Order Code RL31832
CRS Report for Congress
Received through the CRS Web
The Export Administration Act:
Evolution, Provisions, and Debate
Updated June 7, 2006
Ian F. Fergusson
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

The Export Administration Act:
Evolution, Provisions, and Debate
Summary
The 109th Congress may consider legislation to renew and to reauthorize the
Export Administration Act (EAA). On December 16, 2005, H.R. 4572 (Hyde) was
introduced and referred to the International Relations Committee. The bill would
revise the EAA, especially in the areas of penalties, enforcement, and U.S. policy
towards multilateral export control regimes. Through the EAA, Congress delegates
to the executive branch its express constitutional authority to regulate foreign
commerce by controlling exports. The EAA provides the statutory authority for
export controls on sensitive dual-use goods and technologies: items that have both
civilian and military applications, including those items that can contribute to the
proliferation of nuclear, biological, and chemical weaponry. The EAA, which
originally expired in 1989, periodically has been reauthorized for short periods of
time, with the last incremental extension expiring in August 2001. At other times
and currently, the export licensing system created under the authority of EAA has
been continued by the invocation of the International Emergency Economic Powers
Act (IEEPA). EAA confers upon the President the power to control exports for
national security, foreign policy or short supply purposes. It also authorizes the
President to establish export licensing mechanisms for items detailed on the
Commerce Control List (CCL), and it provides some guidance and places certain
limits on that authority. The CCL currently provides detailed specifications for about
2,400 dual-use items including equipment, materials, software, and technology
(including data and know-how) likely requiring some type of export license from the
Commerce Department’s Bureau of Industry and Security (BIS). BIS administers the
Export Administration Regulations (EAR), which, in addition to the CCL, describe
licensing policy and procedures such as commodity classification, license
applications, and interagency dispute resolution procedures.
In debates on export administration legislation, parties often fall into two camps:
those who primarily want to liberalize controls in order to promote exports, and those
who believe that further liberalization may compromise national security goals.
While it is widely agreed that exports of some goods and technologies can adversely
affect U.S. national security and foreign policy, some believe that current export
controls can be detrimental to U.S. businesses and to the U.S. economy. According
to this view, the resultant loss of competitiveness, market share, and jobs can harm
the U.S. economy, and that harm to particular U.S. industries and to the economy
itself can negatively impact U.S. security. Others believe that security concerns must
be paramount in the U.S. export control system and that export controls can be an
effective method to thwart proliferators, terrorist states, and countries that can
threaten U.S. national security interests. Controversies have arisen with regard to
particular exports such as high performance computers, encryption technology,
stealth materials, satellites, machine tools, “hot-section” aerospace technology, and
the issue of “deemed exports.” The competing perspectives on export controls have
clearly been manifested in the debate over foreign availability and the control of
technology, the efficacy of multilateral control regimes, the licensing process and
organization of the export control system, and the economic effects of U.S. export
controls. This report will be updated periodically.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Evolution of the Export Administration Act . . . . . . . . . . . . . . . . . . . . . . . . . 2
107th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
H.R. 4572 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Analysis of Provisions in EAA Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Types of Control Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
National Security Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Foreign Policy Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Short Supply Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Control List and Licensing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Commerce Control List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
License Review Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Issues Concerning IEEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Technology and Commodities of Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
High Performance Computers (HPCs) . . . . . . . . . . . . . . . . . . . . . . . . . 13
Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Stealth Technology and Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Satellites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Machine Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Deemed Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Competing Perspectives in the
Export Control Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Availability and the Controllability of Technology . . . . . . . . 18
The Effectiveness of Multilateral Regimes . . . . . . . . . . . . . . . . . . . . . 21
The Licensing Process and Organization of the Export Control
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

The Export Administration Act:
Evolution, Provisions, and Debate
Introduction
Legislation to rewrite and reauthorize the Export Administration Act of 1979
(EAA)(P.L.96-72) again may be considered in the 109th Congress. On December 16,
2005, H.R. 4572 (Hyde) was introduced and referred to the International Relations
Committee. The bill would revise the EAA, especially in the areas of penalties,
enforcement, and U.S. policy towards multilateral export control regimes. The EAA
provides the statutory authority for export controls on sensitive dual-use goods and
technologies, items that have both civilian and military applications, including those
items that can contribute to the proliferation of nuclear, biological and chemical
weaponry. The EAA, which originally expired in 1989, periodically has been
reauthorized for short periods of time, with the last incremental extension expiring
in August 2001. At others times, including currently, the export licensing system
created under the authority of EAA has been continued by the invocation of the
International Emergency Economic Powers Act (IEEPA)(P.L. 95-223).
The EAA is the statutory authority for the Export Administration Regulations
(EAR), which are administered by the Bureau of Industry and Security1 (BIS) located
in the Department of Commerce. These regulations establish the framework for
regulating exports of dual-use, potentially sensitive commodities, software,
computers, and technology. Exports are restricted by item, country, and recipient
entity. The EAA, which was written and amended during the Cold War, focuses on
the regulation of exports of those civilian goods and technology that have military
applications (dual-use items). Export controls under the EAA were based on
strategic relationships, threats to U.S. national security, international business
practices, and commercial technologies many of which have changed dramatically
in the last 20 years. Some Members of Congress and most U.S. business
representatives see a need to liberalize U.S. export regulations to allow American
companies to engage more fully in international competition for sales of high-
technology goods. Other Members and national security analysts contend that
liberalization of export controls over the last decade has contributed to foreign threats
to U.S. national security, that some controls should be tightened, and that Congress
should weigh further liberalization carefully.
This paper discusses the Export Administration Act in terms of its evolution in
the 20th century, its major features including the types of controls authorized by the
act, the Commerce Control List and export licensing procedures, and issues
concerning the maintenance of export controls under IEEPA. It then highlights
1 This agency was known as the Bureau of Export Administration prior to April 2002.

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several controlled commodities that have been featured prominently in export control
discussions. Finally, it discusses competing business and national security
perspectives concerning several of more contentious themes in the export control
debate: the controllability of technology, the effectiveness of multilateral control
regimes, the organization of the export control system, and the impact of export
controls on the U.S. economy and business.
The Evolution of the Export Administration Act
Export controls in time of war have been an element of U.S. policy for almost
one hundred years.2 The end of WWII, however, ushered in a new era in which
export control policy would become an extensive peacetime undertaking. The start
of the cold war led to a major refocusing of export control policy on the Soviet-Bloc
countries. Enactment of the Export Control Act of 1949 (P.L. 81-11) was a formal
recognition of the new security threat and of the need for an extensive peacetime
export control system.
The 1949 Act identified three possible reasons for imposing export controls.
Short-supply controls were to be used to prevent the export of scarce goods that
would have a deleterious impact on U.S. industry and national economic
performance. Foreign policy controls were to be used by the President to promote
the foreign policy of the United States. The broad issues of regional stability, human
rights, anti-terrorism, missile technology, and chemical and biological warfare have
come to be controlled under this rubric. National security controls were to be used
to restrict the export of goods and technology, including nuclear non-proliferation
items, that would make a significant contribution to the military capability of any
country that posed a threat to the national security of the United States.
Coincident with the establishment of the post-war U.S. export control regime
was the establishment of a multilateral counterpart involving our NATO allies. The
large amount of critical technology being transferred from the United States to the
NATO allies, and the growing capability for technological development by the allies
themselves required the establishment of a multilateral control regime. Toward this
end, the Coordinating Committee for Multilateral Export Controls (CoCom) was
established in 1949. CoCom controls were not a mirror image of U.S. controls but
generally did reflect a uniformly high level of restrictions.
With little change in the perceived threat, the Export Control Act was renewed
largely without amendment in 1951, 1953, 1956, 1958, 1960, 1962, and 1965. With
the onset of the U.S.-Soviet era of “detente” in the late 1960s, however, the first
serious reexamination and revision of the U.S. export control system occurred. At
2 In the first half of the 20th century, war, or the imminent threat of war, led to the Trading
With The Enemy Act of 1917 and the Neutrality Act of 1935. In 1940, Congress increased
presidential power over the export of militarily significant goods and technology with the
passage of P. L. 76-703, “An Act to Expedite and Strengthen the National Defense.” In each
of these instances the rationale for control was the necessity of not giving aid and comfort
to the nation’s enemies.

