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The Center for
International Trade & Security
Export Control Newsletter No. 76
May 15, 2006 – May 29, 2006
What’s New at CITS
1. International Export
Control Conference
The Center for International Trade and Security hosted an
international export control conference from May 29-31. This conference
brought together nongovernmental experts to focus on developing more
effective export controls in order to stem the spread of weapons of mass
destruction. As part of the conference, CITS launched an International
Export Control Association (IECA) – a network of experts committed to
strengthening export controls through research, training, education and
outreach.
2. April 2006 Russian Legislative
Visit to Washington DC
During April 22-28, 2006, the Center for International Trade and
Security hosted a group of Russian legislative experts and representatives of
Russian Federal agencies in Washington
DC. This visit was organized
jointly by CITS/UGA and the Institute
of World Economy and International
Relations of the Russian
Academy of Sciences in
Moscow (IMEMO) as part of CITS’ Legislative Outreach program. Support for
this visit was provided by a two-year grant from the Carnegie Corporation of New York. More
3.
New CITS Issue Brief Examines India’s Export Control Policy and
Record
India's record on nuclear nonproliferation has come under
scrutiny recently in the context of the proposed nuclear deal. This new issue
brief from CITS examines Indian dual-use export controls from the perspective
of assessing political commitment, institutional capacity, and specific cases
of proliferation. It updates CITS report on Indian export controls [May 2005]
by examining new developments in Indian policies and procedures. More
Export Control Newsletter
U.S. Export
Controls
1. “US defends curbs on high-tech sales to
Beijing, Export Controls,” Financial
Times (London, England), 24 May 2006.
2. “San Jose man is charged in technology sale
to China,” San Jose Mercury News/Knight
Ridder, 23 May 2006.
International Export Control
Development
1. “Eurasian Bloc calls for stricter
nonproliferation regime at Belarus meeting,” BBC Monitoring, 26 May 2006.
New Zealand
2. “Military Link puts Rakon
under spotlight,” The Press
(Christchurch, New Zealand), 29 May 2006.
Pakistan
3. “US Expert says A Q Khan case ‘far from
closed’,” Hindustan Times, 27 May
2006.
4. “Pak insists A Q Khan’s case is closed,” The Press Trust of India, 28 May 2006.
South Korea
5. “Firms penalized for violating strategic
product export rules,” Global News Wire
– Yonhap, 28 May 2006.
Macedonia
6. “Macedonia, US sign memorandum
on accelerating export licensing procedure,” BBC Monitoring, 26 May 2006.
China
7. “China Update,” Inside U.S. Trade, 26 May 2006.
United Kingdom
8. “UK customs foils plot to sell WMD to
hostile country,” The Scotsman, 26
May 2006.
Turkey
9. “Turkish government report says missile parts,
‘dual use’ material reach Iran through Turkey,” Associated Press Worldstream, 26 May
2006.
Russia
10. “Russian government commission urges
tougher nonproliferation regime,” BBC
Worldwide Monitoring, 22 May 2006.
Libya
11. “Libya export controls may relax after
state sponsor removal,” Inside U.S.
Trade, 19 May 2006.
Kazakhstan
12. “US gives Kazakh border guards three new
patrol boats,” BBC Monitoring Worldwide,
18 May 2006.
U.S. Export
Controls
1. “US defends curbs on high-tech sales to Beijing, Export Controls,” Financial Times (London,
England),
24 May 2006.
The US says a
planned expansion of its controls on the export of high-technology goods to China will not be a burden for US companies
and dismisses claims that its restrictions on high-tech exports are fuelling
the trade deficit with China.
David McCormick, US
undersecretary of commerce for industry and security, told the FT that the
controls would be handled "in a very targeted
way" and the department was certain they would "not place a burden
on industry".
The US is preparing to
enact restrictions on the sale to China of 46 new types of products
in 10 categories - including specialised chemicals,
lasers, electronics and telecommunications - in case those products find
their way into the hands of the Chinese military.
A draft of the proposed restrictions was circulated in March and the US is expected to propose the changes formally
after Mr McCormick returns from China, where
he is briefing leaders on the plans.
Bill Reinsch, president of the National Foreign
Trade Council, a US
business group that opposes the controls, said that, while the commercial
impact of the restrictions would be minimal, US exporters opposed the move.
"We still don't think they've made the case that these are things that
need to be controlled for national security reasons," he said.
The list was likely to annoy Beijing, Mr Reinsch said, as the items
were drawn from a range of goods restricted only for states regarded as
sponsoring terrorism on the US,
such as Iran and North Korea.
