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[House Report 107-297]
[From the U.S. Government Publishing Office]

107th Congress                                            Rept. 107-297
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================

                                     

                   EXPORT ADMINISTRATION ACT OF 2001

                               __________

                              R E P O R T

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                                   ON

                               H.R. 2581

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

      [Including cost estimate of the Congressional Budget Office]

                                     

 March 8, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                   HOUSE COMMITTEE ON ARMED SERVICES
                      One Hundred Seventh Congress

                      BOB STUMP, Arizona, Chairman
DUNCAN HUNTER, California            IKE SKELTON, Missouri
JAMES V. HANSEN, Utah                JOHN M. SPRATT, Jr., South 
CURT WELDON, Pennsylvania                Carolina
JOEL HEFLEY, Colorado                SOLOMON P. ORTIZ, Texas
JIM SAXTON, New Jersey               LANE EVANS, Illinois
JOHN M. McHUGH, New York             GENE TAYLOR, Mississippi
TERRY EVERETT, Alabama               NEIL ABERCROMBIE, Hawaii
ROSCOE G. BARTLETT, Maryland         MARTIN T. MEEHAN, Massachusetts
HOWARD P. ``BUCK'' McKEON,           ROBERT A. UNDERWOOD, Guam
    California                       ROD R. BLAGOJEVICH, Illinois
J.C. WATTS, Jr., Oklahoma            SILVESTRE REYES, Texas
MAC THORNBERRY, Texas                TOM ALLEN, Maine
JOHN N. HOSTETTLER, Indiana          VICTOR F. SNYDER, Arkansas
SAXBY CHAMBLISS, Georgia             JIM TURNER, Texas
VAN HILLEARY, Tennessee              ADAM SMITH, Washington
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
LINDSEY GRAHAM, South Carolina       JAMES H. MALONEY, Connecticut
JIM RYUN, Kansas                     MIKE McINTYRE, North Carolina
BOB RILEY, Alabama                   CIRO D. RODRIGUEZ, Texas
JIM GIBBONS, Nevada                  CYNTHIA A. McKINNEY, Georgia
ROBIN HAYES, North Carolina          ELLEN TAUSCHER, California
HEATHER WILSON, New Mexico           ROBERT BRADY, Pennsylvania
KEN CALVERT, California              ROBERT E. ANDREWS, New Jersey
ROB SIMMONS, Connecticut             BARON P. HILL, Indiana
ANDER CRENSHAW, Florida              MIKE THOMPSON, California
MARK STEVEN KIRK, Illinois           JOHN B. LARSON, Connecticut
JO ANN DAVIS, Virginia               SUSAN A. DAVIS, California
EDWARD L. SCHROCK, Virginia          JAMES R. LANGEVIN, Rhode Island
W. TODD AKIN, Missouri               RICK LARSEN, Washington
RANDY FORBES, Virginia
JEFF MILLER, Florida
JOE WILSON, South Carolina
                    Robert S. Rangel, Staff Director
               Erin C. Conaton, Professional Staff Member
                   Jarrod Tisdell, Research Assistant
                            C O N T E N T S

                              ----------                              
                                                                   Page

Purpose and Background...........................................     7
Legislative History..............................................    10
Section-by-Section Analysis......................................    10
  Section 2--Definitions.........................................    10
  Section 105--Export Control Advisory Committees................    10
  Section 201--Authority for National Security Export Controls...    11
  Section 202--National Security Control List....................    12
  Section 203--Country Tiers.....................................    12
  Section 206--Congressional Review and Report...................    12
  Section 211--Determination of Foreign Availability and Mass 
    Market Status................................................    13
  Section 221--Exports of High Performance Computing Technology..    14
  Section 309--Compliance with International Obligations.........    15
  Section 310--Designation of Countries Supporting Terrorism.....    16
  Section 402--lnteragency Dispute Resolution Process............    16
  Section 506--Enforcement.......................................    16
  Title VII--Export of Satellites................................    17
  Section 807--Technical and Conforming Amendments...............    17
Committee Position...............................................    17
Fiscal Data......................................................    17
  Congressional Budget Office Estimate...........................    18
  Committee Cost Estimate........................................    22
Oversight Findings...............................................    22
Constitutional Authority Statement...............................    22
Statement of Federal Mandates....................................    22
Record Vote......................................................    32
Changes in Existing Law Made by the Bill, as Reported............    24
Additional and Dissenting Views..................................    28
  Additional Views of Robin Hayes................................    28
  Dissenting Views of Gene Taylor................................    29
  Dissenting Views of Adam Smith, Ellen O. Tauscher, and Rick 
    Larsen.......................................................    30

107th Congress                                            Rept. 107-297
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================

 
                   EXPORT ADMINISTRATION ACT OF 2001

                                _______
                                

March 8, 2002.--Committed to Committee of the Whole House on the State 
                 of the Union and ordered to be printed

                                _______
                                

    Mr. Stump, from the Committee on Armed Services, submitted the 
                               following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 2581]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Armed Services, to whom was referred the 
bill (H.R. 2581) to provide authority to control exports, and 
for other purposes, having considered the same, report 
favorably thereon with amendments and recommend that the bill 
as amended do pass.
  The amendments (stated in terms of the page and line numbers 
to the committee print document containing the text of the 
amendment as reported by the Committee on International 
Relations) are as follows:
  Page 5, strike lines 7 and 8 and insert the following:

                          (iii) the release of an item to a 
                        foreign national within or outside of 
                        the United States;

  Page 6, strike line 22 and all that follows through page 7, 
line 2, and insert the following:

                          (ii) Technology.--The term 
                        ``technology'' means specific 
                        information, communicated by any means 
                        tangible or intangible, that is 
                        necessary for the design, development, 
                        production, or use of an item, 
                        including taking the form of technical 
                        data or technical assistance.

  Page 13, lines 4 and 5, strike ``by the business community on 
the export control advisory committees'' and insert ``on the 
export control advisory committees by nonproliferation and 
national security experts, and by the business community''.
  Page 16, lines 10 and 11, strike ``in consultation with the 
Secretary of Defense, the Secretary of State,'' and insert 
``with the concurrence of the Secretary of Defense and in 
consultation with the Secretary of State,''.
  Page 16, line 16, strike ``would'' and insert ``could''.
  Page 17, strike line 17 and insert the following:

          (3) To restrict the export of items that could 
        contribute to acts of international terrorism so as to 
        prove detrimental to the national security of the 
        United States, its allies, or countries sharing common 
        strategic objectives with the United States.

  Page 21, lines 13, 17, and 23, strike ``would'' and insert 
``could''.
  Page 22, line 1, strike ``would'' and insert ``could''.
  Page 24, insert the following after line 2:

          (4) Militarily critical technologies list.--
                  (A) Establishment.--The Secretary of Defense 
                shall establish and maintain a Militarily 
                Critical Technologies List, which shall be part 
                of the National Security Control List.
                  (B) Contents.--The Militarily Critical 
                Technologies List shall be composed of a list 
                of items that are, or could be, critical to the 
                United States military maintaining or advancing 
                its qualitative advantage and superiority 
                relative to other countries or potential 
                adversaries.
                  (C) Authority of the secretary of defense.--
                Notwithstanding any other provision of this 
                Act, other than section 201(d)(2), the 
                Secretary of Defense shall have sole authority 
                for adding any item to or removing any item 
                from the Militarily Critical Technologies List, 
                regardless of whether that item is otherwise on 
                the Control List or otherwise controlled for 
                export under this Act.
                  (D) Licensing of militarily critical 
                technologies list items.--Items listed on the 
                Militarily Critical Technologies List shall not 
                be approved for export without the express 
                consent of the Secretary of Defense, unless the 
                President determines otherwise pursuant to 
                section 402(b).
                  (E) Annual report.--The Secretary of Defense 
                shall report annually to the Committee on Armed 
                Services of the House of Representatives and 
                the Committee on Armed Services of the Senate 
                on actions taken to carry out this paragraph.

  Page 24, line 5, insert ``as set forth in paragraphs (1), 
(2), and (3) of subsection (a)'' after ``Control List''.
  Page 27, insert the following after line 11:

          (4) Nondelegation.--The President may not delegate 
        the authorities he has under subsection (a) and this 
        subsection.

  Page 31, insert the following after line 10:

SEC. 206. CONGRESSIONAL REVIEW AND REPORT.