CRS-3
this time, the growing importance of trade to the U.S. economy and those of our
allies began to exert significant political pressure for some liberalization of export
controls. Congress passed the Export Administration Act of 1969 to replace the near-
embargo characteristic of the Export Control Act of 1949. The continued shift of
policy toward less restrictive export controls continued in the renewal of the act in
1974 and 1977. The act was comprehensively rewritten in 1979, and this act forms
the basis of the export control system today. It was amended in 1985, and some
moderate further liberalization occurred in the following years.
The collapse of the Soviet Union in 1989, an event some have partially
attributed to the success of U.S. cold war export control policy, marked a dramatic
change in the nature of the external threat the United States. Beginning with the
George H.W. Bush Administration, the export control system has been reduced in
scope and streamlined, but the basic structure of the law remains intact. There are
many who see a need to revamp the act, whether to enhance exports, to shift the
focus to current national security threats, or to increase penalties for violations.
The dissolution of CoCom in 1994 and its replacement by the Wassenaar
Arrangement in 1997, also significantly changed the export control environment.3
This new multilateral arrangement is more loosely structured than CoCom and
members do not have the authority to block transactions of other members.
Generally more liberal control practices abroad raise important questions about the
ultimate effectiveness of U.S. export controls (under either the current or a revised
EAA) in achieving national security objectives and the fairness of unilateral controls
to American industry.
Congress has not been able to agree on measures to reform the Export
Administration Act that regularly have been introduced since the 101st Congress. The
export control process was continued from 1989-1994 by temporary statutory
extensions of EAA and by invocation of the International Emergency Economic
Powers Act (IEEPA). Thereafter, export controls were continued for six years under
the authority of Executive Order No. 12924 of August 19, 1994, issued under IEEPA
authority. Many of those who favor reforming the act, whether to liberalize or to
tighten controls, contend that operating under IEEPA imposes constraints on the
administration of the export control process and makes it vulnerable to legal
challenge, thus undermining its effectiveness. (See p.10) Legislation passed by the
House and Senate and signed by the President on November 13, 2000 (P.L. 106-508)
extended the EAA of 1979 until August 20, 2001, temporarily removing the need to
operate the export control system under IEEPA powers. Since then, export control
authority has again been operating under IEEPA provisions pursuant to Executive
Order 13222, issued August 17, 2001.4
3 For details on Wassenaar, see CRS Report RS20517, Military Technology and
Conventional Weapons Export Controls: The Wassenaar Arrangement
, by Richard F.
Grimmett.
4 IEEPA provisions are renewed yearly through Presidential determination, the most recent
being on August 2, 2005, and contained in 70 Federal Register 45273 (August 5, 2005).

CRS-4
Legislation to rewrite the Export Administration Act has been introduced in the
last several Congresses. In the 104th Congress, the House passed the Omnibus Export
Administration Act of 1996 (H.R. 361) on July 16, 1996, after hearings and
consideration by the Committee on International Relations, the Committee on Ways
and Means, and by the Committee on National Security. On July 17, 1996, the bill
was received by the Senate and referred to the Committee on Banking, Housing and
Urban Affairs, which held a hearing but took no further action. Export control
legislation (H.R. 1942) was introduced in the 105th Congress, but no action was
taken. In the 106th Congress, the Export Administration Act of 1999 (S. 1712) was
introduced by Senator Michael P. Enzi. On September 23, 1999 the Senate Banking
Committee voted unanimously (20-0) to report this legislation to the Senate floor
(S.Rept. 106-180). However, action by the Senate on S. 1712 was not taken due to
the concerns of several Senators about the bill’s impact on national security.
107th Congress. Export control legislation was again introduced in the 107th
Congress. On January 23, 2001, Senator Enzi introduced the Export Administration
Act of 2001 (S. 149). Hearings were held on this legislation by the Senate Banking
Housing and Urban Affairs Committee in February 2001, and the measure was
reported favorably for consideration by the Senate by a vote of 19-1 on March 22,
2001 (S.Rept. 107-10). The Senate debated the legislation on September 4-6, 2001,
and it passed with three amendments by a vote of 85-14. This bill was similar though
not identical to S. 1712, introduced by Senator Enzi in the 106th Congress.
The House International Relations Committee held hearings on EAA and export
controls on May 23, June 12, and July 11, 2002. The House version of the Export
Administration Act, H.R. 2581, was introduced on July 20, 2001 by Representative
Benjamin Gilman. As introduced, it was identical to S. 149, except for the additions
of provisions related to oversight of nuclear transfers to North Korea. At the markup
session on August 1, the House International Relations Committee passed the
legislation with 35 amendments. The House Armed Services Committee (HASC) and
the House Permanent Select Committee on Intelligence(HPSCI) received H.R. 2581
through sequential referral. On March 6, 2002, HASC further amended H.R. 2581
and reported out the legislation by a vote of 44-6 (H.Rept. 107-297). HPSCI held
hearings on the legislation but did not alter it. The legislation received no further
consideration in the 107th Congress. The Administration supported S. 149 and
opposed House attempts to revise it. In the 108th Congress, Representative Dreier
introduced EAA legislation (H.R. 55), which was identical to S. 149, but no action
was taken on it.
The National Defense Authorization Act (NDAA) has also been used
periodically as a vehicle to attempt to amend the export control regime. In 2004, the
House version of NDAA 2005 (H.R. 4200) contained two export control-related
provisions that would have affected dual-use export controls. The first (Sec. 1404)
would have required a license for dual-use goods controlled under the Export
Administration Regulations (EAR) for technology and items contained in the
Militarily Critical Technology List (MCTL), a list compiled by the Department of
Defense (DOD) (see p. 6). The provision is in response to a March 2004 DOD study,
which noted that several MCTL technologies were not controlled under the EAR or
the International Traffic in Arms Regulations (ITAR). The second provision (Sec.
1405) would have required that exporters obtain licenses for items controlled under

CRS-5
the EAR or the ITAR to a destination if that destination had previously exported such
items to China. In addition, the granting of the license would be conditional on the
written assurance of the foreign government or entity not to transfer the licensed item
without the written consent of the President. The House NDAA report (H.Rept. 108-
491) expresses concern that military embargoes on China imposed after the
Tiananamen Square massacre may be repealed which may lead to the transfer of such
U.S. goods or technology to China. However, neither of these provisions were
contained in the conference report (H.Rept. 108-767) signed by the President on
October 28, 2004.
H.R. 4572. A bill to revise and extend the Export Administration Act was
introduced by Representative Henry Hyde on December 16, 2006, and was referred
to House International Relations Committee. It is not a comprehensive overhaul of
1979 EAA, but rather one that addresses penalties, enforcement, and the relation of
the United States to multilateral control regimes. According to an administration
official, the legislation reflects “targeted changes ... that all sides can be supportive
of.”5 The legislative addresses three areas of export controls: penalties, enforcement,
and multilateral export control regimes. The bill also extends the expired EAA for
two years from the date of enactment, and provides authorization of appropriations
for export control activities.
Penalties. The proposed legislation would revise the penalty structure and
increase penalties for export control violations. The bill raises criminal penalties for
individuals to the greater of $1 million or 10 times the value of the export, and the
term of potential imprisonment to ten years. For firms, it raises penalties to the
greater of $5 million or 10 times the value of the export. Previously, the base penalty
was the greater of $50,000 or 5 times the value of the export, or five years
imprisonment. Certain violations, such as those for exports controlled for foreign
policy purposes could receive higher penalties. The bill also raises civil penalties
from $10,000 (or $100,000 for national security controls violations) to $500,000, and
it expands the list of statutory violations that could result in a ten-year denial of
export privileges.
Enforcement. The bill also restates the enforcement provisions to account for
the current bureaucratic structure of Customs in the Department of Homeland
Security. It directs the Secretary of Commerce to publish and update best practices
guidelines for effective export control compliance programs. It also expands the
confidentiality provisions beyond licenses and licensing activity to include
classification requests, enforcement activities, or information obtained or supplied
concerning U.S. multilateral commitments. The bill includes new language governing
the use of funds for undercover investigations and operations and establishes audit
and reporting requirements for such investigations. It also authorizes wiretaps in
enforcement of the act. Finally, the bill establishes an export enforcement fund using
proceeds from civil violations to fund investigative activity.
5 Peter Lichtenbaum, Assistant Secretary for Export Administration, “Administration Will
Press Congress to Renew EAA, but no Major Reform in Sight,” International Trade
Reporter
, January 19, 2006.

