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[House Document 106-315]
[From the U.S. Government Publishing Office]

106th Congress, 2d Session - - - - - - - - - - - House Document 106-315

 
 NATIONAL EMERGENCY CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION 
         ACT OF 1979 FOR FEBRUARY 19, 2000 TO AUGUST 19, 2000

                               __________

                             COMMUNICATION

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

A 6-MONTH PERIODIC REPORT ON THE NATIONAL EMERGENCY DECLARED BY 
  EXECUTIVE ORDER 12924 OF AUGUST 19, 1994, TO DEAL WITH THE THREAT TO 
  THE NATIONAL SECURITY, FOREIGN POLICY, AND ECONOMY OF THE UNITED STATES 
  CAUSED BY THE LAPSE OF THE EXPORT ADMINISTRATION ACT OF 1979, PURSUANT 
  TO 50 U.S.C. 1703(c)

December 4, 2000.--Referred to the Committee on International Relations 
                       and ordered to be printed

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
89-011                     WASHINGTON : 2000

                                           The White House,
                                     Washington, November 17, 2000.
Hon. J. Dennis Hastert,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: As required by section 204(c) of the 
International Emergency Economic Powers Act (50 U.S.C. 1703(c)) 
and section 401(c) of the National Emergencies Act (50 U.S.C. 
1641(c)), I transmit herewith a 6-month periodic report on the 
national emergency declared by Executive Order 12924 of August 
19, 1994, to deal with the threat to the national security, 
foreign policy, and economy of the United States caused by the 
lapse of the Export Administration Act of 1979.
            Sincerely,
                                                William J. Clinton.
President's Periodic Report on the National Emergency Caused by the 
  Lapse of the Export Administration Act of 1979 for February 19, 2000 
  to August 19, 2000