  (a) Notification.--The Secretary shall inform the appropriate 
committees of Congress at least 30 days before any change to 
the export status of an item on the National Security Control 
List (other than the Military Critical Technologies List) is 
made.
  (b) Report.--Upon the request of either the chairman or 
ranking member of any of the committees of Congress notified of 
a proposed change under subsection (a), the Secretary shall 
promptly provide to that committee a report that contains a 
clearly stated description of the proposed change, and the 
reasons why the change is justified and necessary. The report 
shall include in its entirety the assessment of the Secretary 
of Defense under subsection (c). The report may be provided on 
a classified basis if the Secretary considers it necessary.
  (c) Assessment.--The Secretary of Defense, in consultation 
with the Secretary of State and the Director of Central 
Intelligence, shall submit to the Secretary an assessment of 
the following with respect to a proposed change on which a 
report is requested under subsection (b):
          (1) The impact that the proposed change will have on 
        the national security of the United States with respect 
        to the purposes of export controls set forth in section 
        201(b).
          (2) The impact the proposed change will have on the 
        United States Armed Forces and the intelligence 
        community.
          (3) The cumulative effects that the proposed change 
        could have on the national security of the United 
        States, as well as the military potential, 
        proliferation activities, and support for international 
        terrorism by countries that may receive the exported 
        items with respect to which the proposed change would 
        apply.
  (d) Appropriate Committees.--For purposes of this section, 
the appropriate committees of Congress are the Committee on 
Armed Services and the Committee on International Relations of 
the House of Representatives, and the Committee on Foreign 
Relations, the Committee on Armed Services, and the Committee 
on Banking, Housing, and Urban Affairs of the Senate.

  Page 31, line 21, strike ``and determine''.
  Page 32, lines 2 and 3, strike ``and making a determination 
with respect to''.
  Page 32, line 9, insert ``, with the concurrence of the 
Secretary of Defense and the Secretary of State,'' after 
``Secretary''.
  Page 32, line 10, insert ``in accordance with subsection 
(c)'' after ``determine''.
  Page 32, lines 14 and 15, strike

  (c) Result of Determination.--In any case in which the 
Secretary determines,

 and insert

  (c) Determination.--In any case in which the Secretary, with 
the concurrence of the Secretary of Defense and the Secretary 
of State, determines,

  Page 33, strike lines 7 through 23 and insert the following:

          (1) Foreign availability status.--An item has foreign 
        availability status under this subtitle only if the 
        item--
                  (A) is available to controlled countries 
                without restriction from sources outside the 
                United States, more than one of which are 
                countries that participate with the United 
                States in multilateral export control regimes 
                as members; and
                  (B) is available in significant quantity and 
                comparable quality to the item produced in the 
                United States so that the requirement of a 
                license or other authorization with respect to 
                the export of the item is or would be 
                ineffective.

  Page 33, strike line 24 and all that follows through page 34, 
line 25, and insert the following:

          (2) Mass-market status.--An item has mass-market 
        status under this subtitle only if the following 
        criteria are met:
                  (A) The item is produced in a large volume 
                and is available for sale to multiple potential 
                purchasers.
                  (B) The item is widely distributed through 
                normal commercial channels, such as retail 
                stores, direct marketing catalogues, electronic 
                commerce, and other channels.
                  (C) The item is conducive to shipment and 
                delivery by generally accepted commercial means 
                of transport.
                  (D) The item can be used for its normal 
                intended purpose without substantial and 
                specialized service provided by the 
                manufacturer, distributor, or other third 
                party.

  Page 35, strike lines 1 through 21.
  Page 44, insert the following after line 14:

                 Subtitle C--High Performance Computers

SEC. 221. EXPORTS OF HIGH PERFORMANCE COMPUTING TECHNOLOGY.

  (a) Joint Process.--The Secretary, the Secretary of State, 
the Secretary of Defense, and the Secretary of Energy shall 
jointly develop and implement a process that would permit the 
United States to monitor effectively the export of high 
performance computing technology to countries of proliferation 
concern. Such a process shall include, at a minimum, the 
following:
          (1) A definition of high performance computing 
        technology and any associated performance metrics.
          (2) The ability to assess the proposed export of high 
        performance computing technology prior to its export 
        and possibly require a license for such export to end 
        users or end uses of concern.
          (3) The use of post-shipment verifications and other 
        procedures to monitor end uses and end users in order 
        to ensure that exports of high performance computing 
        technology are not being used by countries of 
        proliferation concern in a manner detrimental to the 
        national security of the United States.
  (b) Report to Congress.--The President shall submit to the 
Congress, not later than 180 days after the date of the 
enactment of this Act, a report describing the process 
developed under subsection (a).
  (c) Implementation.--The process developed under subsection 
(a) shall first become effective 60 days after the end of the 
180-day period described in subsection (b).
  (d) Repeal of Certain Export Controls.--Subtitle B of title 
XII of division A of the National Defense Authorization Act for 
Fiscal Year 1998 (50 U.S.C. App. 2404 note) is repealed, 
effective 60 days after the end of the 180-day period described 
in subsection (b).
  (e) Inclusion of Items in Definition.--The definition of 
``high performance computing technology'' under subsection 
(a)(1) shall include computer hardware, software, technical 
data, and source codes.
  (f) End Use Review.--
          (1) Notification.--Any United States person that 
        exports a computer with a dollar value of more than 
        $250,000, or any equivalent metric developed pursuant 
        to subsection (a), shall, not less than 10 days before 
        the item is exported, provide to the Secretary a 1-page 
        notification described in paragraph (2) with respect to 
        the export.
          (2) Content.--A notification under paragraph (1) with 
        respect to a proposed export shall include the 
        following:
                  (A) A detailed description of the item to be 
                exported.
                  (B) Performance measures of the item to be 
                exported.
                  (C) The quantity and dollar value of the item 
                to be exported.
                  (D) The name, address, and telephone number 
                of the end user of the exported item.
                  (E) The end uses of the exported item.
          (3) Interagency review.--Within 24 hours after 
        receiving a notification under paragraph (1), the 
        Secretary shall refer the notification to the Director 
        of Central Intelligence (in this subsection referred to 
        as the ``Director'') and the Secretary of Defense. The 
        Director and the Secretary of Defense shall review the 
        notification to determine whether the end user or any 
        end use of the item to be exported--
                  (A) could threaten the national security of 
                the United States;
                  (B) could contribute to the proliferation of 
                weapons of mass destruction or the means to 
                deliver them; or
                  (C) could assist foreign terrorist 
                organizations in performing acts of 
                international terrorism.
          (4) Determination.--Within 7 calendar days after 
        receiving a notification under paragraph (3), the 
        Director and the Secretary of Defense shall inform the 
        Secretary of any determinations they made under 
        paragraph (3) with the respect to the notification. If 
        the Director or the Secretary of Defense determines 
        that a proposed export meets any of the criteria set 
        forth in subparagraphs (A), (B), and (C) of paragraph 
        (3), the Secretary shall immediately so notify the 
        United States person exporting the item.
          (5) Report.--The Secretary, with the concurrence of 
        the Secretary of Defense and the Director, shall report 
        annually to the Congress on the implementation of this 
        subsection. The report shall contain the number and 
        type of determinations made by the Director and the 
        Secretary of Defense under paragraph (3).
          (6) Effective date.--This subsection shall take 
        effect 90 days after the date of the enactment of this 
        Act.

  Page 57, lines 15 and 16, strike ``and except as provided in 
section 304, the President may'' and insert ``, the President 
shall''.
  Page 58, line 7, strike ``that''.
  Page 58, line 8, insert ``that'' after ``(1)''.
  Page 58, line 11, insert ``in consultation with the Secretary 
of Defense, that'' after ``(2)''.
  Page 84, line 22, strike ``chairperson'' and insert 
``committee''.
  Page 85, line 2, strike the period and insert the following: 
``, except that any decision of the committee is not valid 
unless it is unanimous. If such a unanimous decision is not 
reached, the license at issue shall be denied, unless the 
matter is appealed under paragraph (3).''.
  Page 85, strike lines 7 through 13 and insert the following:

          (3) Further resolution.--The President shall 
        establish additional levels for review or appeal of any 
        matter that cannot be resolved pursuant to the process 
        described in paragraph (1). Each such review shall--
                  (A) provide for decision-making based on the 
                concurrence of the participating departments 
                and agencies;
                  (B) provide that a department or agency that 
                fails to take a timely position, citing the 
                specific statutory and regulatory bases for a 
                position, shall be deemed to have no objection 
                to the pending decision;
                  (C) provide that any decision of an 
                interagency committee established under 
                paragraph (1) or interagency dispute resolution 
                process established under this paragraph may be 
                escalated to the next higher level of review at 
                the request of an official appointed by the 
                President, by and with the advice of the 
                Senate, or an officer properly acting in such 
                capacity, of a department or agency that 
                participated in the interagency committee or 
                dispute resolution process that made the 
                decision; and
                  (D) ensure that matters are resolved or 
                referred to the President not later than 90 
                days after the date the completed license 
                application is referred by the Secretary.
        If concurrence of the participating departments and 
        agencies is not reached at a level of review 
        established under this paragraph, the license at issue 
        shall be denied unless the matter is escalated to the 
        next higher level of review or the President determines 
        otherwise.

  Page 145, line 4, strike ``repeatedly''.
  Strike title VII.
  Strike section 807(k).
  Redesignate title VIII as title VII and redesignate the 
sections therein accordingly.
  Amend the table of contents accordingly.

