Strategic Objective 1.2

Performance Goal: Ensure fair competition in international trade (ITA)

Help build a rules-based trading system in which international trade is both free and fair for U.S. firms and workers.

ITA’s MAC program’s overall objectives are to obtain market access for U.S. firms and workers and to achieve compliance with trade agreements that the U.S. has signed with other countries. The IA program defends U.S. industry against injurious and unfair trade practices by administering the antidumping (AD) and countervailing duty (CVD) laws of the United States and enforcing other trade laws and agreements negotiated to address such trade practices.

ITA successfully completed 100 percent of AD/CVD cases on time in accordance with its statutory mandate. The number of AD/CVD cases completed on time is a reflection of the diligence of IA staff to complete its casework within the statutory timeframe. Domestic industry generates AD/CVD cases, and timeliness of case activity is a critical factor for delivering customer satisfaction. Timeliness of casework is also essential for upholding the integrity of the AD/CVD laws as a credible and fair legal mechanism to address unfair trade actions by foreign interests. The stated target reflects management’s prioritization of adherence to statutory requirements. ITA must always complete these cases within the limits set forth in law.

ITA faces new demands as the international trade environment changes from year to year: new barriers are erected, the role of international organizations and alliances is strengthened, and other foreign regulatory measures are implemented that have a negative impact on ITA exports. This performance measure assesses the extent of ITA’s efforts to monitor trade agreements, identify and initiate MAC cases on behalf of U.S. businesses, and work to their resolution. Market access cases arise from complaints received by ITA from U.S. companies experiencing overseas barriers to U.S. exports, which are not covered by trade agreements. Compliance cases rise from complaints received by ITA from U.S. companies regarding failures by foreign governments to implement trade agreements negotiated by the U.S. and through monitoring efforts by ITA compliance officers.

ITA is in the vanguard of commerce to ensure fair competition by obtaining greater market access, and measures performance through concluded compliance cases. The number of MAC cases concluded is based on a number of cases processed by ITA where no further action by ITA is warranted, such as a case successfully resolved; complaint was groundless, i.e., no violation; industry decides not to pursue a complaint; case referred to USTR for consideration for formal dispute settlement resolution; or the problem cannot be resolved despite ITA efforts. ITA met its annual target. MAC concluded 85 market access and trade compliance cases.

Leveling the Playing Field by Removing Barriers that Hinder American Exporters

Free and fair trade is a two-way street that requires all parties to play by the rules. When the access of U.S. farmers, ranchers, workers, and businesses to foreign markets is thwarted by the failure of other governments to live up to their international commitments, the Department takes aggressive actions to remove barriers for U.S. exporters. The Administration regularly negotiates solutions to potential WTO cases and unfair trade practices that achieve timely and meaningful results for U.S. companies and workers and avoid drawn-out, costly litigation battles. The Administration’s tough, practical, problem-solving approach has helped level the playing field for U.S. manufacturers, innovators, and workers, as well as farmers and ranchers. Examples include:

• Telecommunications. Opening Korea’s closed telecommunications and wireless market to ensure that U.S. telecom companies and workers can continue to expand by selling their products in this important market.
• Textiles. Relaxing India’s burdensome import certification requirements on U.S. textiles exported to India.
• Auto Parts. Removing Mexico’s barriers to U.S. auto parts.
• Patent Protection. Settling ongoing IPR disputes with the Dominican Republic regarding patents and winning commitments for improved enforcement against piracy and counterfeiting.
• Optical Media Protection in the Philippines. Encouraging the Philippines to enact key legislation that will provide greater protection for the optical media industry. This legislation addresses piracy at a high level and is part of an ongoing effort to prevent piracy of U.S. intellectual property in the Philippines.
• Updating Copyright Law in Uruguay. Convincing Uruguay to revise its antiquated 1937 copyright law to address U.S. industry IPR losses estimated at $32 million annually.
• Stopping Transshipment and Piracy in Paraguay. Renegotiating an IPR Memorandum of Understanding with Paraguay to reduce transshipment, piracy, and counterfeiting challenges to U.S. industry.

