Senate Banking, Housing and Urban Affairs Committee

Subcommittee on International Trade and Finance


Hearing on the Reauthorization of the Export Administration Act and
Managing Security Risks for High Tech Exports


Prepared Testimony of Ms. Trisha Dedik
Director
Office of Nuclear Transfer and Suppliers Policy Division
Arms Control and Nonproliferation Office


9:30 a.m., Tuesday, March 16, 1999

The Department of Energy appreciates the opportunity to address the Subcommittee. In my remarks today, I will focus on that part of the multilateral export control regimes that deal with nuclear-related equipment, materials and technologies. In so doing, I will provide you with an overview of the multilateral arrangements, including their strengths and weaknesses. Because of views that have been expressed in support of a so-called "super regime," I will conclude my remarks about multilateral controls with some thoughts about the efficacy of creating a single multilateral regime to handle all export controls.

In the second part of my remarks, I will describe how the U.S. Government administers nuclear export controls, and in particular, how the Department of Energy participates in the interagency process.

When examining multilateral export controls, it is worthwhile to focus first on those controls at the international level that are designed to prevent the spread of nuclear weapons. These controls have not only been in place longer than the others have, but they are the most comprehensive of all the multilateral controls. There is also an important legal underpinning to the controls that is provided by the Treaty on the Non-Proliferation of Nuclear Weapons (NPT).

Nuclear export controls had their origins as far back as the Atoms for Peace Program following World War II, however, for practical purposes we can look to 1970 as the date for the initiation of nuclear export controls at the multilateral level.

A key provision of the NPT, which came into force in 1970, was a commitment by all parties to the Treaty to require safeguards by the International Atomic Energy Agency (IAEA) on all transfers of nuclear material and other equipment and material that is especially designed or prepared for the production, processing, or use of special fissionable material.

Soon thereafter, several nuclear supplier states, party to the Treaty, began to meet to reach a common understanding of what constitutes equipment and material that is "especially designed or prepared" for the production, processing, or use of special fissionable material. This group of suppliers became known as the Zangger Committee in honor of its first chairman. These suppliers published in 1974 the so-called Trigger List, that is, a list of equipment and material that meets the criteria of the NPT and that would "trigger" the application of safeguards as a condition of supply.

Later in 1974 the world was shocked by the detonation of a nuclear device by India, a non-party to the NPT. This led to a series of meetings of key nuclear supplier states, some of whom were not yet parties to the NPT and thus not participants in the Zangger Committee, to respond to the Indian event. This group, first known as the London Club because of its meeting place, responded by publishing in 1978 an expanded Trigger List and a set of guidelines that went beyond the requirements of the NPT to address such issues as retransfer, sensitive technology restraints, and physical protection. The London Club, which became the Nuclear Suppliers Group (NSG), did not meet again until early 1991. However, from the original seven participants, the number of adherents to the NSG Guidelines grew to 26 by 1991.

Nuclear export controls continued to evolve in the period prior to 1991 through initiatives carried out in the Zangger Committee. The major thrust of the effort was devoted to clarifying the entries and identifying the individual pieces of equipment that were important to the fuel cycle activities on the Trigger List.

Throughout the 1980s, the United States pursued discussions with other suppliers on the need to reach a multilateral agreement to control items not eligible for the Trigger List. These were items of importance in the nuclear fuel cycle, but did not meet the especially designed or prepared criteria because they had non-nuclear applications as well. Other items of concern were equipment and material that could be used in the development, production, and testing of nuclear weapons. These items too, had dual uses and were not eligible for control on the Trigger List.

The meeting of the Nuclear Suppliers Group in The Hague, in early 1991, provided the opportunity for the United States to propose, and to successfully obtain, the establishment of a working group to examine the possibility of multilateral controls on nuclear-related dual-use equipment, materials, and related technology. One year later, at the meeting of the NSG in April in Warsaw, Poland, agreement was reached on a comprehensive arrangement to control items that could make a major contribution to an unsafeguarded fuel cycle activity or to a nuclear explosive activity. At last there were multilateral controls on the dual-use commodities that had previously been under unilateral control in the United States, as a result of the requirements of the Nuclear Non-Proliferation Act (NNPA) of 1978.