                         Purpose and Background

    The purpose of H.R. 2581, the Export Administration Act 
(EAA) of 2001, as amended, is to establish a modern, 
comprehensive framework for the control of U.S. exports of 
dual-use items (those goods, technologies, and services with 
both military and commercial application) that protects and 
advances U.S. national security without unnecessarily 
restricting free trade and international commerce.
    The last comprehensive legislative effort to fashion a 
dual-use export control system was the Export Administration 
Act of 1979 (Public Law 96-72), which expired in 1994. Since 
then, and with the exception of brief reauthorizations, the 
export control process has been implemented through emergency 
executive order. As such, the committee recognizes the need not 
only to pass a new EAA, but to update current law where 
appropriate so U.S. export controls address the new national 
security needs of the United States, the economic realities of 
globalization, and the changed international security 
environment of the 21st Century, for the next several years.
    The committee considered H.R. 2581, as reported by the 
Committee on International Relations; this bill is the House 
alternative to S. 149, which passed the Senate on September 6, 
2001. In the course of this consideration, the committee held a 
two-panel hearing that included witnesses from the Departments 
of Defense, Commerce, and State, and from industry, the 
national security community, and the General Accounting Office 
(GAO). This hearing highlighted significant problems with H.R. 
2581 as reported, particularly regarding the role of the 
Secretary of Defense in the export control process, the 
shortcomings of national security safeguards within the 
proposed system, and the inadequacies of executive branch 
implementation of current law and Congressional intent, among 
other things.
    Based on that hearing, the committee decided to consider 
and amend H.R. 2581 as reported. The bill as amended includes 
provisions to restore and strengthen the role of the Secretary 
of Defense in the export control process and to impose 
additional safeguards to ensure that sensitive dual-use items 
are not transferred to potential adversaries, proliferators of 
weapons of mass destruction, or terrorists, where they could 
prove detrimental to U.S. national security. The amended bill 
also reestablishes important elements of the EAA of 1979 that 
were not included in either S. 149 and H.R. 2581 as reported. 
Incorporation of these provisions is designed to ensure the 
proper involvement of the Secretary of Defense, commensurate 
with his duties and responsibilities, in the export licensing 
process.
    The committee amendment would strengthen the role of the 
Secretary of Defense in several key ways. First, it would 
reestablish the Militarily Critical Technologies List (MCTL)--a 
list of technologies most critical to the maintenance and 
advancement of the U.S. military's qualitative superiority over 
other countries and potential adversaries. The Secretary of 
Defense would have sole authority over the creation and 
maintenance of this list, and would have veto authority over 
any licenses involving an item on this list. Only the 
President, by using the dispute resolution process specified in 
Section 402 of the bill, could overrule the Secretary of 
Defense's decisions with regard to the MCTL.
    Second, the committee amendment would not allow the 
Secretary of Commerce to make export control decisions that 
impact U.S. national security, unless he has the concurrence of 
the Secretary of Defense. The basic statement of authority for 
the Secretary of Commerce would be altered to require the 
Secretary of Defense's, as well as the Secretary of State's, 
concurrence with regard to the regulation of national security 
export controls. Further, the committee amendment would require 
unanimity in the dispute resolution process among participating 
departments and agencies before a license could be approved. 
This change would preserve the Secretary of Defense's authority 
to object to a license on national security grounds, and is 
consistent with the bill's underlying presumption of denial.
    Third, the committee amendment would require the Secretary 
of Commerce to seek the concurrence of the Secretaries of 
Defense and State when making foreign availability and mass 
market determinations as the basis for decontrol of dual-use 
items. In addition, with regard to ``foreign availability,'' 
the bill would restore the standards codified in the 1979 EAA, 
which are well-understood by the implementing bureaucracy and 
have served the nation's security well over the last twenty 
plus years. These standards would improve the definition of 
foreign availability contained in S. 149 and HR 2581, which 
could otherwise lead to the decontrol of scores of items based 
on a relaxed standard of foreign availability, quantity, and 
quality. The committee amendment would also require that strict 
criteria be met (rather than merely considered as under the 
base bill) before a determination of foreign availability or 
mass market status is made.
    The committee amendment would make two major changes to 
strengthen national security export controls. First, it would 
broaden the number of items available for control to encompass 
those that ``could'' contribute to the military capabilities, 
proliferation activities, or terrorism potential of a country, 
thus giving the Secretary of Defense more say over items for 
control. Second, the committee amendment would close a loophole 
in the base text by requiring the President to impose controls, 
regardless of a foreign availability or mass market finding, if 
the item in question is controlled by a multilateral export 
control regime or international agreement to which the United 
States is a party. This change would help ensure that the 
United States maintains its international responsibilities and 
that sensitive dual-use items remains controlled.
    The committee amendment would also change the underlying 
bill with regard to two particular commodities. In terms of 
satellite exports, the amendment strikes Title VII of the bill 
as reported by the International Relations Committee. That 
version would have overturned provisions of the Strom Thurmond 
National Defense Authorization Act for Fiscal Year 1999 (Public 
Law 105-261) which moved satellite exports from the primary 
jurisdiction of the Commerce Department to the State 
Department. The committee amendment would retain the State 
Department's authority over satellite exports, as the committee 
feels this is the most appropriate process to ensure the 
national security implications of these items are fully 
considered in decisions to export.
    On the subject of high-performance computer exports, the 
committee was concerned about the action taken in the 
underlying bill to strike provisions of the National Defense 
Authorization Act for Fiscal Year 1998 (Public Law 105-85). 
That Act requires notification of departments involved in the 
licensing process before computers above a certain performance 
threshold could be exported to nations of proliferation 
concern. The Act also includes provisions allowing the 
President to adjust that performance thresholdfollowing 
Congressional notification, and requires the Secretary of Commerce to 
conduct post-shipment verification of high-performance computer 
exports.
    The committee amendment would require the Secretaries of 
Commerce, Defense, State, and Energy to jointly develop and 
implement a process for monitoring high-performance computer 
exports, including a new definition and metric(s) for high-
performance computers; an ability to assess proposed exports of 
such items in advance; and post-shipment verification 
procedures to ensure that high-performance computing technology 
is not diverted to an improper end-use or end-user. Sixty days 
after the President submits a report to Congress on this new 
process, the provisions of the 1998 defense act would be 
repealed.
    Finally, the committee amendment would require exporters to 
provide a one-page notification to the Department of Commerce 
10 days prior to exporting any computer with a dollar value 
greater than $250,000. The Secretary of Commerce would then 
refer this notification to the Secretary of Defense and the 
Director of Central Intelligence, who would then determine 
whether the end use or end user of the item could threaten U.S. 
national security, contribute to the proliferation of weapons 
of mass destruction, or assist foreign terrorist organizations. 
If a positive determination is made, the exporter would be 
immediately notified, prior to shipment, by the Secretary of 
Commerce.

                          Legislative History

    H.R. 2581 was introduced on July 20, 2001 and was referred 
to the Committee on International Relations and the Committee 
on Rules. The bill was reported (amended) November 16, 2001 by 
the Committee on International Relations (H. Rept. 107-297, 
Part I). The bill was also referred jointly and sequentially to 
the Committee on Agriculture, the Committee on Armed Services, 
the Committee on Energy and Commerce, the Committee on the 
Judiciary, the Committee on Ways and Means, and the Committee 
on Intelligence (Permanent Select) on November 16, 2001.
    On March 6, 2002 the Committee on Armed Services held a 
mark-up session to consider H.R. 2581 as amended by the 
Committee on International Relations. The committee adopted the 
amended bill with an amendment and reported the same favorably 
by a rollcall vote. The record vote can be found at the end of 
this report.

                      Section-by-Section Analysis

    The following is a section-by-section analysis of those 
sections of H.R. 2581 amended by the Armed Services Committee.

                         Section 2--Definitions

    Changes made to this section of the underlying bill would 
strengthen the definitions of ``technology'' and ``export.'' 
The amended definition of ``technology'' would broaden the term 
to cover both tangible and intangible transfers of information, 
including but not limited to, information communicated by word 
of mouth; by fax, e-mail, or other electronic means; through 
sketches, letters, and memos; or made available for visual 
inspection.
    The amended definition of ``export'' would better encompass 
two areas to strengthen the control and enforcement of ``deemed 
exports.'' First, the release of technology to a foreign 
national in the United States would include the release of any 
``item''--a broader term that includes the previously-covered 
technology, as well as goods and services--to a foreign 
national in the United States. Second, the release of items to 
foreign nationals would be expanded to include the release to a 
foreign national ``within or outside of'' the United States. 
According to a senior Department of Commerce official during 
testimony before the committee, this was a definitional 
shortcoming requiring correction to prevent the release of 
sensitive dual-use items outside of the United States.

