Thank you, Mr. Chairman, for the opportunity to testify on reauthorization of the Export
Administration Act. While the Administration has not had an opportunity to review this issue
with this Committee since July 1996 and many developments have taken place in the intervening
time which should be considered, I appreciate the opportunity to discuss this important issue at
the beginning of the session. I look forward to working with you to achieve a goal I believe we
both share -- the long overdue reauthorization of an EAA that will protect our national security in
an era of economic globalization that has arrived in the wake of end of the Cold War.
Your Committee has long led the way in the Congress in considering EAA reform, and I think it
is a good sign that you are moving so quickly this year.
Since the EAA's August 1994 expiration, we have maintained export controls through a
combination of emergency statutory authority, executive orders, and regulations. Enacting a
revised EAA will help exporters by bringing the law up to date with current global realities,
minimize the possibility of legal challenges under current emergency authority, enhance U.S.
credibility in international fora, and curtail the piecemeal export control legislation that is
difficult for industry to understand and comply with.
Today, I would like to first describe why a new EAA is preferable to operating under emergency
authority. I will then discuss the significant features of the Administration's proposed bill and
H.R. 361, which was passed by the House of Representatives in 1996. The latter bill passed
under suspension of the rules in the House and reflected a broad consensus of support. I regret
the Senate did not have time to take it up then, but I hope you will take a close look at this time,
along with the concerns I will express for several of its provisions.
The Need for a Revised Export Administration Act
Continuing to operate under emergency authority raises the possibility of increasing legal and
political complications. Using IEEPA means functioning under certain legal constraints and
leaving important aspects of our control system at risk of legal challenge. In addition, operating
under emergency authority can undercut our credibility as leader of the world's efforts to stem
the proliferation of weapons of mass destruction.
While I do not want to overstate the case, because we have thus far not faced these
complications, and we will continue to pursue our export control policies despite them, at a
minimum they are likely to consume increasing amounts of time and energy that could be better
used to administer and enforce the export control system more effectively.
In some significant areas, we have less authority under IEEPA than under the EAA of 1979.
Foremost among these are the penalty authorities which are substantially lower, both criminal
and civil, than those for violations that occur under the EAA of 1979. However, even the EAA
penalties are too low, having been eroded over the past 20 years by inflation. The
Administration's bill as well as H.R. 361 both significantly increased these penalties.
We rely on the deterrent effect of stiff penalties. The longer we are under IEEPA, or even the
EAA of 1979, the more the deterrent effect erodes.
Another limitation of IEEPA concerns the police powers (e.g., the authority to make arrests,
execute search warrants, and carry firearms) of our enforcement agents. Those powers lapsed
with the EAA of 1979. Our agents must now obtain Special Deputy U.S. Marshal status in order
to exercise these authorities and function as law enforcement officers. While this complication
can be overcome, doing so consumes limited resources that would be better used on enforcement.
Both the Administration's proposed EAA and H.R. 361 continued these powers.
Finally, the longer the EAA lapse continues, the more likely we will be faced with challenges to
our authority. For example, IEEPA does not have an explicit confidentiality provision like that
in section 12(c) of the EAA of 1979 or similar provisions in the Administration's proposal and
H.R. 361. As a result, the Department's ability to protect from public disclosure information
concerning export license applications, the export licenses themselves, and related export
enforcement information is likely to come under increasing attack on several fronts. Similarly,
the absence of specific antiboycott references in IEEPA has led some respondents in antiboycott
cases to argue -- thus far unsuccessfully -- that BXA has no authority to implement and enforce
the antiboycott provisions of the EAA and Export Administration Regulations.
The lapse of authority also has policy ramifications. Although we have made great progress in
eliminating unnecessary controls while enhancing our ability to control sensitive exports,
exporters have the right to expect these reforms to be certain and permanent. For example, while
we are implementing the President's 1995 executive order making the licensing process more
disciplined and transparent, a statutory foundation for that process would send an important
message to exporters that these reforms will not be rolled back, and they will have the certainty
they need to plan their export transactions.
In addition, failure to enact a new EAA that reflects the changed world situation sends the wrong
message to our allies and regime partners, whom we have been urging to strengthen their export
control laws. We have also been working with the former Soviet Union and Warsaw Pact
countries to encourage them to strengthen their export control laws, but our credibility is
diminished by our own lack of a statute.
Renewal of the EAA of 1979
Some of these same issues also militate against a simple renewal of the expired EAA. For
example, as I noted earlier, the penalties have been substantially eroded by inflation. In addition,
the EAA of 1979 is a Cold War statute that simply does not reflect current geo-political realities.
Its basic national security control authorities are predicated on the existence of a single bipolar
adversary and a multilateral regime, CoCom, that ended nearly five years ago. A renewal of the
EAA of 1979 is not much better than operating under IEEPA.
Significant Features Needed in a Revised Export Administration Act
The Administration's Proposal
In February 1994, the Administration proposed a revised EAA. Granted many things have
changed since then, but our overall goal was, and remains, to refocus the law on the security
threat the United States will face in the next century -- the proliferation of weapons of mass
destruction in a more complicated era than we faced during the Cold War -- while taking into
account the growing dependence of our own military on strong high technology companies here
at home developing state of the art products and, in turn, those companies' need to export to
maintain their cutting edge.
To meet that goal, the Administration's proposal emphasized the following principles: 1) establish a clear preference for export controls exercised in conjunction with the multilateral nonproliferation regimes; 2) increase focus on our own economic security by greater discipline on unilateral controls; 3) simplify and streamline the licensing system; 4) strengthen enforcement; and 5) provide exporters with expanded rights to petition for relief from ineffective controls without impinging on the Administration's ultimate authority to make judgements that protect our national security.
