Resolution: The legislation seeks to expedite and increase the transparency and predictability of the export-licensing review process. It establishes criteria for the review of license applications and sets up a time-limited process for the Secretary of Commerce and other Executive Branch Department officials to review and provide a recommendation on the license: referrals must be made within nine days and recommendations within 30 days (with certain limited exceptions). The legislation also establishes a process to resolve interagency disputes over the approval or denial of a license within 90 days of the application’s original referral.
International Arrangements: The legislation encourages the United States to participate in new multilateral export control regimes and to take steps to enhance existing regimes.
Advisory Committees: The legislation authorizes the President to establish the President’s Technology Export Council and Export Control Advisory Committees.
This legislation responds to the increase in the diffusion of high-technology products around the world, while also addressing the national-security concerns raised in the Cox-Dicks report from the House Select Committee, U.S. National Security and Military/Commercial Concerns with the People’s Republic of China, and adopts several of its recommendations, including: (1) emphasizing the importance of strengthening multilateral export-control regimes; (2) incorporating a multilateral export-control violation provision; (3) enhancing enforcement resources; and (4) significantly increasing criminal fines and civil penalties for export-control violations.
On April 24, 2007, the Administration proposed the Export Enforcement Act of 2007 to reauthorize the EAA for five years. Among the key provisions of the proposed legislation are:
Increased penalties, with maximum corporate criminal penalties up to $5 million or ten times the value of the exports and maximum individual criminal penalties up to $1 million and 10 years imprisonment and $500,000 per violation civil penalties.
Permanent and expanded law-enforcement authority.
Permanent EAA confidentiality protections for business-confidential information.
Expanded criminal enforcement capabilities.

Banking Committee Chairman Dodd introduced this legislation (S. 2000) by request on August 3, 2007. No Congressional action on this legislation has occurred.

The proposed S. 2000 falls far short of the type of Export Administration Act modernization that is required given the global commerce in high-technology products. By failing to provide procedures for removing mass-market products and those that are already available abroad as the earlier legislation did, for example, S. 2000 fails to focus important government-resources on the technology products that pose the greatest national-security risks and would continue policies that undermine U.S. technological competitiveness internationally, which itself is a vital component of U.S. security.

ECAT Position: ECAT companies support continued efforts to renew and modernize export controls in a manner that recognizes technological advances, global availability of certain technologies and the need for predictable, transparent and timely regulatory decisions and recognize that many of the most needed reforms can be accomplished through regulatory revisions. If legislation moves forward to renew the Export Administration Act, it should provide an export-control system that promotes national security and maintains U.S. technological leadership. Whatever path is taken, the revised export-control system should provide for a higher threshold for the imposition of foreign-policy controls, create a new mass-market regulation, ease the ability to obtain foreign-availability determinations, and reduce export-license processing time. The proposed S. 2000 falls far short of the needed reforms.

2008 Export Control Defense Directive

On January 22, 2008, the President issued an Export Control Defense Directive that reforms the manner in which the Department of State licenses the export of defense equipment by enhancing financial and other resources and making procedural changes to expedite and make more effective the processing of export-license applications for items on the U.S. Munitions list. Key changes include:

Providing additional financial and intelligence resources for the review and processing of defense-trade licenses;
Requiring that license applications be decided within 60 days absent a strong reason for additional time.
Upgrading the electronic-licensing system to enable all agencies to access the same information.
Authorizing the Secretary of State to update U.S. controls on exports involving dual-use items and third-country nationals from NATO and other allied countries.
Creating a formal interagency dispute mechanism to provide for more timely resolution of licensing-jurisdiction issues
Establishing a multi-agency working group to improve procedures for conducting export-enforcement investigations.

These changes will improve the export-control process, making it more focused and efficient, which in turn strengthens U.S. national security controls, while also advancing U.S. technological and industrial competitiveness in this important field.

ECAT Position: ECAT supports the 2008 Export Control Directive on defense products that will improve national-security protections, while also advancing U.S. technological and industrial competitiveness with our key allies.

Wassenaar Arrangement

In 1996, the United States and 32 other countries approved the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Technologies. The agreement replaced the Coordinating Committee for Multilateral Export Controls (CoCom). Unlike CoCom, the Wassenaar Arrangement does not impose mandatory multilateral export controls and instead operates on the basis of national discretion. Current participating countries in Wassenaar are: Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Romania, the Russian Federation, Slovenia, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom and the United States.

