[Senate Hearing 106-349]
[From the U.S. Government Publishing Office]
S. Hrg. 106-349
DUAL-USE AND MUNITIONS LIST EXPORT CONTROL PROCESSES AND IMPLEMENTATION
AT THE DEPARTMENT OF ENERGY
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HEARING
BEFORE THE
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
JUNE 10, 1999
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
59-453cc WASHINGTON : 2000
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
U.S. Government Printing Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
Hannah S. Sistare, Staff Director and Counsel
Christopher A. Ford, Chief Investigative Counsel
Curtis M. Silvers, Professional Staff Member
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Laurie Rubenstein, Minority Chief Counsel
Darla D. Cassell, Administrative Clerk
C O N T E N T S
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Opening statements:
Page
Senator Thompson............................................. 1
Senator Lieberman............................................ 2
Senator Akaka................................................ 16
Senator Domenici............................................. 22
Witness
Hon. Gregory H. Friedman, Inspector General, Department of
Energy, accompanied by Sandra L. Schneider, Assistant Inspector
General for Inspections, Department of Energy, and Alfred K.
Walter, Office of the Inspector General, Department of Energy
Testimony.................................................... 4
Prepared statement........................................... 29
Appendix
Letter from Chairman Thompson, dated Aug. 26, 1998, sent to six
agencies....................................................... 25
``The Department of Energy's Export Licensing Process for Dual-
Use and Munitions Commodities,'' Inspection Report, Department
of Energy, Office of Inspector General, Office of Inspections,
dated May 1999, submitted by Hon. Gregory H. Friedman,
Inspector General, Department of Energy........................ 43
Memo for the Secretary, Department of Energy, from Hon. Gregory
H. Friedman, Inspector General, Department of Energy, dated May
28, 1999....................................................... 98
Letter sent to Hon. Bill Richardson, Secretary, Department of
Energy, from Chairman Thompson and Senator Lieberman, dated
June 16, 1999, with answers to questions from the Department of
Energy......................................................... 100
Letter to Hon. Gregory H. Friedman, Inspector General, Department
of Energy, from Chairman Thompson, dated June 11, 1999,
containing questions for the record submitted by Senator Akaka. 103
Letter from Hon. Gregory H. Friedman, Inspector General,
Department of Energy, sent to Chairman Thompson, dated June 25,
1999, with answers to questions submitted by Senator Akaka..... 103
Letter from Ernie J. Montz, Under Secretary of Energy, Department
of Energy, sent to Chairman Thompson, dated July 14, 1999, with
supplemental answers to questions for the record submitted by
Senator Akaka, from the Export Control Task Force, Department
of Energy...................................................... 106
Letter sent to Hon. Gregory H. Friedman, Inspector General,
Department of Energy, from Chairman Thompson, dated July 9,
1999, with answers to questions from the Department of Energy.. 110
DUAL-USE AND MUNITIONS LIST EXPORT CONTROL PROCESSES AND IMPLEMENTATION
AT THE DEPARTMENT OF ENERGY
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THURSDAY, JUNE 10, 1999
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:05 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Fred
Thompson, Chairman of the Committee, presiding.
Present: Senators Thompson, Voinovich, Domenici, Lieberman,
and Akaka.
OPENING STATEMENT OF CHAIRMAN THOMPSON
Chairman Thompson. Let us come to order, please.
In June of last year, the Committee heard testimony
regarding a general breakdown of our licensing and control of
dual-use items. As a result, I requested an agency review last
August by the inspectors general of six different agencies. I
asked them to review the licensing processes for dual-use and
munitions commodities in an effort to determine what weaknesses
still exist and what efforts we make to assess other countries'
handling of these items after export. Dual-use items are those
that have both civilian and military applications and munitions
are those that have to do with strictly military applications.
This was an update of a similar report that was issued by
four of the agencies back in 1993, so this, in a real sense, is
an update of these conclusions. But, obviously, since that
request, a great deal of additional information about the
problems of our weapons labs with regard to controlling
information has surfaced.
The six agencies from whom I requested this report are the
Departments of Defense, Energy, Treasury, State, Commerce, and
the Central Intelligence Agency. Each of these agencies plays a
key role in controlling dual-use and munitions commodities.\1\
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\1\ Chairman Thompson's letter, sent to six agencies, dated Aug.
26, 1998, appears in the Appendix on page 25.
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The first agency to complete their work is the Department
of Energy, and because they have highlighted some particular
problems within our nuclear weapons labs, they are here today
to discuss their findings. We look forward to, of course,
having the other agencies in the not-too-distant future. We are
going to have individual reports from the inspectors general of
these various agencies and a comprehensive report that tries to
tie all of it together so we can look at it from a
comprehensive standpoint.
Senator Lieberman.
OPENING STATEMENT OF SENATOR LIEBERMAN
Senator Lieberman. Thanks, Mr. Chairman, for holding this
hearing today which addresses a topic of genuine urgency and
importance. The export control process is of vital interest to
our national security and economic strength and the complex and
serious nature of the issues demand the kind of careful and
reasoned examination of the process that you requested the
Inspectors General of Defense, Commerce, Treasury, State, CIA,
and Energy to undertake. So I appreciate the lead that you have
taken on this issue.
Let me also thank the witnesses from the DOE Inspector
General's office for their very good work in this report on
their agency's export control procedures. The report, I think,
will help place in context the important issues surrounding a
wide range of national security concerns related to American
trade and security policies, a matter that has obviously taken
on renewed importance in light of the recent release of the Cox
report, with its allegations that some American companies had
business dealings with the PRC that circumvented or violated
the current export control process.
What makes this such a difficult area to deal with, I
think, are the complex issues associated with export control.
In some cases, controlling high-tech equipment that has both
commercial and military application, so-called dual-use
commodities, may not be easy. High-performance computers
provide an excellent example of this, because technology that
is considered sensitive today, or maybe in that case has been
considered sensitive yesterday, may be in widespread commercial
use today. In other words, it is sometimes going to be
difficult to define precisely what technology should or should
not, or realistically can or cannot be adequately controlled.
A second difficulty in the crafting of our export control
policies is that the United States may not be the only country
that produces a specific controlled technology. As the authors
of the Cox report have reminded us, other nations around the
world may be quite willing to sell to countries that we would
consider a possible security threat. So if we undertake
unilateral action to place advanced technologies, such as
satellites or supercomputers, on our restricted lists, we may
in the end not prevent a potential adversary from obtaining it
elsewhere, and, of course, we may also be doing some damage to
American companies' international market positions. So the best
course, though clearly not an easy course, is to arrive at a
system of controls on a multilateral basis.
There is also a larger question, I think, that we will need
to consider as these hearings go on. The export control system
focuses on products, but there are overall industrial
capabilities in critical defense areas where we need to ensure
that our companies continue to dominate or retain significant
market share. So I think we have really got to think big about
export controls and look at this larger question of whether the
United States will retain industrial capability in the key
defense needed technologies.
The answer to the question will have an effect on whether
we have a fully robust American defense or whether parts of
that capacity emigrate abroad. In other words, we have a
problem here not just of individual products, but of overall
technologies.
That, of course, does not mean we should relax our export
controls. As the Cox report well reminded us, there is still a
great deal of technology in commercial use that can have
military applications and there are still many individuals and
nations who we obviously cannot count on to use that technology
in a manner that coincides with our national security
interests. We must take care not to unwittingly provide
technologies to nations which may use it to our detriment.
So I think our challenge here is to create an export
control regime that protects our national security interests
around the world while recognizing that we will harm our
national interest if we unduly curtail the legitimate export of
American technology for commercial use. By telling us how the
current process works, the information discussed in this report
that we will hear testimony on today and the additional
material we expect from the other inspectors general will
assist in framing these issues, and I think in this, Mr.
Chairman, this Committee has a unique opportunity under your
leadership to really provide some information and, hopefully,
reasoned judgment on these complicated issues.
Before closing, let me just make a few brief comments on
the specifics of the report that we are going to hear about
today.
Most importantly, I guess, I was heartened to read in it
that, on a whole, from the perspective of this review of the
DOE, the current control process is working. But, I must say, I
am also disappointed with some of the report's findings, most
significantly the apparent failure by DOE officials to follow
proper procedures regarding obtaining licenses for visiting
foreign scientists at our national labs. I understand that
there are now efforts to remedy this problem, but it is very
troubling to learn in this report, or to see here another
example of insufficient focus at the labs on the protection of
sensitive information. I will be interested in hearing from our
witnesses this morning how serious they believe this problem to
be and whether they have any reason to believe that sensitive
information was, in fact, improperly transferred to parties who
should not have seen it.
Mr. Chairman, once again, I thank you for holding this
hearing. I look forward this morning to a good, constructive
discussion with the witnesses and I thank them for doing a
first-rate job in their report.
Chairman Thompson. Thank you very much.
Senator Voinovich, did you have any opening comments?
Senator Voinovich. No. I am looking forward to hearing the
testimony.
Chairman Thompson. Thank you very much.
With us today is the Inspector General for the Department
of Energy, Gregory Friedman. Accompanying him are Sandra
Schneider and Alfred Walter, also from the Inspector General's
office.