            Section 105--Export Control Advisory Committees

    Changes made to this section of the underlying bill would 
permit the participation of nonproliferation and national 
security experts in any export control advisory committees 
established by the Secretary of Commerce pursuant to this 
section. The underlying bill made no allowances for these types 
of experts, but permitted the widest possible participation by 
the business community. By including nonproliferation and 
national security experts on the Secretary's advisory 
committees, the committee intends that he receive more balanced 
information and advice when faced with weighing U.S. national 
security and economic interests regarding export controls.

      Section 201--AUTHORITY FOR NATIONAL SECURITY EXPORT CONTROLS

    The committee amendment includes several changes to this 
section. First, the amendment would modify the overall 
authority for imposing national security export controls. The 
Secretary of Commerce's authority would no longer be exercised 
``in consultation with'' the Secretary of Defense; the revised 
provision would now require the Secretary of Defense's 
concurrence. This change is one of several made by the 
committee to address significant concerns that the Secretary of 
Defense have a prominent enough role in the export control 
process to adequately safeguard national security.
    Second, the committee amendment would also change the 
standard for the first purpose of national security controls 
which relates to the impact of a proposed export on the 
military potential of countries so as to prove detrimental to 
the national security of the United States, its allies, or 
countries sharing common strategic objectives with the United 
States.
    While both ``could'' and ``would'' are subjective 
standards, the committee's intent is to safeguard U.S. national 
security by anticipating unforeseeable threats and uses of 
dual-use items. To accomplish this, the standard would be 
raised from one where a direct, causal link to a threat is 
probable, to one where such a link is possible. The committee 
intends that this change require those implementing the export 
control system to at least consider a broader category of items 
for control. It is not intended to have the effect that all 
licenses considered under this standard would necessarily be 
denied; ratherthe goal would be to ensure closer scrutiny of 
the impact of potential end-uses, and the possible intentions of their 
end-users, on U.S. national security.
    Third, the committee amendment would clarify a provision 
from the underlying bill. As reported by the International 
Relations Committee, H.R. 2581 expressed the third purpose of 
national security export controls as ``to deter acts of 
international terrorism.'' Because the deterrence of terrorism 
is also a purpose of foreign policy controls in Title III of 
both versions of the bill, the committee intended to clarify 
the difference between the two definitions. Foreign policy 
controls could be imposed on items to deter or punish a country 
or entity for committing or preparing to commit terrorist acts. 
National security controls, under this new definition, would 
``restrict the export of items that could contribute to acts of 
terrorism so as to prove detrimental to the national security 
of the United States, its allies, or countries sharing common 
strategic objectives with the United States.'' The use of the 
term ``could'' is intended to capture a broader range of items 
in the same way as its use was explained in the preceding 
paragraph.
    Finally, a similar change was made to the underlying bill 
to change ``would'' to ``could'' for the risk factors listed in 
paragraph (e) of this section--presumption of denial of certain 
licenses.

              SECTION 202--NATIONAL SECURITY CONTROL LIST

    The committee amendment would change this section to 
include the requirement to preserve the current Military 
Critical Technologies List (MCTL), created under the Export 
Administration Act of 1979, but as a subset of the broader 
National Security Control List (NSCL). Neither the underlying 
bill nor S. 149 included such a provision. Items listed on the 
MCTL would not be able to be licensed for export without the 
approval of the Secretary of Defense, and only the Secretary of 
Defense would be authorized to add or remove items from the 
MCTL. The President, however--using the authority given him in 
the dispute resolution process of section 402(b)--would retain 
the ability to overrule a decision of the Secretary of Defense. 
The provision would also require an annual report by the 
Secretary of Defense to the Committees on Armed Services of the 
Senate and the House of Representations on implementation of 
this provision. Finally, the committee amendment would clarify 
that the risk assessment required in subsection (b) would only 
apply to the NSCL, not the MCTL.
    With this modification, the committee intends to further 
strengthen the role of the Secretary of Defense. The provision 
would give the Secretary of Defense sole authority to establish 
and maintain a list of dual-use technologies that he determines 
are critical to the United States maintaining its military 
superiority and qualitative advantage relative to other 
countries or potential adversaries. Examples of critical items 
the committee expects the Secretary of Defense would place on 
the Military Critical Technologies List include, but are not 
limited to, stealth technology and jet engine ``hot section'' 
technologies.
    An important distinction to be made between S.149 and the 
underlying House bill on the one hand, and the 1979 EAA on the 
other, is that the National Security Control List established 
by the Senate version would focus controls primarily on the 
current threats to U.S. national security, such as the 
proliferation of weapons of mass destruction and terrorism. 
Only the provision contained in the committee amendment would 
provide an explicit provision focusing controls on preserving 
and advancing U.S. military capabilities as intended by the 
establishment of the Militarily Critical Technologies List.

                       SECTION 203--COUNTRY TIERS

    Under this section, as amended, the President would not be 
able to delegate his authority to establish and maintain a 
country tiering and assignment system. The assessments to be 
used by the President in assigning countries to tiers would all 
relate to the potential risks such countries may pose to U.S. 
national security. The committee is concerned that, if the 
President can delegate this authority, he may do so to an 
agency without particular national security expertise. The 
provision to prevent that delegation aims to ensure that 
national security concerns remain primary in the tiering 
system.

              SECTION 206--CONGRESSIONAL REVIEW AND REPORT

    The committee amendment would establish a new provision to 
address what the General Accounting Office (GAO) has described 
as a longstanding problem: executive branch failure to 
implement policies and procedures in the export control process 
as Congress intended. To respond to this concern, the provision 
would require the Secretary of Commerce to notify the Congress 
at least thirty days prior to a change being made to the export 
status of an item on the National Security Control List. The 
provision would also require the Secretary of Defense, in 
consultation with the Secretary of State and the Director of 
Central Intelligence, to conduct an assessment of the national 
security impact of making such a change to the control list.
    Under this provision, the chairman or ranking member of the 
House Armed Services Committee (and other committees) would 
have the right to require a detailed report by the Secretary of 
Commerce on the proposed change and the justifications for it, 
along with the Secretary of Defense's national security 
assessment, before the change is implemented.
    In addition to mandating a notification and report 
requirement for the Congress, the committee intends this 
provision to require the executive branch to do its homework 
and have a full understanding of the national security impact 
of changes in the export status of the item before it is 
decontrolled, and to be able to justify this decision to the 
Congress. Given reports by the GAO and other national security 
experts that past decontrol decisions had limited analytical 
bases, the committee fully expects that the national security 
impact assessments required under this provision be 
comprehensive, rigorous, and analytically based, and that the 
scope and methodology employed be scientifically sound.

  SECTION 211--DETERMINATION OF FOREIGN AVAILABILITY AND MASS MARKET 
                                 STATUS

    The committee amendment would make several changes to this 
section. First, it would clarify that while the Secretary of 
Commerce would be responsible for reviewing the foreign 
availability and mass market status of controlled items, 
determinations madeunder this section would require the 
concurrence of the Secretaries of Defense and State.
    Second, the amendment would restore the definition of 
foreign availability from the 1979 EAA which provides for 
decontrol if an item of comparable quality is available in 
sufficient quantities to controlled countries without 
restriction from foreign suppliers. However, the amended 
provision would make two changes to the 1979 standard--that of 
``significant'' rather than ``sufficient'' quantity and the 
requirement that at least one of the foreign suppliers be 
participants with the United States in a multilateral control 
regime. This change was made due to the committee's concern 
that the definition contained in S. 149 and H.R. 2581 had been 
dramatically altered to allow for the possible decontrol of 
scores of items based on a relaxed standard of foreign 
availability, quantity, and quality. The committee believes 
that if items of comparable quality to controlled U.S. items 
are available without restriction in significant quantities 
from sources outside of the United States, then the U.S.-origin 
items should be strong candidates for decontrol under the 
``foreign availability'' provision.
    Finally, the provision would require that the criteria for 
foreign availability or mass market status be met before 
decontrol; S. 149 and H.R. 2581 as reported by the 
International Relations Committee would have allowed for 
decontrol after only considering such criteria.
    The committee intends the change requiring Secretary of 
Defense concurrence to address a key finding of the GAO--namely 
that in the past, the Department of Commerce had unilaterally 
decontrolled items under the ``foreign availability'' exemption 
category based on little or no analysis. It is the intent of 
the committee that the Secretary of Defense and Secretary of 
State have an equal voice and role in making these 
determinations given the serious national security 
implications, and the expectation of the committee that 
``foreign availability'' and ``mass market'' assessments will 
be comprehensive, rigorous, and scientifically sound.
    An exemption for ``mass marketed'' items is a new concept 
introduced by the authors of the Senate bill; it is the 
``domestic'' counterpart to foreign availability. In S. 149 and 
H.R. 2581, the Secretary of Commerce can make a ``mass market'' 
determination--which would result in the automatic decontrol of 
the item--after considering a set of general criteria. This 
approach raised concern that U.S. companies could simply mass 
produce and mass market their controlled items off of the 
Commerce Control List, even when there was no evidence that 
these sensitive items were acquired by countries of concern. 
Given the lack of strict standards, the unusual amount of 
discretion given to the Secretary, and the serious national 
security implications of decontrol decisions, the committee 
decided that it was in the best interests of the nation to 
transform these ``considerations'' into requirements.

