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[H.A.S.C. No. 107–11]






FEBRUARY 28, 2002


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One Hundred Seventh Congress

BOB STUMP, Arizona, Chairman

CURT WELDON, Pennsylvania
JIM SAXTON, New Jersey
JOHN M. McHUGH, New York
HOWARD P. ''BUCK'' McKEON, California
J.C. WATTS, Jr., Oklahoma
WALTER B. JONES, North Carolina
LINDSEY O. GRAHAM, South Carolina
JIM RYUN, Kansas
BOB RILEY, Alabama
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ROBIN HAYES, North Carolina
KEN CALVERT, California
ROB SIMMONS, Connecticut
JO ANN DAVIS, Virginia
W. TODD AKIN, Missouri
JOE WILSON, South Carolina

JOHN SPRATT, Jr., South Carolina
LANE EVANS, Illinois
GENE TAYLOR, Mississippi
MARTIN T. MEEHAN, Massachusetts
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ADAM SMITH, Washington
JAMES H. MALONEY, Connecticut
MIKE McINTYRE, North Carolina
ROBERT BRADY, Pennsylvania
BARON P. HILL, Indiana
JOHN B. LARSON, Connecticut
SUSAN A. DAVIS, California
RICK LARSEN, Washington
Robert S. Rangel, Staff Director
Erin Conaton, Professional Staff Member
Jarrod Tisdell, Research Assistant


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    Thursday, February 28, 2002, Export Administration Act of 2001


    Thursday, February 28, 2002



    Skelton, Hon. Ike, a Representative from Missouri, Ranking Member, Committee on Armed Services

    Stump, Hon. Bob, a Representative from Arizona, Chairman, Committee on Armed Services


    Crouch, Hon. J.D., Assistant Secretary of Defense, (International Security Policy)
    Jochum, Hon. James J., Assistant Secretary of Commerce, (Export Administration)
    Van Diepen, Hon. Vann, Acting Deputy Assistant Secretary of State, (Nonproliferation)
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Christoff, Joseph
Crouch, Hon. J.D.
Jochum, Hon. James J.
Milhollin, Gary
Miller, Hon. Jeff
Rice, Edmund
Skelton, Hon. Ike
Stump, Hon. Bob
Van Diepen, Hon. Vann

[There were no Documents submitted for the Record.]

[Questions for the Record are pending.]


House of Representatives,
Committee on Armed Services,
Washington, DC, Thursday, February 28, 2002.
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    The committee met, pursuant to call, at 1:02 p.m., in room 2118, Rayburn House Office Building, Hon. Bob Stump (Chairman of the Committee) presiding.


    The CHAIRMAN. [Presiding.] Meeting will please come to order.
    This afternoon the committee meets to take testimony on H.R. 2581, the Export Administration Act of 2001.
    The committee received this legislation on sequential referral for a period of time that expires today. Although, I understand, leadership has indicated a willingness to agree to a few more days for us to probably consider this matter.
    This legislation originated in the Senate, where it was the subject of a lengthy debate spanning several years. However, once the Senate passed its version of the bill last year, the House International Relations Committee considered a companion version in August of that year in an amended form, and that is what is before us now.
    The purpose of this legislation is to authorize and reform the expired Export Administration Act, which establishes how the government regulates the export-sensitive dual-use technologies abroad. However, reform is always in the eyes of the beholder, and the concern over this bill is that it will open the flood gates and allow some of our most sensitive technologies to flow into labs and arsenals of nations who have consistently demonstrated hostility to the United States interests and could one day become our military adversary.
    This, of course, is what lies in the heart of this policy debate. How do you strike a proper balance between the overriding need to protect national security, yet still allow American businesses to expand its global market in the competitive technology sector?
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    I suspect there will never be a universally accepted answer to this question. However, I think it is fair to say the Armed Services Committee has, over the years, insisted that our nation's policy in this area properly account for the unique and increasingly challenging national security needs of the United States. While this cannot be an absolute standard, it certainly should be an overriding one.
    To help us understand this broader policy context and how this specific legislation addresses these concerns, we have before us a cross section of witnesses representing the various perspectives on this issue. First, we will hear from a panel comprised of government officials from three principle departments involved in executing the export process: the honorable J.D. Crouch, Assistant Secretary of Defense for international security policy; the honorable James J. Jochum Assistant Secretary of Commerce for export administration; and Mr. Vann Van Diepen, acting deputy Secretary of State for nonproliferation.
    And we will address the second panel when we get to it.
    We welcome all of you and look forward to your testimony.
    Before we begin, let me turn to Mr. Skelton for any opening remarks he would like to make.

    [The prepared statement of Mr. Stump can be found in the Appendix on page ?.]


    Mr. SKELTON. Mr. Chairman, thank you very much.
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    And thank the witnesses, especially. I see my fellow Missourian, Secretary Crouch, here. Appreciate all three of you, especially you, Secretary Crouch, for being with us today.
    This bill which is under consideration, H.R. 2581, as amended by the House International Relations Committee, seeks to answer a fundamental question: How can the United States balance the need to ensure its national security with the need to maintain and strengthen our high technology export sectors? This question has always been a difficult one, but it is even more so in the present circumstances.
    During times of recession particularly we must be concerned for the strength of our export base. And in times of global war, we must be even more vigilant in ensuring that U.S. technologies are not used by terrorists or rogue states to build conventional military capabilities or weapons. These two goals, national security and industrial competitiveness, are not incompatible. The current bill goes a long way to reconcile them.
    But it is important to remember that no committee charged with overseeing U.S. national security has yet reviewed this bill. Both the bill reported by the other committee and its Senate counterpart were drafted and debated before the tragic events of September the eleventh. Our Armed Services Committee, therefore, has a unique responsibility to ensure that American national security interests are protected in the new Export Administration Act (EAA) without unduly hampering the ability of our technology industries to compete.
    I hope the witnesses today, both from the government agencies most involved in the export control and from industry of the national security community and the General Accounting Office, will provide us with information we need to take action.
    There are similarities of particular concern. Let me highlight two.
    First this committee must ensure that the Secretary of Defense maintains a strong role in the export control process. The proposed EAA strengthens the role of industry in the process of deciding which items are controlled, and retains the center role of the Secretary of Commerce in these and other licensing decisions. Members of this committee are concerned that the Secretary of Defense be given at least an equal role so as to ensure critical technologies do not end up in the hands of future adversaries.
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    Second, this bill overturns actions taken by this committee over the last few years relating to the export of high-performance computers and satellites. These two items, the changes seem aimed at easing the licensing restriction and decreasing congressional visibility on the export of these items. There may be a need to make changes to the current law, but these reversals should not be made lightly with national security interests at stake. I hope the witnesses will help address both the rationale for the proposed changes and the possible implications for them.
    And this bill is an ambitious undertaking. It attempts to rewrite the export control system for the first time since the end of the Cold War. And the questions raised about what products to control, the process to use in controlling them are very difficult and complex. And I thank witnesses for being with us today and we look forward to you enlightening us.
    Thank you, Mr. Chairman.

    [The prepared statement of Mr. Skelton can be found in the Appendix on page ?.]

    The CHAIRMAN. Thank you, Ike.
    Gentlemen, all of your prepared statements will be printed in the record in their entirety. And if we can start off with Secretary Crouch. Secretary, the floor is yours.


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    Mr. CROUCH. Thank you, Mr. Chairman, and Congressmen Skelton, other members of the committee. I want to begin by thanking this committee for holding this hearing and inviting the Defense Department to testify.
    In particular, I want to thank the committee for its leadership on export control issues, now and over the last several years. The issue does not always make headlines, as we know, but from recent history, inattention to export controls can have grave national security consequences. This committee has lead the way in ensuring that national security issues remain paramount, that the country consider its trade and technology transfer interests after the Cold War.
    Those of us in the Defense Department who now deal with these issues appreciate the committee's past commitment and leadership, and we look forward to working with you as this country transforms its approach to export controls to deal with an uncertain security environment in the 21st century.
    The Defense Department believes that H.R. 2581, which Mr. Gilman introduced last summer, is an excellent foundation to begin that transformation. As introduced, the bill expands the Department of Defense's (DOD's) formal role in export controls by codifying the licensing referral process and requiring that DOD be informed of commodity classification actions.
    Additionally, H.R. 2581 endorses the concept of deemed exports which we think is important in the information age. Increasingly, we must think of technology as knowledge not just hardware, if we are to ensure that dangerous capabilities do not fall into the wrong hands. H.R. 2581 makes progress on this issue, and the Administration supports passage of the bill as introduced.
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    In the new security environment, DOD is placing a higher priority on export control issues than perhaps it did in the past. We agree that the export control system created for the Cold War is now outdated.
    Back then the United States primarily sought to keep advanced technology out of the hands of known adversaries. Today, technology is changing faster, and our future adversaries may be unknowable. Obviously, this makes it harder to keep technology out of the wrong hands.
    Some may be tempted to throw in the towel and decontrol everything. That is not the approach that this Administration, and in particular that is not the approach that the Defense Department, will take on this issue. We will have to develop new methods and new metrics for assessing technology. Those metrics will continually change to keep pace with developments in technology, and the international security environment.
    In short, from a national security standpoint, our export control regime must constantly evolve to keep pace with the threats to our security.
    We have only recently completed assembling our policy team and reorganizing in the Department to give export controls a higher priority within the Department of Defense. The President and the Secretary of Defense are committed to reforming the export control process and improving its contribution to our national security. And as we move forward in this process, I look forward to sharing ideas with this committee and working with Congress to ensure that we achieve the President's goals.
    Thank you very much.

    [The prepared statement of Secretary Crouch can be found in the Appendix on page ?.]
    The CHAIRMAN. Secretary Jochum
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    Secretary JOCHUM. Thank you, Mr. Chairman, Mr. Skelton and members of the committee. Thank you for the opportunity to present the Administration's view on the Export Administration Act of 2001. We also appreciate the committee taking its valuable time to look at this important issue.
    The Administration believes that an effective export control system is critical to our national and economic security. This is particularly true as we continue to face threats from terrorists and rogue states developing weapons of mass destruction.
    We must ensure that our adversaries and potential adversaries do not obtain goods or technology that could be used as a weapon that might ultimately be directed against us. It is also important that American exporters have the opportunity to compete on equal footing with their foreign competitors in the global marketplace.
    Unfortunately, in recent years, our export control authority has been based on either the outdated Export Administration Act of 1979 or the International Emergency Economic Powers Act, known as IEEPA. The 1979 Act has expired on six occasions in the past 22 years. It most recently expired in August of last year, and it has not been reauthorized to date.
    Consequently, we are operating under IEEPA, which raises serious legal and political complications. It also greatly weakens our enforcement efforts by among other things significantly lowering the penalty for export control violation. The low level of penalties under both IEEPA and the 1979 Act could be viewed merely as a cost of doing business and have little deterrent effect.
    In the past, the remedy to operating under IEEPA has been simply to extend the 1979 Act. This is no longer sufficient. The 1979 Act is a Cold War statute that does not reflect current economic and political realities. The basic national security authority of this law is predicated on the existence of a multilateral regime known as the Coordinating Committee (COCOM) that went out of existence eight years ago. Finally, the repeated shifting back and forth between IEEPA authorities and the 1979 Act has severely hampered our enforcement efforts. The coherent modern statutory basis for U.S. export control law will enhance our ability to bring enforcement actions against alleged violators.
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    In early 2001, the Administration conducted a thorough interagency review, led by the National Security Council, of the bill then pending in the Senate, S. 149. As a result of its review, the Administration proposed a number of changes to the bill which the secretaries of state, defense and commerce and the national security adviser all agreed would strengthen the President's national security and foreign policy authority to control dual-use exports.
    The Senate incorporated these changes into S. 149, and as a result, the Administration strongly supported the bill, approved by the Senate last summer by a vote of 85-14.
    In the House, Representative Gilman introduced H.R. 2581, a bill that largely incorporated the provision of the Senate bill. The one notable exception is a provision concerning North Korea, which the Administration opposes.
    Both the Gilman bill and S. 149 eliminate the Cold War structure of existing law, provide greater opportunities for exporters to seek revision of ineffective controls and importantly give the President broad authority to protect national security.
    National security controls are authorized to restrict the export of items that would contribute to the military potential to the detriment of the United States and its allies, to stem the proliferation of weapons of mass destruction and to deter terrorist acts. In addition, the bill provides for the first time an explicit statutory provision, several additional important authorities, including catch-all controls and enhanced control.
    Catch-all controls ensure that no exports, even of otherwise uncontrolled items, are made to weapons of mass destruction programs. Enhanced controls allow the President to exempt for reasons of national security items from the foreign availability, mass market and parts and components provisions of the bill. Thus, the President can present at the outset sensitive technologies being considered under those provisions that would otherwise limit control.
    The Gilman bill also provides for the first time a statutory role for the Department of Defense and other relevant Departments in the export control process in several important ways.
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    First, the Secretary of Commerce is required to refer all license applications to the Secretary of Defense and State and to other relevant agencies.
    Second, all reviewing Departments are authorized to escalate a proposed licensing decision to a higher level of appeal all the way up to the President.
    Third, the commerce secretary is required to notify the Department of Defense of all commodity classification.
    And fourth, the bill provides for the first time a formal advisory role for the intelligence community in the export licensing process.
    In the area of enforcement, the Gilman bill, like S. 149, significantly raises the penalties for export control violation and contains other provisions that enhance our ability to enforce the law.
    For example, penalties on corporations are raised to $5 million per violation, or 10 times the value of the export, whichever is greater. Criminal penalties on individuals are raised to $1 million, and civil penalties increase to $500,000. By way of comparison, under IEEPA, the maximum criminal penalty is $50,000, and civil penalties today for export control violation are capped at $12,000.
    In addition, the bill authorizes the Commerce Department to conduct undercover operations and enables wiretaps based on violations of export control law.
    Commerce also is authorized to station attaches abroad to ensure that U.S. items are not diverted or misused. These new enforcement authorities are particularly important in light of the war on terrorism.
    In August of last year, the House International Relations Committee reported out H.R. 2581 which retained many of the provisions of the Gilman bill that I have just mentioned but also added approximately 30 amendments to the framework of that carefully constructed bill. Consequently, the Administration strongly opposes the bill as reported out by HIRC.
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    I must emphasize that the Administration continues to carefully review and formulate its position on each individual HIRC amendment. Moreover, I would like to provide three significant concerns that the Administration has with the HIRC amendments in general.
    First, certain provisions in the HIRC bill would limit the flexibility of the President to conduct foreign policy and implement export controls. An example of this is the requirement that the President wait 30 days prior to removing those foreign policy controls not imposed by law. This provision could constrain the President from acting promptly to protect national security, as he did, for example, when the Administration removed certain sanctions on India and Pakistan following September 11.
    Second, several provisions would actually change the focus of export controls from protecting national security to other non-security related areas. Examples of this are the amendments that would require export controls on pesticides, agricultural chemicals and test articles intended for clinical investigation for purposes of public health and environmental protection. We believe these issues are best raised and addressed under the authorities outside the context of the Export Administration Act.
    Third, certain provisions of the HIRC bill appeared to actually roll back existing authorities. One example of this is the definition of export, which appears to limit our ability to control the transfer of intangible technologies to foreign nationals outside the U.S. as we do today.
    In conclusion, the Administration strongly believes that S. 149 and H.R. 2581 as introduced provide the authority needed to prevent terrorists and other potential adversaries from obtaining sensitive items that could be used to threaten our national security. The bills also provide transparency and predictability in the licensing process that will benefit U.S. exporters.
    We look forward to working with this committee and others in the House to pass a new EAA this year. Thank you for the opportunity to testify.
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    [The prepared statement of Secretary Jochum can be found in the Appendix ?.]
    The CHAIRMAN. Thank you, sir.
    Secretary Van Diepen?


    Secretary VAN DIEPEN. Thank you Mr. Chairman.

    Congressman Skelton, and members of the committee, thank you for the opportunity to provide the views of the Department of State on the Export Administration Act. We welcome your commitment to take up this important issue quickly and give it the attention it deserves. My testimony—
    The CHAIRMAN. Secretary, would you put the microphone just a little closer please.
    Thank you.
    Secretary VAN DIEPEN. My testimony will focus on the State Department's priorities for the EAA.
    Export controls are, first and foremost, a national security and foreign policy tool. At the same time, we must be mindful of the burden that such controls place on U.S. industry and therefore focus our efforts on those items, end-uses and end-users that present a substantial risk.
    It is also important that the new Export Administration Act not compromise the integrity of our strong munitions export control system. State supports the Senate version of the Export Administration Act, in part because it does not affect the Arms Export Control Act except in explicit conforming amendments.
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    The State Department's objectives in enacting the new Export Administration Act have consistently focused on four principles.
    First, strengthening the multilateral nonproliferation and export control regime: the nuclear suppliers group, the missile technology control regime, the Australia Group's chemical biological regime, and the Wassenaar Arrangement on arms and dual-use technology.
    Our objective in these regimes is the same as for our national export control policy as a whole: to balance economic consideration with a national security requirement to prevent the proliferation of dangerous technologies.
    Our partners in these multilateral regimes share this objective, even if all of them do not always agree with us on where the balance is.
    Above all, participation in the multilateral regimes is in U.S. security interest. Any legislation on export controls needs to provide this and future Administrations with the flexibility to abide by, strengthen and negotiate new multilateral regimes that promote U.S. interests.
    That is why the Administration worked to include a provision that allows for continued controls on any item that is on a multilateral regime list, notwithstanding any other provision in S. 149.
    The second principle is the ability to authorize unilateral U.S. controls when needed, such as those for anti-terrorism purposes. Although we agree strongly that multilateral controls are preferable, the new Export Administration Act must allow us the flexibility to impose unilateral controls when necessary to achieve critical national security and foreign policy goals.
    Third, a new Export Administration Act must permit controls based on the end-user and the end-use, especially as concerns weapons of mass destruction missiles, as well as on the items themselves. These catch-all controls are extremely important to our effort to hinder proliferation. And, in addition, they help us show leadership on this issue in convincing other countries to enact similar controls.
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    The Administration strongly prefers the language in the bill reported out of the Senate, which provides all the necessary legal authority to continue these critical controls without constraining the President's flexibility.
    Fourth and finally, it is essential that the President must have the ability to make any decision on export controls that he feels is in the national interest.
    Specifically, the Administration seeks an Export Administration Act that gives the President the authority to maintain controls on items listed by the multilateral regimes, to control items to terrorist-list countries and designated terrorist entities, to implement catch-all controls, to maintain unilateral national security controls on an items despite foreign availability or mass market status, to maintain and impose unilateral foreign policy controls when necessary, and to impose enhanced controls on items the President determines to be particularly sensitive, notwithstanding other restrictions.
    One of the main reasons the Administration supports S. 149 and much of H.R. 2581 as introduced is that they protect the President's latitude to make these critical decisions. We will work closely with the House to ensure that the final bill does not tie the President's hands on export control decisions.
    The State Department appreciates the efforts of this committee and others in the House to undertake a thorough review of this extremely complex subject and produce a new Export Administration Act. Export controls play a critical role in protecting American security.
    How they are implemented is also crucial to the health and competitiveness of U.S. industry. As the lines between military and civilian goods grow increasingly blurred, it is important that our export controls balance these factors.
    A new Export Administration Act must create the architecture to accomplish this goal. The Administration feels that much of H.R. 2581 as introduced would achieve an appropriate balance between protecting U.S. national security and foreign policy interests, while supporting U.S. economic leadership. However, because of the North Korea provisions and because of many amendments added by the HIRC, the Administration strongly opposes H.R. 2581 as reported by the House International Relations Committee.
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    The Department of State welcomes the opportunity to work with the committee on this essential task.
    Thank you, Mr. Chairman.