Your report covers a number of areas and recommendations. I
was particularly interested in your findings regarding the
deemed export licensing process. I look forward to your
explaining to us today what your findings and recommendations
are, and particularly as they apply to scientists visiting our
labs from other countries, so we appreciate your being with us
today.
Mr. Friedman, would you like to make an opening statement?
I think we all read your report, but any summary statement you
might want to make, we would appreciate it.
TESTIMONY OF HON. GREGORY H. FRIEDMAN,\1\ INSPECTOR GENERAL,
DEPARTMENT OF ENERGY, ACCOMPANIED BY SANDRA L. SCHNEIDER,
ASSISTANT INSPECTOR GENERAL FOR INSPECTIONS, DEPARTMENT OF
ENERGY, AND ALFRED K. WALTER, OFFICE OF THE INSPECTOR GENERAL,
DEPARTMENT OF ENERGY
Mr. Friedman. Thank you, Mr. Chairman. Mr. Chairman and
Members of the Committee, I am pleased to be here today to
testify on the Office of Inspector General's review of the
Department of Energy's export licensing process for dual-use
and munitions commodities. This review was part of an
interagency effort by the Inspectors General of the Departments
of Commerce, Defense, Energy, State, and Treasury and the
Central Intelligence Agency. It was requested by the Chairman
of this Committee as a follow-up to a similar IG review in
1993.
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\1\ The prepared statement of Mr. Friedman appears in the Appendix
on page 29.
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I am joined today at the witness table by Sandra Schneider,
the Assistant Inspector General for Inspections, and Alfred
Walter, the Director of the Office of Management Operations of
the Office of Inspections. They will also be available to
respond to the Committee's questions concerning our review.
In short, we determined that the Department of Energy's
process for reviewing nuclear dual-use and munitions license
applications generally appeared adequate, subject to certain
concerns which I will discuss. Our review also identified
indicators of possible problems with the licensing of deemed
exports.
Certain commodities and technologies are designated as
dual-use. That is, they have both a civilian and military
application. Some are also designated as nuclear dual-use,
items controlled for nuclear nonproliferation purposes. For
example, carbon fibers are used in the manufacture of tennis
rackets, golf clubs, and fishing poles, yet they are also used
in the manufacture of centrifuges for uranium enrichment
activities. Another group of controlled commodities is
designated as munitions, which are goods and technologies that
have solely military uses, such as high explosives.
The Nuclear Transfer and Supplier Policy Division of the
Office of Nonproliferation and National Security is responsible
for reviewing export license applications and recommending to
the Departments of Commerce or State either approval or
disapproval of an application. Procedures for processing dual-
use license applications submitted to the Department of
Commerce are clearly articulated in relevant regulations.
However, there is no equivalent process for reviewing munitions
cases referred by the State Department.
As part of the interagency review, the Department of
Commerce provided a statistically-based sample of 60 export
license applications that it had provided to the Department of
Energy in the first 6 months of 1998. We determined that all of
the 60 cases in the sample were appropriately referred by the
Department of Commerce. Our analysis of the 60 cases disclosed
that the Proliferation Information Network System, commonly
referred to as PINS, contained the required records concerning
the recommendations and decisions on the 60 cases. The data in
PINS was appropriately secured. PINS provided an adequate audit
trail. The Department of Energy analysts were provided an
adequate level of training. The escalation process for
resolving agency disagreements regarding approval or
disapproval of specific license applications appeared
satisfactory, and there was no evidence that the Department of
Energy analysts were being pressured improperly regarding their
recommendations.
We also reviewed whether the Department of Commerce was
appropriately referring cases to the Department of Energy
through an analysis of an additional random sample of 60 cases
provided by the Department of Commerce not previously referred
to the Department of Energy. Of the 60 cases not previously
referred, a Nuclear Transfer and Supplier Policy Division
analyst concluded that one case should have been referred,
based on the involvement of a nuclear end user for the
commodity. However, the Department of Commerce maintains that
the license application was not required, therefore, neither
was a referral.
The Department of Energy has delegated to the Department of
Commerce the authority to process export licenses for certain
commodities without referring them to the Department of Energy.
Based on the Department of Energy's review of a sample of the
delegated cases, the Department of Energy officials determined
that approximately 1 percent should have been referred but were
not. The Department of Energy officials plan to rescind the
delegations of authority to the Department of Commerce and
determine whether they should be continued.
The international traffic in arms regulations implemented
by the State Department include the U.S. munitions list, which
identifies munitions commodities that are subject to export
controls. These items include those used in the design,
development, or fabrication of nuclear weapons or nuclear
explosive devices. The regulations do not require the State
Department to refer license applications for munitions
commodities to other agencies for review, and there is no
formalized system for escalating and resolving differences
among agencies.
As a result, the Department of Energy's role in reviewing
munitions license applications is not clear. Historically, the
State Department has received few requests for export of
nuclear-related commodities but routinely refers any such
applications to the Department of Energy for review. The
Department of Energy handles munitions license applications in
the same manner as dual-use applications referred from the
Department of Commerce.
In our 1993 report on the Department of Energy's export
license process, it contained 11 recommendations for corrective
actions and some still need additional review and action. For
example, an assessment of the adequacy of the staffing level
for the Nuclear Transfer and Supplier Policy Division is
required.
Two other recommendations require the Department of Energy
to coordinate with the Department of Commerce to obtain
information regarding the shipment of commodities. The
remaining recommendation requires the Department of Energy to
coordinate with the State Department to obtain information
regarding whether a license application was approved by the
State Department for a munitions commodity and whether the
commodity was actually shipped. This type of information for
both Departments of Commerce and State would assist the
Department of Energy analysts in their review of license
applications for possible proliferation implications.
I would now like to address our concerns with regard to
deemed exports. During our review, there were indicators that
the Department of Energy laboratories were not seeking export
licenses for foreign nationals having access to certain
unclassified information. According to the Export
Administration Regulations, any release to a foreign national
of technology or software that is subject to those regulations
is, ``deemed to be an export'' to the home country of the
foreign national.
Our review included a relatively small judgmental sample of
foreign national assignees from China, India, Iran, Iraq, and
Russia who were involved for more than 30 days in unclassified
activities at four the Department of Energy laboratories. We
then identified several cases where an export license may have
been required because of the information being accessed or the
individual's employer. We found that laboratory guidance was
not clear. We believe this stems from the fact that the Export
Administration Regulations and internal the Department of
Energy guidelines do not clearly explain when a deemed export
license may be required.
We also found the laboratories we surveyed generally rely
on the hosts of the foreign national assignee to determine
whether there are export concerns. We found several hosts who
were not aware of or did not understand the requirements for
deemed export licenses and several hosts who did not appear to
exercise appropriately their host responsibilities. Our review
also disclosed that there is no organization within the
Department of Energy that has management responsibility for the
deemed export license process.
In response to our report and our recommendations, the
Department has told us that it is clarifying its policies and
has initiated a number of other corrective actions, including
the establishment by the Under Secretary of an export control
task force to review export control issues relating to the
Department of Energy facilities, including deemed exports.
Mr. Chairman, this concludes my testimony. My colleagues
and I would be pleased to answer any questions you might have.
Chairman Thompson. Thank you very much, Mr. Friedman, for a
good presentation and a good report. We thank you and your
entire staff for that.
As I said earlier, this is going to be the first of several
hearings on these subjects, and it is a subject that is going
to be with us for a while. It has become very high profile. It
is of obvious importance.
The dual-use commodities matter, of course, is regulated
primarily by the Export Administration Act. We are going to
hear a lot about that. The Export Administration Act of 1979
expired in 1994, and its policies have been continued pursuant
to executive order since that time, but Congress is going to
take up the matter of the Export Administration Act now for the
first time in a long time. There have been some amendments to
it, but, basically, the 1979 framework is pretty much what we
have been operating under. We are going to readdress that.
One of the things we are dealing with here today is the
body of rules and regulations that have been promulgated by the
Commerce Department pursuant to the Export Administration Act,
the Export Administration Regulations. So that is what we are
dealing with.
Here today, the Department of Energy primarily has to do
with nuclear-related dual-use items. These items are referred
to the Department of Energy by the Department of Commerce. I
think, as everyone knows now, the Department of Commerce pretty
much runs this show in terms of dual-use items and when matters
come in, they make a determination as to what should be handed
out to these other agencies. That is a gross
oversimplification, but that is kind of the way it works. We
are looking here at what is normally handed to the Department
of Energy, and that is nuclear-related dual-use items.
You mentioned some problems on the munitions side, and
those are points well taken, I think. But as far as I am
concerned, today, I want to talk primarily about the dual-use
part regulated by the Department of Commerce as opposed to the
munitions part that is handled primarily by the State
Department.
In your report, there is some good news, as Senator
Lieberman pointed out. The responses, the timely responses, the
training appears to be adequate. The escalation process as it
goes through the potential appeal process, that seems to be
working pretty well from the Department of Energy's standpoint.
We will get into perhaps a little bit later what still is left
over from the 1993 inquiry. As you know, in 1993, the
Inspectors General conducted a similar review, and you did make
some recommendations. One of the things we want to talk about
is the extent to which those recommendations have been
implemented. But it looks like, pretty much, most of them have.