     SECTION 221--EXPORTS OF HIGH PERFORMANCE COMPUTING TECHNOLOGY

    The committee amendment would add a new section 
specifically addressing high-performance computing technology. 
This provision would require the Secretaries of Commerce, 
Defense, State, and Energy, within 180 days of the enactment of 
this Act, to jointly develop and implement a process that would 
permit the United States to effectively monitor the export of 
this technology. At a minimum, the process would have to 
include a definition of high performance computing technology 
and any associated performance metric(s); an ability to assess 
proposed exports in advance and possibly require a license for 
them for end uses or to end users of concern; and the use of 
post-shipment verifications and other procedures to monitor end 
uses and end users. Sixty days after the President reports to 
Congress on this new process, provisions of the 1998 National 
Defense Authorization Act requiring notification of computers 
exports above a certain performance threshold to countries of 
proliferation concern, reporting to Congress before adjustments 
to that threshold are made, and post-shipment verifications 
would be repealed.
    In addition, the committee amendment would provide a 
mechanism for exporters to determine whether an end use or end 
user of a proposed export is of national security concern. Not 
less than 10 days before a proposed shipment of a computer with 
a dollar value of $250,000--and regardless of whether the 
computer is subject to a license--a U.S. exporter would have to 
provide the Secretary of Commerce with a one-page notification 
regarding the technology, end use, and end user of the item. In 
turn, the Secretary of Commerce would notify the Secretary of 
Defense and the Director of Central Intelligence (DCI) of the 
proposed export. Within seven days, the Secretary of Defense 
and DCI would then determine and notify the Secretary of 
Commerce as to whether the end use or end user could threaten 
U.S. national security, contribute to the proliferation of 
weapons of mass destruction, or assist foreign terrorist 
organizations in undertaking terrorist acts. If such a 
determination were made, the Secretary of Commerce would 
immediately notify the exporter in question. Finally, the 
provision would require the Secretary of Commerce, with the 
concurrence of the Secretary of Defense and the Director of 
Central Intelligence, to report annually to Congress on 
determinations made under this section.
    The committee intends these provisions to respond to the 
concerns of the Administration and industry while protecting 
U.S. national security. It recognizes the limited utility of 
the existing computing performance measure, millions of 
theoretical operations per second (MTOPS), and responds to 
Administration and industry complaints about its use. It also 
responds to the view of industry raised during a hearing on 
this subject that exporters are willing to self-police their 
exports if they can obtain better information about end uses 
and end users of concern.
    Yet, the committee also intends these provisions to address 
the view of a senior Defense Department official that the 
government should not ``decontrol high-end computers, either 
from a hardware perspective or a software perspective.'' The 
committee seeks to give the Administration the flexibility it 
has sought in establishing a new definition and process for 
controlling high-performance computing technology. It also 
addresses the real problem raised by the GAO in its testimony 
before the committee, that there is a need for continued 
Congressional oversight in this area, given the outdated MTOPS 
metric and the lack of adequate national security analyses in 
decisions about high-performance computing.

         SECTION 309--COMPLIANCE WITH INTERNATIONAL OBLIGATIONS

    The committee amendment would make two changes to this 
section. First, it would exempt controls imposed to comply with 
a multilateral export control regime or with an international 
obligation from the reporting requirements of section 304. 
Second, it would close a loophole in the underlying bill by 
requiring the President to impose controls, regardless of a 
foreign availability or mass market finding, if the item in 
question is controlled by a multilateral export control regime 
or international agreement to which the United States is a 
party. This change would help ensure that the United States 
maintains its international responsibilities and that sensitive 
dual-use items remain controlled. The committee believes that, 
with regard to controlling dual-use exports for national 
security purposes, the United States must play a leadership 
role internationally by maintaining high standards and opposing 
the decontrol of sensitive items covered by international 
agreement due to pressure from exporters.

       SECTION 310--DESIGNATION OF COUNTRIES SUPPORTING TERRORISM

    The committee amendment would modify this section to 
require the Secretary of State to consult with the Secretary of 
Defense when determining whether a license is required for 
items being exported to a country that has repeatedly provided 
support for acts of international terrorism. The role of the 
Secretary of Defense would be to offer his assessment as to 
whether the item could make a significant contribution to the 
military potential of such country, including its ability to 
support acts of international terrorism. This change would 
address a weakness in the corresponding section of the 
underlying bill that was highlighted by the GAO. The GAO 
testified before the committee that ``without the Department of 
Defense's input into these important military assessments, 
Congress might receive notifications that do not fully reflect 
the potential military impact of these exports.''

          SECTION 402--INTERAGENCY DISPUTE RESOLUTION PROCESS

    The committee amendment would modify this section to 
require unanimity among participating departments and agencies 
at the first level of dispute resolution before a license could 
be approved, thus preserving the Secretary of Defense's ability 
to object to a license on national security grounds. 
Additionally, failure to reach concurrence would result in 
license denial, which is consistent with the presumption of 
denial that is the foundation of H.R. 2581, as reported by the 
International Relations Committee. The amended section would 
also restore key elements of S. 149 regarding further 
resolution of conflicts if the initial interagency committee 
cannot reach a unanimous decision, thus streamlining the 
decision-making process so as to allow for timely 
determinations of export decisions. At each level, however, 
failure to reach concurrence would result in license denial, 
unless appealed to the next higher level or the President 
determines otherwise.
    The committee believes the interagency dispute resolution 
process proposed under both S. 149 and H.R. 2581 would give too 
much authority to the Secretary of Commerce, would skew 
decisions toward the interests of the business community, and 
would fail to give the Secretary of Defense a role in the 
process commensurate with his duties, responsibilities, and 
expertise. For example, under S. 149 and H.R. 2581, license 
disputes would be resolved at the first level through the 
unilateral decision of a chairperson selected by the Secretary 
of Commerce. Appeals would be allowed under these bills, but 
the process for decision-making at these higher levels of 
appeal, at least in S. 149, would be based on majority vote. 
The committee is concerned that the Secretary of Defense could 
easily be outvoted during a license dispute--and the license 
approved--even though the Secretary of Defense has unique 
expertise and insight with regard to national security, and the 
item in question had clear national security implications.

                        SECTION 506--ENFORCEMENT

    The committee amendment would modify this section to 
require the Secretary of Commerce, if a country has obstructed 
or denied post-shipment verifications (PSVs), to deny a license 
for the export of those items (or any substantially identical 
or directly competitive items or class of items) to all end 
users in that country until such post-shipment verification is 
allowed. The standard used in the underlying bill would have 
only required the Secretary of Commerce to take such action if 
a country had repeatedly obstructed or denied post-shipment 
verification.
    Given that the GAO raised the issue of post-shipment 
verification enforcement as a major weakness in the U.S. export 
control system, and cited the fact that the People's Republic 
of China has obstructed U.S. post-shipment verification efforts 
for years the committee believes that requiring license denial 
for repeated obstruction is too subjective (if not too lenient) 
a standard. As amended, the Secretary would be required to deny 
licenses under this section if a country obstructs any U.S. 
enforcement efforts.

                    TITLE VII--EXPORT OF SATELLITES

    The committee amendment would modify the bill to retain the 
current law provisions on satellite exports of the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 
1999 (Public Law 105-261).
    H.R. 2581 as reported by the International Relations 
Committee would have overturned these provisions and returned 
jurisdiction for most satellite and related exports to the 
Department of Commerce from the Department of State. The 
committee did not find sufficient evidence of problems with 
this arrangement to justify changing the prevailing law. In 
testimony before the committee, the Department of Defense noted 
its support on this issue by endorsing S. 149, which retained 
existing law. In addition, significant concerns remain about 
the national security implications of satellite exports. For 
these reasons, the committee recommends retaining the State 
Department's authority over these items.

            SECTION 807--TECHNICAL AND CONFORMING AMENDMENTS

    The committee amendment would strike subsection (k) of this 
section which would repeal provisions of the National Defense 
Authorization Act for Fiscal Year 1998 (Public Law 105-85) 
regarding high performance computing technology. As explained 
inthe new section 221, such repeal would be conditional upon 
required Administration actions and reports.

                           Committee Position

    On March 6, 2002, the Committee on Armed Services ordered 
H.R. 2581, as amended, reported to the House with a favorable 
recommendation by a vote of 44-6, a quorum being present.

                              Fiscal Data

    Pursuant to clause 3(d)(2)(A) of rule XIII of the Rules of 
the House of Representatives, the committee attempted to 
ascertain annual outlays resulting from the bill during fiscal 
year 2003 and the four following fiscal years. The results of 
such efforts are reflected in the cost estimate prepared by the 
Director of the Congressional Budget Office under section 402 
of the Congressional Budget Act of 1974, which is included in 
this report pursuant to clause 3(c)(3) of rule XIII of the 
Rules of the House.