    [The prepared statement of Secretary Van Diepen can be found in the Appendix on page ?.]

    The CHAIRMAN. Thank you, sir.
    The chair recognizes the gentleman from Missouri, Mr. Skelton.
    Mr. SKELTON. You will have to explain a few things to me. The previous law expired.
    Mr. JOCHUM. Correct.
    Mr. SKELTON. What was wrong with the previous law?
    Mr. JOCHUM. What was wrong with the previous law?
    Mr. SKELTON. Yes.
    Mr. JOCHUM. Compared to this law?
    Mr. SKELTON. Or to anything. What was wrong with it?
    Mr. JOCHUM. Well, I think we have done, I mean, the reason it expired is because it had a sunset provision—
    Mr. SKELTON. No, no, no, no. Answer my question. What was wrong with it? The reason it expired because the expiration date passed.
    Mr. JOCHUM. Right.
    Mr. SKELTON. What was wrong with it? That is all I want to know.
    Mr. JOCHUM. Well, I am not sure I can say anything was wrong with it. I think we had a pretty good process set up. It gave us a framework to implement export control authorities. I mean, since August I cannot say that things are going off to potential adversaries or terrorists or anything like that. I mean, we have an underlying authority.
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    But what this new bill does is some of the things we testified about. It gives the Department of Defense an explicit role, gives the intelligence community an explicit role, which is not in the old act.
    But when you read the old, what is really interesting, sir, when you read the old act—
    Mr. SKELTON. As I understand it, you support the Senate bill, is that correct?
    Mr. JOCHUM. The Administration supports the Senate bill and most of the bill that was introduced in the House by Representative Gilman. What we do not support is amendments that were added by HIRC.
    Mr. SKELTON. The Senate bill, as I understand it, takes the Department of Defense out of the equation to a great extent; is that not correct?
    Mr. JOCHUM. I do not think that is correct. I think it adds the Department of Defense into the equation—
    Mr. SKELTON. Well, the International Relations bill put the Defense Department back in, did it not?
    Mr. JOCHUM. I think both the Senate bill and the House bill have very parallel provisions on the role of the Department of Defense. I think they are exactly the same.
    Mr. SKELTON. Let me try again. Then what is wrong with the bill that came from Chairman Hyde and Congressman Lantos' committee? What is wrong with that?
    Mr. JOCHUM. Here is what is wrong with it. At the beginning of 2001, the Administration took a good look at the Senate bill. It had several recommendations for changes that would enhance national security. We recommended those to the Senate, they adopted them, and we think we have a very carefully constructed bill.
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    Mr. Gilman essentially introduced that bill, which we supported in large part. The 30 amendments that were added we feel were things we did not ask for as an Administration and, as I said in my testimony, in different categories, take us away from the national security focus of export controls and tie the President's hands in some regard.
    Mr. SKELTON. As I understand it, tell me if I am wrong, the House bill, as amended by the International Relations Committee, strengthens the national security process, does it not?
    Mr. JOCHUM. I do not think so. I mean, I would be willing to look at individual provisions, but—
    Mr. SKELTON. Are you telling this committee it does not strengthen national security process?
    Mr. JOCHUM. Sir, if you would point to a specific provision, we could talk about that. But I think if you look at the role of the Defense Department, in this bill, that is how we define national security, it is the same as the Senate bill.
    Mr. SKELTON. I will have some questions later, Mr. Chairman.
    The CHAIRMAN. Gentleman from California, Mr. Hunter?
    Mr. HUNTER. Thank you, Mr. Chairman.
    Gentlemen, I have looked at this bill, and my opinion is that this is an extremely dangerous bill, as it was proposed by the Administration, the major provisions of which were proposed by the Administration, as it came out of the Senate and, to a lesser degree but nonetheless still dangerous, to national security after it was amended by the HIRC.
    You know, you said, Mr. Jochum, that we never want to sell anything or make it possible for things to be transferred from this country that one day may kill our soldiers on the battlefield, did you not?
    Mr. JOCHUM. I did not use those words, but I agree with that statement—
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    Mr. HUNTER. You basically said—
    Mr. JOCHUM. Absolutely.
    Mr. HUNTER. Okay. I have a little poster here that has the genesis of the materiels and components of the Scud missiles that killed Americans in Desert Storm. Let me just read to you the participation by United States companies.
    Electronic Associates supplied the computer system for the missile wind tunnel. International Imaging Systems supplied the image-enhancing equipment capable of missile targeting. Litton Industries financed a West German firm which built Iraq's missile complex. Scientific Atlanta supplied antenna testers through West German firms for missile complex. TechTronic supplied measuring equipment through West German firms to the missile site. And Wiltron supplied the network analyzers used to develop missile guidance.
    My point is that we have an unfortunate history of Western companies and American companies, under our export regime, supplying, in fact, the systems to adversaries which are used and were used to kill Americans on the battlefield.
    Now, I have looked at this bill with respect to the participation by the Secretary of Defense, for example, in this entire process. It looks to me that he has been minimalized here. This is a list of controlled items that are dual-use items.
    The Secretary of Defense and the Secretary of Commerce must concur, as I understand, to put an item on that list; is that not right?
    Mr. JOCHUM. That is correct.
    Mr. HUNTER. Why can't the Secretary of Defense decide that something is dangerous enough that it should go on the list? And why shouldn't he be allowed to do that, since he knows the security implications of certain components?
    Mr. JOCHUM. I think that happens. I mean, I think underlying your question is the presumption that there is some adversarial relationship between the Commerce and Defense Department.
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    Mr. HUNTER. Wait a second, Mr. Secretary. We are talking about the law. Now, he either has a right to unilaterally put something on the list or he does not.
    And if you have a prohibition, that is, the fact that you must have concurrence between those Departments before something can go on the list, that means effectively that the Department of Commerce, if they disagree with Defense, can veto it and the item does not go on the list. Is that not true? Under the strict reading of the law, it says they must have concurrence.
    Mr. JOCHUM. I think that is true, but—
    Mr. HUNTER. Would you rather have it in such a way that the Secretary of Defense can, if he thinks something is detrimental to security, can add that system to that list? Don't you think that makes sense?
    Mr. JOCHUM. It does make sense. And I think if the Secretary of Defense brought to us an item that was detrimental to national security, we would add it to the list.
    Can I just point out, though—
    Mr. HUNTER. Well, do you think he should be able to add it to the list even though your people, in your judgment, disagree with him? Obviously you have set up a dispute resolution. That presumes that there are going to be disputes, right?
    Mr. JOCHUM. Absolutely.
    Mr. HUNTER. Well, then, should he not have the right, when he thinks something is detrimental to our security, could be used to kill Americans on the battlefield, as the Secretary of Defense, with all the intelligence apparatus that the Defense Department has behind that decision, why shouldn't he be allowed to put that on the list?
    Mr. JOCHUM. Sir, if that were the case, it would be on the list.
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    But I would just like to point out the difference between this—
    Mr. HUNTER. But I just want you to answer the question, because I have got a lot of questions here.
    Do you think that would be a good thing to have, to have the right of the Secretary of Defense unilaterally to add to the list?
    Mr. JOCHUM. All I can say is we do not have a position because that issue has not been put forward before us.
    Mr. HUNTER. Okay, I have a couple others for you then.
    Mass market: The mass market status is determined by the Secretary of Commerce.
    Mr. JOCHUM. Correct.
    Mr. HUNTER. Why shouldn't the Secretary of Defense have an opportunity to concur in that determination?
    Mr. JOCHUM. Can I briefly explain the mass market procedure?
    Mr. HUNTER. Certainly.
    Mr. JOCHUM. Okay, thanks.
    Before we get to the mass market analysis, the President has the ability to prevent any item from being considered for mass market status. If the President fails to do that then, you are correct, the Secretary of Commerce, in consultation with the Secretary of Defense, makes a decision on the mass market status.
    Why is that the case? I believe it is because it is a market analysis, it is purely a market analysis to determine whether something is on a mass market basis.
    Now, if that is a positive determination by the Secretary of Commerce, the President then, on the backside, still has the ability to overrule that decision and set it aside indefinitely.
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    Mr. HUNTER. Okay. Let's go to the President weighing in in this process.
    You and I know the President is extremely busy. In reality, there is not going to be a lot of time for the President to say, ''Wait a minute. Cancel my appointments. I have to work on the accelerometer issue.'' Okay?
    So we know that, logistically, we have put that office in a position where it is going to have minimal determining power here, with respect to what is or what is not sold.
    The President does not have time to do that. Don't you agree with that?
    Mr. JOCHUM. I think the Administration is comfortable with having the President making the decisions vested in the President.
    Mr. HUNTER. Okay. I am not talking about how they are comfortable. I am talking about as a practical basis, no matter who is President, the idea that the chief executive of the United States is going to have to start getting into the details of dual-use technology, some of which is extremely complex, and take away from his schedule to make a determination, don't you think that by defining him into that, or by giving him that provision we are basically assuring that there are going to be very few times when there is a Presidential determination made? Don't you think, as a matter of practically, scheduling?
    Mr. JOCHUM. I do not think so. And the analogy I would use is that, the millions of theoretical operations per second (MTOPS) decision, for example, is vested in the President. It is just a way decisions are made in the executive branch that, you know, decisions are taken up the line and into the President.
    But the Administration does not believe that this will prevent us from setting aside mass market determinations if the facts call for it.
    Mr. HUNTER. Okay. Let me go to your mass marketing and your foreign availability status. It has to, one, be available to controlled countries from sources outside the U.S.; has to, two, be acquired at a price that is not excessive; has to, three, be available in sufficient quantity so the requirement of a license or other authorization with respect to the export of such item is or would be ineffective. Those are the criteria.
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    Let's take missile components, Okay? Today you have Egypt, Iran, Syria and Pakistan importing North Korean rocket components in fairly large quantities. You can argue that requiring a U.S. license for their sale would obviously be ineffective.
    This stuff is all a question of judgment. But if you give literal meaning to this very broad change, incidentally, and you have changed the foreign availability description from what it was in the old law, that Congressman Skelton talked about, this extremely liberal phrasing that you have in that particular provision means that you can make the case that you have these missile components now being imported by Egypt, Iran, Syria and Pakistan from North Korea, and therefore why can't we sell some of them?
    Now, I have looked at this managing steel situation. In 1986, a Pakistani-born Canadian business man tried to smuggle out about 25 tons of that steel to Pakistan's nuclear weapon program. We caught him and we have him in prison. It is being controlled for export since 1981. That managing steel is now produced by companies in France, Japan, Russia, Sweden, the U.S. and the U.K. It meets all the criteria of mass marketing status.
    Now, here we have a guy who is doing, what, 48 years in prison because he sold, he tried to export managing steel to Pakistan's nuclear weapon's program. Do you agree that he should be freed, because what he was trying to export was something that was actually available, arguably, on the mass market?
    Mr. JOCHUM. Obviously, I do not think that and I do not—
    Mr. HUNTER. Why not?
    Mr. JOCHUM. I do not think the examples you raised would absolutely lead to a mass market or a foreign availability positive determination.
    One important point—
    Mr. HUNTER. Well, wait a second. You have it being produced by companies in France, Japan, Russia, Sweden, the U.K. and the U.S., and they list it on the Internet. Now is that something that is available on the mass market or not? It sounds to me like it is.
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    Mr. JOCHUM. But one important point: The Administration went to the Senate in January of 2001 and said, ''If these items are controlled in a multilateral control regime, we will still control them, regardless of the foreign availability mass market status.'' Those would not be decontrolled.
    Mr. HUNTER. Sir, you are telling me that absolutely the managing steel is going to continue to be controlled.
    Mr. JOCHUM. I believe so.
    Mr. HUNTER. Do you know for sure?
    Mr. JOCHUM. I cannot tell you for sure. I do not know if Vann knows, if it is on a multilateral list, but I believe it is.
    Mr. VAN DIEPEN. Managing steel is controlled both under the nuclear suppliers group and the missile technology control regime, and so it would qualify for this status.
    Mr. HUNTER. Okay. Flip to the page in the bill itself and show me where it says, if it is controlled on a multilateral regime it is not going to be taken off the list. Have you it there? In the bill.
    Mr. JOCHUM. Section 309, I think.
    Mr. HUNTER. And, Mr. Chairman, that will be my last question for a while, but let me come back with the second round.
    The CHAIRMAN. The gentleman from—
    Mr. HUNTER. Let the gentleman respond.
    The CHAIRMAN. Okay, Okay.
    Mr. VAN DIEPEN. Section 309 of the Senate bill: ''Notwithstanding any other provision of this act setting forth limitations on authority to control exports, and except as provided in Section 304, the President may impose controls on exports to a particular country or countries, one, of items listed on the control list of a multilateral export control regime.
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    Mr. HUNTER. Okay, wait a second. You put out the perfect the word there, ''may.'' Okay? Now, obviously if what you are saying is, even though it is under a multilateral control regime, Missile Technology Conrol Regime (MTCR) or something else, there is no guarantee, or there is no block, to that thing being taken off our control.
    Now, the President, you say, can make the decision to not let it go. But he can do that anyway, right? In other words, the President can disregard mass marketing or foreign availability if he wants to, if he makes the exception, if he has the time to devote to this, right, under you bill?
    Mr. JOCHUM. Right.
    Mr. HUNTER. Okay. So what you are saying is, however, if something is on a multilateral regime, the President may decide to keep it on. So what that means is that we have opened the door, these items that are being controlled, where we are trying as hard as we can to persuade our allies not to sell the weapons of terror to the bad guys, we can be, at the same time, finding that there is mass marketing, as in the managing steel that I just defined where the stuff is on the Internet, even though we have sent people to prison for exporting it. And you have a direct conflict with your multilateral regime.
    And you say the President may, if he decides or if it is brought to his attention, recover from that very difficult position. Nonetheless, it is not a bar in the language of the bill itself. Is that right? It is not a bar?
    Mr. VAN DIEPEN. Sir, I think the way we are looking at it is, this law would give us the authority to maintain controls on such items, irrespective of—
    Mr. HUNTER. Well, let me just tell you. We are not talking about giving permission to control items; we are talking about having real laws with real definitions that can be applied in any Administration in a very concise way without having to figure out what the attitudes of the present Administration are.
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    And what you have done is you have made it possible to have our Department of Commerce decontrol items which could be used to kill Americans on the battlefield, even though those same items are controlled under a multilateral regime and on a list.
    So at the same time we have our State Department people going in, trying to convince our allies not to sell to the bad guys, even though they can make money doing it, we can have our own Department of Commerce removing that item from the list, unless the President intervenes, right?
    Mr. VAN DIEPEN. Well, sir, all I can say is I am, in fact, one of those State Department people who try to convince other countries not to do that. And if we believed the bill would have that effect, we would not be supporting it.
    Mr. HUNTER. Okay.
    Thank you, Mr. Chairman. That is all for a while.
    The CHAIRMAN. We will go back to you, Mr. Hunter.
    The gentleman from Mississippi, Mr. Taylor?
    Mr. TAYLOR. I want to thank the gentlemen for appearing today.
    Under the Constitution, who is given the responsibility for regulating trade between nations?
    Mr. JOCHUM. The U.S. Congress, I believe, sir.
    Mr. TAYLOR. Article I, Section 8 or 9, if my memory serves me correct.
    If I listened to your presentation properly, Mr. Jochum, you said, ''I will just ignore that old Constitution thing and let some bureaucrats within this Administration, or the last Administration, or the next Administration; just let us do your job.''
    I would remind the Secretary that one year ago right now, the President of the United States, very nice guy, stood before the American people, me and 280 million other people, and said, ''We can cut taxes by $1.3 trillion, and we will have surpluses as far as the eye can see.'' We now have deficits as far as the eye can see.
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    As recently as August, the President of the United States wanted to give 3 million illegal aliens amnesty. Come October, he had changed his mind and wanted to tighten up the borders.
    I do not think, in the case of something that can become a weapon of mass destruction or help a potential foe build a weapon of mass destruction, we can make that kind of mistake. I do not think this Administration can afford to make that mistake; I do not think the last Administration or the next Administration.
    So, Mr. Secretary, I will respectfully tell you that you have not convinced me that we should just trust some bureaucrats to make that decision.
    And I would give you the opportunity to respond.
    Mr. JOCHUM. Mr. Taylor, I agree with you. We do not, we cannot let these items fall into the wrong hands. I think what the Administration has worked with the Congress to write here is a bill that goes way beyond the bill we have had for the last 25 years, in terms of protecting national security.
    The 1979 Act had no role for the Department of Defense to look at export licenses. We now have that role in this statute, and a variety of other enhanced enforcement authorities.
    I think what we have done here is significantly enhance national security, so you do not have to trust the bureaucrats downtown to implement the law the way you would want to. You have built in safeguards within the system, we have an interagency process to look at export control licenses; you do not have to trust the Secretary of Commerce to make the right decision.
    Mr. TAYLOR. Mr. Jochum, I happen to have been around long enough to remember when a letter was being passed around by the California delegation, signed by both Democrats and Republicans, encouraging the previous Administration to allow a company by the name of Hughes Loral to go over and launch some satellites from China because they could make a lot of money in the telecommunications business. And nothing could possibly go wrong as a result of that, they were told.
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    Now, I did not sign the letter; a lot of people did. Something did go wrong. The Chinese learned how to kick multiple nuclear warheads off of one rocket as a result of that.
    How many more times do we have to, as a nation, get burned before we start looking out for national security first, instead of somebody who can make a quick buck?
    Mr. JOCHUM. Sir, I would just reiterate, I think the bill before you today does a much better job than the bill that was in place at that time in protecting national security.
    The CHAIRMAN. Gentlelady from Virginia, Mrs. Davis?
    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman.
    And thank you, gentlemen, for being here. I had a couple questions, but I think I am just going to be forced to make a few comments.
    First, you know, I sit on the International Relations Committee as well, so I have heard all the debates. I heard the debates on the 30 amendments that were put on. It is beyond me how you, Secretary Jochum, could not answer Mr. Skelton's question with regard to the two bills, and especially the one with the amendments. I happen to disagree with you; I think the amendments that we put on the bill tighten the security of the bill.
    And you could not answer, I think it was Mr. Hunter's question, you know, but if you look at Subsection 601, the Senate had no comparable provision. The House International Relations Committee (HIRC), we put on the amendment that the Secretary, this was with regards to regulations on exports to foreign nationals, ''The Secretary, with the concurrence of the Secretary of State and the Secretary of Defense, shall issue regulations to govern the release of technology to a foreign national within the United States and to establish appropriate procedures and entities to ensure compliance with those regulations.'' How does that not tighten up the security?
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    Now, we heard this bill in August, prior to September 11. At that time, my biggest concern was national security. If that was my concern, you can bet it is more my concern now.
    I guess I am just going to ask you to tell me why you do not think a section such as that tightened up the bill.
    Mr. JOCHUM. I would be glad to. Right now, under the definition in current law, promulgated in the regulations promulgated pursuant to that, we do regulate the transfer of intangible technology to foreign persons in the United States.
    Mrs. JO ANN DAVIS OF VIRGINIA. What regulates that?
    Mr. JOCHUM. We regulate it under the current definition of exports. What this definition did—
    Mrs. JO ANN DAVIS OF VIRGINIA. Who regulates it?
    Mr. JOCHUM. We do on an interagency basis.
    Mrs. JO ANN DAVIS OF VIRGINIA. Everybody that we just said, Secretary of State, Secretary of Defense.
    Mr. JOCHUM. Absolutely. It goes through our normal export control process. But the sentence you just read says: ''Within the United States.''
    Mr. JOCHUM. That limits us. We actually now control the transfer of intangible technology from a U.S. person to a foreign person even outside the United States. Our concern with that provision—
    Mrs. JO ANN DAVIS OF VIRGINIA. Does this law superseded that?
    Mr. JOCHUM. I think it precludes us from doing that. I mean, I do not know what the intent of the amendment was, but the drafting seems to limit our existing authority.