There are still some lingering problems in some other areas.
One of the things you pointed out, of course, is the
problem with deemed exports, and this is one of those things,
of course, that makes your work so wonderful. Although lots of
times we think that we are trying to ask you to come up with
something that will, in effect, verify what we already believe,
quite often, you come up with something that has not occurred
to anybody. I do not know about anybody else, but I was not
aware of the deemed export problem at all.
You point out a problem here where foreign nationals are
visiting our laboratories. As you know, we have had a policy
now for some years, certainly in the 1990s, of pushing
visitation programs between our labs, labs in China, and labs
in Russia, and in connection with cooperative efforts in the
nonproliferation area, which, I guess, in the wrong hands can
turn to proliferation instead of nonproliferation.
But all that has been going on and you highlight a problem
where foreign nationals come and visit our labs and have access
to dual-use or munitions information. As you point out, under
the regulations, or under the law, we have all assumed that the
law says that when these people have this kind of access, it is
deemed to be an export. It is just like an export. I mean, you
are giving them the information, in effect, and if you have got
a problem with that, you have got just as big a problem with it
by showing it to someone, giving them access for a month,
maybe, or 2 months, as if you shipped it to them.
So that is the basis of the situation. As I understand it,
it is based on the nature of the information that they might be
exposed to and it is also based on their citizenship.
Obviously, some countries are more sensitive than others. It is
also based on, perhaps, their employer--that is, who the
foreign national might be working for.
My understanding is that your methodology was that you
looked at assignments, and the definition of assignments is
when the foreign national is, let us say, at a lab for more
than 30 days, is that correct?
Mr. Friedman. That is correct.
Chairman Thompson. Did you look at all assignments over a
period of time?
Mr. Friedman. No. We looked at a selected, small judgmental
sample.
Chairman Thompson. Do you know how many assignments there
have been over the last year or 2 years or any particular
period of time?
Mr. Friedman. Mr. Chairman, at the four labs that we looked
at, Sandia, Lawrence Livermore, Los Alamos, and Oak Ridge,
according to the information that was provided to us by the
Department, there were 3,100 assignments in 1998. But I want to
caution you and the other members of the Committee that we
think that number may not be accurate and we are working with
the Department to try to figure out what the right number is.
It is a significant number, and I also want to caution you that
a large percentage of those were people from non-sensitive
countries.
Chairman Thompson. Could you elaborate on that a little
further, as to why you think the information might be off and
in what direction and to what extent?
Mr. Friedman. Well, in the information that was provided to
us, there were anomalies in terms of two of the labs in that
the numbers are so low that it does not look reasonable. We
will be trying to clarify that with the Department. So,
therefore, we think the number may be understated.
Chairman Thompson. I see. There are also those that are
denominated as visitors, which, as I understand it, are those
who come for 30 days or less. You only looked at the
assignments and did not look at the visitors, is that correct?
Mr. Friedman. That is correct.
Chairman Thompson. Do you have any feel for how many
visitors there have been over this same period of time to these
four labs?
Mr. Friedman. I would ask that Ms. Schneider respond to
your question.
Ms. Schneider. The numbers that Mr. Friedman referenced----
Senator Lieberman. Ms. Schneider, would you take the
microphone and speak into it, please?
Ms. Schneider. I am sorry. The number that Mr. Friedman
references, the 3,200 number, is the best number that we have
been able to identify from the Department at this point in
time. However, they advise us that the laboratories may have
substantially higher numbers of visitors and assignees which
they have not been able to provide.
Chairman Thompson. I had 3,100. Is it 3,100 or 3,200?
Ms. Schneider. Actually, the number we got was closer to
3,200.
Mr. Friedman. Thirty-two-hundred.
Chairman Thompson. All right. Does that indicate both
assignments and visitors, or just assignments?
Mr. Friedman. No. Let me clarify. The visits, and I can
total them very quickly, it is 953 at Oak Ridge, 525 at
Lawrence Livermore, 88----
Chairman Thompson. A little bit slower. It is 953 at Oak
Ridge----
Mr. Friedman. Five-hundred-twenty-five at Lawrence
Livermore, 88 at Los Alamos, and 53 at Sandia.
Senator Lieberman. And what is the period of time there?
Mr. Friedman. In calendar year 1998.
Senator Lieberman. Ninety-eight?
Chairman Thompson. Are these assignments or visitors?
Mr. Friedman. Those are visits.
Chairman Thompson. Those are visits?
Mr. Friedman. Yes.
Chairman Thompson. What does that total to, do you know?
Mr. Friedman. About 1,600.
Chairman Thompson. About 1,700? You have 3,200 assignments,
with the caveats that you indicated, and about 1,700 visitors?
Mr. Friedman. Right.
Chairman Thompson. For the four labs.
Mr. Friedman. And I would attach the same caveat to the
visitors, as well.
Chairman Thompson. That same caveat, for 1998?
Mr. Friedman. Correct.
Chairman Thompson. All right. Is there any reason to
believe that the numbers have substantially increased or
decreased over the last few years, or would you think that
would be a static number?
Mr. Friedman. I really could not answer that.
Chairman Thompson. You do not know that? All right. That
gives us some sense of the level, and we might contrast that
with the number of--let us see. The deemed export problem is a
potential problem with visitors as well as assignments, perhaps
not as big a problem, but potentially, I suppose, it is still a
problem?
Mr. Friedman. That is one of the points we have made, is
that there is a lack of clarity in the procedures and the
processes that govern that, Mr. Chairman. One of the issues
that came up was there are people at the Department of Commerce
who apparently have informed people at the Department of Energy
that visitors, that is, people who are here 30 days or less,
are not subject to those same requirements, and we are not
positive that is the case. That is one of the issues that needs
to be clarified.
Chairman Thompson. Apparently in some people's mind, there
is some question as to whether people on assignment come under
the regulations.
Mr. Friedman. Given the lack of clarity of the policy, yes,
that is right.
Chairman Thompson. So it is all a little hazy?
Mr. Friedman. That is correct.
Chairman Thompson. But in terms of a potential problem, a
person there 30 days could be as much of a problem as a person
there 35 days?
Mr. Friedman. Absolutely.
Chairman Thompson. All right. So we are dealing with 4,900
or almost 5,000 assignments and visitors in 1998. How many
applications were there for deemed exports in 1998?
Mr. Friedman. The information we were provided is that
there were two applications.
Chairman Thompson. Two? I think that pretty much speaks for
itself.
Mr. Friedman. Mr. Chairman, let me be very clear about
that. The number of these individuals were from non-sensitive--
--
Chairman Thompson. I understand. Certainly, not all of them
are a problem, or I am assuming that most of them are going to
be people from countries that present less of an export-control
problem. These are rough numbers, we understand. But we do know
that there was in the neighborhood of 4,900 foreign nationals
visiting our labs under some kind of program in 1998 and there
were, apparently, two applications for deemed export licenses.
Now, the nature of the problem, of course, has to do with--
well, there are several elements to it, but one of them
certainly has to do with who is responsible. As you understand
it, from your inquiry, the host to the foreign national has
primarily been given the responsibility for complying with
deemed export rules. Is that also a matter that is in some
dispute, as to whether or not the host is the correct person to
make the initial determination as to whether a license is
needed, or is that pretty clear?
Mr. Friedman. It is clear at the laboratory level. However,
when you talk to the host, as our report points out, it is not
clear to too many of the hosts.
Chairman Thompson. So from a policy standpoint, as far as
the Department of Energy is concerned, it is clear.
Mr. Friedman. No. I do not believe it is codified in the
Department of Energy's policies, but at the labs we visited,
the hosts were the focal point and had responsibility in the
lab policies for submitting export license applications.
Chairman Thompson. All right. Taking it down to the
laboratory level, then, as far as the administration of the lab
is concerned, the people in charge would tell you that the
hosts make that determination?
Mr. Friedman. That is correct.
Chairman Thompson. All right. But what you are saying is
that when you get down and actually talk to the hosts it's a
bit different. Describe the hosts. Who is the host?
Mr. Friedman. The host is a laboratory employee who
invites, perhaps, a foreign national to visit him or her at the
laboratory to collaborate on some work that they may be doing.
Chairman Thompson. What level of employee do you have to be
in order to do this? I assume not any employee could invite a
foreign national.
Mr. Friedman. I really do not know the answer to that, Mr.
Chairman.
Chairman Thompson. All right. So what did you find when you
went into these labs and actually talked to these hosts in
terms of their carrying out this responsibility?
Mr. Friedman. A number of them, and the report gives the
specifics and Ms. Schneider can elaborate on this, but a number
of them at all the labs simply did not understand, did not
recognize, or did not realize that it was their responsibility
to make that kind of a determination.
Chairman Thompson. So they did not realize they were
supposed to be making that determination?
Mr. Friedman. That is correct. They were not educated, they
were not trained, and they did not seek guidance in these
cases.
Chairman Thompson. Were they familiar with the deemed
export concept?
Mr. Friedman. Many were not.
Chairman Thompson. They were not familiar with the concept
of a deemed export?
Mr. Friedman. I think that is correct.
Chairman Thompson. They did not know they were supposed to
be doing that sort of thing.
Mr. Friedman. That is correct.