Another important outcome of the 1992 Warsaw meeting was agreement, by the then 27 nuclear supplier states, to require the recipient of any item on the Trigger List to have an agreement in force with the IAEA that placed all of its nuclear program (past, present, and future) under safeguards. This U.S. goal had finally been reached after eluding us for many years.

In the ensuing years, the NSG has continued to meet on a regular basis. A plenary is held every spring and dual-use consultations have taken place twice a year. Working groups created to address specific issues meet as needed. The Zangger Committee, while less active than in the years of NSG dormancy, has continued to play an important role as the interpreter of the NPT commitments of parties to the Treaty. In a practical sense, it has been critical to the multilateral nuclear regime because it has drawn China, not a member of the NSG, into its membership.

With that background, I would now like to highlight some of the strengths of multilateral nuclear export controls, and then point out some of the areas that pose potential problems for the future.

First, let us look at the level of participation in the multilateral nuclear regimes. Since October 1997, when China joined the Zangger Committee, all major nuclear suppliers are now active participants in the multilateral regimes. An early criticism of multilateral controls was the absence of many suppliers of importance from the process. In recent years this concern has been allayed by the active participation of countries like South Africa, South Korea, Argentina, Brazil and, most recently, China in the multilateral arrangements.

We are now able to focus on the quality of the participation of supplier states. One approach has been a DOE initiative to improve the nuclear export control systems in the newly independent states of the former Soviet Union. The objective of this effort is to reduce the risk of illicit trafficking in nuclear materials and to help create an infrastructure to enable their systems to operate effectively.

Another initiative has been the DOE program to develop and implement a computerized information sharing system among the NSG member states. This system, which is already operational, provides a real-time communications system for suppliers to notify others of proposed transfers that have been denied in order to ensure that other suppliers will not undercut them. It also enables the smaller countries to contact technical experts in the United States and other nuclear suppliers for advice on a wide range of technical questions, enabling all members to make informed decisions, (see Attachment).

Secondly, a strength of the international nuclear export control regime is in the nature of the control lists, how they are developed, and how they are maintained.

Before an item is either added to the lists or removed from the lists, there are meetings of technical experts from the member states that conduct an in-depth examination. Before an item is recommended for addition to a list it must meet the tests of significance and controllability. Likewise, during the periodic reviews it may be determined that an item no longer meets the criteria. In all cases, either to add or to delete, a consensus is required of all members.

In spite of the potential paralyzing effect of a consensus rule, the United States has found that it has not been a detriment to the workings of the regimes. For example, during the negotiation of the dual-use arrangement in 1991 there was concern that many of the items we felt to be important would not be accepted by all of the other members. Instead, when the final list was adopted it contained as many, if not more, items than we had had under unilateral control.

Thirdly, and certainly not last in importance, is the relationship that exists between proliferation concerns and important commercial interests. In that regard, the NSG has been successful in striking a balance in its approach to nonproliferation objectives and being supportive of the commercial interests of member states.

The targets of the controls have been as narrowly defined as possible so as not to interfere with legitimate trade. For example, the Trigger List commodities are prohibited from going to those countries that do not have a fullscope safeguards agreement with the IAEA, and those, such as Iran, that have an agreement, but whose intentions are suspect. In the case of the dual-use controls, members are committed to preventing exports of the items to unsafeguarded nuclear fuel cycle facilities and to nuclear explosive activities. This too, impedes trade with only those countries of proliferation concern.

A major concern of the suppliers when negotiating the dual-use arrangement was over the possibility that suppliers would undercut each other. As a means of allaying these concerns, a process was established for a member to notify other members of exports denied in accordance with the guidelines, and with the agreement of all members, honor the denials. This has helped to create a level playing field for the commercial interests of the members and also has been effective in preventing proliferant countries from shopping around.

Because of misunderstandings, and perhaps efforts by the countries of proliferation concern to stir up trouble, the NSG has recently engaged in a major effort to make the guidelines more transparent to the non-member states, particularly those from the developing world. A transparency seminar was held in late 1997 in Vienna and another one will be given next month in New York. The objective is to demonstrate that the NSG is supportive of the peaceful uses of the atom in the more than 175 countries that have made a commitment to nuclear nonproliferation.

