Hearing on Reauthorization of the Export Administration Act:
Government Agency Views

The Honorable Rose Gottemoeller
Assistant Secretary for Nonproliferation and National Security
Department of Energy

10:00 a.m., Wednesday, June 23, 1999

Thank you Mr. Chairman for the invitation to testify along with other Administration witnesses about the Department of Energy's (DOE) views of the legislative efforts to reauthorize the Export Administration Act (EAA). The Department is keenly aware of the importance of these efforts and the impact they will have on the national interests of the United States. The bill before us is very complex; it must strike an appropriate balance between strengthening export control and national security efforts while not unduly burdening U.S. industry. It is for this reason that I would ask that the Administration be given sufficient time to consider fully each of the 116 pages of the draft bill and its provisions under discussion today. The Administration has had little time to review and discuss the bill -- either its merits or its shortcomings. Rather, we are in the initial stages of identifying issues and developing an Administration position.

There is no system of export controls in the world that is more all encompassing and transparent to public view as the U.S. system. While it may appear complex to other countries, it has served this country well for over 50 years. While the focus of attention of this hearing is on the licensing responsibilities of the Department of Commerce (DOC), we should keep in mind the other three components of the U.S. system. We should ensure that we not only take into account the lessons learned in the administration of dual-use export controls since the expiration of the previous EAA in August 1994, but also to ensure that the new EAA is consistent with, and complements, the other parts of the system that are administered by the Departments of Energy and State, and the Nuclear Regulatory Commission (NRC).

Secondly, in finalizing a new EAA, I believe that we should "practice what we preach" to other countries. For several years, the United States has been engaged in a massive effort to assist other countries in the establishment of effective export control systems at their national level, as a first step before bringing them into the multilateral arrangements. The need for U.S. assistance has arisen from several directions. First and foremost was the breakup of the former Soviet Union that instantly created many new countries, most of whom possessed sensitive materials and technology, but with little or no means to control them. U.S. outreach efforts also were intensified by the creation of new multilateral export control regimes (the Australia Group, the Missile Technology Control Regime, the Wassenaar Arrangement, and the Nuclear Suppliers Group Dual-Use Arrangement), and by the reinvigorization of the Zangger Committee, and the Nuclear Suppliers Group. The then operative statute (governing dual-use export controls) provided the Executive Branch the ability to respond swiftly to potential proliferation threats, including the development of new export control regimes. It would appear that this activity, is among a number of Presidential prerogatives that would be impinged under the proposed legislation.

Furthermore, U.S. assistance to other countries in export controls has sought to incorporate four principles:

1. Inclusiveness -- The need to have all relevant agencies involved in the policy formulation and license review processes. To ensure that the unique perspectives of each agency are taken into account, whether it be foreign policy, technical, trade promotion, nonproliferation, or national security.

2. Accountability -- The need to have a process that establishes clear lines of accountability for the decisions to approve or deny exports. To ensure that enforcement measures are established to deal with, and to penalize, those that do not comply with the law and regulations.

3. Technical expertise -- The need to provide the administrators of the system with the best possible technical and policy expertise to enable them to make informed decisions.

4. Cooperation with industry -- The need for the government to work closely with the private sector. To ensure that the exporter is kept informed of the laws, regulations, and policies that affect their contacts with foreign customers.

In addition to seeking to instill these principles into the national systems of other countries, we also have stressed the importance of adhering to the international norms of conduct of responsible nations as embodied in the multilateral export control regimes -- current or future. I fear that some of the proposals contained in the legislation before us would not allow us to implement fully our multilateral commitments.

So it is in the context of the model that the United States has suggested for others that I wish to make a few further comments about the proposed legislation.