Chairman Thompson. Then you pointed out that there was a
problem with the Export Administration regulation, actually,
that set this up. In looking at your report, as you say, ``A
reader could conclude from the way it is worded that an export
license is not required for research conducted by the
Department of Energy laboratories and federally funded research
and development centers. Virtually all of the Department of
Energy laboratories have been designated as these centers.
However, we conclude that a blanket exemption for work at these
centers was probably not intended.'' I think that is probably
an understatement. So, in other words, you could read this
regulation and potentially conclude that all labs were exempted
from this deemed export policy, even though I would assume, our
nuclear weapons laboratories would be the primary place that
you would want it to be applied.
Mr. Friedman. Precisely.
Chairman Thompson. That is a problem as far as the
regulation is concerned. Then you pointed out a problem as far
as the DOE order is concerned, and then the guidelines pursuant
to the order. Could you characterize the ambiguity there in
terms of guidance?
Mr. Friedman. They are largely silent on the question of
deemed exports.
Chairman Thompson. I notice there is one reference here
under the guidelines that says the private sector would need an
export license. The language in the guidelines could give the
impression that while the private sector would need an export
license, that the Department of Energy would not. So if you
talk about private-sector requirements, the implication might
be that it pertains only to private-sector and not to
government requirements.
Mr. Friedman. That is correct.
Chairman Thompson. Clearly, that is something that you
brought to the attention of the appropriate authorities at the
Department of Energy, and what has been their response to that?
Mr. Friedman. We brought this to the attention of the Under
Secretary in March. He was the Acting Deputy Secretary at the
time.
Senator Lieberman. Who was that?
Mr. Friedman. Dr. Moniz. He immediately created a task
force, which included the Offices of Intelligence,
Counterintelligence, General Counsel, and Defense Programs, and
they are attacking the problem as we speak.
Chairman Thompson. All right. There are several more
specifics I want to get into a little later, but I am going to
relent right now. Senator Lieberman?
Senator Lieberman. Thanks, Mr. Chairman. Let me just pursue
the question of deemed exports for a few moments more. With all
the concern lately about security at the DOE facilities, can
you determine if any sensitive information might have been
compromised by the apparent shortcomings in the deemed export
license process?
Mr. Friedman. We could not make that determination,
Senator, and frankly, it was not part of our task. I am not
sure we have the competence, to be honest with you. It requires
a very keen sense of end use, end users, home countries,
employers, and expertise that is really beyond us.
Senator Lieberman. I appreciate that. The numbers are so
startling that you have come up with. It looks like it is about
a total of 5,000 in 1998, the 3,200 assignees and about 1,700
visitors, and out of that total, only two licenses applied for.
It makes me concerned, obviously, about what might have been
compromised.
Am I correct in saying that, again, that these visiting
foreign scientists presumably were not gaining access to
information that was classified? Is that correct?
Mr. Friedman. The context in which we are presenting this
is that these were people who were here for unclassified visits
and had access to only unclassified functions, matters,
software, and technology. So we have no indication that they
had access to classified material.
Senator Lieberman. But, nonetheless, it has previously been
determined that even the unclassified information might be
sufficient to deem it an export and, therefore, require a
license?
Mr. Friedman. That is correct.
Senator Lieberman. Your report does not, and understandably
so, address the issue of whether American scientists traveling
abroad might require an export license under certain
circumstances, although, and as you follow the story unfolding
around DOE and the labs, it is easy to see why similar concerns
might be present for information that might be shared by DOE
scientists as they travel abroad. I wonder what policies, if
any, cover deemed exports by lab employees traveling overseas
in meeting with foreign nationals.
Mr. Friedman. Well, to be candid with you, Senator
Lieberman, we did not pursue that matter. Again, it went beyond
our charter in this particular review. But the general question
of deemed exports does apply to U.S. citizens traveling to a
number of foreign countries.
Senator Lieberman. So as you read the current state of law
and regulation, the deemed export license requirement covers
not just contacts here in the U.S. but for our scientists
traveling abroad?
Mr. Friedman. That is correct.
Senator Lieberman. That is something we may want to ask DOE
to look at more closely. Let me just ask you to flesh out a
little bit more, what is DOE now doing as far as you understand
to establish more control over this deemed export license
process?
Mr. Friedman. We understand that the Department and the
task force has been working with the Department of Commerce and
the Department of State to try to clarify the requirements. It
has been rewriting its own internal order to try to make it
more clear to everyone, both Feds and to the contractor
laboratory and personnel, what a deemed export is, when it is
required, and when an export license is required to be sought.
Those are the efforts that are now being undertaken.
Senator Lieberman. Would you judge them at this point to be
adequate or inadequate, or is it too early to say?
Mr. Friedman. Well, it is too early to say, but I must say,
Senator, that we are gratified by the reaction that has taken
place. It was very prompt. We met within a week after we had
first sent our memo to the Under Secretary with the task force,
so that we think is a prompt response.
Senator Lieberman. Do you think they are dealing also with
this question of the hosts and informing the hosts of their
responsibility under the----
Mr. Friedman. Yes.
Senator Lieberman. You do? OK. Let me turn to the
delegation of authority, which you have covered in the report,
certain categories of applications that the Department of
Energy has been allowing the Department of Commerce to handle
without referring to the Department of Energy. Apparently, this
procedure, which covers some 1,000 or 1,500 cases a year, is
now being reevaluated by the Department of Energy. I gather
that DOE analysts determined that 1 of the 60 randomly selected
non-referred cases examined by your office should have been
referred. Is that correct?
Mr. Friedman. That is correct.
Senator Lieberman. That was a situation involving the
provision of software, hardware, and a Fortran compiler to a
Russian nuclear power facility, which should have been
referred, according to DOE, because it involved a nuclear end
user, right?
Mr. Friedman. That is correct.
Senator Lieberman. How was this case resolved, to the best
of your knowledge?
Mr. Friedman. It has not been resolved.
Senator Lieberman. It has not?
Mr. Friedman. There is a difference between the Department
of Energy and the Department of Commerce. At least to the best
of my knowledge, at this point, it has not been resolved, and
it is one of the issues we are going to be talking to the task
force about.
Senator Lieberman. Good. Does this suggest larger concerns
that you have with the delegation of authority process?
Mr. Friedman. As we indicated, the Department itself
undertook a review of the cases that were subject to the
delegation and came up with roughly a 1 percent error rate.
Senator Lieberman. What prompted that reevaluation, as far
as you know?
Mr. Friedman. I am not sure I have that information right
now. I suspect they were concerned about the way the
delegations were being handled, as well.
Senator Lieberman. Go ahead.
Mr. Friedman. They came up with a 1 percent error rate, so
they are taking a closer look at the delegation to see if that
process is working properly or not.
Senator Lieberman. So it is as yet unresolved, but they are
continuing to work with the Department of Commerce on that?
Mr. Friedman. That is right.
Senator Lieberman. Let me ask you one or two questions
about the munitions exports and State Department procedures. I
gather that the State Department receives few requests for the
export of nuclear weapons or explosive devices as components
but refers certain of these cases to DOE and consults on
others. While the procedures for the Department of Commerce's
processing dual-use applications are clearly articulated in
regulations, no comparable procedures exist for reviewing these
munitions cases by the State Department.
Your report determined that, in fact, there was no process
in place, in contrast to the more formalized procedures on
dual-use applications, for the resolution of the interagency
disputes on munitions cases, and I wanted to ask you whether
you think that that has proved to be a problem, and if so, what
steps might be undertaken to improve the situation.
Mr. Friedman. At this point, Senator, we cannot point to a
problem. In all candor, this whole process is part of an
intricate system, of course, for ensuring national security,
and our concern is if there is a vulnerability in terms of the
ability to reconcile differences of recommendations or judgment
with regard to the Department of Energy or another department,
that there be a formal escalation process to resolve those
differences, as there is for dual-use commodities.
Senator Lieberman. I thank you for that. Let me ask you
just one or two final policy questions. Your examination of the
export control processes employed by DOE, based on that
examination and other relevant agencies, I wonder what
recommendations regarding some of the larger policies that
guide these decisions that you might have.
For instance, does the system we have in place, to the best
of your knowledge, appear to adequately assure that all
national security and commercial interests are taken into
account? Can you reach a judgment on that?
Mr. Friedman. Our overall judgment, in terms of the
evaluation process itself, is that it was adequate in virtually
all respects, so that we are comfortable with that, based on
the sampling that we have done.
Senator Lieberman. Do you have any knowledge from your own
experience--I know that COCOM expired and there are other
attempts at multilateral cooperation, but they are not, to my
knowledge or in my opinion, very successful--do you have any
judgment about the multilateral regimes with voluntary
restraints set by individual governments that are in effect
now, and do you have any thoughts about this dilemma that we
have that we can decide not to sell and we can protect our own
secrets, as it were, but other industrialized nations can go
ahead and effectively do business and proliferate?
Mr. Friedman. We really have not thought that through.
Senator Lieberman. OK. Thanks very much. It is a good
report, and thanks for your responses.
Chairman Thompson. Thank you. Senator Voinovich.