Fortunately, there are few concerns with the workings of the multilateral nuclear controls. One of most perplexing issues is, in a way, attributable to the success of the regime. The problem is how to continue to draw more and more countries into the multilateral supplier arrangements and still be able meet as a body and to conduct meaningful business. Already with the 35 countries of the NSG, the meeting facilities of the Point of Contact in Vienna (the Mission of Japan) are hard pressed to accommodate the delegations for the dual-use consultations and the meetings of the working groups. With each annual plenary, the size of the group continues to grow. Few members can afford to host such a large group of people. It will become increasingly difficult to get a volunteer to host the annual meeting.

These logistical problems are not the only concerns. Perhaps of greater concern are the anticipated difficulties in being able to carry out the work of the group. As the number increases, so will the difficulty in being able to reach a consensus on proposals. Given the one member, one vote rule, the influence of major suppliers, such as the United States will be reduced.

A recent trend noted in the NSG meetings, that is somewhat of a concern, is the growing participation from the member states of persons who have neither a technical background in nuclear matters, nor are well versed in nuclear nonproliferation policy. These persons tend to be administrators in their domestic export control systems and are often more concerned with form rather than substance.

The last concern provides a good transition into my thoughts about a possible path for the future that would lead to the creation of a single multilateral regime to administer international export controls. The so-called "super regime" has many supporters in the international community. It is especially appealing to the smaller countries where a handful of officials must administer all of the arrangements and attend all of the meetings.

A consolidated regime offers some positive benefits. It would provide a single set of guidelines and a harmonized list. It would reduce the number of meetings that some country representatives would have to attend.

On balance, however, we see downsides to such an idea that more than offset any potential benefits. Today, the membership differs among the various multilateral regimes. This would pose an immediate problem in how to handle the matter of a country that has not been accepted into all of the existing arrangements. In the long run the problem of a growing membership, just expressed with regard to the NSG, would be compounded with the single regime. We also are convinced that in a "super regime," the issues unique to nuclear, or chemical/biological, or missile, or conventional would not get the dedicated policy and technical attention required.

Our experience in national nuclear export controls contributes to our strong views about the single multilateral regime. In the U.S. system, the commercial and nonproliferation concerns have been well served by the division of licensing responsibility for nuclear and nuclear-related exports between the Department of Energy, the Department of Commerce, the Department of State, and the Nuclear Regulatory Commission. Each, in consultation with the other agencies of the Executive Branch is able to achieve a proper balance between commercial interests and proliferation threats.

I would like now to explain the U.S. nuclear export control system that serves our national interests both domestically and in the international arena. The focus will be on the role of the Department of Energy in the process.

There is a strong, long-standing statutory and policy basis for U.S. Department of Energy (DOE) participation in the development and administration of national and multinational arrangements to control the export of nuclear and nuclear-related equipment, materials, and technology. The Atomic Energy Act of 1954 (AEA), as amended, and the Nuclear Non-Proliferation Act of 1978 (NNPA) form the foundation of U.S. nuclear nonproliferation and export control regulations and policy. The Nuclear Transfer and Supplier Policy (NTSP) Division within DOE plays a major role in the formulation of U.S. nuclear nonproliferation and export control policies and makes unique contributions to the implementation of these policies, nationally and internationally. Staff members include export control policy and technical experts, as well as foreign affairs specialists. Additionally, NTSP relies heavily on the expertise of the DOE national laboratories for technical input to their analyses, assessments, and decisions.

The U.S. system of nuclear export controls has evolved over a period spanning more than 40 years. While many supplier states have systems that resemble the U.S. system in many respects, no other state has a system that is more all encompassing and open to public view. The system adopted in the U.S. for administering nuclear export controls and the role of DOE in the system can best be understood by examining the four regulatory parts of the system.