                  Congressional Budget Office Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the cost estimate prepared by 
the Congressional Budget Office and submitted pursuant to 
section 402(a) of the Congressional Budget Act of 1974 is as 
follows:

                                                     March 8, 2002.
Hon. Bob Stump,
Chairman, Committee on Armed Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2581, the Export 
Administration Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Ken Johnson 
(for federal costs), Angela Seitz (for the state and local 
impact), and Paige Piper/Bach (for the private-sector impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).

Export Administration Act of 2001

    H.R. 2581 would replace the expired Export Administration 
Act of 1979 (EAA) and would update the system of export 
controls and penalties for national security and foreign policy 
purposes. Since the expiration of the EAA in August 2001, the 
President has extended export controls pursuant to his 
authority under the International Emergency Economic Powers 
Act. The Bureau of Export Administration (BXA) in the 
Department of Commerce administers export controls. This bill 
would authorize such activities through 2005.
    CBO estimates that implementing H.R. 2581 would cost about 
$310 million over the 2002-2007 period, assuming appropriation 
of the necessary funds. Because the bill would increase 
criminal and civil penalties for violations of export controls, 
CBO estimates governmental receipts would increase by $3 
million in 2005 and $7 million a year thereafter. The increase 
in criminal penalties would cause direct spending from the 
Crime Victims Fund to rise by about $1 million in 2006 and $3 
million in subsequent years. Because the bill would affect 
direct spending and receipts, pay-as-you-go procedures would 
apply.
    H.R. 2581 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments.
    The bill would impose private-sector mandates as defined by 
UMRA on certain exporters. CBO estimates that the total direct 
cost of those mandates would fall below the annual threshold 
established by UMRA for private-sector mandates ($115 million 
in 2002, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the bill is shown in the following table. 
The costs of this legislation fall within budget functions 370 
(commerce and housing credit), 050 (national defense), and 150 
(international affairs).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2002    2003    2004    2005    2006    2007
----------------------------------------------------------------------------------------------------------------
                                     CHANGES IN REVENUES AND DIRECT SPENDING

Estimated Revenues..............................................       0       0       0       3       7       7
Estimated Budget Authority......................................       0       0       0       0       1       3
Estimated Outlays...............................................       0       0       0       0       1       3

                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

EAA Spending by the Bureau of Export Administration:
    Estimated Authorization Level...............................      39      86      87      90       0       0
    Estimated Outlays...........................................      11      98      85      90      13       5
EAA Spending by the Departments of State and Defense:
    Estimated Authorization Level...............................       2       2       2       2       0       0
    Estimated Outlays...........................................       1       3       2       2       0       0
Total Proposed Changes:
    Estimated Authorization Level...............................      41      88      89      92       0       0
    Estimated Outlays...........................................      12     101      87      92      13       5
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: H.R. 2581 would authorize the BXA to 
control the export of certain items from the United States for 
national security or foreign policy purposes. Generally, export 
controls would not apply to products that are widely 
distributed through normal commercial channels. For this 
estimate, CBO assumes that H.R. 2581 will be enacted in the 
spring of 2002. When fully phased in, CBO estimates that 
provisions of the Export Administration Act of 2001 would 
increase revenues by about $7 million a year beginning in 
fiscal year 2006 and direct spending by about $3 million a year 
beginning in 2007. In addition, we estimate that implementing 
the bill would cost $310 million over the 2002-2007 period, 
assuming appropriation of the necessary amounts.
            Revenues
    Since the expiration of the Export Administration Act of 
1979 in August 2001, criminal and civil penalties for violating 
export control laws have been collected under the International 
Economic Emergency Powers Act. H.R. 2581 would significantly 
raise the maximum criminal fines that could be imposed for 
violations of export controls. The bill would set the maximum 
criminal fines at 10 times the value of the exports involved, 
or $5 million for corporations and $1 million for individuals, 
whichever is greater. Under the bill, civil penalties of up to 
$500,000 could also be imposed for violations of the law. On 
average, about three years elapse between the initial 
investigation of violations of export control law and the 
collection of a penalty. Because the amount of a fine is based 
on the law in force at the start of an investigation, CBO does 
not expect penalties under the new law to be collected until 
fiscal year 2005. Based on information from the Department of 
Commerce, CBO estimates that enacting the bill would increase 
receipts from civil penalties by about $4 million a year and 
receipts from criminal penalties by about $3 million a year 
beginning in 2006.
            Direct spending
    Collections of criminal fines are recorded in the budget as 
governmental receipts (i.e., revenues), which are deposited in 
the Crime Victims Fund and spent in subsequent years. CBO 
estimates that the additional direct spending resulting from 
the increase in criminal penalties would be about $3 million a 
year beginning in 2007, because spending from this fund 
generally lags behind the collection of criminal fines by about 
a year.
            Spending subject to appropriation
    H.R. 2581 would authorize the appropriation of between $72 
million and $76 million a year for the BXA to implement the 
provisions of the bill during the 2002-2005 period. Also, the 
bill would authorize additional appropriations of at least $3.5 
million annually to hire 20 employees to establish a best 
practices program for exporters, at least $4.5 million annually 
to hire 10 overseas investigators, $5 million to enhance the 
BXA's program to verify the end use of controlled exports, at 
least $5 million to procure a computer system for export 
licensing and enforcement, and $4 million annually to hire and 
train additional license review officers.
    CBO estimates that the BXA has already received an 
appropriation of $55 million for fiscal year 2002 to implement 
the Export Administration Act. The bill would authorize a total 
of $72 million for this year. This estimate assumes the 
additional $17 million would be provided in a supplemental 
appropriation this spring. Also, CBO estimates that 
implementing a best practices program for exporters would cost 
about $4 million a year, stationing overseas investigators 
would cost about $5 million a year, and procuring the computer 
system would cost about $2 million in 2002 and $3 million in 
2003. Any such spending would be subject to appropriation of 
the necessary amounts. Based on BXA's historical spending 
patterns, CBO estimates that implementing the bill would cost 
the agency about $302 million over the 2002-2007 period. This 
estimate assumes that funds are appropriated for the BXA 
through 2005, as provided in section 506 of the bill.
    H.R. 2581 also would require the Departments of State and 
Defense to review the classification of exports under the new 
rules established by the bill, and to make any recommendations 
concerning these rules to the Department of Commerce. Based on 
information from the Departments of State and Defense, CBO 
assumes that those two agencies would need to hire additional 
staff to conduct these reviews. CBO estimates that implementing 
these provisions would cost about $1 million in 2002 and $8 
million over the 2002-2005 period.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act establishes pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. The net changes in outlays and governmental receipts 
that are subject to pay-as-you-go procedures are shown in the 
following table. For the purposes of enforcing pay-as-you-go 
procedures, only the effects through 2006 are counted.

----------------------------------------------------------------------------------------------------------------
                                                       By fiscal year, in millions of dollars--
                                    ----------------------------------------------------------------------------
                                      2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................      0      0      0      0      1      3      3      3      3      3      3
Changes in receipts................      0      0      0      3      7      7      7      7      7      7      7
----------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
H.R. 2581 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments.
    Estimated impact on the private sector: The bill would 
require pharmaceutical companies that apply for licenses to 
export certain test articles, including drugs, medical devices, 
biological products, and additives, to undertake new 
procedures. Such firms would have to identify each clinical 
investigation concerning those articles involving human 
subjects and submit proof that the protocols for each 
investigation have been examined by an institutional review 
board. Based on information from the Pharmaceutical Research 
and Manufacturers of America and the Food and Drug 
Administration, CBO estimates that the cost to identify and 
submit proof of review would be small and that few test 
articles would be subject to the new procedures.
    The bill would prohibit implements of torture from being 
exported to certain countries. According to the Bureau of 
Export Administration, the number of prohibited instruments 
would be minimal. Historically, the value of such exports has 
been small.
    H.R. 2581 also would require exporters not currently filing 
their applications through the Automated Export System (AES) to 
do so. Based on information from the Bureau of Export 
Administration, the number of additional exporters that would 
now be required to file through the AES would be minimal.
    Previous CBO estimate: On September 21, 2001, CBO 
transmitted an estimate for H.R. 2581, as ordered reported by 
the House Committee on International Relations on August 1, 
2001. Previously, on April 2, 2001, CBO completed an estimate 
of S. 149, the Export Administration Act of 2001, as ordered 
reported by the Senate Committee on Banking, Housing, and Urban 
Affairs on March 22, 2001.
    Both these prior estimates contained CBO's estimates for 
increases in revenues and direct spending resulting from higher 
civil and criminal penalties. Based on new information from the 
BXA, CBO now estimates that enacting either H.R. 2581 or S. 149 
would increase penalty collections by $7 million a year and 
direct spending by $3 million a year when fully phased in.
    CBO estimates that implementing H.R. 2581, as ordered 
reported by either the House Committee on International 
Relations or the House Committee on Armed Services, would 
increase the discretionary costs of the Departments of State 
and Defense by a total of $8 million during the 2002-2005 
period. CBO did not anticipate any such increases in cost for 
these departments as a result of S. 149.
    On November 9, 2001, CBO transmitted a private-sector 
mandate statement for H.R. 2581, as ordered reported by the 
House Committee on International Relations on August 1, 2001. 
Both versions of H.R. 2581 contain the same private-sector 
mandates. CBO determined that S. 149 contained no private-
sector mandates as defined by UMRA.
    Estimate prepared by: Federal Costs: Ken Johnson; Federal 
Receipts: Erin Whitaker; Impact on State, Local, and Tribal 
Governments: Angela Seitz; and Impact on the Private Sector: 
Paige Piper/Bach.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis and G. Thomas Woodward, Assistant 
Director for Tax Analysis.