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Multilateral Control Regimes. The legislation establishes objectives for
U.S. participation in multilateral export control regimes. The bill seeks to insure that
multilateral export control regimes support the national security goals of the United
States through elucidation of common procedures, features, standards, and reporting
requirements.
Analysis of Provisions in EAA Legislation
Several principles and concepts have been common to the EAA and to efforts
to renew and reauthorize the legislation. Generally, these provisions set out the types
of export controls authorized (including national security, foreign policy and short
supply controls), licensing procedures, the license review process, and penalty and
enforcement procedures, the latter currently subject to IEEPA authority.
Types of Control Authority
Since the 1949 Act, U.S. dual-use export controls have restricted certain items
based on national security, foreign policy, or for the effect of domestic exports on the
national economy. These three categories form the basis by which items on the
Commerce Control List (CCL) (see below, p. 7) and items subject to the Export
Administration Regulations are controlled. In practice, the preponderance of items
on the CCL are controlled for both national security and foreign policy reasons with
different control standards determining the licensing policy of an item to a particular
country.
National Security Controls. The 1979 Act restricted the export of goods or
technology that could make a significant contribution to the military capabilities of
any other country or groups of countries that would prove detrimental to the national
security of the United States. National security control items fall under the National
Security licensing requirement of the EAR. The list “Country Group D-1” presently
serves as the list of controlled countries.6 Licenses for items controlled for national
security purposes are reviewed on a case-by-case basis and are approved if it is
determined the item is destined for civilian use or would not make a significant
contribution to the military potential of the country of destination.7
Pursuant to EAA, the goods and technology to be controlled for national
security purposes are identified by the Secretary of Defense and other appropriate
agencies. The Secretary of Defense and the Secretary of Commerce (the Secretary)
are obligated by the act to periodically review and revise the list. For this purpose,
6 This list currently includes Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia,
China (PRC), Estonia, Georgia, Iraq, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania,
Macau, Moldova, Mongolia, North Korea, Roumania, Russia, Tajikistan, Turkmenistan,
Ukraine, Uzbekistan, and Vietnam. ( EAR 15 C.F.R. 740, Supplement 1).
7 EAR, 15 C.F.R. 742.4.

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the Secretary of Defense maintains the Military Critical Technology List (MCTL).8
The national security based control list is also consistent with the control list of the
Wassenaar Arrangement. U.S. national security controls, however, do not cover items
that are covered under nuclear, chemical, biological or missile proliferation regimes,
or to countries covered by anti-terrorism controls. These items and destinations are
controlled for foreign policy purposes.
Foreign Availability. Items controlled for national security purposes are
subject to a foreign availability determination. Foreign availability exists when a
good is available to controlled countries from sources outside the United States in
“sufficient quantity and comparable quality” so that control of the item would be
ineffective.(Sec. 5(f)(1)(a)) The 1979 Act charges the Secretary, in conjunction with
the Secretary of Defense and other appropriate agencies, with determining on a
continuing basis whether any item currently subject to export control for reasons of
national security meets foreign availability status. Under EAA, a request to make a
foreign availability determination can be made by a license applicant or through the
initiative of the Secretary. If the Secretary makes a foreign availability determination,
the item must be decontrolled, although the President can overturn that decision with
a determination that decontrolling such items would be detrimental to the national
security of the United States. In such case, the President is directed to enter
negotiations with multilateral control partners to eliminate the availability in
question.
The 1979 EAA provided for the decontrol of items on the CCL determined to
have foreign availability, and it set guidance for the Secretary to make such
determinations. It gave the Secretary the ability to initiate such determinations and
it provided that license applicants could petition the Secretary to begin the
determination. The Secretary’s determination of foreign availability does not need
the concurrence of other agencies, but he must submit determinations to other
agencies as the Secretary considers appropriate. The bill also created the Office of
Foreign Availability to gather data for the Secretary to make foreign availability
determinations and to report to Congress on operations and improvements on the
ability to assess foreign availability. This office no longer exists. According to one
commentator, “this is, no doubt, largely because substantial activity in the 1980s and
early 1990s produced only meager results.”9
Mass Market. The concept of mass market status was proposed in EAA
legislation introduced in the 106th and 107th Congress. Neither the 1979 EAA nor
current regulations provides for decontrol of items based on mass market criterion.
Mass market status was defined to apply to items produced or made available for
sale in large volume or to multiple buyers. Under legislation introduced in the 106th
and 107th Congress, the item’s manner of distribution; its conduciveness to
commercial shipping; or its usefulness for intended purposes without modification
or service were also criteria considered when determining mass market status. This
feature proved to have been a controversial part of the legislation, and was cited as
8 The list can be seen at [http://www.dtic.mil/mctl].
9 William A. Root, United States Export Controls (Fourth Edition), (Aspen Law and
Business Publisher), 4-21 (2001 Supplement).

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a stumbling block in negotiations over the bill in the 107th Congress with some
Members arguing that its existence would provide for wholesale decontrol of
sensitive items.
Foreign Policy Controls. The EAA authorizes the President to control
exports for the purpose of promoting foreign policy objectives, complying with
international obligations, or deterring and punishing terrorism. Currently, foreign
policy controls are in place for anti-terrorism, regional stability, crime control, United
Nations sanctions purposes, unilateral embargoes and sanctions, and non-
proliferation objectives. This latter category includes adherence to multilateral non-
proliferation agreements in the areas of chemical and biological weapons, nuclear
proliferation, and missile technology.
The EAA attaches limitations on the use of foreign policy controls. Foreign
policy controls must be renewed on a yearly basis.10 It requires the President to
clearly state objectives and criteria for controls to be reported to Congress. It directs
the President to engage in negotiations to remove the foreign availability of items
controlled for foreign policy purposes, and it requires the President to impose
controls to comply with international obligations or treaties. Furthermore, it requires
a license for the export of certain items to countries that support international
terrorism. Additionally, foreign policy controls are not authorized for sales of
medicine or medical supplies, donations of food, medicines, seeds, and water
resource equipment intended to meet basic human needs, or for sales of food if the
controls would cause malnutrition or hardship. Controls on sales of agricultural
products and medicines have been further amended by the Trade Sanctions Reform
and Export Enhancement Act of 2000 (Title IX, P.L. 106-387).11
Enhanced Proliferation Control Initiative. Controls based on the end-use
or end-user of an item (also known as catch-all controls) are also administered as
foreign policy controls. They were introduced under the Enhanced Proliferation
Control Initiative (EPCI) of 1991, and they are contained in Part 744 of the EAR.
Catch-all controls require a license for export or reexport of any item, not just
specifically controlled items, if the applicant knows or is informed by BIS that item
will be used for nuclear, missile, chemical or biological proliferation activities. The
Bureau of Industry and Security (BIS) maintains an end-user list of entities requiring
licenses subject to EPCI.12 Current regulations prescribe a presumption of denial for
licenses to certain entities in Russia, China, Pakistan, India, and Israel and to foreign
terrorist organizations as designated by the Secretary of State.
Short Supply Controls. The 1979 EAA authorized restriction on the export
of goods and technology to protect domestic industry from shortages of scarce
10 For a description of the full range of foreign policy controls implemented, see BIS,
Foreign Policy Report 2004, available at
[http://www.bis.doc.gov/PoliciesAndRegulations/04ForPolControls].
11 See CRS Issue Brief IB10061, Exempting Food and Agricultural Products from U.S.
Economic Sanctions: Status and Implementation
, by Remy Jurenas.
12 EAR, 15 C.F.R. 744, Supplement 4.