The DOE has statutory responsibility for regulating the transfer of nuclear technology and technical assistance. In accordance with Section 57.b of the Atomic Energy Act only the Secretary of Energy, with the concurrence of the Department of State and after consulting with the Departments of Defense and Commerce, the Nuclear Regulatory Commission and the Arms Control and Disarmament Agency, may authorize persons to engage, directly or indirectly, in the production of special nuclear material outside the United States. This provision applies to technology transfers and technical assistance to all activities of the nuclear fuel-cycle, including non-power reactors. These transfers may take both tangible and intangible form.

Under the implementing regulation, Part 810 of Title 10, Code of Federal Regulations, the Secretary of Energy has granted a general authorization for transfers in non-sensitive nuclear activities to some countries. For other countries, a specific authorization from the Secretary is required for all activities that fall within the scope of the controls. For assistance involving sensitive technologies (production reactors, enrichment, reprocessing, plutonium fuel, heavy water production, and non-power reactors above 5 MW) a specific authorization is required for transfers to all countries. Differentiation of countries involves many factors including nonproliferation credentials, maturity of their export controls, location, and their nuclear trade relationship with the United States. Because of the complexity of the issues involved in these types of transfers, the time to process applications for nuclear technology transfers is considerably longer than for other export cases.

Inquiries from persons and companies seeking to transfer nuclear technology or to provide technical assistance are received by, and reviewed by, DOE to determine if the proposed activity falls outside the scope of the regulation, is generally authorized, or if it requires a specific authorization of the Secretary of Energy. If a specific authorization is required, DOE staff will prepare an analysis of the proposed assistance. If it is determined that the proposed activity is contrary to U.S. nuclear export control laws, regulations or policy, the request is denied and the applicant is notified. If DOE staff intends to recommend approval to the Secretary of Energy, the analysis and the preliminary recommendation, including conditions to be applied to the transfer, are sent to the other agencies for comment, and in the case of the Department of State, for its approval. After the consultations are completed, the case is sent to the Secretary of Energy for his or her final determination of whether the proposed transfer would be inimical to the interests of the United States.

For requests involving sensitive technologies, DOE will convene a panel of experts to determine if the proposed activity meets the legal standard for Sensitive Nuclear Technology (SNT). Assistance determined to be SNT requires much more stringent conditions of supply.

DOE must also maintain strict internal technology security controls. Because of its role in the development, production, testing, and disposition of nuclear weapons and thus its possession of vast amounts of sensitive information, DOE must be especially vigilant in protecting its own information. In order to meet this challenge DOE has established programs to monitor DOE persons and contractors in their technical exchanges and travel; to track visits by foreign nationals to DOE facilities; and to review closely all transfers of publications, computer software, and technical data from DOE to other countries.

In the U.S. system of nuclear export controls, essentially all commodities uniquely related to peaceful nuclear uses are under the jurisdiction of the Nuclear Regulatory Commission (NRC). Materials and equipment controlled by the NRC correspond to a great degree with commodities controlled by Part 1 of the Nuclear Suppliers Group Guidelines, the so-called Trigger List.

NRC licensing authority comes from various sections of the Atomic Energy Act, as amended, and is implemented by Part 110 of Title 10, Code of Federal Regulations. Applications received by the NRC, an independent U.S. Government agency, are transmitted to the Department of State for a consensus Executive Branch recommendation for approval or denial. DOE is the Executive Branch agency that provides the technical evaluation of each NRC license application, and for cases to be approved, the DOE obtains assurances from the recipient government on peaceful uses, retransfer, and physical security.

An important aspect of the process for administering the export controls on nuclear materials and equipment licensed by the NRC, is the requirement that such cooperation be conducted in accordance with a bilateral agreement for cooperation in the peaceful uses of nuclear energy. The DOS with DOE participation negotiates these agreements. Administrative arrangements to facilitate the flow of commodities licensed by the NRC are implemented by DOE.

The Department of Commerce (DOC) has licensing authority for all commodities and technologies for use in peaceful nuclear programs that are not otherwise controlled by NRC and DOE. The statutory authority of DOC in this area comes from the Export Administration Act of 1979, as amended and as extended by Executive Order and from Section 309.c of the Nuclear Non-Proliferation Act (NNPA) of 1978. The laws are implemented through the Export Administration Regulations (EAR) found in Title 15, Code of Federal Regulations.

