Prepared Statement of Senator Carl Levin

Mr. Chairman, today we turn our attention to the status of our export control system. Export controls serve two purposes. First and foremost, they are designed to insure our national security by preventing the proliferation of military capabilities that could harm us, especially the proliferation of weapons of mass destruction. And second, they are intended to protect our national interest by not unreasonably hindering our economic and technological development. A good export control policy accomplishes both of these goals.

I am pleased that our committee is holding this hearing. This committee has earned a solid reputation for approaching national security matters in a strong bipartisan and objective manner. That's what congressional oversight of our export controls requires, and I am confident that this committee will make a constructive contribution to the Senate's understanding of these complex and important matters.

Having served on several committees that have held hearings on this subject over the past several months, a number of facts have already emerged. First, our export control policy with respect to the export of communications satellites to China shifted dramatically in 1988 when President Reagan approved a new policy of allowing the export of such satellites for launch in China. This was a controversial decision at the time, and we learned in the Governmental Affairs Committee, for example, that President Reagan's science advisor, Dr. William Graham, opposed President Reagan's decision. Nonetheless it happened, and Presidents Bush and Clinton have followed suit.

When President Reagan made his decision, communications satellites were considered a military item and were maintained on the Munitions List and licensed, therefore, by the Department of State. However, as the use of these satellites for commercial purposes grew over the years, pressure increased to transfer the dual-use satellites to the Commerce Control List with licensing by the Department of Commerce. In 1992 President Bush ordered approximately half of the communications satellites transfer-red from State to Commerce for licensing.

We've also reviewed in other committees the 1989 response to the human rights violations perpetrated by China at Tiananmen Square. We passed a law imposing a number of sanctions on China including prohibiting the export of munitions, nuclear related equipment and commercial satellites to China unless the President personally signs a waiver declaring such export to be in our national interest. From 1989 on, therefore, every export of a satellite to China required not only a license from either the State Department or the Commerce Department, but also a waiver from the President. President Bush granted waivers for 9 satellites; President Clinton has granted waivers for 11.

With the 1992 shift from State licensing to Commerce, questions began to arise as to whether national security concerns were being properly addressed. At the same time, pressure was building, including pressure from Congress, to transfer the balance of the communications satellites from the Munitions List to the Commerce Control List. As a result, President Clinton decided in 1996 to transfer the balance of the satellites to Commerce for licensing, after issuing an Executive Order that implemented a new export control regime for items licensed by Commerce to strengthen national security controls. Under the new regime, any application for a license by the Commerce Department is now reviewed by State, DOD, ACDA, DOE and Commerce. For satellites, if there is any disagreement about the issuance of the license, the licensing decision is made by a majority vote of the agencies. If an agency disagrees with the outcome of the vote, it can appeal the decision to the committee of Assistant Secretaries from these agencies, and if an agency still disagrees, it can appeal the decision to the Secretaries, and eventually the President.

The post-Tiananmen waiver procedure for the export of satellites to China is the same whether the satellite is licensed by State or Commerce. In a letter to Senator Cochran and me dated June 22, 1998, National Security Adviser Sandy Berger wrote: ``Once the waiver recommendation reaches the National Security Council staff, the process followed for granting the waiver is the same regardless of which agency recommended the waiver, State or Commerce.'' I'd like the NSC's letter to be made part of the record today.

The question many people are asking is whether the new regime for licensing of commercial satellites by Commerce is adequate to protect our national security interest. Does Commerce have too much authority? Does DOD have too little?

During hearings in the other committees Commerce, State and DOD testified that they do not want to return to the previous regime where communications satellites were licensed by the State Department. They said it was a "bad idea." DOD testified in the Governmental Affairs Committee yesterday that it thinks this new regime actually gives DOD more authority over Commerce licensing than the previous regime, because DOD still has an equal voice but it now sees many more licenses.

Last month, I wrote to the Department of Defense and the Department of State to get answers to very specific questions about how the current regime is working. I asked DOD and State if they actually supported all of the satellite export licenses that have been issued by Commerce; they said they did. I asked DOD and State if they actually supported the 1992 and 1996 transfers of Jurisdiction over commercial satellites from the Munitions List to the Commerce Control List; they said they did. I'd like their letters to be made part of the record today, as well.

GAO testified before the Intelligence Committee that it can't draw a conclusion on whether this current regime is adequate with respect to national security, because it hasn't reviewed it in practice. It has been tasked by the Intelligence Committee to do so and report back. I suggest this committee join the Intelligence Committee in that request.