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materials and the potential inflationary impact of foreign demand. Few short-supply
controls remain in force; they include restrictions on exports of crude oil, petroleum
derivatives, unprocessed western red cedar, and the export of horses by sea.13 The
EAA legislation proposed in the 107th Congress did not provide for short-supply
control authority.
The Control List and Licensing Procedures
Within the Department of Commerce, the Bureau of Industry and Security
administers the license application process. In FY2005, BIS reviewed 16,719
applications with a total value of approximately $36 billion, which included $23
billion in licenses for crude oil exports in return for refined petroleum. The value of
dual-use technology licenses, approximately $13 billion, represented 1.4% of total
U.S. exports in FY2005. BIS approved 14,100 (84%), denied 239 (1.4%), and
returned 2,380 (14%) license applications. Most applications for licenses are
referred to other government agencies for evaluation, extending the length of the
review process. The average processing time for referred license applications was 31
days, down from 36 days in FY2004. China was the largest destination for controlled
goods with 1,303 licenses approved valued at $2.4 billion, approximately 6% of the
value of total exports to China in FY2005. The greatest number of approved license
applications to all destinations was for thermal imaging and light intensive cameras,
accounting for 2,413 applications with a value of $68.2 million.14
Commerce Control List. The 1979 EAA directed the Secretary of
Commerce (Secretary) to create a control list, known in the Export Administration
Regulations as the Commerce Control List). The CCL includes items controlled for
national security, foreign policy, and short- supply purposes. Under foreign policy
controls, it incorporates the control lists of the multilateral non-proliferation regimes
to which the U.S. adheres. The CCL currently provides detailed specifications for
about 2,400 dual-use items including equipment, materials, software, and technology
(including data and know-how) likely requiring some type of export license. The
description of the item also enumerates the control(s) applicable to the item. In many
cases, items on the CCL will only require a license if going to a particular country.
In addition, items on the CCL often are eligible for license exceptions, a practice that,
while not requiring prior approval for an export, vests exporters with certain due
diligence and record-keeping requirements related to a given transaction. Yet some
products, even if shipped to a friendly nation, will require a license due to the high
risk of diversion to an unfriendly destination or because of the controversial nature
of the product. The end-use and the end-user can also trigger a restriction. The CCL
is periodically updated (with the benefit of significant input from other government
agencies) to decontrol broadly available items and to focus controls on critical
technologies and on key items in which the targeted countries are deficient.
Commodity Classification. The process by which an item is placed on the
CCL is known as commodity classification. This process has engendered
13 EAR, 15 C.F.R. 754.
14 BIS, 2005 Annual Report, p.5
[http://www.bis.doc.gov/News/2006/annualReport/BIS_annualReportComplete05.pdf].

CRS-10
considerable controversy in the debate over the EAA. The commodity classification
process directs the exporter to request from BIS a recommended classification for an
export item if that item does not correspond to an existing CCL listing. BIS is
required to refer these requests to State and Defense under certain referral criteria
promulgated in 1996. Commerce was criticized by the General Accounting Office
(GAO) and by a select committee of the U.S. House of Representatives investigating
improper transfers of U.S. technology to China (the Cox Commission) for the low
number of classifications the agency referred.15 Because of the differing licensing
requirements at State and Commerce, a classification decision that excludes input
from State and Defense may contribute to the export of items that, if referred, may
be found to fall under the jurisdiction of the State Department’s International Traffic
in Arms Regulations.
License Review Procedures. The EAA and the implementing Export
Administration Regulations (EAR) establish policies and procedures for the review
of license applications and the resolution of interagency disputes. Procedures
currently employed were created by Executive Order 12981,16 as amended, of
December 6, 1995. These procedures confer on the Secretary of Commerce (the
Secretary) the power to review and to determine the disposition of export licenses.
The Departments of State, Defense, and Energy have authority to review any licenses
submitted, and the Secretary may refer licenses to others as he deems appropriate.
These agencies may waive their right to review license applications for certain
commodities or to certain destinations.
Within nine days of a license application’s registration, the Secretary must seek
additional information, refer the application to other agencies, assure the security
classification is correct, return the application if a license is not required, grant the
application, or notify the applicant of denial. In case of review by another agency,
the reviewing agency must request any additional information from the Secretary
within 10 days. After reviewing the file, the reviewing agency may request
additional information which the Secretary shall promptly request from the applicant.
Within 30 days of receipt of the application, or of requested review information,
the agency must recommend approval or denial of the application, and provide
regulatory or statutory justification for a denial. If an agency fails to provide a
recommendation within 30 days, the agency is deemed to have no objection to the
decision of the Secretary. However, the license application is subject to several
actions that can ‘stop the clock’ on the license application.
Dispute Resolution. The 1995 Order created a three-level interagency
dispute resolution mechanism. The top tier of this structure is the Export
Administration Review Board (EARB), an entity itself created by Executive Order
15 See GAO Report 02-996, Export Controls: Processes for Determining Proper Control of
Defense Related Items Need Improvement, Sept. 2002; H.Rept. 105-851, U.S. National
Security and Military/Commercial Concerns with the People’s Republic of China, May 25,
1999.
16 EAR, 15 C.F.R. 750.4.

CRS-11
in 1970.17 The Board consists of the Secretary, who serves as Chair, and the
Secretaries of State, Defense, and Energy. The Chairman of the Joint Chiefs of Staff
and the Director of Central Intelligence are non-voting members. The Board may also
invite the heads of other agencies to participate as appropriate. Under the EARB is
the Advisory Committee on Export Policy (ACEP), which consists of the Assistant
Secretary for Export Administration, who serves as Chair, as well as the relevant
assistant Secretaries and appropriate officials from the agencies represented in the
EARB. The Operating Committee (OC) of the ACEP is the third tier which is made
up of representatives of the departments listed above. The Chair is selected by the
Secretary of Commerce and serves as the Executive Secretary of ACEP.
The dispute resolution process begins with the OC. The Chair reviews the
recommendations of the examining departments and informs them of his decision
within 14 days of the deadline for receiving agency recommendations. Any reviewing
department may appeal the decision of the Chair to the ACEP. An appeal may be
made within five days by an appointee of the President and must state the statutory
or regulatory basis for the appeal. The ACEP members review recommendations and
information and vote on the application within 11 days of such an appeal. Within
five days of a majority decision of the ACEP, a department head of a dissenting
agency may appeal the decision to the Secretary. Within 11 days of such an appeal,
the EARB must decide by majority vote on the disposition of the application. A
member of EARB may appeal this decision to the President within five days of the
application. The interagency appeal process must be completed within 90 days of the
registration of the application. However, the Order does not set a time frame for
Presidential consideration of a license decision.
BIS’s denial of an export license must be explicitly supported by the statutory
and regulatory basis for the denial, giving specific considerations and modifications
that would allow BIS to reconsider an application. An explicit appeal procedure is
specified in the EAR. One possible basis for appeal is an assessment of foreign
availability (see above, p.5). If the item in question can be shown to be readily
available from a non-U.S. source in sufficient quantity and of comparable quality
then a license denial may, in some cases, be reversed. In FY2005, BIS reported that
165 cases were escalated to the OC, and that a further 15 were examined by the
ACEP.18
Issues Concerning IEEPA19
When the 1979 EAA first expired in September 1990, President George H.W.
Bush extended existing export regulations by executive order, invoking emergency
authority contained in the International Emergency Economic Powers Act (IEEPA).20
17 Executive Order 11533, June 4, 1970; continued by Executive Order 12002, July 7, 1977.
18 BIS, 2005 Annual Report, p. 6.
19 This section was written by Jeanne Grimmett, Legislative Attorney, American Law
Division.
20 50 U.S.C. §§ 1701 et seq. See Exec. Order No. 12730, 55 Federal Register 40373 (1990).
(continued...)