Chinese leaders have repeatedly said Washington
could reduce bilateral trade imbalances by easing its controls on high-tech
goods. But Mr McCormick said the Chinese claims
were vastly overstated. Of the Dollars 41bn (Euros 32bn, Pounds 21.8bn) in US
exports to China last year, about Dollars 2.4bn had involved licensed
technology - and only Dollars 12.5m worth of goods had been denied export permission,
Mr McCormick said.
"It's a fraction of a fraction of a fraction of the overall trade
deficit," he said. "The numbers just don't, in any objective
analysis, support any correlation between the trade deficit and our export
control regime."
Mr McCormick also said Washington was moving to make it easier to
sell high-tech products to legitimate civilian Chinese importers that had
long-standing ties with US suppliers.
The American Chamber of Commerce in China said many Chinese companies
had told its members that they never bothered to approach US suppliers of
high-tech goods "because of the uncertainty surrounding the approval and
licensing programmes".
2. “San Jose
man is charged in technology sale to China,” San Jose Mercury News/Knight Ridder, 23
May 2006.
A San Jose executive has been charged
with illegally exporting technology to China
that can be used to develop cruise missiles, according to documents filed
last week in federal court in San
Jose.
Yuequiang Chen, 45, also known as Bill Chen, was
accused in a complaint with violating federal laws barring the export of
military technology to China
without a license from the U.S. Department of Commerce.
In an affidavit filed by federal agents, Chen is identified as the general
manager of San Jose-based Data Physics, described as a maker of signal
processing equipment for use in noise and vibration testing. The complaint
alleges that Chen has for several years orchestrated the sale of the
technology to a company in China
believed to be a developer of cruise missiles.
International Export Control
Development
1. “Eurasian Bloc calls for stricter
nonproliferation regime at Belarus
meeting,” BBC Monitoring, 26 May
2006.
Text of report by Belarusian news agency Belapan
Minsk, 26 May: The Interparliamentary Assembly of
the Eurasian Economic Community [made up of Belarus, Kazakhstan, Kyrgyzstan,
Russia, Tajikistan and Uzbekistan] calls on legislatures of other countries
to support the initiative put forward by Russian President Vladimir Putin to create a network of international nuclear fuel
cycle centres which "might become a precursor
of a global infrastructure for using peaceful nuclear energy in the interests
of mankind". A statement to this effect was adopted on 26 May at a
session of the Interparliamentary Assembly of the
Eurasian Economic Community in Minsk.
The document says that any use of nuclear energy for peaceful means "is
an asset for all mankind". "Industrial uranium enrichment, which is
not approved by the International Atomic Energy Agency, is a threat to
stability and order," the statement stresses. To this end, the Interparliamentary Assembly of the Eurasian Economic
Community says that "export controls over weapons of mass destruction
shall be stepped up both at legislative and organizational levels".
New Zealand
2. “Military Link puts Rakon
under spotlight,” The Press (Christchurch, New Zealand), 29 May 2006.
The Government should stop Auckland
company Rakon exporting hardware specifically
designed for smart bombs and missiles, the Green Party says.
It was revealed last August that Rakon's crystal
oscillators were being used in global positioning systems (GPS) in United States smart bombs and missiles which
were likely to have been used in Iraq.
The company said its products were specifically designed for the military but
were able to be exported because they were not covered by the Ministry of
Foreign Affairs "strategic goods" list.
Rakon products were being used in military items on
the list but export controls did not apply to goods manufactured overseas.
Rakon emails show the company has worked on
components designed to withstand radiation.
Greens MP Keith Locke said that raised questions about whether the components
would be used in nuclear weapons, which would clash with New Zealand's
anti- nuclear stance.
An investigation into Rakon's activities was
needed, as was a strengthening of the export rules for military components,
he said.
Pakistan
3. “US Expert says A Q Khan case ‘far from
closed’,” Hindustan Times, 27 May 2006.
Leading American nuclear expert David Albright has told the U.S.
Congress that it should not consider the nuclear proliferation case against
Pakistani nuclear scientist A Q Khan as over, as there are a number of
unanswered questions.
Participating in a hearing by the subcommittee on international terrorism and
non-proliferation, Albright, the president of the Institute for Science and
International Security (ISIS), said that the Bush Administration and American
Congressmen should react with caution to a recent statement by the Pakistan
Foreign Office spokesperson that the case against Dr Khan is now closed.