Senator Voinovich. We have various Committees in Congress
that are involved in this and there are two aspects of it. One
is that some things got out that should not have and people are
concerned about it. The other aspect is, what are we going to
do to tighten this up? I am interested in knowing, from your
observations, has everyone got the message? Are you satisfied
that the effort being made by the administration in terms of
dealing with this problem of tightening it up is adequate, and
if you do not think it is adequate, what other things do you
think they should be doing so they can come back to Congress in
a month or 2 months.
The point I am making is that there are a lot of people in
Congress that want to write an administrative policy that is
going to take care of the situation, and as a former mayor and
governor, I do not think that is the way to get the job done.
You have a problem, you go to the administration and you say it
is a problem. We know it is a problem. You know it is a
problem. What are you doing to solve it? Come back to us with
your recommendations.
From your perspective, do they get it and are they moving
forward with it and are we going to come up with something that
is really going to tighten this thing up so that we do not have
what we have had in the past?
Mr. Friedman. Senator, at this point, we are gratified with
the action that the Department has taken. It is our intent to
go back at some point in the future to take another look at
this issue, to make sure that the fix that has been implemented
is, in fact, addressing the issues. That is the only assurance
that I can give you at this point in time.
Senator Voinovich. The task force that is in place, is that
task force just in the Department of Energy, or is it involving
the other agencies?
Mr. Friedman. It is a Department of Energy task force, but
they are interacting and coordinating with State and Commerce
Departments and I am comfortable that they are doing the right
things at this point.
Senator Voinovich. Is there a facilitator or a process in
place to get everybody's input into this?
Mr. Friedman. The task force has the imprimatur of the
Under Secretary and certainly one of the leaders is a deputy
chief of staff, so I think it has the right people to get the
right people involved.
Senator Voinovich. In your testimony, on page 9, you note
that the Nuclear Transfer and Supplier Policy Division of the
Office of Nonproliferation and National Security may be
understaffed. How big a shortfall are you talking about?
Mr. Friedman. We did not do a formal staffing study, so I
cannot answer that question specifically. I think that is the
Department's responsibility because they have taken on a number
of additional responsibilities within that division and I think
they need to be adequately staffed to evaluate the numerous
export license applications that come in.
Senator Voinovich. Mr. Chairman, I would suggest that we
ask the question about what they are doing, if they have a
staff problem, what are they doing to remedy the problem there.
I would be interested in getting a report back on that.
You also note that the Department's intelligence
capabilities are not being fully utilized in the processing of
export cases. What is the Department doing to address that
situation?
Mr. Friedman. Actually, the situation, we understand, has
been largely remedied, with the advent of PDD-61, the
Presidential Decision Directive, as a result of which, the
Department has established the Offices of Intelligence and
Counterintelligence as separate stand-alone offices within the
Department. We think, in large measure, that issue has been
addressed.
Senator Voinovich. From your observations, we have, what,
5,000 visitors of one sort or another, and you say most of them
are from countries where we have not any problem, but is there
anyplace where, before somebody can become a host, that it has
to be approved by someone? Do you know?
Mr. Friedman. I am not here formally representing the
Department, but the Secretary, under his sweeping
reorganization, has established an Office of Foreign Visits and
Assignments Policy Office, and that is the first time that such
an office will have been established, as I understand it,
certainly in recent history, and they will be, as I understand
it, addressing the issues that you are referring to. So there
will be a centralized accountability office within the
Department to address those issues.
Senator Voinovich. Mr. Chairman, again, I think that it
would be interesting to get a report back from them on just
exactly who is going to do it, what the procedures are, and the
standards that they are going to set. Also, I think that they
should be recommending a whole new education policy where they
decide that somebody can be a host and what the
responsibilities are of that host.
Chairman Thompson. We will be expecting to hear from the
Department of Energy on that. Anything further?
Senator Voinovich. Nothing more.
Chairman Thompson. Senator Akaka.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Mr. Chairman. I have a
statement and I ask that it be placed in the record.
Chairman Thompson. It will be made a part of the record.
[The prepared statement of Senator Akaka follows:]
PREPARED STATEMENT OF SENATOR AKAKA
Mr. Chairman, I am pleased to join you in welcoming the witnesses
today from the Department of Energy's Office of the Inspector General
to discuss their report on ``Inspection of the Department of Energy's
Export Licensing Process or Dual-Use and Munitions Commodities.''
I thank you, Mr. Chairman, for requesting the Inspectors General of
the Departments of Energy, Defense, State, Commerce, Treasury and the
Central Intelligence Agency to conduct an expanded review of their
agency's export licensing processes.
This review ill flush out the distressing problems with our export
control licensing process raised by Dr. Peter Leitner, senior strategic
trade advisor with the Department of Defense's Agency of Defense Threat
Reduction, in his June 1998 testimony before this Committee.
It is important to note that the Inspector General's review of the
Department of Energy's export licensing process was relatively
positive. His recommendations for improving the transparency and
efficiency in the process were accepted by the Energy Department's
Nuclear Transfer and Supplier Policy Division.
The report criticizes the lack of procedures, or understanding of
the procedures, for licensing foreign nationals working at the national
weapons laboratories who may be exposed to controlled dual-use and
munitions technical data. This is referred to as a ``deemed export''
because the United States views the transfer of controlled technology
to a foreign national as an export to his or her home country. It is
very evident that the Department of Energy and the national weapons
laboratories do not understand how to determine what constitutes
controlled technical data for which an export license is necessary.
We cannot tell from the IG's report whether or not additional
losses of dual use and critical military technology occurred from the
failure to screen foreign visitors.
Rather than dwelling on the failures of the past, we need to focus
on improving the screening process. This hearing is an excellent first
step in that direction.
I am pleased, however, that the report concluded that licensing
analysts have not been forced to change their recommendations on
license applications as Dr. Leitner reported happened at the Defense
Department. I am also pleased to learn that DOE's computer system for
processing license applications was found to contain complete, accurate
and consistent information with Commerce's database with the minor
exception of a few cases, apparently caused by a glitch in the Commerce
Department's computer system.
There is larger issue at stake here: How do we maintain the free
flow of ideas needed to maintain our technical edge without sacrificing
our national security. In the area of exports, I hope this Committee
will examine even more closely how to maintain a choke-hold on critical
dual use exports in an environment of rapid technological revolution.
I welcome our witnesses once again and I thank them for taking the
time to testify before us this morning.
Senator Akaka. Mr. Chairman, I also want to add my welcome
to the panel this morning and to point out that I felt that the
Inspector General's review of the Department of Energy's export
licensing process was relatively positive. But there are
problems, and I want to mention that some of the problems with
DOE was because of the export licensing process. One problem
was a lack of clarity in what constitutes a deemed export and
confusion about who is responsible for determining when a
deemed export license is required. So one of my questions is,
who is responsible for determining when a deemed export license
is required? Is this DOE or the Department of Commerce, or DOE
in cooperation in the Department of Commerce?
Mr. Friedman. It is within the Department of Energy family,
Senator.
Senator Akaka. So within the Department of Energy?
Mr. Friedman. Yes.
Senator Akaka. So it is not done in cooperation with the
Department of Commerce?
Mr. Friedman. In terms of the determination that an
application needs to be submitted, it is the Department of
Energy responsibility.
Senator Akaka. How many deemed export licenses have been
granted for the lab-to-lab programs?
Mr. Friedman. I do not have that information, Senator.
Senator Akaka. Have any deemed export licenses been
requested for the U.S.-China lab-to-lab program, do you know?
Mr. Friedman. I do not have information to that
specificity.
Senator Akaka. Do you know whether any foreign students who
are attending U.S. universities working on lab-sponsored
programs have been included in this?
Mr. Friedman. I am afraid I am striking out, Senator. I do
not know the answer to that question, either. I apologize.
Senator Akaka. Very well. Mr. Chairman, thank you. I am
very interested in export licensing and I hope maybe we can
discuss this later. Thank you.
Chairman Thompson. Thank you. Thank you very much.
I was looking at some of the details of your report here.
At Los Alamos, they told you that they were allowing their
hosts to make the threshold deemed export determination, but
you say, however, 9 of the 14 hosts who were interviewed
contended that they were not responsible for making this
determination, right?
Mr. Friedman. That is correct.
Chairman Thompson. At Lawrence Livermore, they indicated
that hosts had received memoranda regarding their
responsibilities, but two of the eight hosts you interviewed
said they had never received any guidance on possible export
control issues relating to foreign nationals they were hosting,
correct?
Mr. Friedman. Correct.
Chairman Thompson. At Los Alamos, a security specialist
said the hosts were made aware of their responsibilities, but
only 7 of the 14 hosts that were interviewed said that they had
received guidance. At Oak Ridge, one Oak Ridge contractor said
that he was listed as the host of a Chinese national assignee
but that in reality, another Chinese national was the actual
host.
Mr. Friedman. Correct.
Chairman Thompson. So you had a Chinese national acting as
the host of another Chinese national?
Mr. Friedman. That is correct.
Chairman Thompson. Getting to these numbers, I think I can
see where you think you may have some under-reporting here. It
seems to me like that Lawrence Livermore, Los Alamos, and
Sandia should all be in the same ballpark. Is that kind of the
assumption that you would operate under?
Mr. Friedman. Yes, sir.
