Testimony on U.S. Export Controls by Department of State
Assistant Secretary for Political Military Affairs (Acting) Stephen D. Mull
before the House Committee on Foreign Affairs’
Subcommittee on Terrorism, Nonproliferation and Trade
The Department of State has been
responsible for regulating defense trade since 1935, with the objective of
ensuring that defense trade supports U.S. national security and foreign
policy interests. The Department’s
primary mission in this regard is to deny our adversaries access to U.S. defense technology, yet permit appropriate
defense trade with our allies and coalition partners to allow for their
legitimate self defense needs and to fight effectively alongside U.S.
military forces in joint operations.
This function is vested in the Bureau
of Political Military (PM) Affairs’ Directorate of Defense Trade Controls
(DDTC), headed by a Deputy Assistant Secretary and consisting of the Offices of
Policy, Licensing, Compliance, and Management.
The Arms Export Control Act (AECA) and Foreign Assistance Act of 1961
are the basic legal authorities, implemented by the International Traffic in
Arms Regulations (ITAR), including the U.S. Munitions List (USML). The USML covers items specially designed for
military applications, and its 20 categories extend from firearms to the Joint
The administration of U.S.
export controls has become increasingly complex in the post-Cold War era,
particularly since the terror attacks on September 11, 2001. The emergence of a significant transnational
terrorist threat using unconventional methods, coupled with globalization of
the world’s economies, presents challenges to export control practices
developed in simpler times.
revolution in international finance, transportation, and communications have
reduced significantly the cost structure of international trade and transformed
the global economy. U.S. companies are now global in
nature, manufacturing an increasing amount of goods overseas and deriving an
increasing percentage of revenue through overseas operations and sales. The defense industry is not immune to these
changes. Globalization also is fueled by
the increasingly unfettered movement and immigration of human capital across
national boundaries. In the EU, for example,
nationals can move freely to seek employment throughout the community. Such changes have made industry and trade
more complex to understand and difficult to regulate.
Unfortunately, these same globalization
trends are being distorted by international terror organizations to conduct
attacks in the United States
and against our friends and allies on their soil. This fact was evident on September 11, 2001
and equally linked to terror attacks in London, Madrid, and Bali. Terror organizations such as al-Qaeda and
Hezbollah also seek to acquire sensitive U.S. military hardware and
technology, including sophisticated night vision devices, MANPADs and
components for crude weapons of mass destruction.
To combat this international terror
threat, the United States
has put together a coalition of nations to take the fight to the terrorists. The United
and other coalition partners are critical to U.S.
efforts in Iraq, Afghanistan
and against terror targets internationally.
Building the partnership capacity of these nations is now a primary U.S. foreign policy and national security
objective, both to allow these countries to control their territory and to
ensure our partners can operate with us on the battlefield, alleviating the need
for additional U.S.
forces. From an export control
perspective, we have no higher priority than approving licenses for coalition
forces in the field in Iraq
At the same time, more traditional
national security and foreign policy challenges continue to exist in terms of
export control policy. China’s rise as an economic powerhouse coupled
with its increased military spending and recognized efforts to acquire
sensitive U.S. military
technology require U.S.
diligence to halt U.S.
military technology from fueling these trends.
From a regional security perspective, the United
States also must continue to seek to restrict sensitive
technology from going to Iran,
other state sponsors of international terrorism, Venezuela and others.
In a June speech, the
Attorney General noted the critical importance of export control enforcement to
combating these threats and to counter the proliferation of nuclear weapons,
their delivery systems and related technologies. The Department of Justice recently announced
the appointment of the first National Export Control Coordinator to support a
nationwide export enforcement initiative.
The scope of the threat and the importance of this work are seen in the
growth in export enforcement cases in the past few years. In FY 2006, law enforcement actions (DHS-ICE)
pursuant to the AECA and the ITAR resulted in 119 arrests, 92 indictments, and
60 convictions. Many of these cases involved
efforts to illegally export defense technology to China
or to terrorist groups. Export controls
and the Department play a key role in preventing the illegal export or
diversion of militarily sensitive items to rogue states and terrorist
All of these international trends -
globalization, the war on terrorism, and the shifting balance of power in Asia and other regional hot spots, are reflected directly
in the export control work of the Department of State’s Bureau of
Political-Military Affairs. Specifically,
these trends are reflected in the increasing number of licenses received by the
PM Bureau and the value of overall licensed trade. In FY 2007, the PM Bureau expects to license
up to $100 billion in authorized exports.