    On August 19, 1994, in Executive Order No. 12924, I 
declared a national emergency under the International Emergency 
Economic Powers Act (IEEPA) (50 U.S.C. 1701 et seq.) to deal 
with the threat to the national security, foreign policy, and 
economy of the United States caused by the lapse of the Export 
Administration Act of 1979, as amended (50 U.S.C. App. 2401 et 
seq.) and the system of controls maintained under that Act. In 
that order, I continued in effect, to the extent permitted by 
law, the provisions of the Export Administration Act of 1979, 
as amended, the Export Administration Regulations (15 CFR 730 
et seq.), and the delegations of authority set forth in 
Executive Order No. 12002 of July 7, 1977 (as amended by 
Executive Order No. 12755 of March 12, 1991), Executive Order 
No. 12214 of May 2, 1980, Executive Order No. 12735 of November 
16, 1990 (subsequently revoked by Executive Order No. 12938 of 
November 14, 1994), and Executive Order No. 12851 of June 11, 
1993. As required by the National Emergencies Act (50 U.S.C. 
1622(d)), I issued notices on August 15, 1995, August 14, 1996, 
August 13, 1997, August 13, 1998, August 10, 1999, and August 
3, 2000, continuing the emergency declared in Executive Order 
No. 12924.
    In 1996, I issued two Executive orders concerning the 
transfer of items from the U.S. Munitions List to the Commerce 
Control List. On October 12, 1996, I issued Executive Order No 
13020 (regarding hot-section technologies for commercial 
aircraft engines) and on November 15, 1996, I issued Executive 
Order No 13026 (regarding encryption products).
    I issued Executive Order No. 12924 pursuant to the 
authority vested in me as President by the Constitution and 
laws of the United States, including, but not limited to, 
IEEPA. At that time, I also submitted a report to the Congress 
pursuant to section 204(b) of IEEPA (50 U.S.C. 1703(b)). 
Section 204 of IEEPA requires follow-up reports, with respect 
to actions or changes, to be submitted every six months. 
Additionally, section 401(c) of the National Emergencies Act 
(50 U.S.C. 1641(c)) requires that the President, within 90 days 
after the end of each six-month period following a declaration 
of a national emergency, report to the Congress on the total 
expenditures directly attributable to that declaration. To 
comply with these requirements, I have submitted combined 
activities and expenditures reports for the 6-month periods 
ending February 19, 1995, August 19, 1995, February 19, 1996, 
August 19, 1996, February 19, 1997, August 19, 1997, February 
19, 1998, August 19, 1998, February 19, 1999, August 19, 1999, 
and February 19, 2000. The following report covers the 6-month 
period from February 19, 2000, to August 19, 2000. Detailed 
information on export control activities is contained in the 
most recent Export Administration Annual Report for Fiscal Year 
1999 and the January 2000 Report on Foreign Policy Export 
Controls, required by section 14 and section 6(f) of the Export 
Administration Act, respectively, which the Department of 
Commerce continues to submit to the Congress under a policy of 
conforming actions under the Executive Order to the provisions 
of the Export Administration Act, as appropriate.
    Since the issuance of Executive Order No. 12924, the 
Department of Commerce has continued to administer and enforce 
the system of export controls, including anti-boycott 
provisions, contained in the Export Administration Regulations 
(EAR). In administering these controls, the Department has 
acted under a policy of conforming actions under Executive 
Orders No. 12924, 13020, and 13026 to the provisions of the 
Export Administration Act, insofar as appropriate.
    The expenses incurred by the Federal Government in the 6-
month period from February 19, 2000, to August 19, 2000, that 
are directly attributable to the exercise of authorities 
conferred by the declaration of a national emergency with 
respect to export controls were largely centered in the 
Department of Commerce, Bureau of Export Administration (BXA). 
Expenditures by the Department of Commerce for the reporting 
period are anticipated to be $21,270,000, most of which 
represents program operating costs, wage and salary costs for 
Federal personnel, and overhead expenses.
    Since my last report to the Congress, there have been 
several significant developments in the area of export 
controls:
Multilateral developments
    Wassenaar Arrangement. The Wassenaar Arrangement on Export 
Controls is a multilateral regime currently consisting of 33 
member countries. Its purpose is to contribute to regional and 