We've also been reminded over the past few months that Congress has a very prominent role to play in overseeing the execution of our export control policy, and that despite numerous opportunities to act, we haven't. We receive 30 days' notice of every export license for an item on the Munitions List; 30 days' notice of every decision to transfer items from the Munitions List to the Commerce Control List; and timely notice of every waiver decision by the President with respect to exports to China. So far, we haven't taken any action with respect to any of these notices. We haven't blocked one satellite export to China, despite notices of 20 waivers by Presidents Bush and Clinton.

Mr. Chairman, we all want to make sure that our export control system works. To do that, we need to get all the relevant facts and place them in their proper context. These issues are complex and technical. Our current export control process-as it should-involves a number of government agencies, and it is a challenge to understand all the pieces of this puzzle and to get a clear understanding of the strengths and weaknesses of the system.

For example, one issue covered in today's prepared testimony is that of exports of so-called supercomputers or high performance computers, those capable of very high speed operations. The Congress took up this question last year, and it was clear that there were many different views on the question of appropriate controls on high performance computer exports to some countries. The Senate voted by a wide margin (720927) last year not to impose new export controls on high performance computers, but then agreed in conference to require export controls to certain countries if there is objection from Defense, State, Commerce, Energy or ACDA to their export.

This committee can make a major contribution to a Congressional review. It is important that in the very near future we hear from the agencies themselves about their experiences with the current system and their recommendations for further improvements or changes, and I hope we'll have the opportunity to do that. I welcome today's witnesses and look forward to their testimony.

The White House
Washington, DC

June 22, 1998

The Honorable Carl Levin
United States Senate
Washington, DC.

Dear Senator Levin:

Thank you for your letter regarding the current process by which Presidential national interest waivers are granted for the launch of U.S.-manufactured satellites by China. The relevant waiver provision_section 902(b), P.L. 10109246_is part of the Tiananmen Square sanctions law.

The waiver process is the same now as it was prior to the 1996 jurisdictional transfer. Before the transfer, Commerce licensed some commercial satellites and some technical data, while State licensed the remaining commercial satellites and technical data, plus military satellites. Even for satellites licensed by commerce, a State license was often required for the associated transfer of technical data. Regardless of which agency had licensing jurisdiction, that agency was responsible for obtaining interagency concurrence on the license before recommending that the President issue a national interest waiver to allow the license to be issued. Thus, the National Security Council staff did not process a waiver recommendation until Defense and State had reviewed the underlying license on national security grounds.

This process has not changed since the 1996 jurisdiction transfer. As before, waiver recommendations may come from State or from Commerce (depending on which receives the first license application for the particular project). As before, the underlying license has been reviewed by Defense and State to address national security concerns before the waiver recommendation reaches the National Security Council staff, The 1998 Loral waiver, for example, was recommended by State because the company first sought a State license for the transfer of technical data, and that license application was thoroughly reviewed by Defense and State before the waiver was recommended.

Once the waiver recommendation reaches the National security Council staff, the process followed for granting the waiver is the same regardless of which agency recommended the waiver, State or Commerce. The ``national interest'' waiver standard requires that the President take into account a broad range of interests. The most important interest is U.S. national security. The National Security council staff confirms that these interests have been addressed in the course of Defense and State review of the license application. This includes consideration of how the proposed satellite export will complement our ongoing efforts to encourage more responsible Chinese nonproliferation behavior. The President also considers foreign policy interests affected by the satellite project, such as promoting more open lines of communication to the Chinese people and advancing our policy of engagement with China. Finally, the U.S. economic interest in the project is considered_for example, whether granting the waiver will support the competitiveness of the U.S. commercial satellite and telecommunications industries.

Please let me know if I can be of additional assistance as you review this issue.

Sincerely,

Samuel R. Berger,
Assistant to the President for National Security Affairs

Defense Technology Security Administration
400 Army Navy Drive, Suite 300
Arlington, VA

June 17, 1998

Hon. Carl Levin
Ranking Minority Member
Subcommittee on International Security
Proliferation, and Federal Services
Committee on Governmental Affairs
United States Senate
Washington, DC.

Dear Senator Levin:

I am responding to your letter of June 3, 1998, requesting information regarding DOD's role in the review of commercial communications satellite exports to China. My answers below are keyed to the specific questions in your letter.

Question:

(1) For each of the export licenses issued by the Bush and Clinton administrations permitting Chinese launches of U.S. built satellites or satellite parts, including the 1998 export licenses for the Loral-built Chinasat-8 satellite, did the Department of Defense:

(a) have an adequate opportunity to review national security concerns prior to approval of the license and ensure the inclusion of appropriate technology security safeguards in the proposed license?

(b) determine that the proposed export license would be consistent with the National security of the United States?