CRS-12
As required by IEEPA, the President first declared a national emergency “with
respect to the unusual and extraordinary threat to the national security, foreign policy
and economy of the United States” posed by the expiration of the act. IEEPA-based
controls were later terminated during two temporary EAA extensions enacted in 1993
and 1994 as Congress attempted to craft new export control legislation.21 After the
second extension expired in August of 1994, President Clinton reimposed controls
under IEEPA.22 During this period, a major restructuring and reorganization of export
control regulations was published as an interim rule in the March 23, 1996 Federal
Register
. On November 11, 2000, President Clinton signed legislation to extend the
authority of the 1979 Act until August 20, 2001,23 when emergency controls were
renewed by President George W. Bush pursuant to Executive Order 13222. Several
deficiencies have been noted in maintaining export controls under IEEPA authority:
! Penalty authorities under IEEPA are substantially lower than under
the EAA and thus have less of a deterrent effect. IEEPA limits civil
penalties to $10,000, willful violations to $50,000, and 10 years’
imprisonment if the violator is an individual or corporate officer
who has knowingly participated in a violation. Equivalent penalties
under the EAA limit civil penalties to $10,000, or $100,000 for
violations involving national security controls, and willful violation
to $250,000 and 10 years’ imprisonment for individuals and $1
million or 5 times the value of exports for firms. Even the higher
EAA penalties have lost some of their deterrent effect due to erosion
by inflation.
! The police power of enforcement agents lapsed with the EAA.
Under IEEPA, these agents must obtain Special Deputy U.S.
Marshal status in order to function as law enforcement officers, a
complication that consumes limited resources better used on
enforcement.
! IEEPA does not authorize the President to limit the jurisdiction of
federal courts and thus does not permit him to extend the EAA’s
general denial of judicial review. In addition, IEEPA does not have
an explicit confidentiality provision to authorize protection from
20 (...continued)
The use of IEEPA authorities to extend expired export controls was anticipated by Congress
in the legislative history of IEEPA. See H.Rept. 95-459 at 13.
21 P.L. 103-10; P.L. 103-277.
22 “Continuation of Export Controls,” Exec. Order No. 12924, 59 Federal Register 43437
(1994); Message from the President, Sept. 11. 1998, “Continuation of National Emergency
Regarding the Lapse of the Export Administration Act of 1979,” Ex. Com. 10845, H.Doc.
105-303.
23 P.L. 106-508.

CRS-13
public disclosure of information pertaining to the export license
applications and enforcement.24
! The IEEPA does not explicitly authorize the executive to implement
provisions to discourage compliance with foreign boycotts against
friendly countries.
! It has been argued that the United States sends the wrong message
to other countries by not enacting appropriate legislation. Although
the United States has been urging countries such as Russia,
Kazakhstan, Ukraine, and China to strengthen their export control
laws and implementing regulations, goes the argument, U.S. export
controls laws have expired and U.S. credibility is diminished by its
lack of a statute.25
Technology and Commodities of Concern
Controversial exports have included telecommunications and advanced
electronic equipment, precision machine tools (especially computer assisted
machines), guidance technology (including Global Positioning System technology),
aerospace and jet engine technology, synthetic materials (especially high-strength,
light-weight, heat- and corrosion-resistant materials), specialized manufacturing and
testing equipment (including mixers, high temperature ovens, heat and vibration
simulators). In the last few years, congressional attention has focused on the
following goods and technologies:
High Performance Computers (HPCs).26 These technologically advanced
computers can perform multiple, complex digital operations within seconds.
Sometimes also called supercomputers, HPCs are actually a wide range of
technologies that also include bundled workstations, mainframe computers, advanced
microprocessors, and software. Until recently, the benchmark used for gauging HPC
computing performance has been the standard known as millions of theoretical
operations per second (MTOPS). The actual MTOPS performed by an HPC over a
period of time can vary, based on which operations are performed (some can take
longer than others or can be performed while other operations are taking place) and
24 In a recent case, however, the U.S. Court of Appeals for the District of Columbia upheld
the authority of the Commerce Department to withhold information on export license
applications under the Freedom of Information Act exemption for matters specifically
exempted from disclosure by statute, notwithstanding the lapse of the EAA. Wisconsin
Project on Nuclear Arms Control v. U.S. Dep’t of Commerce, 317 F.3d 275 (D.C.Cir. 2003).
25 Testimony of William A. Reinsch the Under Secretary for Export Administration,
Department of Commerce on the Reauthorization of the Export Administration Act of 1979
(EAA), before the Senate Committee of Banking, Housing and Urban Affairs, Subcommittee
on Trade and International Finance, on Jan. 20, 1999.
26 For additional information, see CRS Report RL31175, High Performance Computers and
Export Control Policy: Issues for Congress
, by Glenn McLoughlin and Ian F. Fergusson
(hereafter cited as CRS Report RL31175).

CRS-14
the real cycle speed of the computer. However, the Wassenaar Arrangement
approved a new standard for calculating computing power in December 2005, which
was incorporated into a BIS final rulemaking on April 24 2006.27 The new standard,
called adjusted peak performance (APP), is the “adjusted peak rate at which digital
computers perform 64-bit or larger floating point additions and multiplications,” and
is measured by a metric known as “weighted teraflops”(WT).28 The control level is
set at 0.75 WT, a level which BIS states “continues to control high-end proprietary
HPCs, such as those used by the Department of Defense and the Department of
Energy for advanced research, development, and simulation.”29 This level replaces
the 190,000 MTOPS benchmark level of January 2002. The level for computer
software and technology is set at 0.04 WT and for computer development and
production technology at 0.1 WT.
Since the advent of HPC technology, there have been restrictions on U.S.
exports. However, some advocates have maintained that because the computing
capabilities of HPCs have advanced so rapidly, and due to the foreign availability of
models comparable to some of those produced in the United States, export
restrictions of HPCs are neither practical or enforceable. During the Clinton
Administration, HPC export thresholds — or the amount of MTOPS capability that
an HPC would need to require a license — were raised several times. The last
change to the MTOPS level was in January 2002, when the Bush Administration
raised the threshold for HPC exports to Tier 330 countries to 190,000 MTOPS, up
from 2,000 MTOPS in 1995.31 (This process of decontrol has had a significant
regulatory impact on BIS. It reports that in 1993 over 11,000 (42% of total license
applications that year) were for computer assemblies and hardware; by 2003, that
number had dropped to 14 license applications for the category that year.)32 Despite
the conversion to the WT metric, changes in the control level are still subject to the
notification requirements of Title XII (B) of Division A of the National Defense
27 71 Federal Register 20876, April 24, 2006.
28 “Wassenaar Arrangement Technical Note on ‘Adjusted Peak Performance’” in The Export
Practicioner
, January 2006, p. 22.
29 71 Federal Register 20878, April 24, 2006.
30 For HPCs, the Commerce Department organized countries of destination into 4 tiers with
increasing levels of export control. These range from a no-license policy for HPC exports
to Tier 1 countries (Western Europe, Australia, Mexico, Japan, and New Zealand) to the
virtual embargo for exports to Tier 4 countries (Cuba, Iran, Iraq, Libya, North Korea, Sudan,
and Syria). Tier 3 countries, including China, Russia and other countries of the
Commonwealth of Independent States (CIS), India, and Pakistan, were subject to a dual
control system distinguishing between civilian and military end-users and end-uses until
2000. In January 2001, President Clinton merged the Tier I and Tier 2 categories and
effectively decontrolled exports to those countries.
31 For a summary of changes to HPC controls, see CRS Report RL31175, and Bureau of
Industry and Security, “High Performance Computer Export Controls,”
[http://www.bis.doc.gov/HPCs/Default.htm]
32 BIS, 2003 Annual Report,
[http://www.bis.doc.gov/news/2004/03annualrept/index.htm#Chap2]