On a year-to-year basis, the number of application received have
increased at an eight percent pace, with total licenses completed by the Bureau
anticipated to rise from 66,000 in FY 2005 to up to an estimated 80,000 in FY
Not only is the licensing volume and
dollar value rising, the complexity of license applications also is increasing,
particularly in the area of Technical Assistance Agreements (TAA) - the export
of defense technology and services, which includes furnishing assistance to a
foreign person in the design, development, and production of defense articles. Such agreements reflect the complexities
inherent in globalization, with such applications including multiple countries
and third country nationals, as well as complex flows of technology
transfers. In FY 2006, more than 7,000
TAAs were received and the value of defense services provided with such
agreements is roughly equal to or greater than the value of hardware
exports. We refer nearly all such
agreements to the Department of Defense’s Defense Technology Security
Administration for review to ensure the proposed activities are consistent with
our national security interests.
This added complexity and increased
volume of licenses has led to an increase in the number of license application
the PM Bureau is working. At the
beginning of FY07 DDTC had over 10,000 pending applications, but by January
2007 the number was reduced to approximately 5,200. We currently have approximately 7,200 pending
applications, with 567 over 60 days old.
It should be noted there always will be a significant number of cases in
the processing pipeline (this simply reflects the hundreds of new applications
we receive daily) and some cases will be difficult from a national security and
foreign policy perspective.
deal effectively with the increasing license volume, the Department is
exploring policy initiatives to manage the risk of more expeditiously licensing
military hardware to U.S.
allies, as well as taking internal steps to facilitate the processing of
licenses. We expect these efforts to
allow us to use our resources more efficiently to focus on restricting U.S. military technology from potential U.S.
A prime example of the former is the U.S.-UK
Treaty on Defense Cooperation, which was signed by President Bush and Prime
Minister Blair in June 2007. This treaty
recognizes the UK as our closest ally and one of our largest defense trade
partner and will permit without prior written U.S. authorization the export of
USML items, with certain exceptions, to the United Kingdom for the following purposes:
(1) combined U.S.-UK military and
counter-terrorism operations, (2) joint research, development and production
projects, (3) UK only projects for end-use by the UK military and (4) items for
the end-use of the U.S. military. The
department will maintain its authority of which end-users can have access to
USML items under the treaty in the UK
by vetting and approving an approved community in the UK.
In addition, the UK
has agreed to make USML items exported under the treaty subject to the UK Official
Secrets Act, which will prevent re-exports and re-transfers of such items
outside the approved community without U.S. approval. The Administration is preparing to provide
the Treaty to the Senate for advice and consent, and hopes that the Congress will
strongly support this initiative.
The U.S.-UK Treaty is a good example
of the Department managing risk to fulfill its dual obligations to build
partnership capacity and to protect U.S. military technology via exports
controls. In the past two years the
Department has processed roughly 14,000 license application for the United Kingdom, with only 18 licenses denied,
none of which were for exports to the UK government. Given these facts, we are comfortable with
creating a license free zone for mutually agreed projects with the UK. Among the benefits we expect to see from
implementing this Treaty is a reduction in the overall growth rate in license
The Administration also is reviewing
the recommendations put forward by the Coalition for Security and
the Department’s continuing review of export control policy, the PM Bureau also
is initiating changes to manage export control risk. Let me briefly mention three of these. First, I have asked the Deputy Assistant
Secretary for Defense Trade Control to institute a mandatory DAS-level review
of any OIF or OEF case that is pending for greater than seven days. Second, we will shortly commence with the
concurrent review of TAA applications with DOD, which we expect to expedite the
review of such items. Third, we are set
to initiate a policy change that will permit employees of foreign companies who are
nationals from NATO or EU countries, Japan,
Australia and New Zealand
to be considered authorized under an approved license or TAA. This will alleviate the need for companies to
seek non-disclosure agreements for such nationals and recognizes the low risk
to of transferring technologies to nationals of these countries under an
approved license or TAA.
Administration values Congress’s role in the consideration of U.S. munitions exports. The AECA requires advance notification to
Congress if a proposed license exceeds a certain value. For NATO, Japan, Australia
and New Zealand,
the thresholds are $25 million for Major Defense Equipment (MDE) and $100
million for all other defense articles and services, and the notification
period is 15 days. For all other
countries, the thresholds are $14 million for MDE and $50 million for all other
exports, and the notification period is 30 days. Small arms exports over $1 million must also
be notified to Congress, as well as all overseas manufacturing agreements for
Significant Military Equipment, regardless of value. The AECA allows both
houses of Congress to enact a joint resolution prohibiting the export within
the 15/30 day notification period.
The Department would ask the HFAC and
other committees of jurisdiction take a close look at several areas that would
help the Executive
Branch manage the risk of facilitating defense trade with partners and allies,
while continuing to restrict U.S.
military technology from reaching potential competitors and enemies. For example, the Congress may wish to
consider raising the dollar reporting threshold for Congressional notifications.
In the end, U.S.
export control policy is designed to enhance our national security and foreign
policy interests, which of course include protecting sensitive technology and
preserving our economic strength and industrial base. Those two standards are sometimes in
conflict. What we as your government owe
the American people is designing a system that adjudicates such conflicts
efficiently and transparently. We hope,
with your help and support, to reform our system with that goal in mind in
order to protect our national interest.