Chairman Thompson. And yet, Lawrence Livermore reports over
500 and Los Alamos and Sandia only reports 88 and 53.
Mr. Friedman. In fairness to the office that gave us this
information, they indicate that they are trying to improve the
quality of their data, if you will. They also indicate that
there may have been some direction from the Office of
Counterintelligence related to restricting the publication of
some of the information of the foreign nationals. So there may
be some reasons for these anomalies, Senator----
Chairman Thompson. That would be pretty ironic, would it
not? The information is so sensitive, you cannot give the
number of foreign nationals, but we have absolutely no clue as
to any deemed export policy and what the foreign nationals are
doing while they are there. How are we going to follow up on
those numbers? Are you going to follow up on that?
Mr. Friedman. We are going to follow up on the numbers,
yes.
Chairman Thompson. Let us know what you come up with. Oak
Ridge, for example, is a science lab. I can see why their
number of scientific visitors would be pretty high. Lawrence
Livermore might have a little less than that, substantially
less, really. But the reported figures from these other two, I
mean, clearly are low, and those are weapons facilities. We
need to know what the numbers are there. If they do not have
accurate numbers or cannot get their arms around their numbers,
as to just the gross numbers of foreign nationals coming there,
that is a hell of a problem in and of itself. So we will not
throw any more rocks until we know that it is justified, but
this is something on which we need some follow-up.
Another area, too. You talked about some areas where the
Department of Energy delegates its authority back to the
Department of Commerce, basically, when the commodity is not
intended for a nuclear end user. My concern there is all the
information that we have come across now shows that some of
these countries are extremely deceptive as to their end user
controls. They refuse to let us have any control over end
users, and some of our own manufacturers, or sellers, I think,
in this country have tacitly participated in such deceptions in
order to make the sales. We send it to these countries and we
do not know what happens to it.
Now, we are learning bit by bit that, in many cases, we
have been deceived. Some of these dual-use items are supposed
to go to one facility and they go to another facility, a
nuclear-related facility or a military facility. Who makes this
end user analysis? Who makes this kind of determination as to
the potential problem there?
If they send it to the Department of Energy, you have your
PINS database there where they collect all this information. It
is a sophisticated computer program. They have a great deal of
the information, as I understand it, with regard to all export
license applications, and presumably, if someone would use it
properly, you would be able not only to tell something about
the cumulative effect of these exports to these various
countries, but also to help with regard to potential
proliferation issues and the end-user problem. But if you are
going to delegate such research to the Department of Commerce,
which is trying to sell the stuff, it looks to me like you have
a potential problem there. What do you think?
Mr. Friedman. I will give you my judgment, as best I can,
but before I do that, they have thought through this question
of the delegations of authority and there is a basis for them,
and if I can, let me refer to Mr. Walter to describe that
process, and then I will give you my best judgment on that.
Chairman Thompson. Mr. Walter.
Mr. Walter. Under Executive Order 12981, agencies,
including the Department, are authorized to review any license
application. The Executive Order also provides the agency the
authority to notify the Department of Commerce of the types of
applications that they do not need to see. DOE has provided the
Department of Commerce delegations of authority for certain
things, for example, items going to the Nuclear Suppliers'
Group. Also commodities not intended for nuclear end use and
end users. So, basically, DOE has said, we want to see all
items that involve nuclear end use or end users, but there are
these other items that, for whatever reason, we do not need to
see.
One of the things you mentioned was that DOE, through its
PIN system, has information, historical information, on export
license applications. This is limited to only applications that
the Department of Energy has received or that have been
referred to the Department of Energy by the Department of
Commerce, not the entire universe of export license
applications. So in the Department of Energy's process of----
Chairman Thompson. But even there, I understand that PINS
does not know what the disposition of any of these license
applications are, either. That is another potential problem.
Mr. Walter. That is correct, and if the Department of
Energy would have that information, that would help in its
proliferation review.
Chairman Thompson. All right. Mr. Friedman, do you want to
follow up on that?
Mr. Friedman. I was hoping to buy more time. [Laughter.]
Mr. Friedman. I think, given the current environment,
clearly, this could be a problem. I mean, I am not going to----
Chairman Thompson. Is this something that has been
discussed or analyzed? Have you talked to the Department of
Energy, or to the Department of Commerce, in particular, about
that particular problem? What I am concerned about, of course,
is an export to a sensitive country but for some ostensible or
alleged commercial use. Well, we know that we have sent some
goods to China for commercial airline purposes that have been
diverted for military-related purposes. That is what I am
trying to get at. If you have not had that discussion with the
Department of Energy or the Department of Commerce----
Mr. Friedman. Well, we have had the discussion with the
Department of Energy, and what the Department of Energy has
told us is that they are going to withdraw the delegations of
authority to review the process.
Chairman Thompson. So they do not know what they do not
know. So we are talking about a process here, not just what the
Department of Energy knows. I think it is a matter for
consideration by the Department of Energy and the Department of
Commerce.
Senator Lieberman.
Senator Lieberman. Thanks, Mr. Chairman. I was struck in
the report--and I suppose this is because we are coming after a
day of closed meetings with people from Justice and the FBI and
others about the ongoing investigation that has resulted from
the Cox report and its preliminaries, but I was struck to note
that in this policy, that is, the existing DOE policy, that
U.S. citizens must serve as hosts of visiting U.S. foreign
nationals, is not very well known.
You cite one case not followed as it should be where there
was a visiting Chinese scientist for whom an American citizen
was listed as the host, but, in fact, the visiting Chinese
scientist was going to work with and did work with a fellow
Chinese national. And this was a Chinese national who was a
temporary resident of the United States, I presume.
Mr. Friedman. I do not have his precise category.
Senator Lieberman. But he was a----
Mr. Friedman. The laboratory policy was, though, that a
U.S. citizen be the host. So, in effect, there was a surrogate
host, because the Chinese national could not serve in that
capacity.
Senator Lieberman. But everyone knew that the visiting
Chinese scientist was working with the Chinese national.
Mr. Friedman. I do not know if everyone knew, Senator, but,
I mean, the people involved certainly knew.
Senator Lieberman. Right. Then I gather another host stated
that his name is officially assigned as the host for many
visitors, but he does not actually know them all.
Mr. Friedman. Correct.
Senator Lieberman. Do I assume that as part of the DOE
review, that they are going to focus in on, to the best of your
knowledge, on this question, along with others?
Mr. Friedman. Yes. I am informed that they are going to be
looking at the question of educating the hosts as to their
responsibilities and ensuring that they can carry out those
responsibilities. Yesterday, the Secretary's advisory board
issued a number of recommendations concerning the foreign
assignee and visitors' program. One of the recommendations
concerned forcing or directing the laboratory directors to get
more directly involved in this program, and that may be a
quality check in this whole process. It may be a useful quality
check.
Senator Lieberman. Yes. Perhaps I should ask you, this is a
very sensitive area, because while I know in some cases of
security concern there is a particular concern about what might
be called ethnic espionage, on the other hand, obviously, in
the best traditions of our country, we do not want to begin to
be automatically suspicious of people who are not U.S.
citizens. So I suppose the more important lapse here is the
failure to carry out the program of deemed export licenses than
the question of the citizenship of the host. Did you make a
recommendation on that? Do you think that is an important part
of this security policy, which is to say that a U.S. citizen
would have to be the host for a foreign visitor?
Mr. Friedman. We did not make a direct recommendation on
that point.
Senator Lieberman. Do you have an opinion on that?
Mr. Friedman. I think that would be a wise policy judgment.
Senator Lieberman. In other words, you think the current
policy should continue, but be enforced?
Mr. Friedman. I think the policy should be that a U.S.
citizen should be the host. That assumes, Senator, that the
hosts continue to play a pivotal role in determining whether
deemed export licenses ought to be sought.
Senator Lieberman. Right.
Mr. Friedman. If that continues, if they are the focal
point, I think you need that kind of assurance, or something
similar to that. There may be exceptions, and I have not
necessarily thought that through entirely, either.
Senator Lieberman. Again, I think you have done a superb
job, and I guess in light of all our questions about the areas
of our worry, we should come back and say for the record that,
basically, you have said that the DOE system is working, and
where it is not working, the Department has now organized a
review which, hopefully, will make it work better. But I think
on the deemed export licenses, particularly, you have produced
some information that is very unsettling and part of the
general sense that I think a lot of us are receiving that our
guard was down here. Even when we had a good policy, which we
seem to have had in the DOE policy on deemed export licenses,
it was not being implemented at all.
Five-thousand visitors and assignees and only two licenses
applied for is a pretty shocking incongruence or discontinuity
in the statistics that you provided. I am sure the Chairman and
I will be asking the Department to respond to that, and I will
be particularly interested in the other subject we talked
about, which is whether anything is being done in regard to
deemed export licenses for our scientists when they travel
abroad. Again, we do not want to stop that, but if we think
there is merit to this policy that the transfer of information
is effectively an export, or can be, and it requires a license
and the kind of equal protection, almost, then it ought to
relate to transfers of information that occur here as well as
those that occur abroad. I hope that we will continue to pursue
it and push DOE on those questions.
Thanks very much, again, to all of you for the quality of
your work here.
Chairman Thompson. Thank you very much.