According to the Daily Times, Albright said that specific questions involving
Iran include the extent of
centrifuge assistance, the logistics of that assistance and the possible
supply of nuclear weapon design supplied to Iran by the Khan network.
"These areas remain especially troubling as we try to determine exactly
how close Iran could be to building nuclear weapons and what sensitive
information may remain in circulation around the world that could fall into
the hands of other enemies of the United States," Albright was quoted as
telling the subcommittee.
He also said that the information supplied by the Pakistan Government to the
IAEA and other governments "appears so far to be incomplete."
The Pakistan Government needed to provide "more assistance" to
investigators, including the IAEA and affected governments "direct
access to question Khan and his associates verbally," he added.
Albright also found the nuclear export control system created by Pakistan
as not having so far been implemented.
4. “Pak insists A Q Khan’s case is closed,” The Press Trust of India, 28 May 2006.
Amid US lawmakers' calls for reopening a probe into disgraced
Pakistani scientist A Q Khan's nuclear proliferation network, Islamabad has
insisted that its investigation into the matter has been closed and ruled out
permitting foreign interrogators to directly question him.
The nuclear proliferation case against Khan had been closed and all important
information had been collected and shared with the International Atomic
Energy Agency (IAEA) and the US,
acting Foreign Office spokesman Suhail Mehmood told the media here.
"We have completed our investigations and shared information with the
International Atomic Energy Association and the US. We do not have any new
information to share with the US,"
Mehmood said.
He also ruled out permitting foreign interrogators to directly question Khan,
who has been kept under house detention here. "However, we remain
prepared for investigations on any new information that comes along the
way."
South Korea
5. “Firms penalized for violating strategic
product export rules,” Global News Wire
– Yonhap, 28 May 2006.
The South Korean government said Sunday it has taken punitive action
against six local companies for exporting products that could be used for
military purposes.
The Ministry of Commerce, Industry and Energy said the companies that violated
the strategic export control rules were detected by examining export records
of chemical products that could be used to make weapons.
Of the six companies, three will be barred from dealing with strategic
control materials for three months, while three others were issued
"severe" administrative warnings.
Authorities did not reveal the names of the companies, but said the chemicals
discovered in the latest inquiry went to China,
Bangladesh, Mexico and the United States. Of the 38 cases of
illegal exports, 25 involved shipments of sodium sulfide. Other chemicals
involved were triethanolamine and hydrogen
fluoride.
"This latest probe only involved the Commerce Ministry, but in the
future a joint operation will be conducted with the Korea Customs
Service," an official said. While the measures taken this time were
light because of the destination of the products and the fact that none were
used to make weapons, such leniency may not be repeated, he said.
He made it clear that companies found to have broken rules will have to pay
for their mistakes.
Macedonia
6. “Macedonia,
US
sign memorandum on accelerating export licensing
procedure,” BBC Monitoring, 26 May
2006.
Text of report in English by Macedonian state news agency MIA
Skopje, 26 May: Mitigation of export and acceleration of the process of
approval and issuing of licenses for dual-use goods and technologies is the
objective of the memorandum of understanding, which Economy Minister Fatmir Besimi and US Ambassador
to Macedonia Gillian Milovanovic signed on Friday
[26 May].
The memorandum enables instalment of a computer
system in Macedonia
for processing of requests submitted by companies for export of dual-use
items. Furthermore, a software system for networking of ministries included
in the export control will be established. The system will include entering,
processing, monitoring, inspection and approval of requests for export
licenses.
According to US Ambassador
Milovanovic, the objective is that Macedonia and USA work together on mitigation
of legal trade, i.e. control of export of goods,
which are useful, but can also be dangerous.
Legal export of Macedonian companies will be alleviated, and we will be
certain that both US and Macedonian citizens will be protected from
inappropriate, i.e. illegal export, Milovanovic
stressed.
Economy Minister Besimi stated that the memorandum
included Macedonia
in the international processes for export control.
China
7. “China
Update,” Inside U.S. Trade,
26 May 2006.
BIS DELAYS DEEMED EXPORT RULE, CREATES GROUP TO STUDY ISSUE
The Commerce Department's Bureau of Industry and Security (BIS) on May 22
announced that it would delay the establishment of a new rule that would
describe when foreign nationals working in the U.S. must be covered by an
export license in order to work on or use sensitive goods and technology.
Instead of new "deemed export" rules, BIS announced the creation of
a new industry advisory group that will examine current U.S. rules
and decide whether and how to adjust them.