CRS-15
Authorization Act of 1998 (NDAA98), which allows implementation of the new
performance level 60 days after a report has been submitted to Congress.33
The National Defense Authorization Act of 1998 (NDAA98) imposed special
conditions on the export of high performance computers. This Title (a) requires the
prior notification requirement for exports of HPCs above the MTOPS threshold to
Tier III countries. Under this provision of NDAA, exports of these HPCs are subject
to the approval of the Secretaries of Commerce, Defense, Energy, and State; (b)
imposes post-shipment verification requirements for these HPCs; and (c) imposes the
requirement to notify Congress of an adjustment in the MTOPS threshold levels.
Each version of EAA in the 107th Congress provided for the repeal of NDAA98
provisions.
Encryption. Encryption is the process of encoding electronic messages to
transfer important information and data securely. “Keys” are needed to unlock or
decode the message. Encryption is an important element of e-commerce security,
however this technology is also central to cryptography and could affect military
code-breaking capabilities. The increased civilian importance of encryption
technology resulted in the transfer in control authority of certain encryption
technology from the Department of State to the Department of Commerce by
Executive Order 13026 on November 16, 1996. Since that time, there have been
several decontrols of encryption items and technology, most recently in June 2002
to reflect changes in the control list of the Wassenaar Arrangement. The result of
these actions has been the progressive decontrol of “retail” or “mass market”
encryption technology. Currently, retail encryption products and technology can be
exported to western countries34, and to non-governmental end-users in other countries
through a license exemption that requires notification of the transaction. Licenses
for encryption products and technology continue to be required for countries covered
by anti-terrorism controls.
Stealth Technology and Materials. Stealth design incorporates materials,
shapes, and structures into a functional system to protect it against electronic
detection. Stealth technology falls into two categories. Certain stealth materials can
deflect an incoming radar signal to neutral space thus preventing the radar receiver
from “seeing” the object. Conversely, other materials may absorb incoming radar
signals preventing them from reflecting back to the receiver. Stealth related
commodities are sensitive from an export control perspective because some materials
and processes involved have civil applications that make it difficult to control
dissemination and retain U.S. leadership in this technology. Concerns over the
potential export of this material led the Department of State to reclassify certain
stealth-related technology as munitions in the 1990s.35
33 The National Defense Authorization Act of 2001 lowered the notification requirement
from 180 to 60 days, H.Rept. 106-945, Sec. 1234, Oct. 6, 2000. The WT metric conversion
notification was sent to Congress on February 3, 2006.
34 European Union countries, Australia, Czech Republic, Hungary, Japan, New Zealand,
Norway, Poland, and Switzerland.
35 For further discussion, see GAO Report NSIAD 95-140, Export Controls: Concerns over
(continued...)

CRS-16
Satellites. Congress has debated the issues of how strictly to control exports
of commercial communications satellites and whether monitoring of foreign launch
operations has been effective in preventing disclosures of missile secrets. In 1998,
the Cox Committee found that U.S. satellite manufacturers provided missile design
information and skills to China through the improper transfer of launch failure
analysis.36 Exports of satellites were licensed by the Department of Commerce from
late 1996 until March 1999. In October 1998, Congress returned the authority,
effective March 15, 1999, to license exports of commercial communications satellites
to the Department of State which had traditionally licensed missile technology
exports.37 The satellite industry claims that this transfer has led to licensing delays
and lost sales resulting from regulatory uncertainty, and they have lobbied to reverse
export controls to Commerce.38 Satellites launched for commercial communication
purposes may contain embedded sensitive technology such as positioning thrusters,
signal encryption, mating and separation mechanisms, and multiple satellite/reentry
vehicle systems. As stand-alone items, these technologies are controlled under the
U.S. Munitions List. One version of EAA legislation in the 107th Congress proposed
to transfer the licensing of commercial communications satellite sales back from
State to Commerce.
Machine Tools. This category covers manufacturing technology such as lathes
and other manufacturing equipment used to produce parts for missiles, aircraft
engines and arms. This capital equipment is increasingly sophisticated, employing
advanced computer software and circuitry. The industry has been vocal in claiming
that its competitive position has been hampered by the lack of multilateral controls
over sales of this equipment, especially the lack of consensus on controls regarding
China.39
Aerospace. “Hot section” technology is used in the development, production
and overhaul of jet aircraft both military and commercial. Technology developed
principally by the Department of Defense is controlled by the U.S. Munitions List.
However, technology actually incorporated in commercial aircraft is regulated by the
Department of Commerce and falls under a separate foreign policy-based control
category. During debates on EAA legislation in the 106th Congress, several senators
raised concerns about the possible decontrol of this technology and sought a “carve-
35 (...continued)
Stealth Related Exports (May 1995).
36 H.Rept. 105-851, U.S. National Security and Military/Commercial Concerns with the
People’s Republic of China, May 25, 1999.
37 Required by the National Defense Authorization Act for FY1999, P.L. 105-261.
38 Satellite Industry Association, “Satellite Export Licensing: The Impact of Federal Export
Control Laws on the California Space Industry,” Presentation, February 2001.
39 See Paul Freedenberg, Testimony before the Senate Banking Committee, Feb. 7, 2001,
[http://www.senate.gov/~banking/01_02hrg/020701/index.htm] (hereafter Freedenberg).

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out” of hot section and other sensitive technologies that would prevent such items
from being decontrolled.40
Deemed Exports. Exports of technology, know-how, and non-encryption
source code is “deemed” to have been exported when it is released to a foreign
national within the United States. Such knowledge transfers are regulated by the
Export Administration Regulations,41 which require that a license must be obtained
by U.S. entities to transfer technology to foreign nationals in the United States if the
same transfer to the home country of the foreign national would require a license.
Deemed exports are not expressly mentioned in the 1979 EAA. House versions of
EAA in the 107th Congress sought to explicitly define deemed exports as exports
falling under the jurisdiction of the act. Processing deemed export license
applications has become a larger part of BIS activity. In FY2005, BIS reviewed 707
deemed export licenses (4.2% of the total licenses submitted to BIS) and reports that
nearly 60% of deemed licenses reviewed were for Chinese nationals.42
In March 2005, BIS established a rule-making procedure in response to an
Inspector General’s (IG) report,43 which recommended that BIS alter the standard
governing which foreign nationals are subject to export controls. Currently, foreign
nationals are subject to export controls requirements based on their country of
citizenship or permanent residency; however, the IG recommended that country of
birth should be the standard used. According to the IG, foreign nationals from
controlled destinations could access technology without scrutiny if they first establish
permanent residency in a third country, and foreign nationals from controlled
destinations often have dual nationalities. However, Under Secretary of Commerce
David McCormick announced in December 2005 that deemed export controls would
continue to be based on country of citizenship or permanent residency, not place of
birth.44
Competing Perspectives in the
Export Control Debate
A principal theme in debates on export administration legislation is the tension
between commercial and national security concerns. These concerns are not mutually
exclusive, and thus it is often difficult to characterize opposing camps. For example,
nearly everyone favors reform of the current system, yet no one considers themselves
opposed to national security. Generally, however, many who favor reform of the
40 “Sen. Warner Says Agreement Near On Bringing EAA Bill to Floor This Week,” 17
International Trade Reporter 340, Mar. 2, 2000.
41 EAR 15 C.F.R. 734.2
42 BIS, 2005 Annual Report, p.5.
43 Deemed Export Controls May Not Stop the Transfer of Sensitive Technology to Foreign
Nationals in the United States
, (IPE-16176, March 2004).
44 David McCormick, “Foreign Talent Need Not Threaten Security,” Financial Times,
December 13, 2005.