Just on that point, is it your opinion that the laws and
the regulations now require our foreign travelers there, if
they impart the right kind of information, to obtain an export
license?
Mr. Friedman. Yes.
Chairman Thompson. So that two number would include our
people abroad, also?
Mr. Friedman. I am not sure of that.
Chairman Thompson. All right. Thank you. Senator Domenici.
OPENING STATEMENT OF SENATOR DOMENICI
Senator Domenici. I came principally because I wanted to
congratulate you on your report and I strongly concur with the
deemed export issue. I also think it needs to be carefully
considered. I would encourage the Department to develop
procedures that do not stifle the international scientific
interactions between the laboratory scientists and foreign
scientists that remain essential for the laboratories to remain
on the cutting edge. I think procedures should be devised at
the labs and the Department that will allow rapid
identification of any potential export issues, and wherever
possible, I would encourage that entire facilities or
technologies be evaluated for export consideration and placed
on approved lists for action. Sometimes, long delays are good
for no one in this respect.
Could I ask a question with reference to scientists
overseas versus visitors to this country. As part of your
evaluation, would you be able to determine whether the effort
to obtain information from American scientists who go to China
is more severe or more pronounced than what we know about
Chinese coming here and gathering information? I have an
impression that American scientists are really pushed when they
go to China and other countries for information that they might
have and that they have to be very well trained in order to
avoid that kind of pressure. Did you have any observations on
that?
Mr. Friedman. We do not, Senator Domenici. That is way
beyond the scope of what we looked at.
Senator Domenici. Let me just say to the Senators, I have
very reliable information that there is far more pressure on
American scientists who go to China and speak the language
because they are of the same culture and educated at the same
schools and because there is such a fraternity of scientists on
nuclear matters, including the whole hierarchy of the Chinese
scientists who build their nuclear weapons and do what they do
to push it forward. Their American-educated leader, has a Ph.D.
from UCLA or University of California, and taught here in
America.
Chairman Thompson. I think we have discovered, too, or at
least our law enforcement officers have made it more clear, I
believe, that some countries as a part of their information
gathering techniques, I am talking about improper information
gathering things, that we would consider improper--that is a
fundamental part of there approach to use the attempted
debriefing of our scientists abroad.
Senator Domenici. Frankly, we can talk about technologies
and making sure we do not get the wrong ones exported. But, we
have got to be awfully careful that our scientific minds are
not transferring the information too. Frequently, such
transfers of ideas are much more desirable buying something
from the commercial market that might be further changed, and
other applied. That is not the subject of this hearing, but it
is the subject of your very serious investigation about what we
could do to help with this matter. I just want to thank you for
the excellent job you have done. Thank you, Mr. Chairman.
Chairman Thompson. Thank you.
I just, finally, want to ask you to give us an assessment
of any problems lingering from the 1993 era. You did an
analysis in 1993. You highlighted some problems. They have set
about addressing most of them, I think. But what is there left
on the table? Where are we not making as much progress as we
should be?
Mr. Friedman. Senator, let me ask Mr. Walter to address
that question.
Chairman Thompson. All right.
Mr. Walter. Basically, there are two areas, I think, that
we need some additional work on, and they involve interagency
actions. They involve Department of Commerce and Department of
State. What we had requested in our 1993 report was that the
Department of Energy get with the Departments of Commerce and
State to obtain what is referred to as ``final disposition'' of
export cases. Final disposition includes not only whether the
license application was approved or denied, but also whether
the item was purchased and/or shipped.
We talked about this briefly earlier, where, from the
Department of Commerce, we are currently getting information on
approval/denial of license applications, but we are still not
getting information regarding whether the item was actually
purchased or shipped. This information would be helpful to our
analysts for their proliferation reviews.
Chairman Thompson. How does that work? If it is denied, how
can it be shipped?
Mr. Walter. If a license application was not approved, the
item should not be shipped.
Chairman Thompson. So if it is approved, the assumption is
that it is shipped, but that might not necessarily be valid? Is
that the point?
Mr. Walter. Yes. We understand now that there is a process
in place at the Department of Commerce to try to get this
information from Customs and to be able to send it out
electronically to DOE. But the system that they would send it
to DOE under has not been completed yet.
Now, from the standpoint of the State Department, we are
not getting either piece of information. We do not know
whether, in fact, the munitions application, for example, was
approved or disapproved and we also do not know, if it was
approved, whether, in fact, it was purchased and/or shipped,
and again, that would be helpful for DOE from a proliferation
standpoint.
Senator Lieberman. Mr. Chairman, if I may, am I right that
the information that we are not getting adequately now would be
critical to our own effort to track possible proliferation of
security items?
Mr. Walter. I would say it would be very helpful. I could
not characterize it as critical, but it would be very helpful.
Chairman Thompson. Thank you very much. We will be
certainly hearing from the Department of Energy on these things
as we proceed along. The Department of Commerce, too, for that
matter. But thank you very much. This is a valuable
contribution.
I think none of us certainly want to see the destruction of
our visitors' program. We understand that there is very much to
be gained all around by scientists talking to each other. You
cannot build a fortress around your country or even all your
technology. But when we let our guard down so substantially,
when we go to sleep, when we see that our most sensitive
technologies are being taken and that we are participating in
allowing them to be taken under various guises, whether it be
espionage or exports or what not, we are actually harming the
visitation program. That is the kind of thing that will destroy
it, unless we plug some of these holes that we have clearly got
now. By identifying them, I think that is the first step and we
appreciate your work. Thank you very much.
Mr. Friedman. Thank you very much.
Chairman Thompson. We are adjourned.
[Whereupon, at 11:20 a.m., the Committee was adjourned.]
A P P E N D I X
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LETTER TO HON. BILL RICHARDSON, SECRETARY, DEPARTMENT OF ENERGY, FROM
CHAIRMAN THOMPSON AND SENATOR LIEBERMAN
Committee on Governmental Affairs,
U.S. Senate,
Washington, DC.
June 16, 1999
The Honorable Bill Richardson
Secretary, Department of Energy
1000 Independence Avenue, S.W.
Washington, DC 20585
Dear Secretary Richardson: On June 10, 1999, the Senate Committee
on Governmental Affairs held a hearing on the Department of Energy
Inspector General's report regarding the Department's Export Control
process. We were pleased to learn that the Inspector General determined
that, for the most part, the Department's process for reviewing nuclear
dual-use and munitions commodities appears to be adequate. We were
troubled, however, by the IG's finding that the Department appears not
to be complying with applicable rules that require certain foreign
nationals visiting DOE's nuclear labs to obtain licenses before gaining
access to controlled technology or information.
According to the testimony of Inspector General Friedman, there may
have been as many as 3,200 foreign national assignees staying more than
30 days at DOE labs in 1998. He also indicated that over 1,600 foreign
nationals may have visited the labs for shorter periods during that
year. In that same year, only two deemed export license applications
were filed regarding visitors to the DOE labs.
Although there may be legitimate reasons why many of these visitors
did not require licenses during their stay at the labs, the stark
contrast between the number of visitors and the number of license
applications, combined with other information the IG provided at the
hearing, raises serious questions about DOE's compliance with export
control requirements. In order to help us more accurately assess the
extent to which this truly is a problem, we would appreciate your
providing some additional information. Specifically:
(1) LPlease provide an exact number of visitors and assignees
to each DOE nuclear lab during calendar year 1998.
(2) LIn each of these categories, how many foreign nationals
were from countries to which we restrict the release of
sensitive technical information? Which countries were involved?
Please provide a breakdown of the number of visitors and
assignees from each country named.
(3) LHow many of these individuals had access to controlled
information or technology?
(4) LHow many export licenses did DOE apply for on behalf of
these visitors and assignees?
(5) LWith respect to the foreign nationals described in
response to Question 2, were all of these assignees and
visitors working under the supervision of U.S. citizens? If
not, who did supervise them? Did the absence of supervision by
a U.S. national comply with applicable requirements?
(6) LHas the Department attempted to determine whether those
individuals may have used any controlled information or
technology to which they had access at the DOE labs when they
returned to their home country?
(7) LHow many DOE employees traveled abroad in 1998 to work
with nationals of countries to which we restrict the release of
sensitive technical information? Did these DOE employees'
interactions with the foreign nationals involve the exchange of
any information or technology that would require a license
under our export control laws? How many of these individuals
received export licenses?
(8) LAre DOE employees with access to controlled information
and technology counseled before trips abroad regarding the need
to protect controlled information?
Finally, we understand that after the IG provided a memo to the
Under Secretary regarding the deemed export issue in March, the
Department formed an Export Control Task Force to address issues
related to the Agency's export control process, including the
Department's treatment of deemed exports. Please advise what steps that
are being taken to (1) define oversight responsibility for deemed
exports, (2) clarify the Department's guidance on visits and
assignments of foreign nationals, and (3) ensure that guidance is
understood and adhered to by Department personnel. Also please provide
an indication of when completion of these initiatives is expected.
We appreciate your prompt attention to these important questions.
Please contact Christopher Ford of the Committee's Majority staff at
(202) 224-4751 and Laurie Rubenstein of the Minority staff at (202)
224-2627 to discuss a time frame for your response.