The proposed legislation in seeking to make the controls administered by DOC "inclusive" of relevant agencies and providing the system with the necessary "technical expertise" has one significant flaw, which we would urge the Congress to correct. Throughout the draft, the Secretary of Energy is included in the process, if and only if, the issue is nuclear related. This, in our view, is unduly restrictive, and on balance, serves to weaken the U.S. ability to strengthen the nonproliferation regime. In the other two parts of the U.S. export control system for non-military transfers administered by DOE and NRC, all relevant agencies, including DOC, are full participants in the interagency process even though they may have no direct interest in an individual case.

Under the present system administered by DOC, in which DOE is a full participant, it is left to each agency to decide whether it can make a contribution to the process or not. For example, in the case of license reviews, DOE has an arrangement with DOC whereby only applications of items controlled because of their nuclear uses and applications for any goods that are destined for nuclear end-users, regardless of the reason for control, are referred to DOE for initial review. For cases not referred to DOE, it also is not uncommon for DOE to be called upon to provide technical expertise in areas not exclusively nuclear. For example, the Department provides support to the interagency community in such areas as high performance computers, machine tools, and lasers. A case in point is the example of DOE laboratory personnel who were requested to take part in missile-related inspections in Iraq following the Gulf War because of the unique expertise they possessed in this area.

More broadly, DOE's responsibilities and expertise in the fields of arms control, multilateral export control regimes, and international cooperation will enable it to provide a useful contribution in areas not exclusively nuclear related. As you know, DOE, through its National Laboratories, possesses the world's best technical resources. This expertise runs the gamut from chasing quarks to the development of non-lethal weapons. It is this expertise, both at Headquarters and at the laboratories, that provides one of the Government's best resources in analyzing the totality of a proliferant weapons of mass destruction program.

The proposed draft fully addresses the principle of "accountability." The draft bill assigns responsibilities for the export licensing decisions and provides a system for resolving disputes among the participants. However, the introduction of a consensus rule presents a system which is problematic at best. The Administration has developed a workable export licensing decision making process in E.O. 12981.

On a more positive note, one area under the principle of "accountability" that drew our attention in the draft bill was Section 803: Violations. DOE notes the proposed financial penalties in the draft bill. The $1 million fine for individuals and $10 million fine for companies is many orders of magnitude greater than the penalties possible under the Atomic Energy Act for violations of the controls administered by DOE and NRC. Although the penalties for export control violations vary from country to country, it also can be observed that the penalties in the draft bill are higher than those we are aware of in other supplier states. Upon passage of the new EAA, the United States should first seek to harmonize its own system of penalties and then begin an initiative to bring the penalties for violations in other supplier states into line with the United States.

The principle of "industry cooperation" is not explicitly addressed in the draft bill. However, DOE is confident that even without a legislative mandate, DOC will continue its outstanding program of outreach to industry.

Finally, our comments with respect to Section 801: International Arrangements, are for clarification, rather than to suggest changes to the substance of the section. It should be made clear that the multilateral export control regimes subject to the provisions of the draft bill are those that deal with goods and technologies under the licensing jurisdiction of DOC. This would exclude Part 1 of the Nuclear Suppliers Group Guidelines and the Zangger Committee Understandings that deal exclusively with goods and technologies licensed by DOE and NRC under the Atomic Energy Act. Section 801 (a) (2) (C) of the draft bill should be amended to read the "Dual-Use Arrangement of the Nuclear Suppliers Group," instead of "Nuclear Suppliers Group."

Mr. Chairman. In closing, I would like to commend those who were involved in creating the staff discussion draft. The creation of such a bill is an extremely difficult and challenging task, but one of extreme importance. A reauthorization of the EAA will fill a major void in the U.S. export control system. It will give the United States increased credibility as we urge other countries to establish effective export control systems, by showing them that we have enacted laws to cover all elements of our export control system. However, it is important that we take great care to address what we believe are a number of serious issues. Absent a satisfactory outcome, the Administration would not be able to support this legislation.

In closing, I would again, thank you for the invitation to appear before you and your colleagues. I look forward to working with you in developing this important legislation that must satisfy both our national and economic security goals without unduly limiting the flexibility of the Administration.

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