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05.10

Technology Export Controls Revisited

By Martin M. Sokoloski and Tom Tierney

Technology export controls continue to be vital to U.S. security and competitiveness, ^[i] but also challenge the ability of industry, laboratories and academia to interact internationally. With limited exception, the transfer of a technology, computer code or even intangible information to a foreign destination or to a foreigner on U.S. soil requires an approved export license. Traveling internationally with software or technical data on a laptop can even require a license. Virtually all technology exports require approval from one or more of over a dozen U.S. Departments and Agencies that have jurisdiction over these licensing processes.  Obtaining a license can be time-consuming, confusing, costly and frustrating, because of the complexity of and variations in the regulations across this diverse set of authorities.

Technology commodities that have both commercial and military applications, otherwise known as dual-use technologies, are primarily regulated under the Export Administration Regulation (EAR) which is administered by Department of Commerce’s Bureau of Industry and Security (BIS). ^[ii] Whereas, commodities specifically designed to meet military requirements or for military purposes are primarily regulated under the International Traffic in Arms Regulations (ITAR) through the Arms Export Control Act (AECA), which is administered by the State Department’s Directorate of Defense Trade Controls (DDTC). ^[iii] 

In general, only defense articles that do not have “predominant civil applications,” or a performance-equivalent to civilian commodities are covered by ITAR; however, there are several exceptions required by Congress due to military or political sensitivities. For example, in 1999, U.S. Congress transferred export licensing authority of satellites and dual-use satellite technologies from the EAR to ITAR. ^[iv]

Dual-use technologies were placed under EAR and Department of Commerce, because the government recognized the need for an industry advocate to promote and encourage exports when it is not contrary to U.S. interests or security.  Nevertheless, evidence shows that State also promotes exports as the vast majority of ITAR licenses are approved, just as with EAR licenses. In fact, some research institutions have never had an export license request denied. The extraordinarily low denial rate for all export regulations makes the licensing process appear more as a “notice of intent” process to export a technology.

Today, commercial products such as space instrumentation and components, spacecraft antennas and specialized GPS receivers, radiation-hardened electronics, communications equipment, computer equipment and software, and encryption technology that were initially developed for military applications are included among the U.S. Munitions List (USML) and therefore regulated under ITAR. ^[v] 

Any person or company who intends to export or to temporarily import a defense article, defense service, or technical data must submit an appropriate license request to obtain prior approval from DDTC. In most cases, the person or company first must be registered with DDTC before a license can be considered. ^[vi]

U.S. persons, companies or organizations face heavy penalties if they provide access to ITAR-listed defense articles, services or technical data to foreign (non-U.S.) persons who are not permanent resident aliens without prior authorization or an authorized exemption. The Assistant Secretary for Political-Military Affairs imposes civil and criminal penalties for willful violations of ITAR, including fines of up to $1,000,000 or imprisonment for not more than ten years, or both, for each violation.

The license applications for ITAR and EAR are reviewed using an interagency process involving multiple Departments and Agencies; however, the submitter has the responsibility for identifying the technology’s category and regulatory jurisdiction. Even systems that are designed for civilian purposes may be regulated under ITAR if its subcomponents are built to meet military standards (MIL-requirements). 

The DDTC may require a Consent Agreement, under which the company is required to institute enhanced compliance measures which may include appointment of a Special Compliance Officer (SCO), institution of a policy of denial, debarment, conduct of comprehensive audits, implementation of a technology security plan, or institution of a "cradle-to-grave" export tracking system. Each Consent Agreement is tailored to the specifics of the cases of the export violations, the company’s cooperativeness in resolving the case, and the level of compliance measures already in place at the company at the time when the Consent Agreement enters into force. ^[vii] These penalties can be ominous for persons or companies exporting commodities that are on the USML.  A classic example occurred as a result after the failed launch of Intelsat 798 satellite aboard a Chinese launch vehicle.  The Department of State charged Space Systems, Loral with violating the ITAR, resulting in stringent controls on technology associated with satellites and launch vehicles.