international security and stability by promoting transparency 
and greater responsibility in international transfers of 
conventional arms and dual-use goods and technologies.
     The United States Government has participated in 
submissions of export data made by member countries in the 
regime since the November 1996 implementation of the Wassenaar 
dual-use export control list. The Wassenaar members make dual-
use data submissions on a semi-annual basis in April and 
October.
     In April 2000, BXA representatives attended an 
Expert's Group meeting to review the Wassenaar Arrangement's 
controls on conventional arms and dual-use goods and 
technologies. Nearly 70 proposals were discussed to modify and 
streamline Wassenaar's Dual-Use and Munitions Lists, 
approximately 30 of which were submitted by the United States. 
The majority of the proposals were in the areas of electronics, 
computers, sensors, and machine tools. Several proposals 
currently under review are tied to relaxing controls on 
microprocessors and computers. As is typical of first round 
discussions, the Expert's Group focused on presentation of 
proposals and reached relatively few final decisions. Member 
countries requested and provided additional information on 
several proposals to further justify recommendations. However, 
there continues to be strong pressure within the Arrangement to 
relax controls on general-purpose microprocessors and digital 
computers in light of rapid technological advances and 
controllability factors. Several countries advocate a complete 
decontrol of general-purpose microprocessors accompanied with 
drastic liberalizations of computer controls.
     Nearly all proposals require additional study by 
member countries and decisions to adopt or reject these 
proposals will occur later in the year. Also in April, BXA 
representatives attended the 3rd Annual Licensing and 
Enforcement Officers Meeting designed to exchange information 
on national practices of respective licensing and enforcement 
procedures. Discussions focused on 15 plenary-mandated agenda 
items, including intangible transfers of technology and 
software, catch-all controls, elements of effective 
enforcement, and international import certificates. Further 
discussions on intangible transfers, catch-all controls, and 
elements of effective enforcement will continue during the 
year.
     In May 2000, BXA representatives attended a 
General Working Group Meeting designed to increase the general 
information exchange regarding regions and projects of concern 
to the United States (e.g., Sudan, Ethiopia and Eritrea). The 
group discussed the specific information exchange on dual-use 
goods and technologies and the scope of dual-use notifications 
and procedures associated with cases requiring ``extreme 
vigilance.'' The group agreed to adopt a ``best practices'' 
procedure for exercising extreme vigilance for Very Sensitive 
List items and to establish criteria for effective enforcement. 
Member countries are still studying U.S. proposals for expanded 
reporting of conventional arms exports, strengthening dual-use 
export notification procedures by establishing a denial 
consultation procedure, and implementing controls on man-
portable defense systems. Discussions on these issues will 
continue during the next meeting, scheduled for late 2000. The 
United States will continue to work with interested countries 
in an attempt to bridge the gap between dual-use items and arms 
in order to increase transparency and reduce differences in 
licensing practices.
    Australia Group. The Australia Group (AG) is an informal 
multilateral export control regime that seeks to impede the 
proliferation of chemical and biological weapons through the 
harmonization of export controls, an exchange of information on 
global proliferation activities, and outreach of nonmembers. 
The 30 member countries meet annually and communicate between 
sessions to review and refine the list of controlled chemicals, 
biological agents, and related equipment and technology.
     At the 1999 AG Plenary, informal agreement was 
reached between the United States and certain concerned AG 
partners to exempt diagnostic test kits used in blood chemistry 
and water quality analysis from export licensing. These kits 
currently require an export license because they contain small 
quantities of AG-controlled chemicals. A proposed U.S. text 
drafted by BXA outlining the parameters of the exemption was 
submitted for informal review by other AG members during the 
week of August 14, 2000.
     All AG members are State Parties to the Chemical 