CRS-18
current export control accept the business perspective that such reform would assist
U.S. business to compete in the global marketplace. Others view the issue more from
a national security perspective. To this group, reform should be concerned less with
the abilities of U.S. industry to export and more with effective controls placed on
potential exports to countries that threaten the security of the United States, terrorists,
violators of human rights, and proliferators of weapons of mass destruction. From
these different perspectives, controversies arise regarding the controllability of
technology, the effectiveness of multilateral regimes, the bureaucratic structure of the
licensing process and the impact of export controls on the U.S. economy.
Foreign Availability and the Controllability of Technology. The foreign
availability and mass market provisions of EAA reauthorization legislation, and the
underlying concept of the controllability of technology, have proved controversial in
the EAA debate. Industry groups that have taken an active position on legislation to
replace the 1979 EAA have considered the adoption of these provisions as a key
benefit of potential EAA legislation. The foreign availability and mass market
concepts are integral to their contention that the flow of technology cannot be
effectively controlled, and that U.S. dominance of cutting-edge technology can no
longer be assumed. According to their arguments, unilateral controls will not stop
other countries from obtaining advanced technology. Advocates of this viewpoint
claim that “countries of concern” will simply obtain this technology from other
nations. Adherents to this view regard current multilateral controls on dual-use
articles as ineffectual. From this perspective, only American business suffers from
the unilateral nature of U.S. export controls. In the process, foreign business wins
new markets or gains an incentive to enter new markets.45
According to the industry position, unilateral export controls are also becoming
increasingly unworkable as the economy undergoes globalization. The current export
control system is predicated on goods being manufactured or assembled in one
country. In many industries, however, component parts are manufactured worldwide
and are considered commodities. If these parts are not available from one source on
a timely basis, they can be obtained elsewhere.46 Purchasing managers at Daimler
Chrysler Aerospace, for example, reportedly have been instructed to reduce
dependence on American components for defense and space technology products
because of delays associated with American licensing procedures.47
Other participants in the export control debate are concerned about the mass
market and foreign availability arguments advanced by industry proponents. Critics
charge that the mass market standard would effectively nullify the whole U.S. control
regime by decontrolling any item that met the criteria under the law. They assert that
45 For examples of this argument see, Prepared Statement of Dan Hoydosh, co-chairman of
Computer Coalition for Responsible Exports, in Senate Banking Committee,
Reauthorization of the Export Administration Act, S.Hrg. 106-461, Mar. 16, 1999
(Reauthorization).
46 Hamre, John, Testimony before the Armed Services Committee, Feb. 28, 2000, transcript,
p. 31-33.
47 Douglass, John W., prepared testimony before the Armed Services Committee, Feb. 28,
2000, p.3.

CRS-19
virtually any product, including dual-use items used for proliferation purposes, could
qualify for mass market status. Similarly, as one non-proliferation advocate testified
regarding EAA legislation in the 106th Congress, the foreign availability criterion
would allow the sale of “anything a controlled country can purchase from a rogue
buyer.”48
A related argument made by industry is that national security is enhanced by
robust export industries. This argument is predicated on the changing nature of
defense procurement, research and development. During the Cold War, the
formative period of the current export control regime, the military conducted
considerably technical research on its own and provided funds for research and
development. Now that situation is largely reversed. The military now purchases
many items ‘off-the-shelf’ and relies to a greater extent on commercial applications.
Industry argues that it is in the national security to sell current technology to generate
funds to develop future technology. If American firms are competitively hindered
because of export controls, the argument goes, foreign firms will gain market share,
increase profits, invest more in R&D, shrink and possibly surpass our technological
lead. These circumstances, in turn, potential could affect the quality of the technology
available for national security purposes. Thus, industry argues it needs a streamlined
export process, one that will not needlessly impede exports.
Critics of industry’s national security position reject this argument. They
maintain that the United States does not promote its national security by selling
advanced technology to potentially hostile states. This technology, if sold to a regime
of dubious stability, could be used against the United States or allies in the future.
Proponents of this argument point to the case of Iraq, which received U.S. weaponry
in the 1980s when Saddam Hussein was considered a useful counterweight to Iran.
Subsequently, this technology was used against Kuwait and allied forces in the
Persian Gulf War. Reliance on the civilian sector for R&D, they claim, is a policy
decision brought about by declining defense budgets in the 1990s. Some further
argue that R&D that advances defense capabilities should be funded within the
Defense Department if it is necessary to maintain controls on technology to certain
nations.
Computing Power.49 Industry groups and some other observers have used
the rapid rise in computing power as an illustration both of the uncontrollable nature
of technology and the inability of the export control system to account for such
innovation. According to one national security analyst, attempting to control
computing power is not “feasible or effective.” He maintains that the restraint of
computer trade is self-defeating because it cedes markets and profits that could be
used for R&D.50
48 Milhollin, Gary, prepared testimony before the Senate Governmental Affairs Committee,
May 26, 2000, p. 6.
49 See also CRS Report RL31175.
50 Richard Perle, former Assistant Secretary of Defense for Security Policy in the Reagan
Administration speaking at the Forum for Technology and Innovation, Mar. 23, 1999,
[http://www.tech-forum.org/upcoming/transcripts/CompExportsTrans.htm].

CRS-20
Increasing computing speeds combined with networking advances have blurred
the distinction between super-computers and commodity computers.
Microprocessors that individually comply with export regulations can be linked
together to create servers with MTOPS capabilities that breach export thresholds. If
enough processors are linked together, they can create a parallel processing system
with capabilities that approach those of a super-computer. The Defense Science
Board noted that the ability to cluster commodity computers in order to multiply
computing power erodes the ability to restrict access to high-performance computing,
even if high-performance stand-alone machines can be controlled.51
Other observers believe the United States can restrict access to the highest
computer technology by limiting exports. They maintain that American-made
computers are perceived as superior, and thus carry greater cachet than products from
other nations. They note that the purchase of an American-made computer product
also buys superior networking and service, often at a better price. Control advocates
maintain that these distinctions are significant, that qualitative differences are
important.52 In addition, networking a parallel processing system, as those without
access to advanced computing technology must do to increase computing capability,
presents additional challenges distinct from those faced by engineers of commodity
computers.
Post-Shipment Verification. One policy that has been attempted to monitor
and verify the end-use of controlled goods is the post-shipment verification
requirement (PSV) on the export of HPCs mandated by Sec 1213 of NDAA98 (see
above). This section requires that a PSV be made for computers destined for
computers controlled to tier III destinations, including China, Russia, India, Pakistan,
Israel and other nations in areas of regional instability.53 Lawmakers have been
especially concerned with exports of HPCs to the People’s Republic of China. The
GAO has reported that China has restricted access to facilities that contain U.S. HPC
exports. It has also found that BIS has made limited efforts to monitor or to verify
compliance with the terms and conditions specified by the export license.54
Reportedly, the difficulty in monitoring the end-use of HPC exports in China has
been exacerbated by the close ties that Chinese state owned enterprises have with the
Chinese military.55
51 Defense Science Board, Final Report of Task Force on Globalization and Security,
Washington: Office of the Under Secretary of Defense for Acquisition and Technology,
Dec. 1999, p. 27.
52 Milhollin, Gary, prepared testimony before the Senate Governmental Affairs Committee,
May 26, 2000, p. 6.
53 Originally this regulation applied to computers over 2,000 MTOPS. The benchmark was
raised over the years to 190,000 MTOPS and has now been replaced by a new metric,
weighted teraflops (WT)(see “High Performance Computers (HPCs),” above).
54 GAO 02-468T - Export Controls: Issues to Consider in Authorizing a New Export
Administration Act, Feb. 28, 2002, p. 7.
55 CRS Report 98-617, Technology, Trade and Security Issues Between the United States
and the People’s Republic of China: A Trip Report
, August 1997, by Glenn J. McLoughlin.