The 2008 conviction of 71-year-old University of Tennessee Professor Emeritus J. Reece Roth has terrified U.S. universities, laboratories and industry of the potential penalties that blatant disregard of export controls can bring. Roth was a leading researcher in atmospheric glow discharge plasmas for aircraft and space propulsion. He allowed Chinese and Iranian nationals to work unrestricted in his laboratory even after being warned by his Department of Defense sponsor that this research would be export controlled. ^[viii] Professor Roth and his company, Atmospheric Glow Technologies, Inc. (AGT), were found guilty of 15 counts of unlawfully exporting defense technologies to foreign citizens without a license. As a result, Roth and a co-worker were sentenced to 4 years and 14 months, respectively in a federal penitentiary. Furthermore, Atmospheric Glow Technologies is now out-of-business, but could have been fined up to $3.75 million along with additional penalties.

Universities and industry use this case as a cautionary tale of the steep penalties export violations can bring. With an increasing percentage of foreigners in physical sciences and engineering, many universities strongly discourage any research that is not covered by the fundamental research exclusion. Stanford President John L. Hennessey reported to the House Foreign Affairs Committee that university faculty would rather decline grants than restrict access to information in their laboratories.

The requirement to balance national security with economic competitiveness interests is challenging to meet. Unfortunately, the push and pull of promoting commercial interests versus protecting information that could proliferate sensitive defense technology to foreign adversaries is revealing the weaknesses in the current ITAR. ^[ix]

The ITAR was designed for the Cold War era, where our adversaries were easily identifiable and the U.S. dominated science, technology and engineering enterprises. However, international threats have changed, globalization has increased the pool of commodity suppliers, and science, engineering and technology discoveries are made worldwide. Today, U.S. security is challenged by both states and non-state actors alike and advanced technologies are available from foreign vendors. In a 2009 report to Congress, the Office of the Director for National Intelligence stated, “We also see … countries [to include Iran and Pakistan] that previously imported weapons and technologies begin indigenous production and export those systems.” ^[x]

As currently structured, the current system of export controls is rapidly becoming obsolete. The regulation is complicated, time-consuming and often mandates unilateral restrictions on the flow of commercially relevant science, technology, engineering systems and information in areas already understood by U.S. competitors and adversaries. The incompatibility of the ITAR system with the rapidly-advancing global marketplace results in inconsistent interpretations of license requests and enforcement of violations.

Universities and industry cite examples of lost business and collaborations due to the difficulty of obtaining licenses for technologies that are readily available from foreign sources. In some cases, foreign corporations are “designing out” U.S. dependent technologies that fall under ITAR restrictions. In other cases, U.S. corporations are moving their research and development offices to countries where export restrictions on their technologies are absent. Instead of protecting critical technologies from export, vague technology descriptions in the regulated-export listings result in unintentional regulation of large technology markets.

The duration of the licensing process varies dramatically from weeks to months depending upon the technology’s end user. For instance, in a 2006 survey, 82 percent of responding American companies reported that average processing times for export licenses increased since 2004. ^[xi]  In 2005, Northrop Grumman reported an average 57 days to receive an ITAR license.

The overhead associated with preparing, filing and monitoring export licenses is costly as well. For example, Lockheed Martin employs more than 220 staff dedicated to preparing more than 2,000 export control license applications annually. ^[xii]

Former National Security Advisor Brent Scowcroft and Lockheed-Martin CEO Norm Augustine co-chaired a National Academies (NA) committee which produced an alarming report, “Beyond ‘Fortress America’: National Security Controls on Science^[xiii] and Technology in a Globalized World.”  The report describes the negative impact export controls is having upon U.S. commercial and technical competitiveness. The NA report's preface states, "The national security controls that regulate access to and export of science and technology are broken. As currently structured, many of these controls undermine our national and homeland security and stifle American engagement in the global economy, and in science and technology. Fixing these controls does not mean putting an end to them, but implementing reforms based on the realities of the risks and opportunities of today's threats to the nation." ^[xiv]

Honorable Scowcroft was later quoted as saying: "[The United States] needs to change to a philosophy that everything is open and restricted only when it is demonstrated that it needs to be."  This philosophy is consistent with National Security Decision Directive 189 (NSDD-189) ordered by President Reagan ^[xv], which states the “where the national security requires control, the mechanism for control of information generated during federally-funded fundamental research in science, technology and engineering at colleges, universities and laboratories is classification.”