Weapons Convention (CWC) and the Biological Weapons Convention. 
The CWC is an international arms control and nonproliferation 
treaty that bans chemical weapons and monitors the legitimate 
production, processing, consumption, export, and import of 
certain toxic chemicals and precursors related to chemical 
weapons. The BWC entered into force in 1975 to prohibit the 
development, production, and stockpiling of biological agents 
or toxins that do not have peaceful uses. AG members support 
national export licensing policies that promote the purpose and 
objectives of the CWC and BWC.
    Chemical Weapons Convention. The CWC is an international 
arms control and nonproliferation treaty that bans chemical 
weapons (CW) and monitors the legitimate production, 
processing, consumption, export, and import of certain toxic 
chemicals and precursors related to CW. BXA has implemented 
certain export control provisions of the Convention in the 
Export Administration Regulations. During this reporting 
period, BXA received two advance notifications of exports of 
Schedule 1 chemicals, two annual reports on exports of Schedule 
1 chemicals for the calendar year 1999, and 13 end-use 
certificates for exports to Taiwan, Malaysia, Thailand, and 
Israel.
    Nuclear Suppliers Group. The Nuclear Suppliers Group (NSG), 
composed of 38 member countries with the European Commission as 
a permanent observer, is an informal group of nations concerned 
with the proliferation of nuclear weapons. The NSG has 
established guidelines to assist member nations in 
administering national nuclear export control programs. 
Controls are focused on certain categories of goods: nuclear 
material, equipment, and technology unique to the nuclear 
industry, and so-called nuclear dual-use items that have both 
nuclear and non-nuclear applications.
     An NSG Working Group meeting was held the week of 
March 6, 2000, in Vienna, Austria, to discuss the control of 
parts and components exports. Under current rules, only a small 
number of parts and components of controlled items are listed 
in the NSG Guidelines as being subject to control. While a 
number of NSG members would like to change that approach, the 
United States favors continuing to allow each member's ``catch 
all'' controls to apply to the export of spare parts and 
components of controlled items.
     At the NSG Plenary held in Paris, France, June 19-
June 24, 2000, the NSG took the following actions: (1) with the 
support of the United States, it was decided that no further 
action was needed to control parts and components; (2) it was 
determined that a working group will continue to look at 
possible options for simplifying the NSG's institutional 
arrangement; (3) Turkey, Belarus, and Cyprus were welcomed as 
new NSG members, and it was agreed that Slovenia, participating 
at this Plenary as an observer, could be admitted to the NSG 
intercessionally; and (4) the United States will host the 2001 
Plenary in Aspen, Colorado, the week of May 7, 2001, when the 
United States will take over the chairmanship of the NSG.
    Missile Technology Control Regime (MTCR). The MTCR is an 
informal group of 32 countries that have agreed to coordinate 
their national export controls for the prevention of missile 
proliferation. Each member, under its own laws and practices, 
has committed to adhere to the MTCR Guidelines for export 
licensing policy for items found on the MTCR Equipment and 
Technology Annex.
     BXA staff represented the Department at a Missile 
Technology Control Regime (MTCR) seminar in Munich, Germany, on 
May 24-26. Topics of discussion included possible measures to 
reduce regional and global security risks, further eliminate 
existing missile stockpiles, and curtail indigenous missile 
development programs. The consensus of views reached at the 
seminar will be presented at the MTCR Plenary meeting in 
October 2000 in Helsinki, Finland.
     BXA represented the Department at the MTCR 
intercessional Technical Experts Meeting (TEM) held in Berlin, 
Germany, on July 4-6. The TEM, at which proposals on technical 
changes to the MTCR Annex are reviewed and prepared for 
consideration by the full MTCR membership, considered a 
proposal tabled by the United States that would expand controls 
on small fuel efficient engines and integrated navigation 
systems used in unmanned air vehicles that can become potential 
delivery vehicles for chemical and biological agents. The 
proposal was well received, and will receive further 
consideration at the next TEM to be held prior to the MTCR 
Plenary scheduled for October 2000 in Helsinki, Finland.

