Tech Industry to Influence New Export Control Bill

Tech Industry to Influence New Export Control Bill

Sen. Phil Gramm

Senate leaders are grappling with how to balance the competing interests of free trade and national security as they shape new legislation to reform export controls on U.S. high-tech equipment and other technologies.

Sen. Phil Gramm, R-Texas, chairman of the Senate Banking, Housing and Urban Affairs Committee, held two hearings in February to look into the new Export Administration Act of 2001 (S. 149). That bill, introduced Jan. 23 by Sen. Michael Enzi, R-Wyo., would provide a new legal framework for the executive branch to implement export controls for national security and foreign policy reasons on nonmilitary items.

At the Feb. 7 hearing, Gramm told representatives from the high-tech industry he would seek their views.

"If anyone has any suggestions, we want to hear them," Gramm said. "We have simply tried to put together the best ideas we could find. If we find better ideas, we'll change the bill."

Crafting legislation is difficult because the nation is trying to achieve two conflicting goals with its export policy, said Gramm. While the United States wants to be the world leader in developing and exporting cutting-edge technology, it also wants to prevent sophisticated technology from falling into the wrong hands.

"We want to dominate the world in high technology. ? At the same time, we are the principal guard at the gate in terms of the security of the world," Gramm said at a Feb. 14 hearing.

Currently, there is no corresponding legislation proposed in the House. The new bill, put together over several years with input from members of the banking committee as well as from many witnesses and members of other committees, is really an effort to deal with these conflicting goals, Gramm said.

The bill makes clear that computer and other technologies that are sold on the world market ought to be decontrolled, he said. The bill also takes steps to strengthen the individual departments that review objections to an export on national security grounds, and places stiff penalties on people who knowingly and willingly violate the law.

Also, if the president decides he wants to control an export for national security reasons, he has the right to do that and cannot delegate that authority to anybody else, Gramm said.

AeA, a Washington-based trade association representing 3,500 high-tech companies, supports the creation of a new Export Administration Act, but the organization also is calling for some changes to be incorporated into the legislation, said AnnMarie McIntyre, AeA director of trade relations.

AeA, formerly called the American Electronics Association, has recommended including language specifying that controlled items do not include transfers of data, technology or source code within a company, McIntyre said. For example, technology could be freely transferred within a company to an overseas subsidiary.

Larry Christensen, vice president of international trade for Vastera Inc., said the inner-company transfers are essential for future business. Vastera manages global trade for clients through software, consulting and managed services.

"Integration of worldwide facilities and efficient use of resources within U.S. companies are critical to the maintenance of leadership within high-technology industries and the economic and employment benefits that leadership provides," Christensen told the Senate Banking Committee Feb. 7.

AeA also asked the committee to consider developing a tiered penalty system similar to that used by the U.S. Customs Service. The Customs' system ranks offenses as negligence, gross negligence and fraud, with a corresponding tiered schedule of penalties, McIntryre said.

The current structure is not fair because the same penalty could be imposed whether a company simply makes an administrative mistake or knowingly conducts fraudulent business, she said.

Gramm and others on the committee appear receptive to the proposed changes and are willing to work with industry to further shape the bill, McIntyre said. However, if opposition to these and other proposed recommendations surface in the Senate or in counterpart legislation in the House, the high-tech industry will try to compromise where needed, she said.

Pressure is likely from congressional defense committees and the national security community to keep controls in place to perhaps a greater extent. John Hamre, who served as deputy defense secretary in the Clinton administration and now is president of the Washington-based Center for Strategic and International Studies, told the committee in a second hearing Feb. 14 that the system of export controls does not effectively protect national security.

Blocking U.S. exports, however, does not necessarily prevent other countries from gaining access to high technology, he said. And any new export controls must recognize and complement modern business practices.

Hamre said one problem with the framework for export controls is that tens of thousands of export officers in companies are preparing forms to get licenses approved by a few hundred government reviewers. Rather than requiring companies to submit licenses for each individual sale, the government should license the export control procedures of a company, Hamre said.

The government also needs a more objective process for determining what needs to be controlled, he said.

"When I was in the government, we attempted to establish such a process for computer products, looking ahead to ensure that we did not block computers that effectively became commodities in the market," he said.

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