Real Results Through Tough Policy Positions With China

The Department has advanced tough trade policy positions and utilized practical problem solving to level the playing field by improving access for U.S. exporters to China. As a result, China agreed to the following:

• Soybeans and Cotton. Reduce barriers and relax market constraints in the soybeans and cotton markets. As a result of U.S. negotiations with China, U.S. soybean exports reached an all-time high of $2.9 billion in 2003 and cotton exports were up 431 percent over 2002 and have already reached record levels ($1.3 billion) this year. China is the largest U.S. export market for both soybeans and cotton.
• Wireless Standards. A more open approach to developing Wireless Internet Standards in China, ensuring the free flow of information, and preserving competition for U.S. technology companies.
• Advanced Telecommunications. Support technology neutrality with respect to Third-Generation (3G) Mobile Phone Standards —­ preserving competition for U.S. telecom and equipment manufacturers.
• Intellectual Property Rights (IPR) Protection. Stricter enforcement and more severe penalties for piracy and counterfeiting of U.S. ideas and innovations. This includes the Department’s pressing the Chinese to agree to a detailed action plan to address the piracy and counterfeiting of U.S. ideas and innovations, particularly through increased Chinese criminal penalties for violators.
• Reducing Red Tape for Exporters. Provide distribution rights to U.S. companies, which allow U.S. firms to engage in wholesaling and retailing U.S. products directly within China.
• Express Delivery. Preserve a growing market for U.S. express delivery service providers by eliminating regulations that would have protected Chinese providers.
• Approval of Biotech Farm Products. Reduce barriers on U.S. biotech soybeans, canola, and corn.
• Opening Financial Services. Reduce capital requirements for financial services and open the auto-financing sector to U.S. competitors.
• Opening Insurance Services. Change insurance regulations to make it easier for U.S. insurance companies to do business in China.

Performance Goal: Advance U.S. national security, foreign policy, and economic interests by enhancing the effectiveness and efficiency of the export control system (BIS)

BIS regulates the export of dual-use items that are determined to require export licenses for reasons of national security, nonproliferation, foreign policy, or short supply; ensures that approval or denial of license applications advances U.S. economic and security interests; promotes the understanding of export control regulations within the business community; represents the Department in interagency and international fora relating to export controls, particularly multilateral regimes; monitors and seeks to ensure the availability of industrial resources for national defense under the authority of the Defense Production Act; and assesses the security consequences for the United States of certain imports.

BIS processes export license applications for controlled commodities of U.S. companies engaged in international trade in accordance with EAR. An integral part of BIS’s mission is to facilitate compliance with U.S. export controls by keeping U.S. firms informed of export control regulations through an extensive domestic and foreign outreach program. BIS provides timely information to U.S. industry regarding the updating of export controls and compliance with EAR.

In FY 2005 BIS successfully promulgated 36 regulations that improved the ability of U.S. companies to compete internationally by streamlining export controls on less sensitive items while enhancing U.S. national security and furthering U.S. foreign policy interests by expanding export controls in key areas. Noteworthy regulations published include multilateral export control regime updates from 2004/2005 Plenary meetings, expanded license requirements for Australia Group controlled chemical/biological dual-use items to non-Australia Group members, revisions to licensing policy for exports to India, revisions to the rules for deemed exports “Technology Transfers to Foreign Nationals in the U.S.,” and a rule to lift certain restrictions on items used by U.S. persons in Libya.

BIS processed over 23,350 export license applications and related requests in FY 2005 benefiting exporting companies and industries, and in turn the U.S. economy, while protecting national security and foreign policy interests.

The basic BIS licensing program that establishes licensing policy, promulgates regulations, and applies the policy and regulations in evaluating and acting on license applications for export of dual use commodities largely accomplishes its fundamental objectives.

BIS is able to fully and effectively meet its responsibility for administering the dual-use export control system using current legal authorities. However, there would be benefits in securing comprehensive dual-use export control legislation. Thus, the Administration seeks a revised, reauthorized Export Administration Act (EAA) that will increase penalties, clarify outdated control requirements, further specify interagency licensing processes, and codify procedural rights of exporters.