The Wassenaar member countries agreed to control certain dual-use items (items with a commercial and military use) that are listed in the appendix to the arrangement. Each member country has discretion to decide what export controls are appropriate for the dual-use items on the list. Wassenaar members continue to review the list of dual-use items and to attempt to coordinate their export control policies. In the area of encryption, Wassenaar members agreed to eliminate controls on encryption products below 56 bits and to extend controls to mass-market encryption products above 64 bits. Revisions were also made in the level of control for telecommunications products and machine tools. As discussed above, in December 2006, Wassenaar members agreed to new controls for computers and microprocessors to bring the controls more into line with technological advances.

In July 1999, the United States issued regulations implementing an agreement among Wassenaar members to control exports of weapons-related goods and technology to pariah states and regions of instability. The regulations include a minor relaxation of controls on some telecommunications and computer equipment, as well as on digital video magnetic tape recorders. The United States has launched an initiative within the Wassenaar Arrangement to strengthen rules preventing members from undercutting the export-license denials of other countries. The United States is concerned that countries with lax export-control laws will circumvent the Wassenaar Arrangement and ship sensitive technology to countries of concern. The U.S. proposal was deferred for further study due to objections raised by Russia and Ukraine.

In late 2000, the Wassenaar Arrangement countries adopted a set of nonbinding “best practices” to promote improved export-control enforcement. In announcing the unanimously approved practices, the Commerce Department indicated that the countries underscored the importance of members having “effective, transparent, and national-law based enforcement systems.” The best practices focused on four areas: (1) preventive enforcement; (2) investigations; (3) effective penalties; and (4) international cooperation and information exchanges. Countries also agreed to liberalize controls on general-purpose microprocessors and high-performance computers and decontrol mass-market encryption products.

At the plenary meeting of the Wassenaar Arrangement in December 2004, the participating countries agreed to the following amendments in the criteria for selecting dual-use items:

Dual-use goods and technologies to be controlled are those that are major or key elements for the indigenous development, production, use or enhancement of military capabilities.
Foreign availability outside Participating States should be taken into consideration.
The ability to control effectively the export of goods should be taken into consideration.
An item that is controlled by another regime should not be dealt with in the Wassenaar Arrangement unless additional coverage proves to be necessary according to the criteria of the Wassenaar Arrangement. When an item is controlled by another regime it should not be automatically excluded from the Wassenaar Arrangement, in particular when concerns and objectives are not identical.
The ability to make a clear and objective specification of the item should be taken into consideration.

In July 2005, BIS issued a final rule to implement these changes and to expand U.S. unilateral controls in certain areas.

At the plenary meeting of the Wassenaar Arrangement in December 2006, the participating countries updated the criteria for the selection of dual-use items. Most significantly, the participating countries agreed to change the metric used to measure high-performance computer controls from the MTOPS metric to the Weighted Teraflop, discussed above. The countries also welcomed Croatia, Estonia, Latvia, Lithuania and Malta to the Wassenaar Arrangement as new Participating States and agreed to the addition of South Africa as a Participating State. On September 7, 2006, BIS issued new rules to implement the Wassenaar decisions, including through adding Croatia, Estonia, Lithuania, Malta and South Africa as Participating States. As discussed above, in November 2007, BIS also issued final regulations to implement the December 2006 decisions.

At the thirteenth plenary meeting of the Wassenaar Arrangement held in December 2007, the members concluded their third assessment to review and evaluate the overall effectiveness of the Wassenaar Arrangement. The plenary also approved a “Statement of Understanding on End-Use Controls for Dual-Use Items” that recommends the application of flexible risk management principles to pre-license, applications and post-license procedures.

The Wassenaar Arrangement represents an important process to promote greater coordination, information-sharing and consistency in review processes; however, Wassenaar could do more, for example, to promote common guidance on the issuance of licenses; review of country-control practices and conditions imposed on the licenses; and continued work on the removal of outdated controls.

ECAT Position: ECAT supports continued work through the Wassenaar Arrangement to promote greater coordination and information on country-specific export controls. ECAT recommends that the Wassenaar countries expand their efforts to make export controls more consistent across the Wassenaar membership to achieve greater consistency and uniformity in export controls.