July 9th, 2006 10:20 EST
United States Proposes New Export Restrictions on Sales to China By Elizabeth Kelleher
Washington – The U.S. Commerce Department has proposed requiring U.S. companies that export high-tech goods to China to verify that their products will not aid China’s military.
David McCormick, under secretary of Commerce, said the proposed rule would achieve two objectives: “supporting American companies in competing in the vast Chinese market for civilian technology while preventing the export of technologies that contribute to China’s military modernization.”
The July 6 proposal would affect U.S. companies that export items from a list of 47 product classifications -- including certain software, computers, machine tools, hydraulic fluids and aircraft. Exporters of such items would be responsible for knowing their customers well enough to be sure that their product is not used in weapons. If companies cannot meet the standard, they would need a license to export these goods to China.
The proposal is meant to enhance security by extending a licensing process beyond items already closely controlled for national security reasons. The new list was developed by the departments of Commerce, State and Defense.
According to William Reinsch, president of the National Foreign Trade Council, the proposal is “overkill” and would be opposed by U.S. businesses, especially those in the aerospace and software industries. He said the compliance burden it would put on U.S. companies is such that they would need intelligence officers, rather than the compliance officers they now employ. The proposal specifies that U.S. exporters must know the end-use of their products, not just the use of an initial buyer.
But the proposal also promises a government-approved list of “validated end users” -- Chinese companies that have the confidence of the U.S. government. Any exporter selling to a company from that group would not require a license to do so. Chinese companies on the list would allow U.S. officials access to their facilities for inspection purposes.
“As [Chinese] companies see benefits of this, more end-users will want to be included, giving us greater transparency into these companies. At the end of the day, that gives us confidence and allows U.S. companies to export more," said Mark Foulon, deputy under secretary of Commerce for Industry and Security.
Foulon said that some exporters worry that anything that ends up in a Chinese soldier’s hands would be encumbered by the licensing process. "There is a perception by some that fountain pens and uniform buttons would be covered by this; that's not the case," he said. The military proposal covers a targeted list of technologies that, while currently unrestricted, he said, have the potential to materially enhance China's military capabilities.
Reinsch said that U.S. businesses fear losing sales if the proposal is adopted. “The Europeans and Japan are going to go right ahead,” he said, referring to those countries’ sales of similar products, which he said will not have to meet the same end-use restrictions.
The Department of Comment will accept public comments on the proposal until November 3. The department must consider those comments before issuing a final rule and that final rule might vary from the proposal based on information submitted in comments.
The full text of the proposed rule is available on the Government Printing Office Web site.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)