The following are reviews conducted by the Government Accountability Office (GAO) and the IG related to this goal:

• Cruise missiles and unmanned aerial vehicles (UAV) pose a growing threat to U.S. national security interests as accurate, inexpensive delivery systems for conventional, chemical, and biological weapons. GAO recommended that BIS assess the adequacy of EAR end-user, or “catch all” controls in addressing missile proliferation and indicate ways in which such controls might be modified to increase their effectiveness. BIS published a revision to the EAR that expanded missile catch-all controls to further address missile proliferation by non-state actors. The regulation strengthened the controls contained in section 744.3 of EAR. BIS also conducted a review of licensing transactions with respect to UAVs/cruise missiles. BIS identified those commodities, end-uses, and destinations requiring additional scrutiny for selection of PSVs.
• To comply with the National Defense Authorization Act’s (NDAA) FY 2004 requirement, the IG conducted an interagency review to assess whether the current deemed-export control laws and regulations adequately protect against the illegal transfer of controlled U.S. technologies and technical information by foreign nationals to countries and entities of concern. The IG determined that some areas of deemed-exports, such as the outreach program, are working well, and acknowledged the steps BIS has taken to strengthen the rest of the program. BIS has also been considering revisions to the deemed export rules and soliciting comments on the IG recommendations.
• In March 2005, the IG released a report on its review of the export licensing process for chemical and biological commodities. The IG said the process is generally working well, but made several recommendations, including improvements in the licensing process, timely publication of Australia Group control list updates, control of certain items on the Animal and Plant Health Inspection Service (APHIS) select agent list, and interagency coordination on Australia Group matters. BIS has already completed action on three of the 11 recommendations.

Performance Goal: Ensure U.S. industry compliance with the Chemical Weapons Convention (CWC) agreement (BIS)

BIS collects, validates, and aggregates data declarations from U.S. companies that produce, use, or trade certain toxic chemicals and related precursors in quantities above thresholds established by the CWC. BIS hosts international inspections at U.S. companies conducted pursuant to CWC inspection provisions. BIS also provides outreach and assistance to U.S. companies to prepare them for possible inspection and apprise them of their treaty rights and obligations.

BIS successfully conducted 12 CWC site assistance visits (SAV) in FY 2005. During SAVs, BIS helps companies comply with CWC regulations and helps companies develop measures to protect confidential business information. None of the companies receiving a SAV were selected for inspection by the Organization for the Prohibition of Chemical Weapons (OPCW) in FY 2005.

BIS has worked closely with the Department of State to address shortcomings in overall treaty implementation, particularly State Party compliance with the CWC requirements to establish penal legislation criminalizing chemical weapons, establish a National Authority, and enact administrative measures to collect industry declarations and host industry inspections. On behalf of the Department of State and government of Romania, BIS drafted and distributed an Implementation Assistance Program (IAP) to promote universal compliance with these requirements and developed and hosted an IAP-dedicated Web site. In coordination with Department of State and OPCW Technical Secretariat officials, BIS representatives conducted assistance visits with States Parties in Africa, South America, and Asia in FY 2005 in support of the IAP. BIS also developed the concept paper for establishing State Party guidelines for CWC compliance assessments by November 2005. A U.S. government paper incorporating these concepts was distributed to OPCW States Parties by the Department of State in June 2005.

BIS did not conduct any implementation activities, (e.g., issuing regulations, collecting declarations, hosting inspections, conducting assistance visits) related to the International Atomic Energy Agency (IAEA) Additional Protocol to the Safeguards Agreement in FY 2005, since the implementing legislation has not yet been passed. However, BIS drafted forms, including forms on behalf of the Nuclear Regulatory Commission (NRC), for U.S. industry use in compiling and submitting declarations to BIS, and provided them to select companies for testing purposes. BIS also compiled a list of abandoned uranium mines that will be subject to declaration under the Additional Protocol upon entry into force, thereby avoiding the need for a data call to industry upon issuance of final regulations. BIS also completed the development of an Additional Protocol Reporting System that will process industry declarations, including those subject to NRC jurisdiction, and will compile interagency data into a combined U.S. national declaration for transmission to the IAEA.