                        Committee Cost Estimate

    Pursuant to clause 3(d) of rule XIII of the Rules of the 
House of Representatives, the committee generally concurs with 
the estimate contained in the report of the Congressional 
Budget Office.

                           Oversight Findings

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, this legislation results from 
hearings and other oversight activities conducted by the 
committee pursuant to clause 2(b)(1) of rule X.
    With respect to clause 3(c)(2) of rule XIII of the Rules of 
the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974, this legislation does not 
include any new spending or credit authority, nor does it 
provide for any increase or decrease in tax revenues or 
expenditures. The fiscal features of this legislation are 
addressed in the estimate prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the committee has not received a 
report from the Committee on Government Reform and Oversight 
pertaining to the subject matter of H.R. 2581.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the committee finds the authority for 
this legislation in Article I, section 8 of the United States 
Constitution.

                     Statement of Federal Mandates

    Pursuant to section 423 of Public Law 104-4, this 
legislation contains no federal mandates with respect to state, 
local, and tribal governments, nor with respect to the private 
sector. Similarly, the bill provides no unfunded federal 
intergovernmental mandates.

                              Record Vote

    In accordance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, a record vote was taken with 
respect to the committee's consideration of H.R. 2581, as 
amended. The record of this vote can be found on the following 
page.
    The Committee on Armed Services ordered H.R. 2581, as 
amended, reported to the House with a favorable recommendation 
by a vote of 44-6, a quorum being present.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported by the Committee on International 
Relations, are shown in Report 107-297 part I, filed on 
November 16, 2001.
    Changes to existing law made by section 221(d) of the bill, 
as reported by the Committee on Armed Services, are shown as 
follows (existing law proposed to be omitted is enclosed in 
black brackets, and existing law in which no change is proposed 
is shown in roman):

NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 1998

           *       *       *       *       *       *       *

DIVISION A--DEPARTMENT OF DEFENSE AUTHORIZATIONS

           *       *       *       *       *       *       *

TITLE XII--MATTERS RELATING TO OTHER NATIONS

           *       *       *       *       *       *       *

       [Subtitle B--Export Controls on High Performance Computers

[SEC. 1211. EXPORT APPROVALS FOR HIGH PERFORMANCE COMPUTERS.

  [(a) Prior Approval of Exports and Reexports.--The President 
shall require that no digital computer with a composite 
theoretical performance level of more than 2,000 millions of 
theoretical operations per second (MTOPS) or with such other 
composite theoretical performance level as may be established 
subsequently by the President under subsection (d), may be 
exported or reexported without a license to a country specified 
in subsection (b) if the Secretary of Commerce, the Secretary 
of Defense, the Secretary of Energy, the Secretary of State, or 
the Director of the Arms Control and Disarmament Agency 
objects, in writing, to such export or reexport. Any person 
proposing to export or reexport such a digital computer shall 
so notify the Secretary of Commerce, who, within 24 hours after 
receiving the notification, shall transmit the notification to 
the Secretary of Defense, the Secretary of Energy, the 
Secretary of State, and the Director of the Arms Control and 
Disarmament Agency.
  [(b) Covered Countries.--For purposes of subsection (a), the 
countries specified in this subsection are the countries listed 
as ``Computer Tier 3'' eligible countries in section 740.7(d) 
of title 15 of the Code of Federal Regulations, as in effect on 
June 10, 1997, subject to modification by the President under 
subsection (e).
  [(c) Time Limit.--Written objections under subsection (a) to 
an export or reexport shall be raised within 10 days after the 
notification is received under subsection (a). If such a 
written objection to the export or reexport of a computer is 
raised, the computer may be exported or reexported only 
pursuant to a license issued by the Secretary of Commerce under 
the Export Administration Regulations of the Department of 
Commerce, without regard to the licensing exceptions otherwise 
authorized under section 740.7 of title 15 of the Code of 
Federal Regulations, as in effect on June 10, 1997. If no 
objection is raised within the 10-day period, the export or 
reexport is authorized.
  [(d) Adjustment of Composite Theoretical Performance.--The 
President, in consultation with the Secretary of Commerce, the 
Secretary of Defense, the Secretary of Energy, the Secretary of 
State, and the Director of the Arms Control and Disarmament 
Agency, may establish a new composite theoretical performance 
level for purposes of subsection (a). Such new level shall not 
take effect until 60 days after the President submits to the 
congressional committees designated in section 1215 a report 
setting forth the new composite theoretical performance level 
and the justification for such new level. Each report shall, at 
a minimum--
          [(1) address the extent to which high performance 
        computers of a composite theoretical level between the 
        level established in subsection (a) or such level as 
        has been previously adjusted pursuant to this section 
        and the new level, are available from other countries;
          [(2) address all potential uses of military 
        significance to which high performance computers at the 
        new level could be applied; and
          [(3) assess the impact of such uses on the national 
        security interests of the United States.
  [(e) Adjustment of Covered Countries.--
          [(1) In general.--The President, in consultation with 
        the Secretary of Commerce, the Secretary of Defense, 
        the Secretary of Energy, the Secretary of State, and 
        the Director of the Arms Control and Disarmament 
        Agency, may add a country to or remove a country from 
        the list of covered countries in subsection (b), except 
        that a country may be removed from the list only in 
        accordance with paragraph (2).
          [(2) Deletions from list of covered countries.--The 
        removal of a country from the list of covered countries 
        under subsection (b) shall not take effect until 120 
        days after the President submits to the congressional 
        committees designated in section 1215 a report setting 
        forth the justification for the deletion.
          [(3) Excluded countries.--A country may not be 
        removed from the list of covered countries under 
        subsection (b) if--
                  [(A) the country is a ``nuclear-weapon 
                state'' (as defined by Article IX of the Treaty 
                on the Non-Proliferation of Nuclear Weapons) 
                and the country is not a member of the North 
                Atlantic Treaty Organization; or
                  [(B) the country is not a signatory of the 
                Treaty on the Non-Proliferation of Nuclear 
                Weapons and the countryis listed on Annex 2 to 
the Comprehensive Nuclear Test-Ban Treaty.
  [(f) Classification.--Each report under subsections (d) and 
(e) shall be submitted in an unclassified form and may, if 
necessary, have a classified supplement.
  [(g) Delegation of Objection Authority Within the Department 
of Defense.--For the purposes of the Department of Defense, the 
authority to issue an objection referred to in subsection (a) 
shall be executed for the Secretary of Defense by an official 
at the Assistant Secretary level within the office of the Under 
Secretary of Defense for Policy. In implementing subsection 
(a), the Secretary of Defense shall ensure that Department of 
Defense procedures maximize the ability of the Department of 
Defense to be able to issue an objection within the 10-day 
period specified in subsection (c).
  [(h) Calculation of 60-Day Period.--The 60-day period 
referred to in subsection (d) shall be calculated by excluding 
the days on which either House of Congress is not in session 
because of an adjournment of the Congress sine die.

[SEC. 1212. REPORT ON EXPORTS OF HIGH PERFORMANCE COMPUTERS.

  [(a) Report.--Not later than 60 days after the date of the 
enactment of this Act, the President shall provide to the 
congressional committees specified in section 1215 a report 
identifying all exports of digital computers with a composite 
theoretical performance of more than 2,000 millions of 
theoretical operations per second (MTOPS) to all countries 
since January 25, 1996. For each export, the report shall 
identify--
          [(1) whether an export license was applied for and 
        whether one was granted;
          [(2) the date of the transfer of the computer;
          [(3) the United States manufacturer and exporter of 
        the computer;
          [(4) the MTOPS level of the computer; and
          [(5) the recipient country and end user.
  [(b) Additional Information on Exports to Certain 
Countries.--In the case of exports to countries specified in 
subsection (c), the report under subsection (a) shall identify 
the intended end use for the exported computer and the 
assessment by the executive branch of whether the end user is a 
military end user or an end user involved in activities 
relating to nuclear, chemical, or biological weapons or missile 
technology. Information provided under this subsection may be 
submitted in classified form if necessary.
  [(c) Covered Countries.--For purposes of subsection (b), the 
countries specified in this subsection are--
          [(1) the countries listed as ``Computer Tier 3'' 
        eligible countries in section 740.7(d) of title 15 of 
        the Code of Federal Regulations, as in effect on June 
        10, 1997; and
          [(2) the countries listed in section 740.7(e) of 
        title 15 of the Code of Federal Regulations, as in 
        effect on June 10, 1997.