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The Effectiveness of Multilateral Regimes. The United States
participates in several multilateral export control regimes. The principal multilateral
regime related to dual-use goods and technology is the Wassenaar Arrangement
(WA) on Dual-Use Goods and Munitions. The WA was created in 1996 and is the
successor organization to the Coordinated Committee (CoCom), the Cold War era
dual-use control regime that ended in 1994. The WA dual-use control list is generally
consistent with U.S. CCL items subject to national security controls. The United
States also participates in four proliferation related control regimes: the Australia
Group (chemical and biological weapons and precursors); the Missile Technology
Control Regime, and the Nuclear Suppliers Group.56
Generally, these groups are characterized by national discretion, a common
control list, and regular reporting requirements. Each group has formulated a
common control list and member nations control the exports of those goods under
their own national laws, a policy know as national discretion. Unlike CoCom,
however, these organizations do not perform a review function prior to the grant of
a national export license. The regime’s members do pledge disclosure of export
licensing decisions, and pledge consultation on sensitive export licenses. Some
groups adhere to a “no undercut” provision — i.e., a member state will not license
the sale of an item in which a license has been denied by another state. However,
these groups operate by consensus and are hampered by limited institutional
structures.
Some observers contend that the Wassenaar Arrangement, in particular, is
ineffective because it relies on consensus of member states. The necessity for
consensus, critics charge, results in a level of control acceptable to all. Its minimal
reporting requirements mandate notification only that an item has been sold, thus
preventing effective pre-export consultation among member states.
Industry representatives stress the necessity of effective multilateral controls.
They argue that export controls are effective only if they are adhered to by all states
capable of exporting a given technology. For example, the machine tool industry has
been at the forefront in criticizing the unilateral nature of our export policies,
especially concerning exports to China. It notes that there is no consensus among
Wassenaar Arrangement countries on the proper limits of technology transfer to
China. (Indeed, no country is explicitly targeted by Wassenaar.) Stringent domestic
controls combined with minimal multilateral constraints only damage American
companies, according to industry spokesmen. They fault the U.S. for having an
overly rigorous licensing policy towards China, without noticeably pursuing a
strategy to convince our allies to follow our lead.57
Proponents of tighter export restrictions note that America traditionally has
taken the lead in export controls and non-proliferation efforts. These efforts included
56 See CRS Report RL31559, Proliferation Control Regimes: Background and Status,
coordinated by Sharon A. Squassoni; and CRS Report RS20517, Military Technology and
Conventional Weapons Export Controls: The Wassenaar Arrangement
, by Richard F.
Grimmett.
57 See Freedenberg, p. 6.

CRS-22
the original EAA, adopted in 1949, and the establishment of CoCom. They argue
that efforts to strengthen CoCom’s successor regime, the Wassenaar Arrangement,
cannot succeed if Washington itself is loosening export restrictions. Thus, the United
States must take the lead in order to convince other nations to follow the U.S.
example. Adherents of this viewpoint argue that the successful negotiating strategy
in these multilateral fora is to adopt controls first and then persuade other countries
to follow suit. Hence in their view, an export control strategy pegged solely on the
policies of other nations, negotiated by consensus, is ineffectual and harmful to
national security.58
Both industry spokesmen and advocates of heightened export controls agree that
the multilateral controls need to be strengthened. Yet, to do this requires consensus
on which goods and which countries represent a threat. There does seem to be
agreement among western nations to restrict dual-use items to a limited number of
‘countries of concern,’59 yet consensus breaks down with regard to other states,
notably China. The export control dilemma in this context becomes clear. Without
consensus on a particular target country, the question becomes whether the United
States should impose controls unilaterally. One then needs to determine either:
which non-proliferation or other foreign policy goals are sufficiently important to
offset possibly damaging American business, and possibly costing American jobs;
or how large an economic benefit would justify risking important national security
goals.
China. Debate over export controls has often focused on China. The dilemma
that encapsulates U.S. export control policy to China is how to benefit from the
potentially vast Chinese market and low Chinese production costs while minimizing
the risk to U.S. security interests of exporting sensitive dual-use technologies to
China. Some representatives of the business community have argued that U.S. export
control policy toward China is too stringent. They claim such controls have hampered
technology transfers to China in the past few years while the controls of U.S. allies
have not. They reported that Chinese companies will not ask U.S. companies to bid
on sales because of the delays associated with the U.S. licensing process. As one
industry spokesman has testified: “The result has been that the Chinese are denied
nothing in terms of high technology, but U.S. firms have lost out in a crucial market.
This serves neither our commercial nor our strategic interests”.60
However, other analysts and several Members of Congress have expressed grave
concerns about China’s dual-use technology acquisitions. They cite findings of the
Cox Commission that China evaded existing export controls to illegally obtain
missile design and satellite technology and that China has circumvented end-user
controls on high-performance computers.61 According to this view, the Commission’s
58 Milhollin, prepared, p. 7.
59 Cuba, Iran, Iraq, Libya, North Korea, and Sudan.
60 Freedenberg, p. 7
61 For more information on technology transfers to China, see CRS Report 98-485, China:
Possible Missile Technology Transfers from U.S. Satellite Export Policy — Actions and

(continued...)

CRS-23
findings show the need for both tightened controls and greater enforcement of export
controls against China. In addition, China has been implicated in several nuclear,
missile, and chemical proliferation activities.62 In 2005, BIS approved 1,303 licenses
to China, which represented potential sales of $2.4 billion, or approximately 6% of
the total value of U.S. exports to China during FY2005 ($39.0 billion).63
The Licensing Process and Organization of the Export Control
System. As noted earlier, the Bureau of Industry and Security (BIS) within the
Department of Commerce (DOC) is responsible for regulating dual-use exports.
However, other agencies also provide input into the licensing process. BIS consults
with other members of the national security community on license applications and
commodity classifications. The Defense Threat Reduction Agency in the Department
of Defense conducts national security reviews for license applications referred from
Commerce and State. The Department of Energy also reviews dual-use license
applications referred by BIS for nuclear uses and nuclear end-users, and it and the
Nuclear Regulatory Commission license exportation of nuclear materials. In
addition, the Office of Defense Trade Controls (ODTC) at the State Department
administers the International Traffic in Arms Regulations. Through the U.S.
Munitions List, ODTC controls the export of weapons and military technology.
Industry leaders identify several problems with the existing licensing system.
First, overlapping jurisdiction between the Commerce and State Departments with
regard to certain dual-use products makes it unclear where the exporters need to
apply for licenses. Second, extended time periods required for license approval
compromise the reliability of U.S. suppliers and make it hard for manufacturers and
customers to plan ahead. Third, the licensing system does not reflect advances in
technology, foreign availability of dual-use items, and the economic impact of export
controls on the industrial base. Finally, there is no opportunity for judicial review of
licensing decisions.
Others consider foreign availability and economic impact to be important
considerations, yet secondary to national security. Export administration officials
claim that they conduct thorough, fair, and expeditious license reviews. Time is
required to check proposed export items against lists of controlled items, check end
users and end uses against lists of suspect recipients, and coordinate with several
government agencies. Officials say they must be able to “stop the clock” to obtain
additional information and investigate certain issues on a case-by- case basis to
insure that sensitive technologies do not find their way into the wrong hands.
Some analysts who see national security as the primary purpose of the export
control regime question whether BIS belongs in the Department of Commerce. They
claim that DOC’s mission is mostly one of promoting exports and generally serving
commercial interests. This, in some eyes, may create an institutional bias towards
61 (...continued)
Chronology, by Shirley A. Kan.
62 Ibid.
63 BIS, FY2005 Annual Report, Appendix F.

CRS-24
the granting of export licenses and skew the process against national security goals.
Other analysts point to the full and equal participation of other agencies, particularly
the Department of Defense, in the current structure to argue that such bias is unlikely
to prevail.