Performance Goal: Prevent illegal exports and identify violators of export prohibitions and restrictions for prosecution (BIS)

BIS’s enforcement efforts focus on sensitive exports to hostile entities or those engaged in onward proliferation, prohibited foreign boycotts, and related public safety laws. In the area of dual-use exports, BIS gives top priority to investigations and enforcement actions involving the proliferation of WMD, terrorist activities, significant exports to state sponsors of terrorism, and dual-use exports destined for unauthorized military/government uses.

BIS engages in activities to prevent violations before they occur and to investigate and prosecute violators to dismantle illicit proliferation networks and deter future violations. Preventive activities include screening license applications for enforcement concerns; conducting end-use checks abroad to confirm the bona fides of parties to export transactions, confirm compliance with license conditions, and uncover diversions to unauthorized end-users/uses; and reviewing Shippers Export Declarations and foreign visitors’ visa applications to identify potential export issues. Outreach activities include educating U.S. businesses on export control requirements and identifying suspicious transactions leading to successful preventative and investigative actions. Investigation and prosecution activities involve BIS Special Agents conducting cases focused on significant proliferation, terrorism and military end-use export violations, and the vigorous pursuit of criminal and administrative sanctions.

In FY 2005, BIS completed 583 investigative actions that resulted in the prevention of a violation and cases which resulted in a criminal and/or administrative prosecution. These actions resulted in 31 convictions for criminal export violations and the imposition of $7.7 million in criminal fines and the assessment of $6.8 million in administrative penalties. BIS enhanced its enforcement capabilities by implementing new procedures to focus enforcement activity on the most significant violations, reduce aging case inventories, and strengthen interagency partnerships; and implementing a new, focused outreach program to U.S. businesses manufacturing and exporting specific goods and technologies targeted for hostile foreign acquisition. In FY 2005, BIS completed over 500 PSVs, a form of end-use check to confirm export license conditions are complied with and identify any unauthorized diversions, and is working to enhance end-use checks by expanding regional responsibilities of BIS Export Control Officers overseas.

Triggered Spark Gaps: A BIS investigation prevented high speed electrical switches like that pictured here, a dual-use good that can be used for detonating nuclear weapons, from illegal export via a South African proliferation network to Pakistan.

As a part of its deemed export review, the IG recommended that BIS implement a program to verify compliance with deemed export licenses issued. BIS conducted its first pilot verification check of a deemed export license holder, and is finalizing the development of this program for implementation.

BIS also expanded its role in the Proliferation Security Initiative (PSI), an interagency, multilateral effort to prevent illicit trafficking in WMD materials. BIS successfully coordinated with PSI partners to interdict two shipments of WMD materials destined to restricted destinations and is actively pursuing two investigations of potential criminal and administrative violations based on those shipments.

In addition to dual-use export controls, BIS enforces the antiboycott provisions of the EAR. Implemented to support countries friendly to the U.S. and eliminate impediments to the U.S. economy, the antiboycott regulations direct U.S. businesses not to participate in foreign boycotts that the United States does not sanction. As well as investigating criminal and administrative violations of the antiboycott regulations, BIS actively supports the State Departments efforts to dismantle Arab governments’ boycott of Israel. BIS provides guidance to the exporting community regarding the antiboycott regulations through public outreach and its telephone and e-mail advice line.

The Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction issued its report to the President on March 31, 2005. The Commission specifically sought out BIS input in its deliberations, and took particular note of the Department’s significant role in U.S. counter proliferation efforts and its contributions to the intelligence community’s efforts. The Commission praised BIS for its efforts in thwarting WMD networks; recommended giving BIS stronger law enforcement powers through renewal of the EAA; and urged the Intelligence Community to take advantage of BIS’s unique role in export controls.