Encryption/high performance computer policy

    Encryption. During the period February 19, 2000, to August 
19, 2000, BXA carried out a number of activities to implement 
the Administration's encryption policy. These activities 
included license and commodity classification processing, 
meeting with industry representatives and technical advisory 
committees, and working with interagency groups on formulating 
encryption policy initiatives. BXA continues to manage a 
significant workload as a result of U.S. companies seeking to 
meet the increased consumer demand for encryption products 
worldwide.
     To support and explain U.S. encryption policy in 
the international arena, BXA actively participates in policy 
discussions with other nations. BXA attended several Wassenaar 
Arrangement working group meetings to explain U.S. policy and 
discuss its proposal to release encryption software considered 
to be ``in the public domain.'' Wassenaar members also 
discussed various proposals to ease key length restrictions for 
mass-market hardware products. On May 8, 2000, BXA briefed the 
Free Trade Area of the Americas E-Commerce Working Group on the 
U.S. encryption regulations. BXA also held encryption export 
control policy discussions with other foreign delegations on a 
bilateral basis.
     BXA continues to educate exporters and the general 
public on the goals of the Administration's updated encryption 
policy, and how to obtain export authorization through 
licensing and classification. BXA presented information 
technology licensing workshops at its conferences in San Diego 
(``Update West 2000'') and Washington, D.C. (``Update 2000''). 
Through regular meetings with U.S. companies and Web site 
updates, BXA provides exporters with practical guidance 
concerning encryption export control policy and procedures.
     The Administration believes its encryption export 
control policy continues to be effective and credible. During 
this reporting period, Congress failed to pass any legislation 
to move beyond these initiatives. The Administration opposes 
proposed legislation such as the ``Security and Freedom Through 
Encryption Act of 1999'' and the ``Promote Reliable On-Line 
Transactions to Encourage Commerce and Trade Act of 1999.'' The 
Administration believes that such legislation is unnecessary in 
light of the current regulatory structure that promotes secure 
electronic commerce, facilitates U.S. competitiveness in global 
information technology markets, and protects privacy in balance 
with public safety and national security interests.
    High Performance Computers. During the past six months, BXA 
has been engaged in various activities to keep pace with 
technological trends in high-performance computers (HPCs). 
These activities include updating export controls on HPCs, 
studying alternative methods for controlling HPCs, meeting with 
industry counterparts to assess their needs, and working on 
developing bilateral and multilateral relationships with 
certain countries to ensure appropriate safeguards are attached 
to the export HPCs.
     On August 3, 2000, the Administration announced 
its intent to raise the National Defense Authorization Act 
(NDAA) notification requirement for exports of HPCs to Tier 3 
countries (as listed in Section 740.7 of the EAR) from 12,500 
millions of theoretical operations per second (MTOPS) to 28,000 
MTOPS, to account for rapid changes in technology over the 
previous six months (MTOPS is a measure of a computer's 
composite theoretical performance, or ``CTP''). Similarly, the 
Tier 2 level for computers eligible for export under a license 
exception will raise to 45,000 MTOPS. The Administration also 
announced its intention to move Estonia from Tier 3 to Tier 2 
effective December 28, 2000, and to move Argentina from Tier 2 
to Tier 1 when BXA publishes its next computer regulation.
     The Information Security Technical Advisory 
Committee is continuing to study alternative control parameters 
for HPCs. The Administration needs to continually update CTP-
based control levels to keep up with the rapid technological 
advances in the computer industry. The need for these 
significant adjustments calls into question the viability of 
the current approach for determining HPC control levels. For 
this reason, BXA will continue to work with other concerned 
agencies to explore alternative control parameters that would 
provide the flexibility necessary to accommodate future 
advances in HPC and microprocessor technology.
     BXA is also actively involved in negotiations with 
one other HPC producing country to ensure that appropriate 
safeguards and licensing mechanisms are in place to avoid 
exports or transfers to countries of concern and proliferation 
entities.