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    Mrs. JO ANN DAVIS OF VIRGINIA. Well, to go back to Mr. Hunter's question, and you answered him with Section 309, one of the amendments we put in required the President to impose export controls, where, when you read it, you said ''may.'' But the House version, I believe, required rather than allowed the President. How does that not tighten it up?
    Mr. JOCHUM. I do not think that was one of the House amendments. I could be wrong about that.
    Mrs. JO ANN DAVIS OF VIRGINIA. Well, according to what I have here, it was.
    But I guess I just have a concern, you know, I mean, we hashed that out and hashed that out and hashed that out, but we did not hear from anybody, I do not believe, on International Relations (IR) that you did not approve of the amendments when we were in there. No one spoke up against it.
    Mr. JOCHUM. No, I agree. The Administration did not take a position prior to the markup, and we are now going through a process where we are going to work with the members of HIRC and the members of this committee to get a bill that everyone can support.
    Mrs. JO ANN DAVIS OF VIRGINIA. But if I am hearing you correctly, what you support is S. 149 with no amendments.
    Mr. JOCHUM. Well, we share your goal on national security. That is our overriding concern. And the provision you just mentioned, frankly, we think it limits our existing authority. But again, I am not saying there was any intent to do that, I think it was just perhaps a drafting issue, and we can work on that.
    Mrs. JO ANN DAVIS OF VIRGINIA. Secretary Crouch, do you believe that the Department, the Secretary of Defense, I guess I am putting you on the spot here, but do you believe that—
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    Mr. CROUCH. That is why I am here.
    Mrs. JO ANN DAVIS OF VIRGINIA. —he has really been included in this bill?
    Mr. CROUCH. Included?
    Mr. CROUCH. Yes, I do.
    Mrs. JO ANN DAVIS OF VIRGINIA. In the drafting of the bill?
    Mr. CROUCH. I would just say, if I might make a brief comment on the intangible transfer of technology, I consider that to be a very serious issue, and I regarded the amendment you were talking about as, in effect, the intent of that amendment was a positive thing, something that we certainly are concerned about inside the Administration, inside the Department.
    I think the problems that have been highlighted by my colleague ought to be something that could be worked out. And so from that standpoint I want to make it clear that it is not the intent of the amendment, in effect, that I think we are challenging, but more maybe the specifics of how it was drafted.
    Mr. JOCHUM. I agree.
    Mrs. JO ANN DAVIS OF VIRGINIA. Well, I guess if I were hearing from you, Secretary Jochum, that you are willing to work with another amendment as opposed to, I believe you said the Administration supports S. 149 and the House version as introduced.
    Mr. JOCHUM. Right.
    Mrs. JO ANN DAVIS OF VIRGINIA. And that was almost cut and dry, it seemed from you—
    Mr. JOCHUM. Yes.
    Mrs. JO ANN DAVIS OF VIRGINIA. —that there would be no amendments. And quite frankly, I do not support it as introduced, although I support very much being able to export. I want to support the industry. But I want to protect national security more than anything.
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    If I am hearing that you are willing to take the amendments we have put on in the House International Relations Committee and massage them to get them to something that, you know, you can live with, that is fine. But to come in and give the impression it is cut and dry, it is S. 149 or nothing, I have a problem with that.
    Mr. JOCHUM. No. And I am sorry if I gave that impression. And let me be clear to the committee: I think the worst-case scenario is inaction, for the reasons I said. When you talk to our enforcement agents in the field, they no longer have independent enforcement authority. The penalties under IEEPA, $25,000?
    Mr. Hunter, some of the examples you raised, American companies, they have been penalized $25,000 today for things like that.
    And the important thing is to get a bill this year, and we will work with you to do that.
    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman.
    The CHAIRMAN. The gentleman from Washington, Mr. Smith?
    Mr. SMITH. Thank you, Mr. Chairman.
    I apologize. I had a constituent meeting I had to go to that dragged on longer than I expected. But I do appreciate your testimony. I have read through it.
    There is one thing I want to ask about on the national security front. It is, sort of, implicit that the choice is, you know, either we protect national security and control the export of these various technologies or we choose to allow business to triumph and go forward.
    I have never personally bought into that dichotomy. I think there is a national security issue if U.S. companies cease to be the leaders in all manner of technology: satellite, encryption, supercomputers. I mean, certainly I would think that our national security and law enforcement branches of our government would have a much better time working with technology that was U.S.-generated than if the leadership on all of that floats overseas.
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    And if we are not getting cooperation from other countries, and if they are, in fact, allowing various technologies out to people who we do not want it to get to, you know, we, sort of, lose the national security side of it on the front end, and on the back end, by not being the leader in technology.
    Because I am sure you know, I mean, technology is just hugely important, both in terms of intelligence and also in military operations, and our ability to generate that helps us in terms of national security. And the degree to which that can be generated by, you know, capital from the free market as opposed to within government, I mean, I do not know that we have enough money to do the research and development (R&D) necessary on technology within the government. So we want to encourage a robust R&D market out there in U.S. technology companies precisely to help out national security as well as the economic interest.
    And I just wondered if you could comment, because from what I have heard, you know, that point really has not been made. It has been, sort of, put out there that we have a choice between national security and business.
    I do not think that is the choice. I think we will jeopardize national security if we do not figure out some way to allow technology companies in the U.S. to maintain their leadership control.
    I am just curious about your comments.
    Mr. CROUCH. Well, I will start off. I agree generally with the statement. I mean, it is not a dichotomy. The problem, as I believe Congressman Skelton alluded to in his opening remarks, is it is striking the right balance between the two. And we think that both the Gilman bill as introduced and in the Senate bill do that. But, you know, obviously reasonable people can disagree on that.
    And so I think, you know, obviously one of the things we are working through here is trying to see what changes or whatever might be made in that regard.
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    I think it depends a little bit on the technology as well. I mean, there are certain things, there are certain categories of things, missile components, weapons of mass destruction components, and the like, which have to be treated differently and have to be accorded a different status and, because of their ability to do great harm to ourselves, our allies our forward-deployed forces and the like.
    And those, I think, are dealt with in this bill. And we believe that the Department of Defense, in particular, has a strengthened role in that process, and in keeping those kinds of things out of the hands of the bad guys.
    Mr. SMITH. Could I ask specifically about those kinds of things? As I look at the Gilman bill, to generate the notion that there is a fairly defined universe of technologies that go towards weapons of mass destruction. But looking at the Gilman bill, it has a fairly broad definition of that. I mean, in developing weapons of mass destruction, basic computers, all kinds of different, it seems to me like just about, well, not every, but a lot of technologies that we would want to export are going to fall under that definition.
    And I guess the question I would have is, and I realize this is not your Department, maybe the gentleman from Commerce could answer, do you see the private companies will be able to maintain their competitive level with international companies under the Gilman bill under those restrictions, knowing what they have go through to export anything that fits into this rather broad definition of having a dual-use that could lead to weapons of mass destruction or something else? Have you thought about that in terms of whether or not that would just so restrict their ability to compete that inevitably they would fall off and just reopen? If you could—
    Mr. JOCHUM. Yes, and I would just note that you have an industry representative on the next panel who might be able to answer that a little more precisely than I.
    But certainly we have to be sensitive to the economic interests. I mean, these are somewhat, as Vann mentioned in his testimony, we have two systems. One is a munitions control system, and this is a dual-use system. These items are generally commercial items that have military capabilities and are being sold for commercial reasons for the most part. So we definitely have to be sensitive to how we are affecting industry.
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    I would still argue that national security is the overriding objective of the export control system. That is clear. But we have provisions in the bill, like the mass market provision that Mr. Hunter pursued with me, that I think would allow industry to come up and force us to look at maybe the cost of export controls.
    When this committee looks at the defense budget, you can measure the cost of national security in a very transparent way: what the taxpayers are paying for it. On export controls, we are getting a national security benefit, but the cost is not transparent. It falls on industries, workers, and we do not always are able to quantify what that cost is in terms of lost sales and market share.
    Mr. SMITH. Let me just clarify this. Without question, I do not think anyone disagrees that the export control regime, national security is the goal on this. There is no question about that. It is just that, as I stated in my first remarks, I hope we have a sufficiently broad definition of that and understand all the complexities of it. But thank you very much.
    The CHAIRMAN. The gentleman from Maryland, Mr. Bartlett?
    Mr. BARTLETT. Thank you very much.
    We have two needs which are frequently intentioned relative to export controls. One is the desire not to export anything which could aid a potential enemy; and second, with the recognition that our procurements from some critical parts of our industrial base are too small to maintain an adequate military-industrial base, exports are essential to our national security in maintaining this military-industrial base.
    Very frequently, obviously, these two needs come in conflict. When they do, how do we resolve that?
    And let me ask second about a general philosophy, and, of course, you would have to except some things like weapons of mass destruction from it. But if a foreign government or entity can buy a technology from someone somewhere in the world in addition to the United States, why shouldn't our guys be able to compete, whether or not that technology might ultimately end up in some weapon or system? Because it is almost nothing that we can sell that could not be used in some way as a part of a future weapons platform.
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    So if we really do not want to sell the bad guys anything that could potentially become a part of our weapon, we will not sell them anything. And I do not know how many of the countries in the world who might tomorrow be the bad guy. So, if you really put this to its limit, we are not exporting hardly anything when we desperately need to export because we cannot maintain with our purchases here an adequate military-industrial base. How do we resolve this?
    Mr. CROUCH. Well, I think it is important to remember that when we talk about export control, we are not talking about exporting or not exporting. We are talking about a licensing process. When we say, if a particular technology is sought by a particular country, we may decide through that licensing process to grant that license. And so, there are opportunities, I think, for companies to sell.
    What the export control process is designed to do is just give us, make sure, in particular the DOD and the Department of State, along with the Department of Commerce, play in that process and make sure that national security equities are protected.
    So, I do not think it is as stark a tradeoff. I mean, I think it really goes back to this issue of balance. And really, what we are debating here is do we have the right tools in this bill, and in the bill, the Senate bill and the Gilman bill as introduced, to do that. And the Administration thinks that we do.
    Mr. BARTLETT. If you would agree that we do not have a monopoly on technology in the world; that weapons system now use a great variety of technologies; that you could look at a big weapons system and almost anything that we might sell could potentially become a part of that weapons system, like high-strength fibers; they are used in a lot of applications, and they, of course, could be used in some applications in weapons systems, and if an entity or a country could buy this technology from somewhere else in the world, even though we know that potentially it could become a part of a weapon, because almost anything can become a part of a weapon, if we now refuse to let our guys participate, aren't we putting at risk our national security because we are limiting our military industrial base that we need?
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    Mr. CROUCH. I do not think we are refusing to let people participate. I think what we are saying is there has to be a licensing process.
    Mr. BARTLETT. I was not accusing you of limiting. I am simply saying that if we were to limit our exports to only those things that could never show up as any part of a weapons system, wouldn't we be exporting almost nothing, so that we would really limit the size of our military-industrial base?
    I am arguing that if you can buy it somewhere else, why shouldn't our guys be able to play?
    Mr. CROUCH. And I think the answer to that question is, in many cases, if it can be bought somewhere else, if there is foreign availability or mass market availability, the answer will probably be that we should be able to sell it.
    Mr. BARTLETT. Even if it might end up in a weapon?
    Mr. CROUCH. I would say that there ought to be exceptions to that. There ought to be circumstances where a particular technology, for example, something that might be critical to creating a biological weapon, might be available in a mass market sense. In my view, anyway, and I do not know whether that would necessarily come out of the licensing process, we ought to, and I believe the President has the authority to keep that item from being able to be exported.
    So it really depends to a certain degree on, I think, who you are exporting to, what the item is, as well as the issue of foreign availability and mass market availability.
    Mr. BARTLETT. So it is a judgment call on a case-by-case basis? It is not a prescription that is easily applied across the board.
    Mr. CROUCH. I think that it is a balance between guidelines and rules that, I think, are established in the bill and judgments that will have to be made both by the executive branch and ultimately by the President.
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    Mr. BARTLETT. Thank you.
    Thank you very much, Mr. Chairman.
    The CHAIRMAN. Let me remind members, we do have another panel to hear from after this panel.
    The gentlelady from California, Ms. Tauscher?
    Mrs. TAUSCHER. Gentlemen, I think we need a bill this year for the reasons that we all understand. We have to understand what we are doing. We have to have real penalties for people that are not doing the right thing.
    But I think this debate has to get back what we are doing. We are 25 or 30 years too late to put the genies back in the bottle. We cannot control technology. What we are attempting to do, I think, are three things.
    First and foremost, what we are attempting to do is to ratchet ourselves to a 21st-century economy that is inextricably intertwined with our national security. And we are trying to deal with the fact that we have to have, as my colleague from Maryland said, an industrial base, technology base that can support our national security and our economy at the same time. And there is tremendous tension there.
    But we have to do this in a way that is respectful of the fact that we are going to have tremendous competitors around the world and that not every computer is going to kill somebody on a battlefield.
    Frankly, I am more worried about the lack of oversight on our national missile defense program than on how much oversight we actually have here. So I think it is probably better for us to be consistent on things than it is for us to pick fights with our own economy and with our own industrial base.
    Isn't it true that what we are attempting to do here is to understand who these people are that want to acquire this technology and, perhaps, achieve that for future knowledge? Isn't it true that what we are trying to do is not control technology, but control the export of it to the point where we have an understanding of where it is going and who is going to use it? And isn't it true that what we are trying to do here is not stop exporting, because, in effect, we all agree we have to do that, but that we are trying to be responsible about it in the sense that we understand that we have very significant national security concerns for many of these types of technology?
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    But in and of itself these are commercially applied technologies that also have military applications. So these are not armaments that we are selling; these are basically pieces of technology. Isn't that right, Mr. Secretary?
    Mr. JOCHUM. We certainly have items on the list that are critical technologies that the U.S. is the only producer, or there are a small number of producers and we control them through a multilateral control regime, where we feel we can control them. And actually that is probably the majority of the items on our list.
    But you raise an interesting question. I think the interesting question you raise is, can the U.S., by making an export, actually further our nonproliferation goals? And I think the answer to that is sometimes yes. And here is why. If we do not make the sale sometimes—
    Mrs. TAUSCHER. Somebody else will.
    Mr. JOCHUM. —someone else will. We have lost the ability to put conditions on the use of that item.
    Mrs. TAUSCHER. Like maintaining it?
    Mr. JOCHUM. Maintaining that item. The conditions on further diversion of the item, the ability for us to inspect that item, where it is at and how it is being used. So absolutely, there are many times when making the export furthers our nonproliferation goal.
    Mrs. TAUSCHER. So this is not a one-way street. I am for this opportunity to have this bill. I am for making sure that it works for everybody. But I am for doing something as soon as possible.
    I am not convinced that delaying and bickering is going to do anything for us in the long term or the short term. And I think that we have to come to a realization that we cannot control technology and that all we are attempting to do is to have more information and some say in where these exports go and to whom they go.
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    And then obviously hopefully get ourselves interjected in some kind of process or some agreement either on maintenance or something else of being related on a continuing basis to where this technology goes. So there is a positive side to this unlike what we have been hearing. There is actually an up side to doing this?
    Mr. JOCHUM. I think there is, yes.
    Mrs. TAUSCHER. And what is the down side to not passing the bill this year?
    Mr. JOCHUM. I think we are working under emergency authorities which is then subject to legal challenge. We could have no export controls. Some parts of our controls have been subjected to court challenge. The penalties are meaningless. I mean, if there are, people who want to make illicit exports, the penalty is just the cost of doing business. You could build it into the cost of the product.
    Mrs. TAUSCHER. Is Congress abrogating its product to do something?
    Mr. JOCHUM. Pardon?
    Mrs. TAUSCHER. Is Congress going to be abrogating its authority to act?
    Mr. JOCHUM. I believe so. I mean, we have emergency authority. We are running an export control system today that has a lot of negative things about it.
    Mrs. TAUSCHER. Thank you, Mr. Chairman.
    The CHAIRMAN. Gentleman from Pennsylvania, Mr. Weldon?
    Mr. WELDON. Thank you, Mr. Chairman.
    Thank you for coming. In my opinion, the single biggest contributor to our security threat of this year and this century were caused by a total breakdown in proliferation control in the 1990s, total breakdown in two areas: a total lack of enforcement of international arms control regimes that are already in place, and I will give you specific examples, and a total relaxation of the standards for what we could export.
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    I say that as someone who sat on the Cox committee for seven months behind closed doors with the Central Intelligence Agency (CIA) and the Federal Bureau of Investigations (FBI). I saw what your two agencies did, State and Commerce, and let me tell you it was not China stealing our technology. It was the wholesale auctioning off of our technology and lowering the threshold, lowering the threshold in the area of satellite technology, in the area of stage separation technology, in the area of guidance systems, in the area of supercomputers.
    In 1995, there were no supercomputers in China. We lowered the export control standard unilaterally without telling Japan in 1996. Within two years, they had 600 high-end 8,000-to 10,000-MTOPS-range and above supercomputers. State Department told us, ''Do not worry. We will get end-use user certificates as to where those computers are.'' We never got those certificates.
    Where would they end up? They ended up in the weaponization labs of the People's Liberation Army (PLA), where they are now designing weapons systems and doing miniaturization of China's nuclear weapons.
    Machine tooling technology. Missile technology. We lowered the threshold in every particular case. And why we lowered that threshold, that is a subject for a different day. But it was basically the decisions made by the Commerce Department and in some cases by the State Department to allow technology to flow. It was not just the law. It was the lowering of the standard.
    And while that was going on, we abandoned the COCOM process, and that was led by the U.S. And we replaced it with something called Wassenaar, which almost every country that belongs says is a joke. It does not control the technology, and for those who say, ''Well, the other guy has it, we should be able to sell it.'' Well, no wonder the other guy has it. We did away with the COCOM process to stop that kind of technology from flowing, and we had American companies who went to other nations and set up subsidiary operations, and then they came to America and said, ''Well, wait a minute. They are selling that software or that technology in Russia. Therefore, if they are selling it in Russia, we ought to be able to compete.''
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    Well, guess what? The America multinational took the technology to Russia and started selling it, and I can think of two instances where that occurred, and then came back and made that argument. It became a self-fulfilling prophecy.
    You want to quantify the cost of what you are talking about, Mr. Jochum? Well, let me tell you. I will quantify it. The increasing cost we need for a defense budget is directly accountable and linkable to the proliferation that occurred in the 1990s. We saw a range in technology from Russia on the Shahab-3, the Shahab-4 and the Shahab-5.
    In fact, in 1997, I had the Congressional Research Service do analysis, you would admit they are a non-partisan agency, of arms control violations, Mr. Secretary, by two countries, China and Russia. And I will submit this document for the record.