Performance Goal: Enhance the export and transit controls of nations seeking to improve their export control system (BIS)

Through a series of bilateral cooperative activities co-sponsored with the State Department, BIS helps the nations that it works with to: (1) develop the procedures and requirements necessary to regulate the transfer of sensitive goods and technologies, (2) enforce compliance with these procedures and requirements, and (3) promote the industry-government partnerships necessary for an effective export control system.

BIS assists in implementing the Department’s international activities by: (1) coordinating and managing BIS participation in the U.S. government’s Export Control and Related Border Security Assistance (EXBS) program, which provides technical assistance to strengthen the export and transit control systems of nations lacking effective systems that are identified as potential locations for export transshipment or transit of nuclear, chemical, biological, or radiological weapons; missile delivery systems; or the commodities, technologies, or equipment that could be used to design or build such weapons or their delivery systems; (2) preparing input for reports and other information on BIS international cooperative programs; (3) representing the Department in ongoing interagency dialogues on international export control assistance programs and other international nonproliferation and export control issues; and (4) providing policy and implementation support for the Office of the Under Secretary for international dialogues and activities.

BIS successfully remedied 40 deficiencies in the national export control systems of countries receiving technical assistance under the EXBS program. Some highlights include: Kazakhstan and Romania passed legislation to improve their respective export control legal frameworks and bring them up to international standards; Armenia adopted a national control list that meets international standards; and more than 170 Russian customs officials from more than 70 customs posts, ports, airports, and other customs entities were trained in use of the Product Identification Tool (PIT). This tool helps customs officials identify dual-use items by sight to better monitor which products require a license and which do not. Cyprus, Turkey, and Kazakhstan made high-level commitments to work with BIS to develop and deploy an indigenous version of the PIT and to train their respective customs officials. BIS conducted industry awareness programs and deployed Internal Control Program software tools in over 400 Russian, Ukrainian, Romanian, and Kazakh enterprises.

BIS initiated an upgrade of the Performance Tracking and Results System (PTRS). New PTRS capabilities will include the ability to track program failures as well as successes and will enable the user to more easily determine the cost associated with remedying a particular deficiency in a program country’s export control system. PTRS is an electronic repository of technical exchange information and supporting documentation related to each country’s performance in developing an export control system.

STRATEGIES AND FUTURE PLANS

ITA will expand its analytical infrastructure to support timely and accurate assessments of: (1) the impact on U.S. industries of the growth of regional trade pacts, and (2) the impact of major competitors exporting their discriminatory technical regulations to third markets in the developing world; develop strategies to support bilateral and multilateral trade negotiations that prevent the adoption of discriminatory international standards and regulations against U.S. products; work closely with foreign governments and regulatory officials in developing strategies that address regulatory barriers, head off potentially harmful regulations, and help shape good regulations and standards; monitor economic data from U.S. global competitors and vigorously investigate evidence of unfair subsidization and production distortions; identify legal remedies available to counter unfair trade practices and ensure that they are eliminated, rather than leave these small and medium-sized manufacturers in the United States with costly trade litigation; and focus and sharpen expertise on China through the recently created China Compliance office in IA. This effort devotes more resources and dedicated experts to China for compliance issues.

BIS continues to refine U.S. export controls in light of geopolitical and global market realities. BIS also seeks to enhance the effectiveness of the EAR by educating exporters and other stakeholders in the export licensing process, thereby improving industry compliance with export control regulations. These efforts will increase the efficiency of the license processing system and thus enable exporters to be more competitive in the global economy while deterring transactions that threaten U.S. security interests.

BIS conducts outreach and educational programs to train U.S. exporters and foreign customers to identify and avoid illegal transactions. In FY 2005, BIS conducted 39 outreach programs. BIS conducted outreach programs in countries such as India, South Korea, and Singapore. In addition, BIS works with its foreign counterpart agencies to encourage other governments to implement enforcement measures to complement BIS’s export enforcement efforts. BIS unveiled an outreach program that includes a new standardized outreach presentation, increased solicitation of industry feedback via surveys, and new outreach tools. Informative feedback from industry is being used to better target the critical issues that are of interest to industry. The standardized presentation will be given to industry representatives in order to educate them on BIS’s enforcement activities. In addition, all BIS agents have been trained on delivering this presentation and will be reaching out to new audiences that have little experience in the export control arena.