Consequently, the Administration's proposal differed in several significant ways from the EAA of 1979. The control authorities reflected the trend towards international cooperation on nonproliferation through multilateral export control regimes instead of reliance on the Cold War distinction between COCOM-based national security controls and other foreign policy concerns. The criteria governing the imposition or extension of unilateral controls were made clearer. The licensing process was shortened and simplified. Enforcement was strengthened through increased penalties, greater authority for undercover operations, and revisions to forfeiture and temporary denial order authority. The unfair impact provision provided exporters with expanded rights to petition for relief from ineffective controls.
H.R. 361 - The Omnibus Export Administration Act of 1996
H.R. 361 was largely similar to the Administration's proposal, including updates in control authority to address current security threats, increased discipline on unilateral controls, and enhanced enforcement authorities. H.R. 361 also contained provisions consistent with Administration licensing process reforms.
H.R. 361's structure reflected the new challenges resulting from the end of the Cold War. As
proposed by the Administration's bill, the basic control authorities were multilateral and
unilateral instead of the national security and foreign policy authorities of the EAA of 1979.
H.R. 361's new structure explicitly recognized the preference for compliance with international
regimes that the U.S. either is a member of (the Wassenaar Arrangement, the Missile Technology
Control Regime, the Australia Group, and the Nuclear Suppliers' Group) or may help create or
join in the future. We viewed H.R. 361's clear preference and explicit guidelines for multilateral
controls as essential for achieving our nonproliferation goals without disadvantaging U.S.
Another significant positive feature of H.R. 361 was its increased discipline on unilateral
controls. The determinations required by H.R. 361 for the imposition, extension, or expansion of
unilateral controls required a more precise analysis of the anticipated and actual effectiveness of
unilateral controls. This more precise analysis would have ensured that our economic security
was not adversely affected by controls which did not significantly advance national security,
foreign policy, or nonproliferation objectives.
H.R. 361 also supported Administration reforms of the licensing and commodity jurisdiction
processes. H.R. 361's standards for license processing were consistent with the 1995 executive
order, which provided for a transparent, time-limited review process that permitted all pertinent
agencies to review any license application and raise issues all the way to the President if they
desired. This "default to decision" approach has replaced the black hole into which licenses
often fell, improving the system's responsiveness to exporters while also providing broader inter-agency review of license applications that enhances our ability to meet our national security,
foreign policy, and nonproliferation goals.
One other area where H.R. 361 made significant improvements is enforcement by substantially
increasing criminal and civil penalties and providing greater operational enforcement authority
for undercover operations and forfeitures. These enhancements are particularly important in the
current environment, with more diffuse threats, elaborate procurement networks, and suspect end
users more difficult to identify.
Provisions of Concern
We did have concerns, however, about H.R. 361's terrorism, unfair impact, antiboycott private
right of action, and judicial review provisions, which I will outline. We also believe that certain
provisions raised constitutional issues.
The Administration shares the Congress' concern about terrorism, and we have taken a very hard
line against terrorist states. However, H.R. 361's terrorism provision would have significantly
reduced the Administration's flexibility to regulate exports to countries on the terrorist list to
reflect unique or changed circumstances. Under it, for example, the Administration would lack
the necessary flexibility to supply U.S. government (diplomatic, military, or humanitarian)
operations, multilateral peacekeeping and humanitarian missions, International Atomic Energy
Agency inspections, and activities of U.S. or third country nationals unaffiliated with the
H.R. 361's unfair impact provision was also a step backward from the Administration's proposal
to clarify exporters' rights to petition for relief from burdensome and ineffective export control
requirements. The provision limited U.S. exporters' statutory right to petition for relief by failing
to include ineffective controls and competitive disadvantage as grounds for such petitions.
Unlike the Administration's bill, H.R. 361 also exempted some other provisions from the unfair
impact process entirely and failed to explicitly allow unfair impact petitions based on anticipated
H.R. 361 authorized private actions for antiboycott violations. These actions could compromise enforcement of the antiboycott provisions of the EAA. Allowing suits for actual and punitive damages, whether or not a violation has been found through government enforcement action, could jeopardize the record of successful enforcement of the antiboycott law through inconsistent judicial interpretations, diversion of government resources, and private settlements that deny access to evidence.
We also believe that H.R. 361's judicial review provision needed to be clarified to ensure it
would not inadvertently allow inappropriate judicial review of U.S. foreign and national security
Finally, certain provisions of H.R. 361 raised constitutional concerns regarding the President's
authority to conduct diplomatic relations and to act on advice from members of his cabinet.
We believe an EAA that allows us to fully and effectively address our security concerns while
maintaining a transparent and efficient system for U.S. exporters is essential. As I have
discussed, the Administration and the House, in H.R. 361, agreed on most of the important
changes to bring the law up to date in light of current economic and proliferation realities. Our
preference is that you take up reauthorization of an EAA that would build on the consensus
I can understand, however, given the Committee's heavy agenda of other matters, that you may
find it difficult to devote the time and attention needed to produce such a bill, which has not been
without controversy in the past, to say the least. Under those circumstances, we would be
prepared to discuss with the Committee an extension of the expired EAA to remedy some of the
short term problems I discussed, particularly in the enforcement area. That is not a substitute for
full reauthorization, but it will better enable us to do our business more effectively while
Congress is deliberating.
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