    [The information referred to can be found in the Appendix on page ?.]

    They documented 38 times they had evidence that China and Russian entities were transferring technology to Iran, Iraq, Syria, Libya and North Korea. You know how many times we imposed the required sanctions that you talk about? Two. Two out of 37. When we knew the Russians or these Russian entities were transferring accelerometers like this one from SSN 19, and this gyroscope, or this gyroscope I should say, and this accelerometer from an SSN 19 missile.
    That is a violation of the MTCR. The State Department knew it. You know what the President's response to me was? ''We do not have any evidence.'' One of our agencies had over 100 sets of these devices. What are these used for? They improve the accuracy of the same missile that sent 28 young Americans home in body bags in 1991, the Scud missile and the next-generation missiles by both Iraq and Iran.
    We caught the Iraqis receiving this technology three times by the Russians, and we did nothing about it. It was so bad that the Congress, in 1997, imposed, passed the Iran missile sanctions bill, forcing your agency to do what you should have done: impose required sanctions on Iran for their involvement with the Russian Space Agency on the Shahab-3 and Shahab-4 system. The bill passed the House with 398 votes. It passed the Senate with 98 votes. It was a veto-proof margin. The President vetoed the bill. We never got to override the veto. This Congress spoke on proliferation.
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    In the 1990s, proliferation was out of control. We talk about now, we are going to do, first of all, we have sold the technology. You have given the hardware away. You have given the high performance computers away. You have given the technology for separation for, allowing the Chinese to (multiple independent re-entry vehicle) MIRV their missiles. We gave that to the Loral Corporation and Bernard Schwartz, who had his own reasons for getting all of those permits in one year that allowed Loral to sell technology and provide technology assistance to China that they never should have had.
    So, yes, I am concerned about export controls, but I am concerned about proliferation in two areas. You have to enforce the current standards that are in place. In my opinion, the Wassenaar pact does not do it. And we are not, still not, in my opinion, fully enforcing the MTCR, among other items.
    And I am submitting the document for the record, Mr. Chairman, of all those 38 instances.
    But in this case, Mr. Chairman, I absolutely, unequivocally say this committee has to take action. In fact, I would hope that we would get Dr. Steve Bryen in to testify, Steve Bryen was the first director at Defense Technology Security Administration (DTSA), and let him testify as to whether or not this act, in fact, does what it is supposed to do.
    It eliminates controls on software and know-how information, perhaps the last vestige of any kind of advantage that we have. We have already given them the high-performance computers. They already have those. We have already given them technology on satellites. We have already given them encrypted algorithms. We have already given that technology away.
    And is there a cost, Secretary Jochum? Yes. And that is why the defense budget is going up by $48 billion more. There is the cost, Mr. Jochum, because we now have to build systems to protect against those very technologies that Iran and Iraq should never have had.
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    We should not have to build a missile defense system, but they got the technology because we did not enforce the appropriate arms control agreements that were on the books back in the 1990s. We let that technology flow like water, and they got it numbers of times. But we did not want to embarrass Boris Yeltsin; heaven forbid we acknowledge that Russia is in violation of a treaty.
    So I am incensed by this whole discussion. Mr. Chairman, I would beg of you to allow this committee next week to take action on this bill.
    All of us want technology to be able to be sold where it is important for us. I cannot, for the life of me, understand how we can transfer guidance systems, stage separation technology, space launch technology, and yet we limit helicopters from being sold to China, which is the current practice. I mean, cut me a break. Conventional platforms, no less.
    And I want to know for the record, what is the appropriate control you have on launch site security, perhaps the last area of technology, where the Chinese and, to some extent the Russians, and I have supported the joint space launch program with Khrunichev and Lockheed, the Proton space launch program.
    But what exists in this bill, or other measures, to control the access to launch sites, which is where the Chinese were able to gain such valuable information in the launches that occurred in China in the mid-and late 1990s?
    I will let you know how I really feel later.
    The CHAIRMAN. Anybody care to answer that?
    Mr. CROUCH. I would be happy to take that one, for the record, the launch site security question.

    [The information referred to can be found in the Appendix ?.]
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    I would just say that the things that the congressman mentioned are very, very serious. And I was not here, unfortunately, in the 1990s. I was not in the last Administration. And I watched those things happening.
    And I agree with, you know, many of the things that you said. In particular, I think Wassenaar can be vastly improved and needs to be. It is one of the reasons that we in the Department have tried to bring technology security policy, our counter-proliferation efforts, as well as our entire approach to cooperative threat reduction, under one new organization; bring it back under the control of policy and try to integrate those concepts.
    We are at the beginning of that journey. We expect to be able to report improvements to you; the kinds of things that you saw happen in the 1990s, you know, you ought to hold us to a much higher standard.
    But I think you make some very good points, and I hope we will all do well to heed them.
    The CHAIRMAN. The gentleman from Hawaii, Mr. Abercrombie?
    Mr. ABERCROMBIE. Thank you, Mr. Chairman.
    Mr. Jochum and Mr. Van Diepen, can you explain, not necessarily explain, could you cite for me, please, for the record, what exactly do you see as the jurisdiction and oversight responsibilities, obligations or authority of the Armed Services Committee, with respect to this legislation?
    Mr. JOCHUM. Sir, I do not know that much about your jurisdiction in respect to this legislation. I would assume you would have quite a bit of jurisdiction.
    Mr. ABERCROMBIE. No, no, within the jurisdiction, what do you see as our authority with regard to your Department and your Department?
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    Mr. JOCHUM. Well, certainly, because we head up a process that has the Defense Department as an integral part of that, I would assume your authority would extend to—
    Mr. ABERCROMBIE. Do we have authority over you? Are we first among equals?
    Mr. JOCHUM. I mean, you know, we have our own authorizing committee, so I do not want to cut out their ability to oversee us.
    Mr. ABERCROMBIE. No, no. I am not making myself clear. I beg your pardon.
    When this legislation is written, who is going to decide, in the end, does this committee have the authority, can we assign the authority to the Department of Defense to make the final decision with respect to whether or not any of the technologies may be exported?
    Mr. JOCHUM. Sir, I assume you probably could, but I do not know. I do not know anything—
    Mr. ABERCROMBIE. What is your position, I am asking, of your Departments? What is the position with respect to this legislation, from your Department and the other Department, what is the position of who shall make the final decision?
    Mr. JOCHUM. Our position is that we support the process that is in place in the bill, which is a process where ultimately the President might have to make the final decision. But every step of the way there is a different procedural setup. At some points it is a majority vote. At the beginning it is unanimity, and then it is appealed.
    Mr. ABERCROMBIE. Keep going.
    Mr. JOCHUM. It depends what you mean by unanimous decision.
    Mr. ABERCROMBIE. No, I did not say unanimous decision. I want to know—
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    Mr. JOCHUM. Well, let me explain it, if I could.
    A license comes into us, the Commerce Department, as the administrative body. We send it out to Defense, State; if it is nuclear-related, Energy. They all give a recommendation on the license.
    If there is unanimity, if they all say no or all say yes, the license is approved or denied.
    If one agency does not agree with that, it goes up to another body, which we call the operating committee.
    Mr. JOCHUM. At that level, and this is, I think, what you were getting that level all the agencies sit in a room and hash this out, but the Chairman of that committee, who is a Commerce Department employee, makes the decision.
    Mr. ABERCROMBIE. Right.
    Mr. JOCHUM. Right.
    Mr. ABERCROMBIE. Is that your position now?
    Mr. JOCHUM. Yes. And just let me finish. If someone wants to appeal that, anyone can appeal that decision, it would then go up to another body, made up of us assistant secretaries, and then the decision is by majority vote.
    Mr. ABERCROMBIE. So Defense Department loses?
    Mr. JOCHUM. Well, not very often that I am aware of. I mean—
    Mr. ABERCROMBIE. It does not, excuse me, and I understand, I realize you are not being sarcastic when you say that.
    Mr. JOCHUM. If you look at our system, it is actually really interesting, because the vast majority of cases get worked out with consensus. I think the system is set up—
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    Mr. ABERCROMBIE. That just gives me no comfort whatsoever.
    Mr. JOCHUM. Okay.
    I am sorry.
    Mr. ABERCROMBIE. Because I am a legislator, believe me, and this is my 28th year, speaking of process. I understand what legislation is about and I understand where you have to try and separate policy from principle and decide whether one is actually applicable or not.
    But in this particular instance, because it has to do with the life and death of American service people and perhaps, without trying to get into hyperbole, the life and death of American foreign policy as it affects the strategic interests and the destiny of the nation, I cannot effectively, I am afraid, tell you how deeply I feel about this issue.
    This has nothing to do with your particular capabilities or abilities or commitment, either of you. I take that as a matter of course, that you devote not only your full professional attention, but your personal commitments as human beings and citizens of the United States to every decision that you make, and you are not cavalier in any respect.
    But in the wake of Mr. Weldon's indictment, if you will, I, too, Mr. Chairman, want to make clear that I feel the Defense Department should have, if anything, the veto over any or all of this. I do not particularly give a damn what the State Department considerations are, because I have run into those before. They are a different set of considerations entirely.
    Commerce certainly, I could care less in the end about that, because, and this is trans-Administration, by the way, and I am sure Mr. Weldon and Mr. Hunter and others will agree with this. This goes back way before the last Administration, with which I disagreed.
    This has to do with what the inherent nature of the Commerce Department is and the inherent nature and responsibilities of the State Department are.
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    Secretary Crouch, you have the responsibility and Secretary Rumsfeld has the responsibility, in my judgment, to have veto power. After all of these discussions, if in the end you still feel and think and have determined that the strategic interests of this country could be compromised in any way, that you have to have the authority, in my judgment, to be able to say no.
    And let me conclude, Mr. Chairman, by saying that I come from the world of academia, where the politics are really vicious, so I understand consensus and all the rest of it. And I understand that you cannot encapsulate ideas or that you cannot take the workings of the mind and say that that has some kind of national boundary. I understand that completely.
    But that is a separate question entirely from aiding and abetting a process in which that which we have achieved, particularly that which has been achieved with the taxpayer dollars of United States citizens, is put out for commercial purpose or for some abstract foreign policy principle at the expense of the strategic interests of the nation for however long or short a period that time might be.
    Therefore, I would respectfully ask your Departments to consider the idea that, particularly in the light of current circumstances where terrorism is concerned, that we consider, you consider whether or not finally a veto power should exist after, I am perfectly willing to let you go through all of the other processes or steps that you have in this process, but in the end, if the Secretary of Defense concludes that the strategic interests of the nation are in any way at risk, that the Secretary should have a veto power.
    You need not answer that question or even comment on it now if you do not wish to, but I can tell you that that is the position that I will be taking when we mark up this bill.
    The CHAIRMAN. Gentleman from Missouri, Mr. Akin?
    Gentleman from Florida, Mr. Miller?
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    Gentleman from Illinois, Mr. Kirk?
    Mr. KIRK. Thank you, Mr. Chairman.
    I spent some time in my professional life at Baker & McKenzie as an export control lawyer. I remember receiving a call from one of my clients who said, ''Let's hypothetically talk about what if somebody accidentally sent a neutron generator to Libya?'' I said, ''I think you need to talk to a criminal attorney.''