Fundamental Research was subsequently defined in the EAR as including basic and applied research in science and engineering whose results “ordinarily are published and shared broadly within the scientific community.” Commerce does not subject fundamental research to regulation when the researchers intend for the product of the research to be published or shared broadly with the scientific community. This reduces the impact of the regulation on academia and some national laboratories, and occasionally affects industry as well.

In contrast, the ITAR does not automatically exempt technologies from regulation with an “intent to publish.” Some academic institutions, industrial laboratories, and national laboratories that perform both fundamental and defense research are considered “non-exempt” regardless of the eventual intent of the research. This alternate interpretation by ITAR has resulted in a significant amount of criticism by the academic community to the extent that many are strongly discouraging defense-supporting research on their campuses to preserve an  academic freedom environment.

A potential solution for this problem is to regulate fewer technologies more efficiently with improved enforcement. Former Lockheed-Martin CEO Norman Augustine sums this up well by saying the export control system should be redesigned such that it “build[s] higher fences around smaller fields.” Export controls remain an important tool for preserving national security and to meet our nonproliferation obligations under multilateral agreements like the Nuclear Suppliers Group and the Missile Technology Control Regime. Technologies that can pose grave danger to the United States are what the controls should protect.

The problem is the system regulates too many technologies inefficiently and with a net negative effect. For example, ITAR creates a “virtual wall” around the United States by treating all space technology as though they are all weapons. “Space capabilities in other parts of the world now come close to matching— in some cases, maybe even exceeding — American space capabilities.” ^[xvi]

The process of updating the USML by adding and removing relevant technologies that are readily available from foreign systems is bureaucratic and lengthy.  As currently implemented, the ITAR no longer slows the rise of foreign space industries because comparable or more advanced technologies are available from other sources. The continued decrease in available U.S. launch platforms and the requirements to use foreign launch systems places the current ITAR in conflict with U.S. national space policy, which encourages international cooperation on mutually beneficial space activities.   

IEEE-USA's Committee on Transportation and Aerospace Policy delivered letters to the Secretary of State, the Director of the Office of Science and Technology Policy, and even to President Bush requesting revision of the export controls policy. IEEE members in the U.S. Space Industry cite the outdated policies as contributing to losing shares in the international market.

The nation’s advanced technology and manufacturing sector is at risk of losing its ability to compete in global competitive markets. The U.S. export controls policy must be modernized, taking into account the growing globalization of economics and technology development. In a world where more advanced technical degrees are being obtained overseas and the U.S. technical workforce is  shrinking, there’s an exponentially-increasing need for foreign expertise in U.S. businesses, universities and laboratories. International cooperation and collaboration is a growing requirement in technology industry, academia and defense.

To many, the space industry is a litmus-test for U.S. competitiveness in research, technology and engineering. The rest of the world is rapidly acquiring equivalent or more advanced technologies, in part due to the United State's inability to obtain the best and brightest talent, collaborate globally and promote its innovations to emerging markets. The outdated export control system is contributing to the decline in the U.S. space industry companies by artificially slowing interactions for both domestic and foreign markets

Speaking at a recent the U.S. Export – Import Bank (Ex-Im Bank) conference in Washington, President Obama stressed the need to reform the export regulations to boost U.S. exports without sacrificing national security saying, “What we want to do is concentrate our efforts on enforcing controls on the export of our most critical technologies, making American safer while enhancing the competitiveness of key American industries.”

IEEE-USA has recommended that the export control process be restructured within the federal government to balance economic interests against the inherent risks associated with military technologies. The U.S. government needs to enable instead of hinder U.S. economic competitiveness by offering more efficient export licensing systems based upon protecting only those critical technologies that are critical to national security. ^[xvii]

Ensuring the scientific and technological competitiveness of the United States by adhering to and preserving the fundamental research exclusion as defined by NSDD-189 is a prerequisite for both national security and economic prosperity. ^[xviii] In addition, under the Arms Export Control Act and the Export Administration Act, expert authorities should be directed to administer the regulations. Subject matter expertise from industry, academia and the government must be involved in the process of identifying the technologies that require regulation and removing technologies that are available in the open market. Further simplification of the process should include identifying a single regulatory authority for all export licensing and enforcement. Finally, the restructured export control regulation should mandate that this federal organization utilize sufficient and appropriate scientific, technical and engineering expertise in concert with national security intelligence and analysis to be able to understand the implications of the exports they are regulating.