With few exceptions, all of the nuclear-related commodities licensed by DOC are controlled multilaterally by the Dual-Use Annex found in Part 2 of the Nuclear Suppliers Group Guidelines.

DOE was given a central responsibility by the Congress in the process for identifying what commodities could be of significance in a nuclear explosives program. Working closely with DOC, experts from DOE and its laboratories created and maintain a Nuclear Referral List of approximately 65 commodities controlled for nuclear nonproliferation purposes. DOE recently completed a comprehensive technical review of the Nuclear Referral List. This was the first such review in several years. In the near future, DOE will meet with persons from DOC and the other agencies to share the results and to solicit their comments.

DOE is also the key agency in the process for reviewing license applications for nuclear-related commodities submitted to DOC. Applications are forwarded to DOE from DOC for review. From DOE the applications are further sent to the relevant technical experts at the DOE laboratories for technical and end-user analyses. In this high-volume and time-urgent process, DOE brings capabilities unique to the interagency process by being able to provide a comprehensive review encompassing both technical and policy aspects. This part of the system is by far the largest and the most labor intensive.

For license applications sent to DOE, extensive use is made of the automated Proliferation Information Network System (PINS) which links Headquarters DOE with the National Laboratories. In order to meet the time constraints for license review, experts in each of the controlled commodities at the national laboratories have been pre-identified and trained to review license applications dealing with commodities in their fields of expertise.

The Department of State (DOS) has responsibility in the U.S. for all militarily-related transfers, including equipment, materials, and technology for use in nuclear weapons programs and in naval nuclear propulsion programs. The legal authority of DOS in this area comes from the Arms Export Control Act of 1976 and is implemented by the International Trade in Arms Regulations (ITAR) found in Title 22, Code of Federal Regulations, Parts 120-130.

By virtue of U.S. legal and policy commitments, traffic in nuclear-related commodities licensed by DOS is very low. DOE closely monitors any license applications for commodities which could be of nuclear nonproliferation concern, including those applications related to nuclear submarine programs. One item of particular interest to DOE are the high explosives controlled by DOS, which are also on the NSG Dual-Use Annex.

Interagency coordination on nuclear export control issues is conducted by the Subgroup on Nuclear Export Coordination (SNEC). The SNEC is chaired by DOS and includes the Departments of Commerce, Defense, and Energy; NRC, and ACDA. Intelligence agencies participate in an advisory role. For nearly two decades, the SNEC was the first-line reviewing body for difficult DOC license applications. Under an Executive Order effective in early 1996, a new streamlined case review process has been implemented that makes it impractical for the SNEC to review DOC license applications to the same extent as before. The SNEC, however, will continue to be an important element of the U.S. nuclear export control system for coordination and implementation of export policy and for dealing with issues related to the licensing process of the DOE, NRC and DOS.

The export control case review system contained in the DOE automated Proliferation Information Network System (PINS) enables DOE to meet the demands of the new license review process that requires resolution of all DOC license applications within 90 days. PINS allows DOE to provide the most comprehensive and timely assessment of license applications of any agency engaged in the process.

In the event that a dispute arises with respect to the disposition of a DOC license application the case is referred to an interagency Operating Committee (OC) for resolution. Agencies not satisfied with the outcome in the OC may bring the case to a higher body, the Advisory Committee on Export Policy (ACEP). If that committee with representation at the assistant secretary level is unable to reach agreement the case may be referred to the cabinet level Export Administration Review Board (EARB). The ultimate authority in the dispute resolution process is the President. In the three review bodies, the OC, ACEP, and EARB, the DOE is a full and voting member.

DOE’s role in U.S. and multilateral nuclear export control systems is a key one. It administers the important element of the U.S. system of controls on transfers of nuclear technology and it is the principal authority on technical matters for the other elements of the U.S. nuclear export control system. For multilateral nuclear export control regimes, DOE is the lead U.S. agency for maintaining efficient and effective guidelines and control lists. The contribution of DOE and the national laboratories has been instrumental in making the United States a leader in multilateral export control regimes and in providing export control assistance to emerging suppliers. No other agency brings to the U.S. and multilateral nuclear export control process the breadth of policy and technical knowledge of nuclear issues that DOE does.


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