    These are very important laws and regulations we have, and I do not think the Congress is fully aware of the precarious legal status you are in right now.
    My understanding is that we have the three executive orders continuing the EAA under International Emergency Economic Powers Act (IEEPA); is that correct?
    Mr. JOCHUM. That is correct.
    Mr. KIRK. And that we temporarily reenacted the old EAA to fend off a lawsuit by a newspaper to uncover all of the confidential licensing.
    Mr. JOCHUM. That is right.
    Mr. KIRK. But that that highly flawed, outdated EAA is expired. How open are we to another lawsuit which would reveal all of this licensing data?
    Mr. JOCHUM. Well, I think it is an ongoing threat. I think we had a positive case, my lawyer is behind me. We had a positive decision, I think, at the appellate level. Eleventh Circuit. So we may be on a little better ground than we were previous to that decision. But there are other areas of our law that has come under attack as well.
    Mr. KIRK. What would you say is your most critical vulnerability? Let's just say, for example, that the International Relations Committee version of this legislation went through the House and the EAA stalled again? What would be your most critical vulnerability operating under IEEPA?
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    Mr. JOCHUM. I think it is the penalty provisions, actually. I think if there are people who want to evade the current regulations and the executive orders, the penalty is just so minuscule that there is no deterrent affect.
    The other area that is really hurting us, and Vann and I were at the Wassenaar arrangement that was referred to this September, we have lost our leadership role in the world on export controls to some extent because we have not been able to get our act together and have an underlying statute. And it is hard to quantify what the effect is of that, but that is certainly apparent to me when I talk to my counterparts in foreign countries.
    Mr. KIRK. To me there is a critical need to upgrade this not just for our national security, but this type of law is very obscure, but it does even have an impact on the Best Buy in Dearfield in Illinois, where you see that ridiculous stamp on updated versions of WordPerfect, I remember, saying ''Do not take the software out of the country without calling your local Commerce Department bureaucrat.''
    And those, kind of, ridiculous results are what happened when the statute and the underlying executive orders become so out of date from where a rapidly changing market is.
    I want to give you one idea that has not been adequately expressed here. Yes, U.S. exports can help out the military capability of another country. We all know that. But I am not sure that the American people realize just how out of date the American military is.
    When I went into combat over Iraq, our aircraft suite had technology that any normal office in America would have thrown out around 1981. And we actually gave civilian laptops to our air crews, which had more updated information and computing power than anything that the slow, old Defense Department could give us.
    I have noted that the export sector seems to drive the civilian sector to higher and higher levels of performance, which is directly related to our national security. I wonder if you could talk about that.
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    Mr. JOCHUM. I will say one word, but maybe JD is more familiar with the procurement practices of the Defense Department.
    But I think you are absolutely right. I think the change in the last 25, 30 years in procurement has gone from the government doing a lot of R&D and developing weapons systems and items that could be used in weapons systems, and commercializing that item at some point. I think the exact opposite is happening today. The private sector, especially in the mid-to late 1990s, has put in a lot capital and resources into R&D, developing things now that the Defense Department seeks to buy it from the private sector. And that is the fundamental problem here.
    I mean the commercial sector is driving this. And the technology, in some cases, is ubiquitous. It is just out there. And our Defense Department is buying commercial off-the-shelf items to upgrade their capabilities.
    Mr. CROUCH. Congressman, when you were over the skies of Iraq, I was flying a desk in the Pentagon 10 years ago. And I have to agree with you that we in the Department are not always in every area on the cutting edge of technology. The world was introduced to 386 computers and I had something called the Lexitron, which people were cannibalizing to try to keep running at the time.
    However, I think and I would generally agree that there has been a shift, that the private sector is, not just from an export standpoint, but I think you also have to recognize it is the internal market of the United States that drives that.
    So, you know, we still have a very strong base here in terms of the internal market. But beyond that there are certain technologies that are more military-specific where we do have a lead and where the investment is both a mixture of private sector funds and DOD and other and DOE funds.
    And in those particular areas, I think we have to be more careful in what we are exporting. Things that maybe are not as dual-use, they have some dual-uses, but they are not as dual-use or they are particular niche areas.
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    So it is a mixed bag, but I think as a general rule that is a correct assessment.
    Mr. KIRK. My general experience has been that the average DOD squadron office is far behind any, you know, Alpha Graphics in America on your big street.
    One last question: One disappointing thing about this bill is a help to exporters to identify who the bad guys are. And this is something that I regularly found in my own practice, that various entities would spring up, and people out in Ohio or in Oregon had no idea who these entities were, and the U.S. government did not want to tell them because of concerns about intelligence sources and methods.
    Is there any way we can enhance the user-friendly capability of those American companies that want to be good citizens, but have no idea who the bad guys are?
    Mr. VAN DIEPEN. I think because of the reasons you cite, Congressman, there are real limits to this. Intelligence sources and methods, again this being a national security committee, I think you can understand the need to protect that. In addition, if let's say we published a list of all the people we knew who at the moment were problematic end-users, that, in effect, becomes a cheating road map for proliferators.
    They make sure that whoever's name is on the license request is not somebody on that list. And they can change names much more quickly than we can detect it, and decide whether or not there is a sources and methods problem and publish it. And so if we try and play that game, it is going to be very difficult for us to keep up.
    Mr. KIRK. You could quickly see the catch-22. ''Do not do something bad, and we will get back to you maybe with a criminal indictment if we ever think you did.'' And when people say, ''Well, how do I know when I have done something bad?'' And then you say, ''Well, when the FBI shows up on your doorstep, you will know.''
    Mr. VAN DIEPEN. Well, I think that that is a pretty limited risk. First of all, most of the items of direct concern are individual license controlled, so the company in Ohio does not make the decision as to whether or not it is exported; we do. And then the so-called catch-all controls would require us to demonstrate that a company, Ohio, knew that what it was doing was assisting a weapons of mass destruction or missile program.
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    I think, A, that is difficult to prove in the abstract, and presumably in most cases, that is not what the company in Ohio knew that it was doing.
    So, I think there is a very limited risk there. But the up-side benefit, in nonproliferation terms, of these catch-all controls is tremendous. And we have found it to be a very successful tool and one that, you know, frankly I have not seen having the kind of input that you have been concerned about.
    Mr. KIRK. Thank you, Mr. Chairman. I hope we do get a bill, because it will be of enormous help.
    The CHAIRMAN. The gentleman from South Carolina, Mr. Wilson?
    Mr. WILSON. Thank you, Mr. Chairman. I do not have a question today. Thank you.
    The CHAIRMAN. Thank you.
    Starting over again, the gentleman from Missouri, Mr. Skelton?
    Mr. SKELTON. Let me ask my friend from Missouri, we all understand the difference between the word concur and consult, do we not?
    Mr. CROUCH. Yes.
    Mr. SKELTON. In the normal scheme of things, in the normal process, the Department of Defense has a concurrence authority unless it slips into another category, or I can call it a loophole, such as the mass market status; am I correct?
    Mr. CROUCH. We have the right—
    Mr. SKELTON. No, we will just go on quicker, am I correct?
    Mr. CROUCH. I think I know where you are going, Congressman. I think, yes, you are.
    Mr. SKELTON. Thank you. Now under Section 211, which is entitled ''Determination of Foreign Availability and Mass Market Status,'' it says, beginning of line 15, ''The Secretary,'' which refers to the Secretary of Commerce, ''The Secretary shall establish a process for an interested person to petition the Secretary for determination that an item has a foreign availability or mass market status. In evaluating and making a determination with respect to a petition filed in this section, the Secretary shall consult with the Secretary of Defense, Secretary of State, et cetera.''
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    Now, a consultation means just that.
    ''Hey, Secretary of Defense, look at this item. I have consulted with you, and I will go on and do as I wish.''
    Now, what is wrong with substituting the word ''concur'' with the word ''consult,'' so that it says, ''In evaluating and making a determination with respect to a petition filed under the section, the Secretary,'' that is the Secretary of Commerce, ''shall concur with the Secretary of Defense, Secretary of State, et cetera''? Doesn't that just, kind of, plug a loophole that might let something slip out that we do not want to slip out?
    Mr. CROUCH. In the abstract, I do not know that there is anything wrong one way or another.
    Mr. SKELTON. Do you agree with me?
    Mr. CROUCH. Well, no, but let me say what I think about it. I said in the abstract, but I think obviously the Administration wants to get a bill, and in this particular case we think that we, the Department, are protected because in such a case where, after being consulted, if we believe that the decision was not right and that U.S. national security was, in fact, jeopardized, we would have the ability to—
    Mr. SKELTON. Consult.
    Mr. CROUCH. To appeal to the President on the subject.
    Mr. SKELTON. And I am sure the President has lots of time to do that. We all know that is really not going to happen.
    Wouldn't you feel better if there were an amendment to give your boss, the Secretary of Defense, a greater role in this process by allowing him to concur as opposed to just be consulted? Wouldn't you feel better?
    Mr. CROUCH. We think the role we have in S. 149 is adequate, and that is why we support the bill.
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    Mr. SKELTON. You would disagree, then, with giving your boss, the Secretary of Defense, a greater role of concurrence?
    Mr. CROUCH. No, what I would say is is that I agree that he has a sufficient role.
    Mr. SKELTON. Which is consult, but not concurrence.
    Mr. CROUCH. That is correct.
    Mr. ABERCROMBIE. Mr. Skelton, would you yield a moment?
    Mr. SKELTON. Yes.
    Mr. ABERCROMBIE. Secretary Crouch, I want to make sure that we are saying the same thing. I just heard you say to Representative Skelton that S. 149, that you are in agreement with S. 149, but do you mean as amended by the International Relations Committee? Because that is two different bills.
    Mr. CROUCH. No, I understand. As my testimony that I gave earlier, and I realize that—
    Mr. CROUCH. —I do not think you were able to be here, Congressman, was that we support both S. 149 and the Gilman bill as introduced. We do not support the HIRC bill, the Administration does not support the HIRC bill as it was reported out of committee.
    Mr. ABERCROMBIE. Thank you.
    Mr. SKELTON. Thank you very much.
    The CHAIRMAN. Gentlelady from California, Ms. Davis?
    Mrs. DAVIS OF CALIFORNIA. Thank you. Thank you, Mr. Chairman. And I was going to waive, but I wanted to just follow up very quickly, and certainly have concerns about the issues that we have talked about and the mass market exception. It does seem odd to me that we would be suggesting that the President would make these final decisions. I think that certainly would have to be strengthened, and I know that my colleague from San Diego, Congressman Hunter, also, you know, shared a concern about that.
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    But let me go very quickly to part of the statement about the bill authorizing the Commerce Department to conduct undercover operations and enable wiretaps based on violations of export control law.
    I certainly believe that we need to look to enhance enforcement and would concur, the cost of doing business should be a whole lot more in this bill. Could you speak to that a little bit more, though, in terms of that ability of Commerce? Is that something that you do today? What is different?
    Mr. JOCHUM. Today the Commerce Department has approximately 100 field agents in the U.S. that investigate possible violations of U.S. export control law. Their authority comes from the 1979 Act, and then IEEPA as implemented through the executive orders. They do not have the specific authority to conduct undercover operations. Likewise, a violation of U.S. export control law is not a predicate offense to enable a wiretap. So they are without those authorities today.
    But just by way of, to note something interesting, in the last two weeks the Commerce Department has arrested and indicted a member of the Hamas and a member of the Hezbollah in two separate incidents, in the United States, for violation of U.S. export control law.
    But generally what we need to do now is get the FBI or Customs agents involved to do those other authorities.
    Mrs. DAVIS OF CALIFORNIA. Do you work, though, with the FBI to do that or does the Commerce Department, can you do that on your own under this bill or today?
    Mr. JOCHUM. Under the current status, we have joint enforcement authority with Customs agents, actually, but we work very closely with the FBI as well.
    Mrs. DAVIS OF CALIFORNIA. Thank you.
    The CHAIRMAN. Gentleman from California, Mr. Hunter?
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    Mr. HUNTER. Thank you, Mr. Chairman.
    The CIA obviously has a lot of information with respect to technology, where it is going, who is stealing it, what companies are phony companies. And Mr. Kirk referred to the front companies that you sometimes see.
    Why not allow the CIA to review all proposed transfers and have a veto if they think that it is damaging to national security? What do you think, Mr. Jochum?
    Mr. JOCHUM. We do allow them to see all proposed transfers. All of our licenses that they want to see are transferred to the CIA for their review and their input. Intelligence is the lifeblood, really, of the decision-making process.
    Mr. HUNTER. You say all of the transfers that they want to see. How do they know what they want to see if they do not have a system to review all of them?
    Mr. JOCHUM. Well, I mean, you will have to ask them their methodology, but I believe there are some countries that they are not as concerned about or end-users, or maybe even items, that they are not concerned about.
    Mr. HUNTER. Why not allow them to have a participation in this interagency process and exercise a veto if they think it is important to security?
    Mr. JOCHUM. They are in the process, but they have not sought further participation and proactively have said—
    Mr. HUNTER. Well, in your personal opinion, would it be good to allow them to have a veto if they think that such a transfer damages national security?
    Mr. JOCHUM. I think they see themselves as providing a product to—
    Mr. HUNTER. I did not ask you how they see themselves. I need an answer from you. In your personal opinion, do you think it would be wise to allow the CIA to have a veto in this interagency determination as to whether a license should be granted?
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    Mr. JOCHUM. It is never presented to us, so we do not have a position on it.
    Mr. HUNTER. I just presented it to you. What is your opinion?
    Mr. JOCHUM. No, I do not think it would be wise then.
    Mr. HUNTER. Okay. You agree that technology transfer is primarily, the primary consideration should be national security and sales or profits should be secondary?
    Mr. JOCHUM. Absolutely.
    Mr. HUNTER. Okay. In that case, why, in the interagency review, does the, in this bill, as came over from the Senate, does the Secretary of Commerce have the right to allow the transfer even against the dissent of the Department of Defense?
    Mr. JOCHUM. If the appeal goes up the chain, he does not have that right. It could go all the way up to the President.
    Mr. HUNTER. Wait a second, though. Under Section 402 of the bill, ''The Commerce Department is set up as a final arbiter of interagency's disputes. If a national security agency objects to an export license application, the case is referred to an interagency committee set up by the Commerce Department.''
    Mr. JOCHUM. Right.
    Mr. HUNTER. The chair of the committee, which the Commerce Department appoints, can then simply decide to grant the license, regardless of what DOD thinks.
    Now, if national security is the preeminent consideration, why not allow DOD to make that determination and then let Commerce take it up if they want to? But why allow Commerce to make what basically should be a security determination?
    Mr. JOCHUM. I think the reason we have had this system in place for 30-some years, 40 years, is that these are essentially commercial items being sold for commercial reasons.
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    Mr. HUNTER. But the point is, nobody cares if they are just commercial items. The only thing that should evoke a veto from any agency is the security aspect to it. We all agree with that, right? If it is something that can be used to damage your troops on the battlefield, that is why you do not want to sell it, right?
    Mr. JOCHUM. Right, and we would agree with that.
    Mr. HUNTER. Okay, then why not have the person who is the expert as to the security application of that system, which is the Defense Department, because they understand things which are components of the defense systems, why shouldn't they make the ultimate determination in this interagency board? Why should the non-expert in security matters, that is Commerce, make the security determination?
    Mr. JOCHUM. The only answer I can give you is that, because these are commercial sales. And so the Commerce Department has the decision at that point. They can escalate that decision—
    Mr. HUNTER. But you just said commercial sales should not predominate over a security determination, right?
    Mr. JOCHUM. Well, there are two different—
    Mr. HUNTER. Right?
    Mr. JOCHUM. Yes.
    Mr. HUNTER. Then if DOD says, ''I have a security determination that this is going to damage our national security interests,'' Commerce says, ''his is good for sales,'' why shouldn't the security determination dominate the decision-making process in the same way you said that it should dominate the policy?
    Mr. JOCHUM. I think it dominates the Commerce Department decision-making—
    Mr. HUNTER. Then you would have no problem with an amendment that gives DOD the final say on whether or not a transfer should be allowed?
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    Mr. JOCHUM. Under the system that is in place—
    Mr. HUNTER. I need a yes or no.
    Mr. JOCHUM. The answer is no, because I think the system that is in place has been recognized by all the agencies as one that works.
    Mr. HUNTER. Okay. So, you do not want to allow DOD to make that determination?
    Mr. JOCHUM. I think the process that is set up is sufficient to protect the national security of this country.
    Mr. HUNTER. Okay.
    Mr. Chairman, are we on a time limitation here?
    The CHAIRMAN. Well, your time has expired, but we can come back to you.
    Mr. HUNTER. I am ready. Thank you.
    The CHAIRMAN. Mr. Abercrombie?
    Mr. ABERCROMBIE. Thank you, Mr. Chairman.
    If I go over something that has been gone over, let me know. I had to see someone. I am doing double duty here.
    Let me go to the question the process that you outlined in regard to Commerce's role, because I do not want to dispute what you said, but because I think it was true to the degree it was outlined. But I think it was a little more to it in terms of what the Secretary of Commerce gets to do or not do in this process.
    Is it not the case then that Commerce decides whether or not referred applications to the other agencies in the first place, and selects the Chair of the interagency committee to review the disputes?
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    Mr. JOCHUM. The new bill would require us to refer all licenses to the other agencies. Second part of your question, yes, he appoints the Chair.
    Mr. ABERCROMBIE. And if no agreement is reached, then the decision is elevated to the President, right?
    Mr. JOCHUM. Yes, up through the chain.
    Mr. ABERCROMBIE. Okay. Now, here is part of the problem: Doesn't the bill as it presently is before our committee, having been modified and amended, with regard to verification, let's say, of digital computers, the bill, I mean, as is presently constituted, before we make a decision on this one, reports have to be done, right, on digital computer over the performance threshold? Since 1998 you have been making reports on that. Is that correct? Post-shipment verification on what they have been used for.
    Mr. JOCHUM. Are you talking about when MTOPS level is raised?
    Mr. JOCHUM. Okay.
    Mr. ABERCROMBIE. We are doing that, right? Do we have 100 percent compliance?
    Mr. JOCHUM. On what, sir?
    Mr. ABERCROMBIE. On the verification on every digital computer over the performance threshold, where that computer went, what it is used for; do we have 100 percent compliance?
    Mr. JOCHUM. We have a backlog of cases that we are working through.
    Mr. ABERCROMBIE. How big?
    Mr. JOCHUM. I would say several hundred cases.
    Mr. ABERCROMBIE. Several hundred cases. Is the backlog because you cannot get access to where those computers operations are taking place and under what circumstances?
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    Mr. JOCHUM. We generally get access, not always in the time that we would want access. I mean, that is an issue that we are working on.
    Mr. ABERCROMBIE. I am confused by your answer. You say you generally get access. I thought we could not send these out unless we were guaranteed that we had access.
    Mr. JOCHUM. No, I think you are referring to the NDAA provisions of 1998 which would require us to do post-shipment verifications on all computer exports of a certain level, but it is after the fact.
    Mr. ABERCROMBIE. That is right.
    Mr. WELDON. Will the gentleman yield?
    Mr. WELDON. Isn't it true that China refused to give us access to the end-user on all the high MTOPS computers that we sold to, gave to them?
    Mr. JOCHUM. I do not think that is true.
    Mr. WELDON. You do not think it is true?
    Mr. JOCHUM. Wait a minute. I believe we are working through a backlog. Are they doing it in a manner that we prefer? No. Are they doing it fast as we would like? No.
    Mr. WELDON. My understanding is, if the gentleman would yield further, that China refused to give us access to the end-user in each of the cases of the high end, above the 8,000 to 10,000 MTOPS range computers. They would not give us access.
    Mr. JOCHUM. Sir, I do not think that is the case.
    Mr. WELDON. You do not think or you do not know?
    Mr. JOCHUM. No, I do not know because I am not the enforcement person.
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    Mr. WELDON. Well, who is?
    Mr. JOCHUM. He is another Assistant Secretary.
    Mr. WELDON. Doesn't State have a role to play in that?
    Mr. JOCHUM. I do not believe so.
    Mr. WELDON. It is all Commerce.
    Look, we on the Cox committee were led to believe that we were denied the ability to have end-use certificate, and to be able to verify those end-use certificates.
    Mr. JOCHUM. End-use certificates, I do not think that is the case, sir. Sir, let me get an answer for you, though.

    [The information referred to can be found in the Appendix ?.]
    Mr. ABERCROMBIE. I will yield again to Mr. Hunter.
    Mr. HUNTER. If you will yield this one time, the GAO report reported that there are 700 cases of Chinese refusal. It is a backlog of 700 cases.
    Mr. JOCHUM. But, I do not think they are necessarily refusals. I think it is a backlog of cases.
    Mr. ABERCROMBIE. Reclaiming my time. Okay.
    Mr. HUNTER. The GAO found it to be refusals.
    Mr. JOCHUM. Okay.
    I am a little out of my element here. This is not my issue. But if you want us to follow up—
    Mr. ABERCROMBIE. But it is more fun this way.
    Mr. JOCHUM. For who?
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    Mr. ABERCROMBIE. Just a couple of things more.
    Mr. JOCHUM. If you want us to follow up in writing on this, I would be happy to.
    [The information referred to can be found in the Appendix ?.]

    Mr. ABERCROMBIE. Yes, please.
    Mr. JOCHUM. I can report that the undersecretary is in China right now talking about this specific issue. It is a serious issue for us. And the Chinese need to do better. Absolutely.
    Mr. ABERCROMBIE. Then you heard Secretary Crouch indicate that the Secretary of Defense does not support the present configuration of S. 149, right, as amended by the International Relations Committee and my guess is, without having heard him, there is at least two items that I think are related to that.
    One: Under the International Relations version, supercomputers will be treated just as any other export and Congress would not receive visibility on their export. Do you agree with that part of it, or would you cede that kind of thing to the Secretary of Defense?
    Mr. JOCHUM. I am sorry, sir. Could you say that again?
    Mr. ABERCROMBIE. Sure. On any approach, at least this is my reading of the International Relations Bill. They would repeal certain provisions of the existing law, the 1998 law. One of the things they do is that supercomputers would be treated just as any other export and Congress would not receive the visibility I was just referring to any longer. That is one thing.
    The second thing, as you have it, the 1999 National Defense Authorization Act moved satellite and related items from Commerce control list, which is under the Secretary of Commerce, to the Secretary of State on the munitions list. And this was supposed to strengthen the national security controls of satellite exports and again provide greater Congressional visibility, and that also is going to be removed. And I am assuming that is at least two things that the Secretary of Defense is not happy about.
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    But is the position of Defense, and is it the position of Commerce, to support those revisions as they now appear in the International Relations Committee version?
    Mr. JOCHUM. On the first, I believe you are referring to the repeal of the 1998 NDAA provision, the MTOPS provision.
    Mr. ABERCROMBIE. On supercomputers.
    Mr. JOCHUM. Right. Which is in the HIRC bill and in the Senate bill. Yes, the Administration supports that repeal.
    Mr. ABERCROMBIE. Does the Secretary of Defense support that?
    Mr. CROUCH. We support getting rid of the MTOPS provision. We do not, however, believe that we should decontrol high-end computers, either from a hardware perspective or a software perspective.
    Mr. ABERCROMBIE. So the Secretary of Defense disagrees with the current version of S. 149 as amended by the International Relations Committee in that regard?
    Mr. CROUCH. I do not think that is one of the critical issues. My understanding—
    Mr. ABERCROMBIE. Well, it is a critical issue with me, and I want to know—
    Mr. CROUCH. No, no, I understand that. But point of clarification. My understanding is that—
    Mr. ABERCROMBIE. How about you tell us later, because you may be not sure? And I do not want to commit you, try to push you into saying yes or no on something you are not certain of.
    [The information referred to can be found in the Appendix ?.]

    Mr. CROUCH. That would be fine.
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    Mr. ABERCROMBIE. And then one last for the record. And then what about the idea, does the Secretary of Defense support the version that I read now about establishing that satellite and related items would move from munitions lists back to Commerce control lists, and it moves the satellite exports back to the purview of Commerce? Does the Secretary oppose that or support that?
    Mr. CROUCH. Our position, again, is that we support the underlying bill. We support S. 149, particularly on the satellite issue. I think that what I would say is that we think the national security is being protected under the current management process.
    Mr. ABERCROMBIE. I have you, Mr. Secretary. The chairman will land on my hand with a gavel if I do not stop.
    But you support the present process. But then, for the record, you will concur with the point I am making that the International Relations Committee version changes that in such a way that the Secretary of Defense would be reluctant, if not, in fact, in opposition, to that version.
    Mr. CROUCH. I do not know whether the Secretary of Defense would be in opposition to that. I would have to take that back to the record.

    [The information referred to can be found in the Appendix ?.]