While some industry sources welcomed the BIS decision to delay the deemed
export controls in light of industry opposition, one source said the delay
appears to be more of a tactical retreat in light of industry opposition to
its initial proposal to strengthen the rules. This source said BIS has
"every intention" to move forward on the rule, and that industry
groups should see the notice as a new beginning to the process, not the end
of it.
BIS also indicated in its May 22 Federal Register notice that it still
believes some steps need to be taken to address the spread of sensitive
technology to foreign nationals working in the U.S.
United Kingdom
8. “UK customs foils plot to sell WMD
to hostile country,” The Scotsman,
26 May 2006.
BRITISH investigators have foiled an attempt to smuggle a weapon of
mass destruction to a hostile state, it was revealed yesterday.
Officers from HM Customs and Revenue claim to have disrupted an operation
involving WMDs and are trying to piece together enough
evidence to bring the case to court. But they have admitted that the
individuals involved are still at large.
The revelations emerged in evidence from HM Revenue and Customs officials to
a hearing of the House of Commons committee on strategic export controls.
The committee was told investigators looking into the smuggling of weapons of
mass destruction were working on a case outside the UK.
The case is understood to involve a UK citizen accused of trying to
sell a WMD to a state covered by sanctions or embargoes. The transaction is
thought to have involved the WMD being moved from a third country, and there
is no suggestion it was destined for the UK.
Turkey
9. “Turkish government report says missile
parts, ‘dual use’ material reach Iran
through Turkey,”
Associated Press Worldstream,
26 May 2006.
An Iranian-owned company, based in Turkey, has illegally shipped
alleged guided missile parts as well as "dual use" nuclear-related
material to Iran, including high-strength aluminum tubes, according to a
recent Turkish government report obtained by The Associated Press on Friday.
The company imported the material to Turkey,
the supposed end-user, from dozens of firms around the world, including the United States, and then shipped them to Iran apparently
after falsifying documents to hide the nature of the material, customs
inspectors said in the report dated May 12.
Turkish authorities would not comment on the report, which was first
published by Cumhuriyet and Milliyet
newspapers Friday. A government official provided a copy of the report to the
AP.
On Friday, Turkey hosted a
multinational exercise to practice intercepting weapons materials before they
reach a country like Iran,
Turkey's
neighbor. Warships from the United States,
Turkey, France and Portugal participated in the
maneuvers, said to be the largest so far of the Proliferation Security
Initiative, or PSI, a program started in 2003 by U.S. President George W.
Bush.
U.S. Secretary of State Condoleezza Rice has credited PSI with several successes
already in intercepting shipments of missile and nuclear technology headed to
Iran,
but she did not elaborate on details.
The reported Turkish crackdown on the activities of the Istanbul-based
company Step Standard Technical Part has highlighted the importance of
Friday's exercise, but also revealed the need to increase scrutiny of
shipment of "dual-use" material which can either be used for
civilian purpose or to make weapons. A sister company Multimat
Import and Export was also involved.
The companies' Iranian owners denied that they had given guarantees to
foreign companies that the end-user would be Turkey, the report said adding, however, that "their
statement was not true." Company officials could not be reached for
comment.
One particular sensitive shipment that reached Iran early this year contained
aluminum tubes, which were of the proper size and material listed as
"dual-use" material, the report said. Such equipment could possibly
be used to construct centrifuges for uranium enrichment.
In another shipment, the companies bought from France
an equipment called "gyros," which can be
used to increase the sensitivity of the guidance system of missiles and
directly transferred them to Iran
in 2004, the report said.
"It is believed that the two companies have escaped from strict export
controls by listing Turkey
as the destination," the inspectors said. They said they have asked
customs authorities in Germany,
the Netherlands, Britain, France,
the United States and Canada to
launch investigations into shipments that originated from those countries.
Turkish authorities have also recently stopped a shipment of aluminum
material to Iran at the
last minute, seizing the material at Gurbulak
border point with Iran.
The report said authorities have confiscated documents and computers from the
companies and that the investigation was still underway. Most of the
shipments to Iran
by the companies included dual use material of aluminum, steel and iron
products and electronic equipment which can be used in defense industry, it
said.
Russia
10. “Russian government commission urges
tougher nonproliferation regime,” BBC
Worldwide Monitoring, 22 May 2006.
Text of report by Russian news agency RIA Novosti
Moscow, 22 May: A government export control commission chaired by Deputy
Prime Minister and Defence Minister Sergey Ivanov, at a meeting on Monday [22 May], discussed some
issues of the Russian
Federation policy in the sphere of
nonproliferation of weapons of mass destruction, the government's press
service told journalists today.