Strong enforcement of U.S. export regulations is critical to protect U.S. national security interests. BIS will continue to focus on preventing, investigating, and prosecuting the most significant export violations involving proliferation, terrorism, and military end-uses. Focused partnerships with U.S. businesses will be maintained regarding specific goods and technologies sought for hostile acquisition, and the deemed export compliance program will be finalized and implemented.

One of BIS’s primary roles in CWC activities is to ensure that confidential business information is protected during inspections of U.S. firms. In addition, with the ratification by the U.S. Senate of the Additional Protocol to the IAEA Safeguards Agreement, BIS will serve as the lead U.S. government agency in U.S. industry’s compliance and will be required to carry out responsibilities similar to those imposed under the CWC. This responsibility includes facilitating domestic visits of international inspection teams to determine compliance with the multilateral treaty obligations by covered U.S. facilities and informing industry of its obligations under the treaty. Industry SAVs prepare covered facilities to receive a team of international inspectors.

U.S. national security interests can also be jeopardized if sensitive materials and technologies from other nations reach countries of concern or terrorists. For this reason, BIS’s strategy includes promoting the establishment of effective export control systems by other nations.

CHALLENGES FOR THE FUTURE

Implementing an export control system that advances U.S. national security, foreign policy, and economic objectives in a dynamic technology and geopolitical environment.

Strengthening the legal foundation of the dual-use export control system. The EAA lapsed on August 20, 2001. Executive Order 13222 of August 17, 2001 (3 C.F.R., 2001 Compo 783 (2002), which has been extended by successive Presidential Notices, the most recent being that of August 2, 2005 (FR 45273, Vol. 70, 150, of August 5, 2005) continues the regulations in effect under the International Emergency Economic Powers Act (IEEPA). While BIS effectively exercises its authority under IEEPA, the legal foundation for the dual-use export control system can be strengthened. The Administration has vigorously advocated a streamlined and strengthened export control system that effectively promotes both U.S. national security and U.S. economic interests. To address this challenge, the Department continues to work with congressional members and staff on export control reforms that enhance the Department’s ability to facilitate legitimate global trade while reducing illicit traffic in dual-use items and targeting export control resources on transactions of greatest risk.

Processing export license applications and related tasks promptly and accurately. In light of evolving technologies and increasing globalization, and new threats, BIS continues to strengthen its internal processes, develop enabling technologies, and work with other license application reviewing agencies to ensure that the process is effective and efficient. BIS also continues to seek to enhance its ability to ensure that U.S. exporters and foreign customers have ready and timely access to regulatory and policy changes. BIS will expand efforts to help key transshipment countries prevent the diversion of dual-use items through their ports. Finally, BIS continues to refine enforcement targeting to ensure investigation and prosecution of the most significant dual-use export and antiboycott cases.

Controlling the most sensitive technologies. BIS is continually faced with the challenge of updating technology controls to reflect the current state of technology. BIS will continue to quickly update the Commerce Control List to reflect changes in the multilateral export control regimes to ensure controls do not burden U.S. industry with outdated controls. BIS is developing and plans to implement in the near future a new metric to identify the most sensitive high performance computers. This effort will include obtaining multilateral agreement on a new metric and revising the EAR to reflect the agreed-upon interagency metric. The new metric is needed to more accurately identify the most sensitive high performance computers. To meet this challenge FY 2006 budget priorities include funding for an office to monitor and assess technology developments.

Implementing U.S. export control policy to reflect geopolitical developments. Dual-use export controls must reflect geopolitical developments and new partnerships as they evolve. For example, in late 2003 Libyan commitments to dismantle their WMD programs prompted revisions to dual-use export controls. As the situation with Libya further develops through 2005 and 2006, BIS will be challenged with how best to respond to these developments. In July 2005 India and the United States concluded the Next Steps in Strategic Partnership and formed a new partnership in several areas, including civilian nuclear cooperation. BIS will again be faced with the challenge of responding to these developments with revisions to dual-use export controls.