    Mr. ABERCROMBIE. Would you please? Because that is crucial to our consideration of this bill.
    Mr. CROUCH. I understand, but I do think it is important to say that I think the current process, the way it is working now, we believe adequately protects U.S. national security.
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    Mr. ABERCROMBIE. Thank you very much, Mr. Chairman.
    The CHAIRMAN. Gentlelady from Virginia, Ms. Davis?
    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman.
    Secretary Jochum, I would like to go back quickly as a follow-up to my question with regard to Subsection 601, C-3 on regulations on exports to foreign nationals. I want to make sure I understand you. If I understood you correctly, if the definition in the HIRC bill were modified to control the transfer of intangible technology to foreign nationals outside and inside the U.S., then would you support that provision?
    Mr. JOCHUM. Well, again, we would have to see the language, but that is what we want to have happen. Yes. I want to be able to control transfer of intangible technologies both in and outside the United States.
    Mrs. JO ANN DAVIS OF VIRGINIA. Okay. So, if the International Relations Committee added the amendment, ''The Secretary, with concurrence of the Secretary of State and the Secretary of Defense, shall issue regulations to govern the release of technologies to a foreign national within the United States and to establish appropriate procedures in each case to ensure compliance with those regulations.'' So if we added, ''within the United States and outside the United States,'' would you support that amendment?
    Mr. JOCHUM. I cannot speak for the Administration, but that is a concept we would want to get at. Yes.
    Mrs. JO ANN DAVIS OF VIRGINIA. So you fundamentally do not oppose the amendment then?
    Mr. JOCHUM. I am asking you to do that concept. I think that is where the amendment is deficient.
    Mrs. JO ANN DAVIS OF VIRGINIA. So you do not have any problems with controlling deemed exports?
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    Mr. JOCHUM. No, we control deemed exports right now.
    Mrs. JO ANN DAVIS OF VIRGINIA. And are you working on new regulations to control deemed exports?
    Mr. JOCHUM. No, we are not.
    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Weldon?
    Mr. WELDON. Mr. Chairman, I am sure I will make this brief, hard as it is.
    First of all, let me clarify for the record what I think is the position of the entire membership of this committee. We believe that 98 percent of the American companies will do the right thing, and will not, in fact, jeopardize our security by selling bad technology abroad. So we are not against 98 percent of our industry in this country that we support and work with very closely.
    In fact, when I spoke to John Douglas' group, the Chief Executive Officers (CEOs) of the major defense companies, a couple of years ago, I talked about the need for an expedited process for permits where you have the noncontroversial technologies.
    And part of the problem we have is that there has been a backlog created, or there was a backlog, back when I spoke then, where industry is not suspect, where there are technologies that are not those, kind of, sensitive things, are being held up because of a permitting process that needs to be streamlined.
    I support that. I am not looking for us to trivialize the process on everything. There are many commodities that I think we should move forward and allow to go forward. That is a decision that I would support the agencies meeting.
    What I am concerned about, and I think what my colleagues are concerned about, are those most sensitive technologies where we really think that DOD needs to play and where, in fact, they have transferred to other nations.
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    And I would disagree that they are going to be on the marketplace anyway, because the technology that Iran, Iraq, Syria, Libya and North Korea have acquired typically have come, in some cases, especially in the case of China and others, through third parties from this country or from a lack of enforcement of other arms control regimes. That is where we want to focus our effort.
    Now, let me ask this question. We did an analysis a couple years ago through the Army's Information Dominance Center down at Fort Belvoir of running a large data-mining profile of proliferation that I will call, I do not know, for lack of a better term, anonymous proliferation. And I want to ask you what process you have in place to deal with this.
    We did a profile, through both classified and unclassified data mining, of three different platforms for the three different services involving very highly sensitive technology. And what we found, this information was all turned over to John Hamre and eventually the FBI, only through computer purposes, the financing entities of the PLA had acquired majority ownership of French and German companies that then acquired majority ownership of American small sub-contracting firms that were doing very sensitive work and sensitive work on very sensitive technology for us.
    Do we have a process in place that prevents that kind of proliferation activity from occurring where there is no, obviously, request for an application? How do we know if a financial entity in China is investing in a European financial banker institution that then acquires a majority interest in an American small firm that is doing very targeted work for us? Which gives them that right, since they own a majority of it, once a year to go through the books of that company, in which case they would be able to see, perhaps, some sensitive technology that we are working on? Is there anything that exists to deal with that kind, and if not, why not?
    And my final point, which I will ask you to respond to, Secretary Crouch, is the current role of the Secretary of Defense in the commodity classification process, does he have the ability to object to the Secretary of Commerce's classification, yes or no? Does he have the ability to object?
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    Mr. CROUCH. I do not believe he has the ability to object.
    Mr. WELDON. So, then, why does the DOD not support Section, in the HIRC bill, 401H, which allows DOD to object? Or do you support that?
    Mr. CROUCH. Because we think that the Department's equities are adequately protected by the fact that the Department must be notified, and in the event that a classification were to go in such a way that we thought was injurious to the national security, that we would have the right to escalate that.
    Mr. WELDON. Well, I would ask you to go back and revisit that, because I think that is an area where many of us are going to want to focus our attention on DOD's role. Again, we are not trying to stop permitting from going forward, but we want to have DOD have the comfort that the Secretary at DOD has that final say if it is, in fact, so sensitive that our security's being jeopardized.
    Do you have a response, Secretary Jochum, on the other point?
    Mr. JOCHUM. If I understand the scenario, you have PLA front companies financing European companies, for instance—
    Mr. WELDON. European financial institutions.
    Mr. JOCHUM. —who then have U.S—.
    Mr. WELDON. Who then acquire small firms doing business in the U.S. doing sensitive work on our technology in DOD.
    Mr. JOCHUM. I thought you were going with which we see: front companies here, you know, try to obtain technology and export it. No, I am not familiar then with the situation you raise—
    Mr. WELDON. So you have no way of detecting that, then.
    Mr. JOCHUM. Well, I assume that it is an intelligence matter, and that is the way we do front companies. The two indictments I talked about earlier, with Hamas and Hezbollah operating here, you know, was truly an internal domestic intelligence matter.
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    Mr. ABERCROMBIE. Would the gentleman yield?
    Mr. WELDON. Sure.
    Mr. ABERCROMBIE. Apropos of that, do you have protocols in place with the CIA and/or the FBI so that they automatically check out any of these highly sensitive areas in terms of the possible ownership connections that might be taking place and that they can report then to the Secretary as to what they have found?
    Mr. JOCHUM. Yes, certainly if we get an export license application, the CIA and FBI would see that and then could report to us on that. I think that Mr. Weldon—
    Mr. ABERCROMBIE. That was not my question.
    Not that they could. Do you have protocols in place where that takes place automatically?
    Mr. JOCHUM. I believe we do, yes, sharing of information on these types of things, yes. I do not know if it is a formal protocol. I mean, we work real close with the—
    Mr. ABERCROMBIE. Could you find out and answer the committee?
    Thank you, Mr. Weldon.
    The CHAIRMAN. Any other questions of this panel?
    Mr. Hunter, you had another question on this panel?
    Mr. HUNTER. Yes, I had just one question here.
    The database on bad end-users; does Commerce maintain a database on that, companies that are bad end-users?
    Mr. JOCHUM. We do have such a database.
    Mr. HUNTER. The phony companies?
    Does DOD have a database on bad end-users?
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    Mr. CROUCH. I do not know. We have access to and use the intelligence community's database on that. We do not have our own independent database.
    Mr. HUNTER. Well, let's say you have an intelligence database, done, I presume, by CIA/Defense Intelligence Agency (DIA), right? And the lady behind you are nodding. So they have a list, right?
    Mr. CROUCH. Yes.
    Mr. HUNTER. Is that list given to Commerce?
    Mr. JOCHUM. Yes. We also use the CIA database.
    Mr. HUNTER. Does FBI have a database?
    Mr. JOCHUM. I assume so, and some of our licenses go to FBI.
    Mr. HUNTER. Okay. Well, my question is, if you take the constellation of intelligence agencies/security agencies, have they all contributed to the database and do they all have a copy of what everybody else has, so that when you try to make a decision as to what a bad end-user is, you have the universe? Can you say that for a certainty?
    Mr. JOCHUM. I do not know if they are integrated in any way, but since they see all of our license applications, they would bring their own resources to bear on that. So I think we probably have the universe covered in not an integrated database.
    Mr. HUNTER. Could you try to make sure of that?
    [The information referred to can be found in the Appendix ?.]

    Mr. JOCHUM. Sure.
    Mr. HUNTER. Now, heretofore DOD has maintained a list of militarily critical technologies; is that right?
    Mr. CROUCH. Yes.
    Mr. HUNTER. The bill that I see came out of the Senate does not have a provision for DOD to maintain that list; is that right?
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    Mr. CROUCH. I do not think it does. That is right.
    Mr. HUNTER. Do you think they should be allowed to continue to have their list of militarily critical technologies?
    Mr. CROUCH. We will continue to have a list of military critical technologies.
    Mr. HUNTER. Well, how to you know that if there is not a provision for it in this bill?
    Mr. CROUCH. Because, I mean, the Department would regard it as absolutely essential to maintain that list for a whole host of other reasons, not just export control.
    Mr. HUNTER. Okay. So if it is not mentioned in the bill, that is simply an oversight, but nonetheless DOD intends to maintain that list.
    Mr. CROUCH. Absolutely.
    Mr. HUNTER. Does that list go automatically to the control list? In other words, those are things you think are militarily critical technologies, right?
    Mr. CROUCH. Correct.
    Mr. HUNTER. Are those all dual-use or some of them dual-use, some of them simply militarily critical technologies?
    Mr. CROUCH. Yes. Some of them would be dual-use, some of them would be military-oriented. Anything that was military-oriented only would I assume end up on the munitions list.
    Mr. HUNTER. Okay. My question, Commerce: If you find that these are, ''mass marketed,'' let's say you have a militarily critical technology on your list, does Secretary of Commerce have the right to jettison that item from the list, thereby allowing it to be sold without license?
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    Mr. JOCHUM. I do not think the mass market provision is set up to provide a positive determination on something that would be militarily significant.
    Mr. HUNTER. Well, how do you know, when you say, ''I do not,'' you have got the letter of the law in front of you or the proposed law.
    Mr. JOCHUM. The things on the militarily significant list I do not believe are sold in the volume and chain of retail markets that the mass market provision speaks to.
    Mr. HUNTER. Well, let me just, Mr. Chairman, I think this is, kind of, important. With your indulgence here, let me go over one of them.
    We have the high-precision electronic switches needed to detonate nuclear weapons, Okay? These are, obviously, very key systems. Iraq tried to buy a batch of them at one point and was stopped. They are allowed to import medical equipment, despite the U.N. embargo, so they bought a dozen machines called lithotripters to rid its citizens of kidney stones.
    So this is obviously a militarily critical technology, makes nuclear weapons go off, but it can also be used in this disposal of kidney stones. Iraq tried to buy 120 of those extra switches as, ''spare parts'' and was turned down.
    They meet all of the mass marketing criteria. They are available in a large volume to multiple purchasers, because they are used in radar, lasers, rockets, et cetera. They are widely distributed through normal commercial channels. They are conducive to shipment and delivery by generally accepted commercial means of transport. And they may be used to their normal intended purpose without substantial and specialized service.
    They meet the criteria, or at least appear to meet the criteria, of mass marketing, yet they are obviously militarily critical items, and they could be extremely dangerous to our national security if they are sent to the wrong people.
    Now, why wouldn't those be decontrolled under mass marketing under this industry definition?
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    Mr. JOCHUM. When I look at the mass marketing provision and look at the debate in the Senate where the section that you refer to originated from, the floor debate and the committee reports, the way I view it is a real retail-oriented provision. I mean—
    Mr. HUNTER. Well, let's just look at the law. I just read to you the proposed law. They either fit in, this is not whether they can coincide with your worldview, Mr. Jochum, they would appear to meet the letter of this proposed law.
    If I was a lawyer for the company that was trying to export these to Iraq, I would say, ''Where did I go wrong here? They are widely available, they are used for a lot of things and they appear to be subject to a mass market. Why can't I sell these nuclear triggers to Iraq?''
    Mr. JOCHUM. I do not think we would find the mass market determination in that case. I do not believe it meets the quantity.
    Mr. HUNTER. Well, then you should have different words. Because the definition that you have here appears to accommodate those triggers. Now, it also appears to accommodate also oscilloscopes, managing steel, that example that I gave you, glass and carbon fibers, and yet even though glass and carbon fibers are used in a lot of things, we sent a guy to jail for 48 months for trying to send them to Iraq for missile systems. So, he may be interested to know if he is still in prison that he is about ready to be exculpated, here.
    So, you have a large number of items which appear to meet the letter of that law. I would say if that is the case, and we simply have to rely on your attitude and your sense of patriotism to make sure that it is not applied, that the law is not applied in this case, we would better change that language. Don't you agree?
    Mr. JOCHUM. Well, I do disagree that it would meet the criteria. But also note that all those items are controlled under multilateral regimes and they would not be controlled under this bill.
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    Mr. HUNTER. That is not necessarily so. You said the President may apply the multilateral regime restriction to it, but he does not have to, right?
    Mr. JOCHUM. Right.
    Mr. HUNTER. Okay. Thank you.
    The CHAIRMAN. Are there any questions to this panel?
    Gentlemen, you have been asked to submit some questions for the record. We need those just as rapidly as possible. If you would expedite the process on your end, we would appreciate it. And we thank you very much. And if you could exit the table as rapidly as possible, we will get to the second panel. Thank you.
    If the second panel would come up: Mr. Joseph Christoff, General Accounting Office; Mr. Edmund Rice, Coalition for Employment Through Exports; and Mr. Gary Milhollin, Wisconsin Project on Nuclear Arms Control.
    The meeting will please come to order. Gentlemen, your statements will be entered into the record in their entirety. If you care to summarize, I am sure we would appreciate it. It has been a long afternoon, if you care to expedite your statements. Mr Christoff, you may proceed.


    Mr. CHRISTOFF. I will do my best, Mr. Chairman. And thank you again for having us here to discuss both bills that are before you. And what I would like to do is to first tell you that we have examined both the Senate and the House bill, the House bill, as amended, to determine whether or not they would balance economic national security and foreign policy interests.
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    And in summary, we found that those bills seek to balance these competing interests. However, the House bill places greater emphasis on foreign policy and national security needs, while the Senate bill emphasizes economic interests.
    And in addition, our work has identified instances where the executive branch has not followed congressional direction in implementing export controls. And we believe that Congress must therefore persist in its oversight of the export control system.
    I would first like to discuss five key differences between the two bills. First, both bills establish a national security control list that is used to restrict dual-use items from countries of concern. When adding or deleting items from the control list, the House bill requires the Secretary of Commerce to obtain the concurrence of the Secretaries of Defense and State. In contrast, the Senate bill does not require the Secretary of State's concurrence.
    This raises the possibility that U.S. foreign policy interest may not be fully considered.
    More importantly, both bills give the Secretary of Commerce sole authority to remove an item from the control list if it is widely available.
    Commerce does not have to obtain the concurrence of Defense or State when removing the item.
    Second, State's role in determining whether an item requires a license differs in each bill. The House version requires the Secretary of Commerce to notify the Secretaries of State and Defense when an exporter requests help in determining whether an item is subject to control. Commerce is not required to notify the Secretary of State under the Senate bill. Without State's input, Commerce might decide that a sensitive item is not subject to export licensing requirements.
    Third, the House bill includes a presumption of denial provision that constrains exports to countries that do not adhere to export control regimes and are involved in developing weapons of mass destruction. Under this provision, the executive branch must presume that applications from end-users in these countries should be denied. The Senate bill does not provide this explicit guidance to the executive branch.
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    Fourth, both bills seek to balance exporters' need for timely review of applications with the government's need to investigate end-users. While both bills establish time frames for the government's overall review, the House bill allows additional time to obtain information from intelligence agencies. The Senate bill does not provide for this additional time.
    And finally, neither bill provides the Department of Defense a role in assessing whether an export would enhance the military capabilities of countries supporting terrorism. Under both bills, only the Secretaries of State and Commerce conduct these assessment and notify Congress. Without input from the Department of Defense, Congress might receive notifications that do not reflect the military impact of these exports.
    I would also like to address the issue of congressional oversight. Our past work has identified several instances where the executive branch has not followed congressional direction in implementing export controls. Let me first discuss high-performance computers.
    Over the past several years, the executive branch has reduced restrictions over the export of high-performance computers. Our work, however, has shown that the executive branch has not adequately justified these decisions. While the decisions recognized the availability of high-performance computers overseas, they did not identify the military uses for the computers or the impact on national security.
    Another critical area for congressional oversight is the licensing of satellites. The House bill transfers the licensing of satellites and related items from the Department of State to Commerce, but it leaves jurisdiction over certain defense-related services to State. Our work has shown that in the past this split responsibility has produced confusion among licensing agencies and exporters. Regardless of what changes in the law result, clear lines of responsibility over satellites, technical data and defense-related services will be needed.
    And finally, our past work has found that post-shipment monitoring of exports is a persistent weakness in the U.S. export control system. Government investigators have had difficulty confirming the appropriate use of U.S. technologies overseas. Access problems are often the issue, particularly with countries such as China, which has restricted access to facilities housing high-performance computers and other U.S. technology. Both bills strengthen post-shipment monitoring and establish clear consequences for countries that refuse to allow this important monitoring.
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    And in conclusion, Mr. Chairman, I would like to point out that export controls are just one of several tools that the United States uses to combat the spread of weapons of mass destruction. International treaties, multilateral regimes and nonproliferation programs all serve to reduce these threats.
    The challenge now facing Congress is to develop an export control process that will reinforce these tools and balance national security, foreign policy and economic interests.
    Thank you.

    [The prepared statement of Mr. Christoff can be found in the Appendix ?.]

    The CHAIRMAN. Mr. Rice?