In addition to these IEEE-USA recommendations, the National Academies also recommends the creation of two new entities: (1) a Coordinating Center for Export Controls, which would coordinate interactions with businesses or universities seeking export licenses, and manage agency processes with respect to granting or denial of export licenses; and (2) an Export License Appeals Panel, comprised of active or retired judges, which would hear disputes on licensing decisions and "sunset" requirements. In addition, these two new entities are to be established as soon as possible through a presidential executive order shortly after the new Administration takes office. ^[xix]

End Notes

[i] See Today’s Engineer, March 2008, “Technology Export Controls — Protection or Bureaucracy?” By George McClure

[ii] Export Administration Regulation, 15 Code of Federal Regulation Part 730.

[iii] International Traffic in Arms Regulations (ITAR), Official Version, published 1 April 2007, U.S. Department of State, Directorate of Defense Trade Controls, Available www.pmddtc.state.gov/official_itar_and_amendments.htm.

[iv] The Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, Pub. L. No. 105-251, 112 Stat. 2267, 10 U.S.C. § 7420 reversed the November 1990 move of dual-use satellite technologies from ITAR to EAR.

[v] U.S. Munition List is covered under section 38 of the Arms Export Control Act (22 U.S.C. 2778).

[vi] For instance see http://pmddtc.state.gov/licensing/index.html. An exemption is present for U.S. Government personnel or people and companies that only produce unclassified data, articles regulated under the Atomic Energy Act, or technologies for experimental or scientific research and development, 

[vii] See http://pmddtc.state.gov/compliance/consent_agreements.html

[viii] On September 3, 2008 Prof. Roth was convicted on violating the Arms Export Control Act (“AECA”), 22 U.S.C. § 2778 by a U.S. District Court jury in Tennessee’s Eastern District.

[ix] A list of items subject to ITAR can be found at ITAR, Part 121-The United States Munitions List, Federation of American Scientists, Available www.fas.org/spp/starwars/offdocs/itar/p121.htm.

[x] Unclassified Report to Congress on the Acquisition of Technology Related to Weapons of Mass Destruction and Advanced Conventional Munitions, by Deputy Director for National Intelligence for Analysis, 2009.

[xi] S. Weinberger, “Industry, Government Make Renewed Push to Change U.S. Export Control Regime,” Aviation Week and Space Technology, 17 July 2006, Available www.aviationweek.com/aw/generic/story_channel.jsp?channel=defense&id=news/aw071706p1.xml. (Includes results of a survey of 44 aerospace and defense companies conducted by Booz Allen Hamilton.).

[xii] Ibid

[xiii] Beyond ‘Fortress America’: National Security Controls on Science and Technology in a Globalized World, National Academies Press, 2009

[xiv] Ibid, page ii.

[xv] National Policy on the Transfer of Scientific, Technical, and Engineering Information, National Security Decision Directive 189 (Sept. 21, 1998)

[xvi] CSIS Center for Strategic and International Studies, “Foreign Policy Opportunities for NASA” By Vincent G. Sabathier & Ashley Bander, Mar 9, 2009

[xvii]  “Beyond "Fortress America" National Security Controls on Science and Technology in a Globalized World”, Committee on Science, Security, and Prosperity; Committee on Scientific Communication and National Security; National Research Council, National Academies Press, 2009, p 6

[xviii] IBID, p 10

[xix] IBID  p 6

Martin M. Sokoloski, PhD, is an IEEE Senior Member and 2004 IEEE Engineering and Diplomacy Fellow. He is chair of IEEE-USA’s Research & Development Policy Committee and chaired the 2009 Workshop on Science, Technology, Engineering & Mathematics (STEM) Enterprise: Measures of Innovation and Competiveness.

Tom Tierney, PhD, is an IEEE Senior Member and is Vice-chair of the IEEE Los Alamos Northern New Mexico Section. He was the 2009 IEEE Engineering and Diplomacy Fellow.

The opinions presented in this article are the author’s [TT] alone and do not necessarily represent those of Los Alamos National Laboratory, the U.S. Department of Energy, or any other U.S. government department or agency.

Comments may be submitted to todaysengineer@ieee.org.