Bilateral cooperation/technical assistance

    As part of the Administration's continuing effort to 
encourage other countries to strengthen their export control 
systems, the Department of Commerce and other agencies 
conducted a wide range of discussions with a number of foreign 
countries.
    Hong Kong. Under the Hong Kong Policy Act of 1992, the 
United States Government committed itself to continuing its 
export licensing treatment for Hong Kong as long as Hong Kong 
maintains an effective and autonomous export control program. 
BXA actively monitors the status of Hong Kong's post-reversion 
export control program to ensure that it continues to be 
effective and autonomous from that of the People's Republic of 
China. By openly and vigilantly observing Hong Kong's program, 
BXA supports Hong Kong's efforts to maintain the separation of 
its export control system from the rest of China.
    The United States and Hong Kong Special Administrative 
Region (SAR) hold semi-annual meetings to exchange information 
and enhance cooperation, as called for in the Agreed Minute on 
Strategic Commodities Trade Controls signed by former Secretary 
Daley and his Hong Kong counterpart in October 1997. These 
meetings assist BXA in monitoring Hong Kong's export control 
program to determine whether their system continues to be 
effective and free from influence by the government of the PRC. 
In March 2000, BXA led an interagency delegation to Hong Kong 
for the fifth round of strategic trade talks since the two 
sides signed the Agreed Minute. During the March meeting, BXA 
encouraged Hong Kong to implement controls on intangible 
technology transfers and provided Hong Kong officials with a 
white paper and other materials on the subject. Hong Kong 
officials gave a comprehensive overview of the SAR's new 
licensing scheme for in-transit cargo at Hong Kong's airport. 
The delegation visited strategic trade control facilities at 
Chek Lap Kok airport, Lok Ma Chau boundary crossing, and Kwai 
Chung container terminal port.
    India. Under a regulation published on November 19, 1998, 
the United States implemented economic sanctions on India by 
imposing a policy of denial for the export or reexport of U.S.-
origin items controlled for nuclear nonproliferation and 
missile technology reasons to India and Pakistan as stated in 
part 742 of the EAR. Prior to the sanctions, the United States 
reviewed applications for these items on a case-by-case basis 
with a presumption of approval.
    In early March 2000, BXA participated in a Commerce 
Department delegation to India to prepare for the President's 
visit to India. The trip's focus was advocacy for pending 
contracts with U.S. companies, primarily in the power and 
telecommunications industries. BXA participated in the trip to 
address sanctions issues related to these and other projects.
    In April 2000, BXA participated in State Department-led 
meetings in Washington with a delegation of Indian export 
control officials. The two sides discussed India's revisions to 
its control list and recent U.S. policy changes. The United 
States provided an analysis of the Indian revisions, which 
expanded controls on munitions and missile-related items. 
Indian officials indicated, however, that as long as their 
civilian programs are targets of the multilateral 
nonproliferation regimes, the Indian government would continue 
to withhold membership in them. The two sides also discussed 
initiating technical-level exchanges on export controls and 
agreed to further discussions on the scope of such exchanges in 
New Delhi in the summer.
    On August 7-10, 2000, BXA participated in an interagency 
visit to India to discuss India's specific interests in a 
program of export control cooperation. In discussions with 
officials in Indian Customs and the Directorate General of 
Foreign Trade in the Ministry of Commerce and Industry, the two 
sides agreed on a series of exchanges, to begin in fall 2000, 
dealing with nonproliferation-related Customs procedures and 
export licensing policies and procedures. This outreach program 
is part of the U.S.-Indian dialogue on nonproliferation led by 
the State Department that began after India's nuclear 
detonations in May 1998. The first activity, a seminar on 
licensing procedures and policies in Washington, is scheduled 
for October 2000.
    Asia. BXA officials attended the Asian Export Control 
Seminar in Tokyo, Japan, from February 29-March 2, 2000. 
Delegations from 12 Asian countries and regions, including 
Australia, China, Hong Kong, Macau, and Chinese Taipei, plus 
the United Kingdom, also attended the conference, which was 
jointly chaired by Japan, the United States, Australia, and the 
United Kingdom. The U.S. delegation, led by the Department of 
State and including representatives from the Department of 
Defense and Commerce/BXA, made presentations on the Wassenaar 
Arrangement, enforcement issues, and export management systems. 
Audience response was very positive and there were questions 
and follow-up discussions on the presentation on export 
management systems. Presentations by other delegations covered 
such issues as transshipment, export control legal authority, 
and other multilateral export control regimes. The conference 
featured small group discussions on a range of export control 
issues.
    Cuba. Since I announced streamlined procedures for sale of 
medicines and medical equipment to Cuba in 1998, approved 
licenses for sale to Cuba of these items have increased 
significantly. However, the food-for-sale program initiated by 
my Administration in 1999 has not been as effective as 
anticipated because prospective U.S. exporters have had 
difficulty in identifying purchasers of the food in Cuba that 
are private, non-governmental organizations, as required by the 
regulations.
    Nonproliferation Export Control and International 
Cooperation. During the period February 2, 2000, through August 
19, 2000, BXA's Nonproliferation Export Control and 
International Cooperation Program (NEC) hosted, participated 
in, and/or coordinated 18 technical exchanges on export 
controls in conjunction with representatives from the 
Departments of State, Defense, Energy, Justice, and the 
Treasury (U.S. Customs Service). These programs sought not only 
to familiarize the governments of Russia, Central Europe, the 
Balkans, the Baltics, the Causasus, and Central Asia with the 
major elements comprising an export control system that meets 
international standards for effectiveness, but also to assist 
the governments in developing and strengthening their own 
national export control systems. These elements involve five 
functional areas: the legal and regulatory framework necessary 
for an effective export control system, licensing procedures 
and control lists, enforcement mechanisms, industry-government 
relations, and system administration and automation support. 
Programs conducted during this period also included special 
activities and multilateral conferences that related to NEC 
objectives. These programs have contributed to a reduction of 
the proliferation threat from and through the participating 
countries by strengthening these countries' national export 
control systems.