    Mr. RICE. Thank you, Mr. Chairman and Congressman Skelton, members of the committee. Let me summarize very briefly. As you say, it is been a long afternoon.
    First, just by way of background, I worked for the House International Relations Committee staff on these issues from 1990 to early 1997. And from 1995 to 1996, when I was a subcommittee staff director, I had the pleasure of working with the staff of this committee to produce a bill that did pass the House with this committee's approval, the Intelligence Committee's approval and the International Relations Committee's approval.
    And it was a, professionally, very rewarding experience. I learned a lot from the staff of this committee during that work. And I bring to the table today a large part of that learning that I had, as well as the work that I have under way today in working for a number of major U.S. exporting companies.
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    My assignment from the committee, in inviting me today, was to discuss industry views. The one caveat I want to offer is that I am not here to represent any specific group, although I am involved in a lot of the discussions among industry on both the Senate and the House bills.
    Let me make five points very quickly. First, for industry, the 1995 and 1996 executive orders, which are still in effect, are the benchmarks for measuring any legislation. Those executive orders, which have been discussed earlier in the hearing, resolve long-standing interagency disputes. They provide for all agencies that have a need to review export licenses in the dual-use area, and to do so, that was confirmed, of course, by Assistant Secretary Crouch and it is confirmed by the last year's Defense Department proliferation report. And in my testimony, I have cited the relevant section of that report, which indicates that DOD today does play an active role in looking at dual-use licenses.
    The system also, under these executive orders, provides for discipline on the license system so you can reach timely decisions. We are looking at these issues from the point of view of dual-use items that are being licensed for legitimate civilian uses. And to that extent, there are competitive pressures on U.S. companies that, in virtually every instance, are facing foreign competition that need to have timely decisions.
    So from the industry's point of view, the current system under these executive orders has worked. And the indication from the previous panel is that the Bush Administration is not seeking significant changes in this system in the pending legislation.
    Moreover, the reports to Congress that are most recent on proliferation do not identify the dual-use export control system as a proliferation problem. The latest 721 report, which came out, I believe, last month, the unclassified version of the national intelligence estimate on ballistic missile proliferation, and the 2001 report by the Secretary of Defense on proliferation threat and response, none of those reports identifies the U.S. dual-use export control system as a problem in the proliferation area.
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    Legislation is needed, from industry's point of view, for two main reasons. One, we do have a strong interest in a sound, statutory basis for the system. Assistant Secretary Jochum referred to the legal vulnerabilities of the current system. Congressman Kirk also referenced them as well. International Emergency Economic Powers Act (IEEPA) is only a temporary emergency authority. It was never designed to run an export control system for these many years.
    The second reason is that the old Export Administration Act is way out of date. Congressman Skelton, in his first question on the first panel, asked, ''What is wrong with the old statute?'' The old statute is focused on fighting the Cold War, and was effective in making economic warfare on Soviet Union, the Warsaw Pact and China.
    Anti-terrorism and counter-proliferation were almost virtually footnotes in the 1979 law, and we need a statute that is focusing the system on what today's threats are. And industry has a strong interest in having that happen, as well.
    There is broad industry support for the Senate bill, and I have appended to my testimony a letter from I believe it was August 30 of last year, from 19 industry groups supporting the bill as it was passed by the Senate.
    Two major reasons, from industry's point of view: One, the mass market foreign availability provisions, in industry judgment, will provide some help in a very narrow range of commercially available products that are, in fact, mass market.
    And second, that the second provision of the Senate bill that has garnered a lot of industry support is the repeal of the 1997 provision on computers. From industry's point of view, and, again, industry's interest is only in exporting dual-use items for legitimate civilian purposes, it is very difficult in today's world to draw a static control line on a dynamic technology.
    This point was made by the Defense Science Board's study, which I believe was published in December of 1999, and I, in my written statement, have quoted several sections out of that report, that on the computer controls, it is extremely difficult in today's world to draw static control lines, especially unilaterally.
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    The fourth point is that industry's position, the House bill, which I have detailed in my statement, there is industry support for Title VII, which would move satellite jurisdiction back to the Commerce Department.
    I would only note that Title VII of the House bill does maintain requirement for the security provisions, which were referenced in the earlier panel. And I would also cite the Defense Science Board's, again, 1999 report, which indicated that controls on legitimate civilian use of commercial communications satellites, especially unilaterally by the United States, is very problematic.
    The last point, before closing, is that industry really does need some help in spotting the clandestine purchasing networks which Congressman Weldon and Congressman Kirk referenced earlier.
    U.S. companies do not want to sell items, any item, to an adversary of the United States. Those few bad actors who decide to do that for their own purposes ought to be investigated, prosecuted and thrown in jail. The rest of the industry has no interest whatsoever in either justifying that kind of behavior, or supporting it.
    But the Iranians really patented the clandestine purchasing network system, which they developed back in the 1980s. The Iraqis learned how to do it, and now we are finding that terrorist organizations are learning as well how to mask their purchases of sensitive items on the world market and turn them against the United States.
    U.S. companies want to help stop that. And they cooperate with the Customs Service and all of the other agencies in the U.S. government, that have a role in doing that.
    But the one area where things are not working very well is in helping the companies identify a company overseas, and one or another agency of the U.S. government may have information on, but it is simply not publicly available.
    I am certainly not suggesting here that the sources or methods be revealed. Very sensitive to that from my own work here on the Hill. But there needs to be a mechanism somehow developed to these companies do that.
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    One suggestion I have is that, since most of these companies are also defense contractors with people with high security clearances, that a system could be found to find individuals in these companies with the relevant security clearances that could provide a link so that information could be passed to stop transfers that may be inadvertent.
    Mr. Chairman, that concludes my brief summary of my comments.
    Thank you.

    [The prepared statement of Mr. Rice can be found in the Appendix ?.]

    The CHAIRMAN. Thank you, Mr. Rice.
    Mr. Milhollin?


    Mr. MILHOLLIN. Thank you very much, Mr. Chairman.
    It is an honor to be here. I also should say that I have had the honor of hearing some of my suggestions in my testimony already mentioned in this hearing.
    I would like to just make a few major points. The first one is that the main problem we are facing is that this bill was conceived, drafted, debated and reported in a bygone period of history: before September 11. I think that the new constellation of threats that we are looking at now forces us to completely reexamine our entire attitude toward security and trade.
    The bill that we are looking at, in my opinion, is fairly one-sided. It started out as an industry wish list. It got improved a little bit, but still needs a lot of work. I think the best thing Congress could do would be to appoint a blue ribbon commission to start over, to look at export controls in the light of the new world we are facing.
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    In the meantime, I think we do need better sanctions, better enforcement, severer penalties. So I would propose that we simply reenact our present law with stricter penalties, with the understanding that we are going to come back to this subject later, revisit it and then use what we have learned since September 11 to draft a new statute.
    I think we can look at what the U.S. Customs Service is doing as an example of how outdated this bill has become. Customs is now taking a list of sensitive commodities around to U.S. companies asking them to be extra careful where they sell them.
    This list of 100 items is a list of the very things that terrorists or terrorist-supporting nations would need to make weapons of mass destruction. I think there is no question but that many of the items, possibly most of the items on this list fit the definition of mass market that is now in the bill, that Congressman Hunter has pointed out.
    I have attached an appendix to my testimony which mentions some of these items. I will just mention them briefly to you. Nuclear weapon triggers have already been mentioned. Glass and carbon fibers. Managing steel. Corrosion-resistant valves. Gyroscopes. Isostatic presses. Induction furnaces. All of these things are used for making missiles and nuclear weapons. Fermenters are also included. They are used for making biological weapons. The list goes on and on.
    In order for us, I think, to responsibly enact, for Congress to responsibility enact a mass market provision that by its terms appears to decontrol at least half of the items, I would estimate, that Customs is now warning our exporters about, I think is extremely dangerous. It just defies imagination to believe that we are sending Customs out with taxpayer dollars to warn exporters about the very things that Congress is now thinking of decontrolling.
    So I urge that this mass market language either be dropped or be redrafted so that it does not catch items that everybody agrees should not be controlled.
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    The government witnesses said that nothing that is now controlled for multilateral purposes would be decontrolled by this language. They also made the same point for foreign availability. If that is true, then I do not see why the Administration should object to amending the law to make that explicit; that is, to put an amendment in the statute that says that the mass market provision, the foreign availability provision simply do not apply to any item that is now controlled for multilateral purposes. I think that would go a long way toward clarifying what the bill now provides.
    I have also mentioned in my testimony the role of the intelligence agencies. We are now in the process of realizing how important intelligence is. It is our first line of defense against terrorism and terrorist-supporting countries. The CIA does not now have a vote on export license applications. It should. It should be asked to sit at the table and take a position. If the CIA votes no, if the CIA believes that there is such a high risk of diversion that an export should not go out, then it should not go out. The CIA should not just be an agency that provides information that may or may not be listened to.
    Also, in my testimony, I have described, mentioned the role of the national security agencies. The point has been made earlier in this hearing that it seems to be weak, and I believe that it is. There are some amendments that could be drafted that should not be opposed by the Administration that would remedy this problem.
    The first one I recommend is that the Pentagon should be given the same authority to put items on the control list that the Commerce Department has. If the Secretary of Defense thinks that some item is dangerous enough for our security that it ought to be controlled for export, then the Secretary of Defense ought to have the unilateral authority to put an item on the list.
    That authority exists under present law. It should exist under any new law that is passed.
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    Also, Congress should ensure that no license application is approved, unless all the national security agencies concur. Under the present structure that this bill establishes, the Commerce Department can simply override a national security agency in the case of a dispute.
    The chair of the committee that resolves disputes is appointed by Commerce, and that chair can simply override even an objection by all of the national security committees under this bill, and simply authorize an export. To prevent that from happening, it has to be escalated. I think that is counter-productive. What should happen is that if a national security agency objects at the expert level, then the export should not go out.
    I also believe that this committee that handles disputes should be chaired by a national security agency. Congressman Hunter has made the point that, after all, if there is a reason for a dispute, it is because of national security, not because of some commercial consideration. And so a national security committee ought to be in charge of the process.
    The government witnesses earlier also indicated that there was an intention on the part of the Pentagon to continue the militarily critical technologies list. I think that is very important. And it is a good thing that the Pentagon intends to continue it. For that reason, I do not see why the Pentagon should object to having that authority put in this bill. It is in the present law. There is no reason not to continue it. If at some time in the future there is a question about where this authority exists, I think it should be resolved now by putting the authority explicitly in the bill.
    I would like to conclude by saying that there is nothing more important today than keeping dangerous technologies out of the hands of terrorists. We have to depend on everybody else in the world, other countries to help us do that. We cannot do it by ourselves. We are now asking other countries to be more careful in their exports licensing decisions. We are asking them to enforce their laws more rigorously.
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    It seems to me that this is exactly the wrong time for us to be weakening our own export controls. We are sending the rest of the world the wrong message. We are sending them the message that they have to do more, but the United States is going to do less. Thank you very much, Mr. Chairman.

    [The prepared statement of Mr. Milhollin can be found in the Appendix ?.]

    The CHAIRMAN. Thank you, Mr. Milhollin.
    The gentleman from Missouri, Mr. Skelton? No?
    Mr. Hunter?
    Mr. HUNTER. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being with us.
    And Mr. Milhollin, you may have noted that during this testimony a lot of the recommendations that I made to our government witnesses were recommendations that you have made in your prepared remarks. And the reason that I did that is because I think that you are spot-on on your analysis of the situation, and your recommendations, and the common sense that you have applied to this.
    And let me just say, I think you have done a great service to the country over the years. You have been before this committee before with respect to the technology transfer. And so there are no large political action committees (PACs) out there that are against technology transfer. You are it. And you have done a great job for the country. I just want to commend you, because I think you have been, not only are you technical astute, but I think you are a little bit of a voice of conscience for us as we rush off to see how much we can sell to the bad guys.
    And that is one problem with this whole idea of foreign availability. I have only seen foreign availability as a terrible thing in a moral sense, because we are basically saying if other guys are selling the Winchesters to the hostiles, then we should do it too so we can make some money.
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    And if you look at the letter of the law, not what the well-intentioned Commerce Department stated they would like it to say, but if you look at the letter of the law, it does not discriminate between mass marketed equipment or foreign available equipment that is provided by bad countries like North Korea to importers such as Pakistan or Syria or Libya or others.
    Foreign availability does not mean it is not restricted, at least in the language that I see in this bill, to other Western countries like Great Britain or France that are selling bad stuff to bad people.
    It can include bad countries that are selling bad stuff to bad people. And that sucks us down to a position where we are level with the lowest common denominator.
    And I see, kind of, a death spiral for technology control in the adoption of that system, because if we are going to say, ''If others are doing it, we want to join in,'' it is, as you have mentioned, absolutely illogical for another country, which may be on the verge of stiffening their spine and being with us on a particular issue, it is a short step for them to say, ''Well, the United States is doing it, so we will join in. In fact, maybe we will go them one step further because we want to sell more than they are selling.''
    So I see that as a morally reprehensible, this whole idea of foreign availability. If bad people are doing it, why shouldn't we be able to do it too and make a buck even though we may face our own bullets coming back at our kids some day on the battlefield?
    Now, I had a question here with respect to mass marketing. If mass marketing takes something off the list—and Mr. Rice, maybe you can help us on this—if mass marketing some thing off the list, and if the Department of Commerce makes the decision on mass marketing, presumably without allowing DOD to fight their determination, then how do you follow that item?
    Let's say that the lawyer for nuclear triggers makes a good case. In fact, it looks like a good case is made by the facts of managing steel. ''We are on the Internet. We make sales all over the world. We are mass marketed.'' Once it is taken off the list, how do we follow it, if at all?
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    Mr. RICE. Well.
    Mr. HUNTER. Let's take managing steel.
    Mr. RICE. Right. Let's take that, because I certainly agree with you that managing steel is a sensitive technology that we do not want our adversaries to get a hold of.
    There are several things that I would point to. First of all, in the pending legislation both the Senate bill and the House bill provide for maintaining what are called enhanced controls. In other words, from a company's point of view, if there is information that a company has or has a reason to know, that a particular item, whether it is on a list or not, whether it is on the control list, any list, any item, is going to go for a foreign military—
    Mr. HUNTER. Right, to a bad end-user
    Mr. RICE. —a bad end-user, bad end-use—
    Mr. HUNTER. Yes.
    Mr. RICE. —then regardless of whether it is controlled or not, the U.S. company is not to ship that.
    Mr. HUNTER. But understand, sir, you just told us that one problem is that we do not give them, that our intelligence guys do not give them the list of who the bad guys are.
    Mr. RICE. But that is why I am urging that that be, that situation be addressed because companies do want to comply.
    Mr. HUNTER. But now Mr. Rice, but let's deal with the world as it really is.
    Mr. RICE. Right.
    Mr. HUNTER. There are national security reasons not, sometimes, not to disclose a bad end-user to a company. So you have the government holding the list close to their chest, right?
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    Mr. RICE. Right.
    Mr. HUNTER. You have the producer of these nuclear triggers or managing steel with a potential customer out there. They do not know if that customer is on this bad guy list.
    Mr. RICE. That is right.
    Mr. HUNTER. And the only way, and you are saying, ''Well, they can self-police if they know, if they only knew, but they do not know.''
    So what I am saying is that in the real world that we live in, once the determination has been made that those nuclear triggers are mass marketed, and they go off the list, is there any other mechanism for us follow it?
    Mr. RICE. As I say, the only mechanism, whether under the current law or under the proposed law, is that the U.S. exporter of that item needs to make sure that they are doing everything that they can to make sure that, A, they identify and know who their customer is.
    Mr. HUNTER. Well, but obviously they are not—a company that makes something in Ohio is not the CIA so they do not know who—
    Mr. RICE. But if they—
    Mr. HUNTER. We both agree that the intelligence agencies are not, they are not about ready to give them this classified information.
    I guess my point is that the idea of taking these guys off the list, the whole reason you have licensing is so people will know and so they can do investigations.
    Once you take them off the list you have taken away our government, our intelligence people and our defense people's ability to investigate them, right?
    Mr. RICE. That is right.
    Mr. HUNTER. I mean, they have no idea what is being sold. So that is not that the reason for licensing?
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    Mr. RICE. That is right.
    Mr. HUNTER. And then is not this taking these things out of the regime of licensing simply finding that they are mass marketing or mass marketed a potentially a very dangerous thing?
    Mr. RICE. That is right.
    And it is beyond my conception that the U.S. government would allow an item like managing steel or the high-speed switches you refer to I believe in an earlier panel.
    Mr. HUNTER. Well, what provision of the law?
    Mr. RICE. Well, under the law, in Title II, which allows the President to maintain controls no matter what. Moreover, there is a presumption of denial in Section 201, for any transfer for weapons of mass destruction purposes.
    Mr. HUNTER. But that is only if you know about it, right?
    Mr. RICE. No, that is regardless of whether it is on a list or not.
    Mr. HUNTER. No, but I am saying that is to a certain bad end-user.
    Mr. RICE. Right.
    Mr. HUNTER. If the guy does not show up and say, ''My name is Iraq Incorporated,'' and the company does not have the list that the intelligence agencies are holding close to their chest and he makes a sale, there is no way for our government to follow that, right? Right?
    Mr. RICE. If an item is removed from a control list under the mass market of foreign availability, that is right.
    Mr. HUNTER. Right.
    Mr. RICE. And I agree with you 100 percent that this provision should not be allowed whatsoever to allow the removal of controls over sensitive items like miraging steel, or high-speed switches or anything else like that.
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    Mr. HUNTER. So do not you think we need some more provisions in this bill?
    Mr. RICE. Well, our view of it is the same as the Administration's, that they have will have enough authority and, frankly, common sense to do that.
    From industry's point of view, which is why I am here today to at least reflect, they are going to have to make that system work. And we believe that they will.
    Believe me, there is no intention on the part of any industry representative I know of to use the mass market or foreign availability provisions to get sensitive items off the list. The only reason why industry has indicated support for that Senate concept is for items that—really the Radio Shack type items; that was all that was ever contemplated here.
    Mr. HUNTER. Well, then we should change the language. Because the problem is you have good intentions, but the good intentions are not manifested in the words of the law. And lawyers, as I understand, the law says that the Secretary shall remove those items from the list if he finds mass marketing, is that right?
    Mr. RICE. With the exceptions I cited earlier in that Title II.
    Mr. HUNTER. So if I am a lawyer for the company that makes these nuclear triggers, and I can show that they meet the criteria of the law that we have passed under mass marketing, I can force the Secretary to remove them. He cannot say, ''You know, I signed, I advocated this law, because I thought it was pretty good, and I wanted to, kind of, move us through this more liberal regime, but I really intend to hold onto all this stuff.''
    Mr. RICE. No, I do not believe that is how it would work out, Congressman. I understand there is a legitimate question, but I really do believe the Senate bill as well as the House bill provides for the United States government to maintain items on the list notwithstanding any finding of mass market or foreign availability.
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    Mr. HUNTER. Can I just take the words that you just gave me, and make an amendment out of that? Would you agree to pass it, that despite the United States maintains the right to control items their finding of mass market notwithstanding?
    Mr. RICE. Not withstanding, if there are related to any sensitive item that is going to threaten U.S. national security. Certainly, I would be happy to work with your staff on that.
    Mr. HUNTER. Okay, I think we need to have an amendment on that.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Abercrombie?
    Mr. ABERCROMBIE. Thank you very much.
    Mr. Rice?
    Mr. RICE. Sir.
    Mr. ABERCROMBIE. Having a good time?
    I think you know by definition it seems the line of questioning, and the views particularly that Mr. Weldon and Mr. Hunter and myself have, that your testimony would probably be the focus of this particular part of the panel. But I want to say to you that I was, and I am sure Mr. Hunter agrees, that we are impressed with precisely your statement or anticipation of this difficulty.
    Page 11 of your testimony, I think, is the relevant point here, where you have, ''A major industry concern is not addressed adequately in either bill: The need for government help in identifying clandestine purchasing networks used by rogue nations and terrorists to defeat export controls and obtain sensitive dual-use items.''
    Would you agree that the conversation you had with Mr. Hunter just now revolves around that statement, right? That if this could be cleared up, that perhaps a lot of your difficulties might disappear?
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    Mr. RICE. Well, I do believe that, which is why I put it in the statement. I mean, this goes much more broadly beyond just the mass market foreign availability issue.
    Mr. ABERCROMBIE. Right.
    Mr. RICE. I mean, our companies are telling me—
    Mr. ABERCROMBIE. But this is the key difficulty, right?
    Mr. RICE. It is a major problem, because, to the extent that U.S. sensitive technology is getting to bad guys, it is increasingly because of these clandestine purchasing networks.
    Mr. ABERCROMBIE. Not only the clandestine purchasing, but the idea that the sensitive nature of these items, in that context then, causes a lot of difficulties that might not otherwise occur.
    Mr. RICE. Absolutely.
    Mr. ABERCROMBIE. If we could resolve that issue, then a lot of this other stuff could be settled, right, in terms of exports.
    Mr. RICE. Absolutely.
    Mr. ABERCROMBIE. That said, then, I want to go to Mr. Christoff. Mr. Christoff, I am going to quote fairly extensively from your testimony, but I am sure when you were listening to my questions, you were thinking, ''He must have read my stuff and has extrapolated it and used it.'' I am going to try and take some credit for myself: I actually, the things that you have in your testimony almost parallel what I was asking before, but I had not read your testimony before I put that together.
    And so what I think has happened is not so much as great minds are working in the same manner, but that it is clear that these are questions that need to be answered; so much so that independently we were dealing with the same subjects.
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    And in that context, Mr. Chairman, this is why I am concerned, because I do not think we got adequate answers from the Commerce Department in the last panel with regard to these things. And I am going to just—it will just take me a moment or two to make my point.
    On page nine of your testimony, Mr. Christoff, you indicate very—and I will read through this briefly. In February 2002 with respect to semi-conductor manufacturing equipment, your statement is, and I quote ''Specifically we found U.S. agencies have not assessed the foreign availability of this technology or the cumulative effects of such exports and U.S. national security interests.''
    And under that you referred to your report ''Export Controls: Rapid Advances in China's Semi-Conductor Industry Underscore Need for Fundamental Policy Review.'' Do you believe that the admonitions or recommendations in that report, GAO-02-151, do you believe that this is met by the International Relations version of S. 149?
    Mr. CHRISTOFF. I think in the report that we issued on the semi-conductors and the reports that we have done on high performance computers, we have consistently said that when the executive branch makes these decisions about decontrolling items, they do a good job of looking at foreign availability, but they do not do a good job of looking at the significant uses of those items or the national security implications.
    Mr. ABERCROMBIE. Do you think that S. 149 as modified meets those objections or recommendations?
    Mr. CHRISTOFF. I think in either bill—I cannot answer that directly, but what I am saying, Mr. Abercrombie, is that—
    Mr. ABERCROMBIE. Maybe I am asking you to draw a conclusion that is not fair. But let me put it this way, could you look at the language?
    Mr. CHRISTOFF. Yes.
    Mr. ABERCROMBIE. Mr. Chairman, this is what I would like, could you look at the language of S. 149 in the light of the recommendations and the observations you just made and perhaps give to the Chairman an assessment as to whether or not you think the language of that amended bill meets what you had in mind or what the GAO had in mind? And to the degree it does not, if you could suggest, if you could suggest language that would do that, we would find that very helpful.
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    Mr. CHRISTOFF. Right. And I think we would be happy to do that. And I think the point we are saying is that when you make these important decisions, you bring everybody to the table and you do the complete analysis that is required by law and that all individuals that have a stake in this be involved in the decision making.
    Mr. ABERCROMBIE. And that is not the case in your judgment at this point?
    Mr. CHRISTOFF. No, not with the semi-conductor, looking at reviews of decontrolling, certainly not with high performance computers.
    Mr. ABERCROMBIE. Mr. Chairman, I think that is very fundamental information to us, and that we need to pay attention that as we go to markup.
    If I can go to the next page, Mr. Christoff, this has to do again with the testimony in the last panel with respect to the high-performance computers. I am going to quote on page 10. ''According to a Commerce official, the restrictions on access have resulted in backlog of about 700 post-shipment visits.'' That was as of March 2001, correct?
    Mr. CHRISTOFF. Correct.
    Mr. ABERCROMBIE. So about a year ago. Do you know whether that 700—that backlog of 700 has been reduced any great degree?
    Mr. CHRISTOFF. I do not know but we will find out about that and—