The commission also addressed issues dealing with the process of streamlining
the export control system.
In particular, the meeting discussed measures to ensure that Russia
implements UN Security Council resolution No 1540, as well as the strategy
and tactics of action in the group of nuclear suppliers, the press service
said.
The meeting also worked out a set of coordinated measures for all interested
federal departments, which are aimed at creating conditions for Russia's
accession to the so-called Australian Group within which a multilateral
export control procedure is functioning efficiently.
The export control commission will hold its next meeting in August, the press
service said.
Libya
11. “Libya
export controls may relax after state sponsor removal,” Inside U.S.
Trade, 19 May 2006.
The Bush Administration's announcement this week that it intends to
remove Libya
from the list of state sponsors of terrorism could lead to a relaxation of
export controls for some dual-use items, but does not automatically mean any
controls will be relaxed, according to private-sector sources.
These sources say they can reasonably expect anti-terrorism-only (AT-only)
items sent to Libya
would no longer be subject to licensing requirements, but cautioned that this
change is not automatic. Other items might benefit from regulatory changes
that would make it more likely for U.S.
exporters to obtain an export license for Libya. But these sources stressed
that it is for now unclear what exact changes might be made.
The Export Administration Regulations (EAR) currently use Libya's status as a
supporter of international terrorism as justification for certain controls,
including AT-only controls and controls for members of Country Group E:1, a
list reserved for state sponsors of terrorism, according to private-sector
sources.
These sources said they expected the Bureau of Industry and Security (BIS),
in consultation with the State and Defense departments, to rewrite the
regulations some time after Libya's
removal from the list of state sponsors of terrorism. The process would
likely result in either the removal of some controls or their retention under
a new justification, these sources said.
BIS is reviewing the State Department's May 15 determination on Libya to
determine what exact regulatory changes are needed, according to a government
official.
An easing of export controls on goods sent to Libya is likely to have a
significant impact on the oil and gas industry, which currently faces
controls on a number of high-tech items.
For example, oil well perforators, which are explosives used in drilling, are
now subject only to AT controls, which means export license applications are
reviewed on a case-by-case basis, sources said. These perforators could no
longer require a license with the removal of Libya from the state sponsors of
terrorism controls, they said.
One private-sector source said there could also be a dramatic impact on
exports of high-tech consumer items that require a license under the AT
controls, and are also subject to a separate ban when exported to Libya.
These items, which include software, hardware and plans used to create
software and hardware, could be freed up for export if BIS removed the
AT-only controls against Libya
and lifted the ban on the export of these items. One source indicated that
BIS might still decide to review exports of encryption technology that is
shipped to non-government users in Libya, and said it is unlikely
that encryption technology would be permitted for export to the Libyan
government.
Some license requirements for items not on the Commerce Control List (CCL)
could also be dropped as a result of Libya's removal from a
terrorist-supporting country designation in EAR regulations, according to an
informed source. Licenses would probably not be needed for these EAR-99
items, because Commerce requires them due to Libya's inclusion on the state
sponsor list.
Under current rules, exports of EAR-99 items to Libya are generally free from
license requirements, but there are some exceptions that require licenses.
EAR-99 items are items subject to export controls through BIS that are not on
the CCL.
Additionally, the policy under which BIS requires companies active in Libya
to report suspected violations of previous trade restrictions could be
modified to cover AT-only items. Under this policy, companies that find
AT-only items in Libya
that entered the country before they were allowed would have to notify this
to BIS (Inside U.S. Trade, June 10, 2005, p. 1).
The prohibition on munitions list exports to Libya
would not be affected by Libya's
removal from the state sponsors of terrorism list, according to State
Department sources. However, Rice's May 15 announcement on Libya would lift two criteria
that require a munitions list ban.
Kazakhstan
12. “US gives Kazakh border guards three new
patrol boats,” BBC Monitoring Worldwide,
18 May 2006.
Excerpt from report by Interfax-Kazakhstan
news agency
Aktau, 18 May: A ceremony to hand over three new
42-feet-long rapid reaction patrol boats along with trailers and spare parts
from the USA to the Caspian naval division of the Kazakh National Security
Committee's Border Service was held today in Aktau
(administrative centre of Mangistau Region, western
Kazakhstan), an Interfax-Kazakhstan correspondent
reports.
The total cost of the boats is 2m dollars, says a press release circulated
during the ceremony by the US
embassy in the republic.
Source: Interfax-Kazakhstan news agency, Almaty, in Russian 0926 gmt 18
May 06
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