U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

99–006

" ! HOUSE OF REPRESENTATIVES 107TH CONGRESS

2nd Session

REPT. 107–297

2002

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

(II)

HOUSE COMMITTEE ON ARMED SERVICES

ONE HUNDRED SEVENTH CONGRESS

BOB STUMP, Arizona, Chairman

DUNCAN HUNTER, California

JAMES V. HANSEN, Utah

CURT WELDON, Pennsylvania

JOEL HEFLEY, Colorado

JIM SAXTON, New Jersey

JOHN M. MCHUGH, New York

TERRY EVERETT, Alabama

ROSCOE G. BARTLETT, Maryland

HOWARD P. ‘‘BUCK’’ MCKEON, California

J.C. WATTS, JR., Oklahoma

MAC THORNBERRY, Texas

JOHN N. HOSTETTLER, Indiana

SAXBY CHAMBLISS, Georgia

VAN HILLEARY, Tennessee

WALTER B. JONES, North Carolina

LINDSEY GRAHAM, South Carolina

JIM RYUN, Kansas

BOB RILEY, Alabama

JIM GIBBONS, Nevada

ROBIN HAYES, North Carolina

HEATHER WILSON, New Mexico

KEN CALVERT, California

ROB SIMMONS, Connecticut

ANDER CRENSHAW, Florida

MARK STEVEN KIRK, Illinois

JO ANN DAVIS, Virginia

EDWARD L. SCHROCK, Virginia

W. TODD AKIN, Missouri

RANDY FORBES, Virginia

JEFF MILLER, Florida

JOE WILSON, South Carolina

IKE SKELTON, Missouri

JOHN M. SPRATT, JR., South Carolina

SOLOMON P. ORTIZ, Texas

LANE EVANS, Illinois

GENE TAYLOR, Mississippi

NEIL ABERCROMBIE, Hawaii

MARTIN T. MEEHAN, Massachusetts

ROBERT A. UNDERWOOD, Guam

ROD R. BLAGOJEVICH, Illinois

SILVESTRE REYES, Texas

TOM ALLEN, Maine

VICTOR F. SNYDER, Arkansas

JIM TURNER, Texas

ADAM SMITH, Washington

LORETTA SANCHEZ, California

JAMES H. MALONEY, Connecticut

MIKE MCINTYRE, North Carolina

CIRO D. RODRIGUEZ, Texas

CYNTHIA A. MCKINNEY, Georgia

ELLEN TAUSCHER, California

ROBERT BRADY, Pennsylvania

ROBERT E. ANDREWS, New Jersey

BARON P. HILL, Indiana

MIKE THOMPSON, California

JOHN B. LARSON, Connecticut

SUSAN A. DAVIS, California

JAMES R. LANGEVIN, Rhode Island

RICK LARSEN, Washington

ROBERT S. RANGEL, Staff Director

ERIN C. CONATON, Professional Staff Member

JARROD TISDELL, Research Assistant

(III)

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 conVerDate 11-MAY-2000 06:28 Mar 09, 2002 Jkt 099006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6601 E:\HR\OC\HR297P2.XXX pfrm01 PsN: HR297P2
2

trol 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:

3

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

4

(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.

5

(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—

6

(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

7

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

8

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.

9

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 threshold following

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 forVerDate 11-MAY-2000 06:28 Mar 09, 2002 Jkt 099006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR297P2.XXX pfrm01 PsN: HR297P2
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eign 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, email, 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 SecVerDate 11-MAY-2000 06:28 Mar 09, 2002 Jkt 099006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6602 E:\HR\OC\HR297P2.XXX pfrm01 PsN: HR297P2
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retary’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; rather the 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.

12

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

13

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 made

under 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

14

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

15

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.

16

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

17

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 in the 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.

18

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-yougo 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).

19

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

20

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-yougo 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.

21

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.

22

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.

23

24

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

* * * * * * *

øSubtitle B—Export Controls on High Performance

Computers

øSEC. 1211. EXPORT APPROVALS FOR HIGH PERFORMANCE COMPUTERS.

ø(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.

ø(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).

ø(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

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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.

ø(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—

ø(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;

ø(2) address all potential uses of military significance to

which high performance computers at the new level could be

applied; and

ø(3) assess the impact of such uses on the national security

interests of the United States.

ø(e) ADJUSTMENT OF COVERED COUNTRIES.—

ø(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).

ø(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.

ø(3) EXCLUDED COUNTRIES.—A country may not be removed

from the list of covered countries under subsection (b) if—

ø(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

ø(B) the country is not a signatory of the Treaty on the

Non-Proliferation of Nuclear Weapons and the country is

listed on Annex 2 to the Comprehensive Nuclear Test-Ban

Treaty.

ø(f) CLASSIFICATION.—Each report under subsections (d) and (e)

shall be submitted in an unclassified form and may, if necessary,

have a classified supplement.

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ø(g) DELEGATION OF OBJECTION AUTHORITY WITHIN THE DEPART- MENT 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).

ø(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.

øSEC. 1212. REPORT ON EXPORTS OF HIGH PERFORMANCE COMPUTERS.

ø(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— ø(1) whether an export license was applied for and whether

one was granted;

ø(2) the date of the transfer of the computer;

ø(3) the United States manufacturer and exporter of the

computer;

ø(4) the MTOPS level of the computer; and

ø(5) the recipient country and end user.

ø(b) ADDITIONAL INFORMATION ON EXPORTS TO CERTAIN COUN- TRIES.—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.

ø(c) COVERED COUNTRIES.—For purposes of subsection (b), the

countries specified in this subsection are— ø(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

ø(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.

øSEC. 1213. POST-SHIPMENT VERIFICATION OF EXPORT OF HIGH PERFORMANCE COMPUTERS.

ø(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).

ø(b) COVERED COUNTRIES.—For purposes of subsection (a), the

countries specified in this subsection are the countries listed as

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‘‘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).

ø(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:

ø(1) The destination country.

ø(2) The date of export.

ø(3) The intended end use and intended end user.

ø(4) The results of the post-shipment verification.

ø(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.

ø(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).

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

ø(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.

ø(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).

ø(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.

øSEC. 1215. CONGRESSIONAL COMMITTEES.

øFor purposes of sections 1211(d), 1212(a), 1213(c), and 1214(a)

the congressional committees specified in those sections are the following:

ø(1) The Committee on Banking, Housing, and Urban Affairs

and the Committee on Armed Services of the Senate.

ø(2) The Committee on International Relations and the Committee on Armed Services of the House of Representatives.¿

* * * * * * *

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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.

(29)

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.

(30)

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

31

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.

(32)

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