    [The information referred to can be found in the Appendix beginning on page ?.]

    Mr. ABERCROMBIE. Could you do that?
    Mr. CHRISTOFF. Yes.
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    Mr. ABERCROMBIE. Thank you. ''In addition, the U.S. government makes limited efforts to monitor exporters and users' compliance with the conditions set forth in export licenses for high-performance computers.''
    What do you mean by ''limited efforts to monitor''? What does that phrase mean?
    What is the practical implication of that phrase?
    Mr. CHRISTOFF. Limited efforts in the sense that there has been difficulties on the part of the Commerce Department, particularly in China, to try to go out and get access to the technologies, including the high-performance computers that we sold overseas.
    So it is a matter of the fact that—despite the fact that we have a 1998 memorandum of understanding between the United States and China, that they allow for these post-shipment verifications, they have restricted that access.
    Mr. ABERCROMBIE. Well, does limited efforts—is that a nice way of saying, ''They do not succeed in being able to monitor''?
    Mr. CHRISTOFF. They do not have the access but they also do not have the resources.
    Mr. ABERCROMBIE. What do they need by way of resources?
    Mr. CHRISTOFF. Well, both bills provide, I think, $4.5 million additional dollars to hire about 10 additional investigators as the Commerce Department does have more resources overseas.
    Mr. ABERCROMBIE. But if they cannot get access, what good does it do to have investigators?
    Mr. CHRISTOFF. Well, it does not.
    Mr. ABERCROMBIE. So the authorizing more investigators, absent some kind of protocols that ensure access, is an exercise in futility.
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    Mr. CHRISTOFF. Well, one of the provisions—
    Mr. ABERCROMBIE. Because you are already hired. I can ask you to make a report to me as to whether or not there is any access or investigation. And all you would have to do at this stage is come back and say that, ''We have 10 more investigators who also cannot do any more than I can do right now, which is to observe they cannot get there.''
    Mr. CHRISTOFF. Right.
    Mr. ABERCROMBIE. Right?
    Mr. CHRISTOFF. Yes.
    Mr. ABERCROMBIE. Okay.
    Well, no, you could not answer that. It is about how do you get more access. Well, Jesus, you stop dreaming that you are going to do business with China.
    By the way, I do not blame the Chinese in this. I mean, I give them credit. And we were stupid enough to do these kinds of things or greedy enough to do them, they are certainly smart enough to take full advantage of it. In fact, it would be, kind of, foolish to think that they would not. I just do not like being made a public ass.
    I can do it on my own time without writing it into the law.
    ''In an effort to ensure,'' quoting again Mr. Chairman, ''In an effort to ensure that sensitive U.S. exports are used only for intended purposes, Section 506 of the bills provides for strengthened post-shipment monitoring and clear consequences for countries refusing such monitoring.''
    In the light of the answer that you just give, what in 506 actually strengthens the capacity of these, say, if we put the money in for these increased investigators, what does the language say? Because I am unable to discover what it is in 506 that you are referring to. What actually strengthens the monitoring and what are the clear consequences?
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    Mr. CHRISTOFF. Well, the HIRC bill as amended is what I am referring to. And the fact that if, this is the language, if a nation who has an agreement with the United states to allow for post-shipment monitoring, repeatedly refused to allow that, the Commerce Secretary must restrict those future export licenses. That is in the HIRC bill.
    Mr. ABERCROMBIE. Is there a trigger mechanism and they do it once, twice, three times?
    Mr. CHRISTOFF. Well, that is a good question. And I think when we were looking at that, at the bill, we kept asking what does the term ''repeatedly'' mean, that would allow for that trigger?
    Mr. ABERCROMBIE. Something like saying, ''I love you''; at what point does it actually get believed?
    Mr. CHRISTOFF. Or the intensity of the feeling, right.
    Mr. ABERCROMBIE. Yes, depending on the activities associated with the phrase.
    Mr. HUNTER. [Presiding.] Would the gentleman yield on that point?
    Mr. ABERCROMBIE. Well, I expect that that probably did get your attention, did it not?
    Mr. HUNTER. You certainly did.
    And I want to thank the gentleman for bringing that up, because that is an area we did not cover. GAO did the report that said they had a backlog of 700 straight instances of refusal by the Chinese to allow us to do the on-site inspection.
    I will bet that after the 700th one, the boys in the Commerce Department say, ''You are really starting to test our patience.''
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    So my question would be, would you agree with an amendment by Mr. Abercrombie or somebody else that would simply say that when there is a refusal for on-site verification with respect to a particular commodity, that the Secretary shall, after a second request and after 30 days have expired since the request without agreement for the verification, then the Secretary shall deny all further licenses for that commodity. Does that sound realistic?
    Mr. CHRISTOFF. If that is the vehicle by which you can, we can define ''repeatedly,'' yes, because you need to have the time frame, you need to have the number of violations that would trigger it. Yes.
    Mr. HUNTER. Okay
    Mr. SKELTON. Would the gentleman yield on that?
    Mr. HUNTER. Is that Mr. Abercrombie's?
    Mr. SKELTON. In some instances, all you need is one.
    Mr. ABERCROMBIE. Yes. I would be for that. And thank you, Mr. Chairman for indulging me in the time. I only have one point I want to make.
    Again, referring to page 10, Mr. Christoff, of your testimony, and by the way, I appreciate the fact that getting testimony virtually devoid of rhetoric as you have put forward here. Virtually every sentence in here is useful and wonder or wonders, one follows the next, each one follows the one before. Very grateful.
    You say, ''Reports we have issued since 1995,'' Mr. Chairman, ''indicate limitations in government and private industry screening.''
    This is very, very important in regard to the repeated instances, you just referred to.
    Again, quoting, ''For example, the Commerce Department does not have complete intelligence information on license applicants that may serve as fronts for proliferaters or terrorists engaged in illicit activities.''
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    This is Mr. Rice's dilemma. I do not think it, and I hope you agree, Mr. Chairman, that it is up to Mr. Rice or his folks to try and figure out what is by definition a national defense agency or a Central Intelligence Agency function to figure out what may be a front or et cetera.
    So when the Commerce Department testified in the last panel that there were at least protocols in place for this, if they are in place, your statement says that they do have complete intelligence information. Is that because the protocols are inadequate or to what would you attribute this difference between your statement and that which was at least implied by the answer on the last panel, that protocols are in place and that there is an adequate capacity to understand when we are dealing with fronts?
    Mr. CHRISTOFF. It is when the Commerce Department decides to bring in the intelligence agencies. And so that has to—
    Mr. ABERCROMBIE. So it is not automatic?
    Mr. CHRISTOFF. No.
    Mr. ABERCROMBIE. Because I asked the question—you know, Mr. Chairman, I asked the question in the last panel whether this was automatic. And if I remember correctly, it was that, ''Yes, this took place as a matter of course.''
    Mr. CHRISTOFF. You know, Mr. Abercrombie there are these three interesting words that I always encounter in the bills. Do you concur or do you consult? Do you notify? And they all have different levels of adherence to them. So those are the, I think, the important words to always look into.
    If you want to bring everyone to the table to make these important decisions you seek concurrence; it is not consultation, it is not notification.
    Mr. ABERCROMBIE. Well, then let me ask you this by way of conclusion. If that is the case, that that complete intelligence information is lacking at the present time with regard to making these decisions, where there recommendations inasmuch as I have not read the pamphlet to which you refer or what you have footnoted here, ''Weapons of Mass Destruction: Assessing U.S. Policy Tools for Combating Proliferation,'' does that document, to your knowledge, contain recommendations as to how we could gather better intelligence or put in law admonitions legally to require this intelligence gathering before—
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    Mr. CHRISTOFF. It does not have specific recommendations. It is bringing up the deficiency.
    Mr. ABERCROMBIE. Are you in a position, because, and I am trying very strictly not to ask you for policy, because I do not think you folks do that.
    Mr. CHRISTOFF. I do not want to make policy.
    Mr. ABERCROMBIE. Of course not. Believe it or not, that is what the Congress is supposed to do. But what I am trying to figure out here is how we can translate what you are talking about into legislative language which would accomplish this task of requiring intelligence gathering agencies to look at each of these things and make a report as to whether or not there are circumstances which would work against the granting of a license. Most specifically, in that regard, whether or not there are false-front companies of clandestine connections that the revelation of which would require us to deny a license.
    Mr. CHRISTOFF. I would like to make the offer to the full committee that I have made to all of your staffs, and that we have done this detailed side-by-side analysis of the two bills. And I think we would like to have the time to sit down and go through it in detail with your staffs and perhaps help you work out some of the concerns and recommendations that you would like to make in the absence, of course, of GAO making any policies.
    Mr. ABERCROMBIE. Mr. Chairman, I would like to take advantage of that.
    Mr. HUNTER. Yes.
    Mr. ABERCROMBIE. Because I was going to suggest it to you. I do not want to tell your agency what to do, but we have to have the resources.
    And I will say to you in conclusion, then Mr. Chairman, I have a lot of regard for the GAO and the Congressional Research Service (CRS). I think between the Library of Congress and the General Accounting Office, this nation is very, very well served. And to the degree and extent that we can take advantage of the expertise that you have there, I really appreciate it.
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    And I am not quite sure of the mechanism, Mr. Chairman, for putting that together.
    Mr. CHRISTOFF. Well, you have eight days, so we will help you quickly.
    Mr. HUNTER. Good. Well, Mr. Rangel is sitting here is the staff director, and I think he needs to dedicate the next three days to working with you on this.
    This is a very vital program.
    Mr. CHRISTOFF. We understand our time frames.
    Mr. HUNTER. We will engage with you.
    Mr. ABERCROMBIE. Can you indulge me one more minute, Mr. Chairman, because I did not want Mr. Milhollin to escape totally from this?
    Mr. Milhollin, I want you to know that I am familiar with the Wisconsin Project, as well, that you are involved with and have been for a period of time. And I would like to add my accolade to that of Mr. Hunter, in this sense: that many times individuals feel and interested groups of people in the United States feel that their voices do not count or will not be heard. And I want to indicate to you that, even though you do not have, as Mr. Hunter indicated, the vast resources and funding that are available to some of the other institutional players in this city, that it is precisely organizational networks and commitments of people like yourself and your associates in the Wisconsin Project that help to give us the opportunity to make intelligent decisions with respect to the national security interests of this country.
    And I want to commend you for it and tell you how pleased I am to have been able to listen to you today and to see you in person.
    Mr. MILHOLLIN. Thank you very much.
    Mr. ABERCROMBIE. And Mr. Rice, I hope that we can come up with something then from this committee. I think you can see what the commitment is here, to aid and assist you so that you do not become the default villain when that is not by any stretch, and I think Mr. Weldon made that clear, by any stretch of the imagination either the intent nor the object of this committee's inquiry.
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    Mr. RICE. Thank you.
    Mr. ABERCROMBIE. Mr. Christoff, thanks again.
    Thank you, Mr. Chairman.
    Mr. HUNTER. Absolutely. We thank the gentleman for his valued input in this. And we have a lot of members really concerned about this issue.
    Mr. Milhollin, you have another little side-project that I thought was kind of interesting in that you folks have been going around to various countries with lists of bad end-users and informing various nations about some of the people their companies may be dealing with; is that right?
    Mr. MILHOLLIN. That is correct, yes.
    Mr. HUNTER. I do not know how much of that, can you talk about that very much?
    Mr. MILHOLLIN. Well, my organization is funded in part by the Pentagon to help former countries, countries in the former East Bloc improve their performance in export controls. And one way of doing that is to give them information about dangerous end-users in countries of concern.
    And in the last couple of years I have been to a number of places one does not ordinarily go, like Moldova, Romania, Bulgaria, Slovenia and so forth. And we have been—
    Mr. HUNTER. Some of the folks that helped to write—that helped to put this bill together from industry were wondering when you would—if you were going to come back from Bulgaria. But unfortunately you found your way back.
    Mr. MILHOLLIN. Yes, I have come back.
    And I also should say that the number of dangerous end-users we find is not decreasing. It is going up every year.
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    But we have also found that in these countries, they have made a decision—they want to come West, they want to be seen as responsible members of the industrialized world.
    They want to be seen as reliable recipients of high technology. They do not want to see machine tools or high-performance computers from the United States go into their country and then come out going to someplace like Iran.
    We have had the honor of being told by Slovenia, for example, that Slovenia denied an export to Iran using our information. And we know that other countries have done the same.
    So it is possible, through assistance and through information about risks, to help people do the right thing. And I think the tendency in the world is in the direction of being more responsible. The problem is that the countries we are worried about are becoming more sophisticated. And so we may not have as much time as we would like.
    Mr. HUNTER. Well, it is interesting what you are doing is what Mr. Rice was wishing American companies had the availability of, which is a list of bad guys, bad end-users.
    Mr. MILHOLLIN. Well, I—
    Mr. HUNTER. But there are some of those that obviously cannot be given out. Some of them can.
    Mr. MILHOLLIN. That is right.
    Mr. RICE. And that is the dilemma, Congressman. I mean we are not asking for sensitive information, but there needs to be a mechanism somehow—
    Mr. HUNTER. Well, you see—but there is a mechanism, Mr. Rice. It is called licensing.
    Mr. RICE. Right.
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    Mr. HUNTER. And what industry has sought to avoid is licensing by saying, ''We want to have these things simply taken off the list when no license is required if mass marketing is proven.''
    So they have asked to be—to have this mechanism, which is the only mechanism you have for really scrutinizing the list, to have that removed.
    So they are not in a very good position to complain about it, now.
    Mr. RICE. My only point, Congressman, in intervening was to suggest that our concern about this is much broader than just what is licensed. U.S. companies do not want to be taken advantage of by these networks.
    Mr. HUNTER. Well, you see I understand, but you know something, Mr. Rice? I bet some of them do for money. I think most of them do not, but I think that obviously you have companies that are—that engage in criminal activity all the time. And some of those companies from time to time have high technology.
    Mr. RICE. Right.
    Mr. HUNTER. And so, you know, operating or betting our national survival on the unanimous good wishes of corporate America is a little bit of a testy thing.
    Mr. RICE. I am certainly not suggesting that.
    Mr. HUNTER. Well, you will agree the way that, the commonsense way to check to make sure you do not have bad end-users getting stuff is the licensing process. You make your application, right, to the company that came in and gave you the check.
    Mr. RICE. Right.
    Mr. HUNTER. I am the government, I check it out, and I find out that they are a bad end-user and I refuse a license.
    Mr. RICE. No disagreement.
    Mr. HUNTER. If you have been exempted or had that product exempted from that list through the mass marketing procedures, that procedure never takes place, that review never takes place as it stands now.
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    Mr. RICE. For any item that is sensitive to U.S. national security, agree completely; no disagreement.
    Mr. HUNTER. Okay.
    Well, thank you very much, gentlemen. I want to really commend you for being here and lasting until the last witnesses.
    And I have one more thing for the record. Probably the greatest Border Patrol chief in American history, Silvestre Reyes, became a grandfather for the first time. I want to get this in the record. And his grandbaby, Amelia Reyes, is here in Silvestre's loving arms.
    And also Michael Harrison, who does my press and recently got me in Stamp Collectors Weekly on three occasions, I am just kidding. Michael Harrison is my press guy and he has a beautiful baby boy, Seth Harrison, with his wife Kylene.
    And the reason I am finishing with these pictures of babies, a little talk about these babies, is because that is what we are here for. We need to have a more secure world, and what we do with respect to this bill, I think, is going to be highly relevant to national security over the decades to come.
    So thanks a lot for being with us.
    Mr. SKELTON. Mr. Chairman—
    Mr. HUNTER. And I recognize the distinguished—
    Mr. SKELTON. I think the audience will be pleased to know the 11-year-old basketball star here, his last name is Skelton.
    Mr. HUNTER. Very pleased. Thank you.
    We are adjourned.
    [Whereupon, at 4:00 p.m., the subcommittee was adjourned.]