Regulatory actions: Published and pending

    Encryption. On January 14, 2000, BXA published regulations 
implementing the Administration's September 16, 1999, 
announcement to simplify the export of cryptography. The 
Administration's encryption policy rests on three tenets: a 
review of encryption products in advance of sale, a streamlined 
post-export reporting system that takes into account industry's 
distribution models, and review of exports to foreign 
government end-users. In carrying out this policy, BXA analysts 
review license applications for exports to government end-
users, classify encryption items to determine eligibility under 
new license exception provisions, and handle industry 
notifications of products released from export controls. BXA 
actively reaches out to the public through correspondence, 
meetings with industry, case consultation, and its Web site.
    On July 17, 2000, the Administration announced changes to 
U.S. encryption policy. The changes will be included in a 
regulation to be published in fall 2000. The most significant 
change in the soon-to-be released regulation is that U.S. 
companies will be able to export encryption products and 
technology under license exception to any end user in the 15 
nations of the European Union as well as Australia, Norway, 
Czech Republic, Hungary, Poland, Japan, New Zealand, and 
Switzerland immediately upon notifying BXA of intent to export. 
Even highly sophisticated encryption items such as source code, 
general purpose toolkits, and high-end routers and switches 
will be included under these new procedures. The upcoming 
regulation will only require licenses for ``cryptanalytic 
items,'' which are a specialized class of tools not normally 
used in commercial environments. Other policy initiatives to be 
implemented in new regulations include streamlined export 
provisions for U.S. products that operate with foreign-origin 
encryption through an Open Cryptographic Interface; are 
compiled from ``open'' source code; are made publicly available 
through submission to international standards bodies; implement 
short-range wireless encryption technologies such as HomeRF and 
Bluetooth; or that implement data encryption at key lengths 
(e.g. 56-bits) that are not controlled by the Wassenaar 
Arrangement. The rule implementing this policy was published on 
October 19.
    Once implemented, this updated policy will reflect the 
invaluable and ongoing dialogue between the interagency working 
group on cryptography and various industry groups and 
organizations advocating privacy protection. Through 
consultation with groups such as the President's Export Council 
Subcommittee on Encryption, Regulations and Procedures 
Technical Advisory Committee, Alliance for Network Security, 
Americans for Computer Privacy, and Computer Systems Policy 
Project, the new regulations will take into account technology 
trends and market realities, which, if not addressed as a 
matter of policy, would only serve to disadvantage U.S. 
industry and undermine the national interest. In addition to 
facilitating exports to the European Union and other key 
trading partners, the new regulation will ease the post-export 
reporting burden on U.S. companies and will simplify exports to 
telecommunication and internet service providers. For the first 
time, exporters will be able to self-classify 56- and 64-bit 
encryption products not controlled by the Wassenaar 
Arrangement, and distribute ``beta test'' encryption software 
under license exception. The regulation will also allow 
incorporation of certain U.S.-origin retail encryption 
components and software into foreign products outside of U.S. 
export control without triggering a U.S. license requirement, 
so long as total U.S. content does not exceed ``de minimis'' 
thresholds.
    These initiatives will assure the continuing 
competitiveness of U.S. companies in international markets, 
consistent with the national interest in areas such as 
electronic commerce, national security, and support to law 
enforcement.
    High Performance Computers. On March 10, 2000, BXA 
published a regulation raising the technical level above which 
exports of high performance computers require licenses 
implementing the President's February 1 update announcement to 
the Administration HPC export control policy. This update 
raised the upper threshold of the license exception CTP for 
exports to Computer Tier 2 countries from 20,000 MTOPS to 
33,000 MTOPS, and from 12,300 MTOPS to 20,000 MTOPS for exports 
to Tier 3 countries. On August 3, 2000, the Administration 
announced a further modification of technical limits. BXA has a 
rule pending to implement the changes. Due to rapid 
technological advancement in the computer industry, the 
technical level of computers is reviewed every six months.
    India. On March 17, 2000, BXA published a regulation that 
removed 51 Indian entities from the Entity List in Supplement 4 
of Section 744 of the EAR. The regulation also changed the 
policy for exports of non-sensitive ``EAR99'' items to listed 
entities from ``presumption of denial'' to ``presumption of 
approval.'' This rule represented the first significant 
modification of measures associated with India sanctions since 
their imposition in November 1998. Because many India 
applications submitted to BXA since May 1998 have been for 
EAR99 items that require a license under Glenn Amendment 
sanctions, the March policy change has resulted in a 
significant increase in the approval rate for India licenses. 
On July 26, 2000, BXA published another rule that removed two 
Indian entities from the Entity List and added one.
    North Korea. On September 17, 1999, I announced my decision 
to ease some of the sanctions against North Korea administered 
under the Trading with the Enemy Act, the Defense Production 
Act, and the EAR. On June 19, 2000, BXA published a regulation 
easing restrictions on exports of low-level items to North 
Korea in response to North Korea agreeing to halt further tests 
of its missile program. Under sanctions easing measures, U.S. 
exporters may now ship agricultural commodities, medical items, 
and low-level industrial goods to North Korea without a 
license. However, all multilaterally controlled items, as well 
as items controlled unilaterally by the United States, continue 
to require a license to North Korea.
    Wassenaar Arrangement. On July 12, 2000, BXA published a 
rule implementing the Wassenaar Arrangement's changes to their 
list of dual-use items. This rule affected entries in 
Categories 1 through 6, and 9 of the Commerce Control List.
    Export Clearance. On July 10, 2000, BXA and the Census 
Bureau jointly published final rules clarifying export 
clearance, including the definition of exporter and the 
requirements for filing a Shipper's Export Declaration. Public 
comments contributed significantly to the development of these 
rules.

Export license information

    During the reporting period, BXA continued to receive many 
requests for exports licensing information through the Freedom 
of Information Act and through discovery requests during 
enforcement proceedings. Under section 12(c) of the Export 
Administration Act, BXA continues to withhold from public 
disclosure information obtained for the purpose of 
consideration of, or concerning, export license applications, 
unless the release of such information is determined by the 
Under Secretary to be in the national interest, pursuant to the 
directive in Executive Order No. 12924 to carry out the 
provisions of the Export Administration Act, to the extent 
permitted by law, notwithstanding an adverse court decision 
regarding BXA's authority to withhold such information. The 
Department has appealed this decision.
    BXA received two Congressional requests for large amounts 
of export licensing information during the reporting period.