Answer: For those license requests for U.S. built satellites or satellite parts referred to the Department of Defense for review by the State and Commerce Departments since 1990, DOD has had an adequate opportunity to provide recommendations regarding whether the license would be consistent with U.S. national security, whether the license should be approved or not, and whether the license should include safeguards and other conditions. While we are still reviewing relevant records, we are not aware of any license having been Issued since 1990 without DOD concurrence. However, the license record will show at least one case where DOD had recommended against export of some satellite parts for which Commerce ultimately issued a license. In this instance, senior DTSA officials resolved the objection satisfactorily with Commerce officials and it was approved with DOD's concurrence. The record of DOD's objection was apparently not changed to reflect this outcome, As for the 1999 license requests for the export of the Loral-built Chinasat-8 satellite, DOD conducted a thorough review and recommended approval on all associated licenses referred to DOD by the State and Commerce Departments. Our recommendation was subject to the application of safeguards and other conditions including requirements for DOD monitoring of the satellite launch and associated technical meetings, and DOD review of technical data prior to its transfer to China.

Question:

(2) With respect to the 1998 export licenses for the Loral-built Chinasat-8 satellite, was the Department of Defense aware at the time it was reviewing the proposed license that Loral was under criminal investigation for participating in a post-launch analysis of a failed 1996 launch?

Answer: DOD was aware of these allegations at the time it was asked to review the export license applications for the 1998 launch of Loral's Chinasat-8 satellite. Those applications were reviewed carefully taking into account all the relevant information available to DOD at that time. DOD's decision to recommend approval of those licenses was based on the facts of those particular cases and on the specific safeguards required by the licenses.

Question:

(3) With respect to each transfer by the Bush and Clinton administrations of commercial satellite technology items from the State Department's Munitions List to the Commerce Department's Commerce Control List, did the Department of Defense:

(a) have an adequate opportunity to evaluate national security concerns prior to the transfer of the commercial satellite technology from one list to another?

(b) determine that the proposed transfer would be consistent with the National security of the United States?

Answer: DOD participated fully in the interagency reviews and supported the final decisions by the Bush administration in 1992 and the Clinton administration in 1996 to transfer commercial communications satellites from the State Department to Commerce Department jurisdiction.

Sincerely,

Dave Tarbell
Director.

United States Department of State
Washington, DC

June 17, 1998

Hon. Carl Levin
Subcommittee on International Security
Proliferation and Federal Services
United States Senate

Dear Senator Levin:

This letter is in response to your letter of June 3 to John Barker, in which you seek answers to questions about the government's approval of export licenses permitting Chinese launches of U.S. built commercial satellites.

(1) For each of the export licenses and waivers issued by the Bush and Clinton administrations permitting Chinese launches of U.S. built satellites or satellite parts, including the 1998 waiver and export licenses for the Loral-built Chinasat-8 satellite, did the Department of State:

(a) have an adequate opportunity to review each proposed license and related waiver prior to its issuance?

We are still reviewing our files. But based on our review to date, we find that the Department of State has had adequate opportunity to review each proposed license application and related waiver prior to its issuance.

(b) support approval of the proposed export license?

The Department of State supported approval of those export licenses that were referred to the Department of State and were ultimately approved, subject to conditions that we required be placed on the export licenses.

The Department of State supported issuance of each of the Presidential waivers that was ultimately approved.

(2) With respect to the 1998 waiver and export licenses for the Loral-built Chinasat-8 satellite, was the Department of State aware at the time it was reviewing the proposed waiver and licenses that Loral was under criminal investigation for participating in a post-launch analysis of a failed 1996 launch?

The Department of State was well aware of the Justice Department investigation. In the spring of 1996 the Department of State discovered potential violations by U.S. firms and requested the support of the Department of Justice and other U.S. law enforcement agencies in investigating the matter fully.

(a) have an adequate opportunity to evaluate foreign policy and other concerns prior to the transfer of the commercial satellite technology from one list to the other?

(b) support the proposed transfer from the Munitions list to the Commerce Control List?

There have been three decisions to remove commercial communications satellites and related items from the United States Munitions List (USML) to the CCL, in 1993, 1996 and 1997.

The State Department was fully involved in these processes and ultimately supported all three decisions, including the 1996 recommendation to the President. In this respect, a number of specific measures were developed to deal with the concerns identified by the Defense and State Departments regarding the transfer of jurisdiction. These additional measures, approved by the President, formed the basis of State Department concurrence in the transfer of jurisdiction.

We hope this information is useful to you. As always, please do not hesitate to contact us if you have further questions.

Sincerely,

Barbara Larkin
Assistant Secretary
Legislative Affairs