[SEC. 1213. POST-SHIPMENT VERIFICATION OF EXPORT OF HIGH PERFORMANCE 
                    COMPUTERS.

  [(a) Required Post-Shipment Verification.--The Secretary of 
Commerce shall conduct post-shipment verification of each 
digital computer with a composite theoretical performance of 
more than 2,000 millions of theoretical operations per second 
(MTOPS) that is exported from the United States, on or after 
the date of the enactment of this Act, to a country specified 
in subsection (b).
  [(b) Covered Countries.--For purposes of subsection (a), the 
countries specified in this subsection are the countries listed 
as ``Computer Tier 3'' eligible countries in section 740.7 of 
title 15 of the Code of Federal Regulations, as in effect on 
June 10, 1997, subject to modification by the President under 
section 1211(e).
  [(c) Annual Report.--The Secretary of Commerce shall submit 
to the congressional committees specified in section 1215 an 
annual report on the results of post-shipment verifications 
conducted under this section during the preceding year. Each 
such report shall include a list of all such items exported 
from the United States to such countries during the previous 
year and, with respect to each such export, the following:
          [(1) The destination country.
          [(2) The date of export.
          [(3) The intended end use and intended end user.
          [(4) The results of the post-shipment verification.
  [(d) Explanation When Verification Not Conducted.--If a post-
shipment verification has not been conducted in accordance with 
subsection (a) with respect to any such export during the 
period covered by a report, the Secretary shall include in the 
report for that period a detailed explanation of the reasons 
why such a post-shipment verification was not conducted.
  [(e) Adjustment of Performance Levels.--Whenever a new 
composite theoretical performance level is established under 
section 1211(d), that level shall apply for purposes of 
subsection (a) of this section in lieu of the level set forth 
in subsection (a).

[SEC. 1214. GAO STUDY ON CERTAIN COMPUTERS; END USER INFORMATION 
                    ASSISTANCE.

  [(a) In General.--The Comptroller General of the United 
States shall submit to the congressional committees specified 
in section 1215 a study of the national security risks relating 
to the sale of computers with a composite theoretical 
performance of between 2,000 and 7,000 millions of theoretical 
operations per second (MTOPS) to end users in countries 
specified in subsection (c). The study shall also analyze any 
foreign availability of computers described in the preceding 
sentence and the impact of such sales on United States 
exporters.
  [(b) End User Information Assistance to Exporters.--The 
Secretary of Commerce shall establish a procedure by which 
exporters may seek information on questionable end users in 
countries specified in subsection (c) who are seeking to obtain 
computers described in subsection (a).
  [(c) Covered Countries.--For purposes of subsections (a) and 
(b), the countries specified in this subsection are the 
countries listed as ``Computer Tier 3'' eligible countries in 
section 740.7(d) of title 15 of the Code of Federal 
Regulations, as in effect on June 10, 1997.

[SEC. 1215. CONGRESSIONAL COMMITTEES.

  [For purposes of sections 1211(d), 1212(a), 1213(c), and 
1214(a) the congressional committees specified in those 
sections are the following:
          [(1) The Committee on Banking, Housing, and Urban 
        Affairs and the Committee on Armed Services of the 
        Senate.
          [(2) The Committee on International Relations and the 
        Committee on Armed Services of the House of 
        Representatives.]

           *       *       *       *       *       *       *

                     Congress of the United States,
                                  House of Representatives,
                                     Washington, DC, March 8, 2002.
    Mr. Chairman, due to the enhanced security measures around 
the Capitol, I was unable to return to the committee hearing 
room until just after the vote had concluded on the Manager's 
Amendment to H.R. 3581, the Export Administration Act of 2001. 
Please let the record reflect that had I been present on 
Wednesday, March 2, 2002, I would have voted yea, in favor of 
the Manager's Amendment to H.R. 2581.
            Thank you,
                                                       Robin Hayes.

                  DISSENTING VIEWS OF HON. GENE TAYLOR

    Mr. Chairman, I voted not to favorably report H.R. 2581 to 
the House because I believe that enactment of this legislation 
will make it easier to export technology that may ultimately be 
used by those who seek to threaten or bring harm upon the 
national security interests of the United States.
    I applaud the efforts of Chairman Stump in offering his 
``manager's amendment'' to H.R. 2581 which addressed the 
obvious flaws of the underlying bill. Unfortunately, I believe 
that this measure may contain other provisions that, if 
enacted, unintentionally weaken existing national security 
safeguards that protect the flow of sensitive dual-use 
technology to the global marketplace.
    I regret that H.R. 2581 was sent to this committee under 
sequential referral and that such a small period of time was 
allotted to us to ensure that the bill was properly considered. 
The subject of export control of dual-use technology is a grave 
matter. It demands the full attention of this committee without 
unrealistic time constraints being attached to it. Legislation 
that makes far-reaching changes to such a complex area of 
national security policy should never be considered in haste.
    Therefore, I could not in good conscience consent to this 
committee's action to positively report H.R. 2581 to the House.

                                                       Gene Taylor.

  DISSENTING VIEWS OF REPRESENTATIVES ADAM SMITH, ELLEN TAUSCHER, AND 
                              RICK LARSEN

    We are writing to express serious reservations with H.R. 
2581 as amended and passed by the House Armed Services 
Committee. The underlying version of the Export Administration 
Authorization (EAA) that we considered--reported by the House 
International Relations Committee--had fundamental flaws. 
Instead of making progress toward improving this legislation, 
we believe the amendments adopted by our committee moved H.R. 
2581 further in the wrong direction. As such, we voted against 
this measure and would like to outline some of the flaws that 
we believe undermine efforts to develop and implement a new 
effective system of national security export controls.
    1. The export of high performance computing technology 
amendment will tie the President's hands by ordering him to 
develop a product-specific export monitoring and control 
system. H.R. 2581 does not dictate to the President how he 
should control any other specific class of products and 
technology. It doesn't tell the President how, for example, to 
control products and technology used to produce chemical and 
biological weapons. The President, drawing on the expertise of 
the Departments of Defense, Commerce, State and Energy, is 
capable of deciding how high performance computing technology 
should be controlled for national security purposes. The 
Administration is already considering a range of options for 
improved computer export controls. This amendment is 
counterproductive since it prejudges those deliberations.
    2. The deemed export provision will also tie the 
President's hands and complicate valuable science exchanges 
between American companies and our allies. The Administration 
has already recognized the need to improve the export control 
system for deemed exports. Rather than forcing a particular 
system on the President, this Committee should provide him the 
flexibility to draw on the expertise in the Departments of 
Defense, Commerce, State and Energy to develop and implement 
the best possible system.
    3. By substituting ``could'' for ``would'', the presumption 
of denial and the license review process create such a vague 
statutory standard that the authority to administer export 
controls in a manner that effectively advances U.S. national 
security will be compromised. In practice, such a vague 
standard will frustrate the effective administration of export 
controls by misdirecting focus and resources away from exports 
that are most relevant to U.S. national security interests.
    4. The foreign availability and mass market amendment is 
another example of a proposal that is problematic. If a product 
is either available from foreign sources or available in such 
mass quantities as to be impossible to control, then a related 
multilateral export control regime is flawed since it makes no 
sense to use scarce resources to control products that are not 
susceptible to being controlled.
    5. The interagency dispute resolution process is a problem. 
It will force the President to become an export licensing 
officer since the requirement of unanimous concurrence at the 
interagency level will clearly force the President to become 
involved.
    6. The export of commercial communications satellites to 
NATO allies and other friendly countries will continue to be a 
problem for US manufacturers by dropping Title VII of the HIRC-
reported bill. The HIRC amendment had retained all the national 
security provisions written into law by this Committee in 1998 
and 1999 and also maintained all current legislative and 
administrative bars to launching in China. The deletion of this 
provision will simply make it easier for foreign competitors of 
this important industry to undermine our US companies.
    We believe that speedy passage of effective EAA legislation 
is critical to heightening our national security and 
strengthening our nation's economy. Unfortunately, as adopted 
by our committee, this legislation falls short on both of these 
goals. In addition, we are attaching a letter sent by House 
Democratic Leader Gephardt to Speaker Hastert--we believe this 
letter clearly outlines why passage of EAA is so crucial and we 
echo his calls for swift movement on this legislation.
    We look forward to continuing our work on this important 
measure as it moves through the legislative process and to the 
Floor of the House.

                                   Adam Smith.
                                   Ellen Tauscher.
                                   Rick Larsen.

                                   
                                   
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