Office of Inspector General and the General Accounting Office 
        studies

    During the reporting period, BXA continued its cooperation 
with the Office of Inspector General (OIG) and the General 
Accounting Office (GAO). OIG initiated three new studies and 
GAO initiated nine. Also during the period, OIG closed three 
studies and GAO closed six, with the issuance of final reports 
or briefings.

Export enforcement

    Export Enforcement continued, through its three constituent 
offices, its programs of prevention of diversions, 
investigation/
enforcement of the export control provisions of the Export 
Administration Regulations, and enforcement of the antiboycott 
provisions of the Export Administration Regulations.

Office of Enforcement Analysis

    Preventive/Compliance Activities. Office of Enforcement 
Analysis (OEA) prevention activities included designing a 
systematic plan to target and prioritize pre-license checks 
(PLCs) and post shipment verifications (PSVs) conducted by 
representatives of U.S. diplomatic posts. The purpose of the 
plan is to ensure that the PLC and PSV programs, which are 
coordinated by BXA's Export Enforcement, reflect the full range 
of U.S. export control concerns and use available resources as 
effectively as possible.
    PLCs validate information on export license applications 
including the reliability of the end-users. In contrast, PSVs 
strengthen assurances that exporters, shippers, consignees, and 
end-users comply with the terms of export licenses and 
licensing conditions that are intended to deter diversions from 
approved end-users and end-uses of dual-use exports. The 
overall objective for conducting PLCs and PSVs is to detect and 
prevent the illegal transfer of controlled U.S.-origin goods 
and technology.
    Another major preventive enforcement activity of OEA is the 
compiling of information regarding parties of export control 
concern and maintaining these names on Export Enforcement's 
watch list. All of the parties included on this watch list are 
screened against names listed on export license applications 
received by BXA. OEA analysts review all applications in detail 
that include a match against a party on the watch list to 
assess diversion risks, identify potential violations, and 
determine the reliability of proposed end-users of controlled 
U.S.-origin commodities or technical data.
    NDAA Activities. OEA has responsibility for implementing 
the High Performance Computer post-shipment verification and 
annual report requirements of the NDAA for FY1998. OEA tracks 
all post-shipment reporting on exports of HPCs over a set 
operating level to ``Tier 3'' counties, as defined by the NDAA, 
and oversees the post-shipment verifications performed on such 
exports. OEA has the responsibility for reporting the total 
number of HPCs exported and the number of NDAA HPC post-
shipment verifications performed to Congress in an Annual 
Report.
    Visa Review Program. During the reporting period, OEA 
continued restructing its Visa Application Review Program to 
prevent unauthorized access to controlled technology or 
technical data by foreign nationals visiting the United States. 
The Office has developed new criteria and thresholds for 
evaluating visa applications for targeting purposes. OEA has 
narrowed its focus and concentrated on specific products most 
often used in weapons of mass destruction projects. OEA's 
evaluation and analysis of visa application cable traffic 
involves preventive enforcement efforts such as recommending 
denial of certain visas and the referral of enforcement leads 
to Office of Export Enforcement (OEE) field offices for 
possible case development. In some instances, OEE Special 
Agents uncovered possible visa fraud on the part of the foreign 
applicant. These findings were forwarded to OEA and submitted 
to the State Department's Visa Fraud Unit for further 
investigation and action during the reporting period.
    Shipper's Export Declaration Review Program. OEA 
systematically reviews Shipper's Export Declarations (SEDs) 
filed by exporters. Using a computerized index of data fields, 
OEA produces a list of SEDs targeted for closer review. These 
reviews focus particularly on licensed and license exception 
shipments, shipments bound for destinations of concern, and 
shipments of strategic commodities of proliferation concern. 
Through these reviews, OEA identifies SEDs that may indicate 
violations of the Export Administration Regulations and refers 
them to OEE special agents for further enforcement actions.

Office of Export Enforcement

    The Office of Export Enforcement opened 486 and closed 813 
investigations during the reporting period.

Office of Antiboycott Compliance Activities

    The Office of Antiboycott Compliance continued to supply 
the State Department with information on boycott requests 
received by U.S. persons. The State Department uses this 
information in its discussions with boycotting countries 
concerning ending the Arab boycott of Israel. The Office of 
Antiboycott Compliance opened four and closed ten 
investigations during the reporting period.

                                  
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