Sincerely,
Joseph I. Lieberman
Ranking Minority Member
Fred Thompson
Chairman
__________
ANSWERS TO QUESTIONS FROM THE DEPARTMENT OF ENERGY
Question 1: Please provide an exact number of visitors and
assignees to each DOE nuclear lab during calendar year 1998.
Answer: Total: 11,136.
Los Alamos National Laboratory (LANL) 3,325
Lawrence Livermore National Laboratory (LLNL) 2,624
Oak Ridge National Laboratory (ORNL) 2,684
Sandia National Laboratory (SNL) 2,503
Question 2: In each of these categories, how many foreign nationals
were from countries to which we restrict the release of sensitive
technical information? Which countries were involved? Please provide a
breakdown of the number of visitors and assignees from each country
named.
Answer: Controls on transfers of technology differ from
country to country, based upon the reason for controlling the
technology. Some export controls are applicable to all
countries, others applicable only to a select few countries.
For example, technology associated with machine tools, which is
controlled for nuclear proliferation reasons, is restricted to
a different group of countries than technology associated with
production of kevlar jackets, which are controlled for anti-
terrorism reasons. Some technologies, such as munitions items,
require a license to any country. We are providing the
information below with respect to visitors and assignees from
countries on DOE's sensitive country list.
A total of 2,876 national visitors and assignees held
citizenship (not necessarily residence) from countries on DOE's
sensitive country list, and these visits and assignments
involved the following laboratories:
LANL 1,063
LLNL 525
ORNL 741
SNL 547
DOE Order 1240.2b, Unclassified Visits and Assignments by
Foreign Nationals, which was in effect during the time of these
visits, defines a foreign national as ``any person who is not a
U.S. National or is a stateless person. An Immigrant Alien is
considered a foreign national for the purposes of this Order.''
Therefore, in 1998, immigrant aliens were considered foreign
nationals and are included in these numbers. For example, at
Lawrence Livermore National Laboratory, of 155 sensitive
country national assignees, 80 were in resident alien status;
and of 370 sensitive country national visitors, they estimate
about a quarter of them (approximately 90) were in resident
alien status in 1998.
Many of the visits were short term in nature and involved one
day tours of unclassified areas, arms control conferences, and
in some instances, job interviews. For example, the North
Korean visit occurred at Sandia National Laboratories'
Cooperative Monitoring Center under the aegis of DOE and the
State Department to help promote North/South Korea arms control
dialogue. The Iraqi visits occurred at Oak Ridge National
Laboratory and Sandia. The Oak Ridge visit was by a permanent
resident alien, employed by a private firm in Wisconsin, who
was seeking employment at the lab. The Sandia visitor (an
Iraqi-born Hungarian who is listed as Iraqi because of his
place of birth) was part of a University of New Mexico class
visiting an unclassified microelectronics facility.
The breakdown of the number of visitors and assignees from
each country is as follows:
India 511, Iran 43, Iraq 2, Israel 127, North Korea 1,
Pakistan 8, Peoples' Republic of China 930, and Russian
Federation 1,131. Other sensitive countries 123.*
* Other sensitive countries include: Algeria, Armenia,
Azerbaijan, Belarus, Cuba, Georgia, Kazakstan, Kyrgyzstan,
Libya, Moldova, Sudan, Syria, Taiwan, Tajikistan, Ukraine, and
Uzbekistan.
Question 3 and 4: How many of these individuals had access to
controlled information or technology? How many export licenses did DOE
apply for on behalf of these visitors and assignees?
Answer: The majority of interactions between DOE laboratory
scientists and foreign nationals occur in the realm of public
domain information or fundamental research. Such interactions
fall outside the scope of U.S. export controls. Additionally, a
transfer of controlled technology to a foreign national
requires a license only when the technology is export
controlled to the home country of the foreign national. It is
for this reason DOE has seen very few requests for export
licenses, and the number of those compares favorably with
private industry and other U.S. Government agency practices.
According to our records, these four laboratories have
applied for export licenses for transfers of commodities and
technology under DOE programs, but no applications for
individual validated export licenses were submitted directly in
connection with visits and assignments of foreign nationals to
the weapons laboratories in 1998. For example, the DOE
Materials Protection, Control, and Accounting (MPC&A) Program,
a cooperative program with the Russian Federation to ensure the
secure storage of their special nuclear material, operated
under a special comprehensive export license granted by the
Department of Commerce (DOC) in 1997, valid for a four year
period. The license grants authorization for transfers of
certain controlled technologies to the participating Russian
institutes regardless of whether the transfer occurs here or
abroad.
Question 5: With respect to the foreign nationals described in
response to Question 2, were all of these assignees and visitors
working under the supervision of U.S. citizens? If not, who did
supervise them? Did the absence of supervision by a U.S. national
comply with applicable requirements?
Answer: The hosts of record for all of the visitors/assignees
were U.S. citizens. However, as identified in previous reports
to Congress, the Department needs to strengthen its policy and
procedures regarding hosts. Under the new policy statement and
Notice, to be released later this month, all hosts must be a
DOE or DOE contractor employee. A visitor cannot be a host.
Additionally, a sensitive country foreign national cannot be a
host of another sensitive country foreign national.
Program reviews shall be conducted periodically by the Office
of Foreign Visits and Assignments Policy and the Office of
Counterintelligence to assess policy effectiveness and identify
improvement areas. In addition, independent oversight of the
overall performance of the Foreign Visits and Assignments
Program shall be the responsibility of the Office of
Independent Oversight and Performance Assurance.
Question 6: Has the Department attempted to determine whether those
individuals may have used any controlled information or technology to
which they had access at the DOE labs when they returned to their home
country?
Answer: As we have responded above, only a very small number
of foreign national visitors/assignees have had access to
controlled information or technology. The Department does not
have the ability to determine what foreign nationals do once
they return home. However, by careful review and screening
prior to a visit or assignment, we believe we can minimize any
risks associated with foreign nationals access to the DOE
laboratories.
Question 7: How many DOE employees traveled abroad in 1998 to work
with nationals of countries to which we restrict the release of
sensitive technical information? Did these DOE employees' interactions
with the foreign nationals involve the exchange of any information or
technology that would require a license under our export control laws?
How many of these individuals received export licenses?
Answer: Routinely, DOE employees and DOE contractor employees
travel to foreign countries, including sensitive countries, in
support of diverse programs and initiatives. In many instances,
these interactions pertain to policy and scientific exchanges,
including basic research, and international conferences that
crosscut the broad spectrum of activities within the Department
and do not involve sensitive information requiring special
controls. Such travel allows the Department to leverage its
resources against those of other countries, helps to reduce
duplication of effort in the international arena, and allows
the United States to coordinate and influence policies and
actions by other countries.
Official foreign travel by DOE employees and DOE contractor
employees, including those working at the nuclear laboratories,
requires approval by the sponsoring program office. In the
event the employee is traveling to a designated ``sensitive
country'' and/or discussing a ``sensitive subject,'' prior to
approval by the sponsoring program office, additional reviews
and concurrence are required. While no export licenses have
been granted, during the review/concurrence process DOE has
denied travel requests and required modifications to joint
activities and presentations to comply with the export control
regulations.
Question 8: Are DOE employees with access to controlled information
and technology counseled before trips abroad regarding the need to
protect controlled information?
Answer: Yes. DOE employees traveling to sensitive countries
are required to have a security briefing prior to departure.
__________
LETTER TO HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF
ENERGY, FROM CHAIRMAN THOMPSON
Committee on Governmental Affairs,
U.S. Senate,
Washington, DC.
June 11, 1999
The Honorable Gregory H. Friedman
Inspector General
United States Department of Energy
1000 Independence Avenue, S.W.
Washington, DC 20585
Dear Mr. Friedman: Enclosed are additional questions from the
hearing which was held on June 10, 1999 regarding the Dual-Use and
Munitions List Export Control Processes and Implementation at the
Department of Energy that have been directed to you and submitted for
the record by Senator Akaka. In order to ensure a complete hearing
record, I would appreciate it if you would return your written
responses to these questions to the Committee on Governmental Affairs
by Friday, June 25, 1999.
If you have any questions, please contact Christopher Ford of the
Committee staff at (202) 224-4751. thank you for your kind attention to
this request.
Sincerely,
Fred Thompson,
Chairman
__________
LETTER FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF
ENERGY, TO CHAIRMAN THOMPSON
Department of Energy,
Washington, DC.
June 25, 1999
The Hon. Fred Thompson, Chairman,
Committee on Governmental Affairs,
U.S. Senate,
Washington, DC.
Dear Mr. Chairman: This is in response to your letter of June 11,
1999, which contained questions from Senator Daniel Akaka concerning
the hearing that was held on June 10, 1999, regarding the dual-use and
munitions export control processes at the Department of Energy. Your
letter was received by this office on June 23, 1999.
Several of the questions are within the scope of our review. Our
responses are enclosed. The remaining questions most appropriately can
be answered by the Department's Export Control Task Force. Therefore,
we have referred these questions to Ms. Rebecca Gaghen, who heads the
Department's Export Control Task Force, and requested she respond
directly to you.
Please contact me if I can be of further assistance.
Sincerely,
Gregory H. Friedman
Inspector General
Enclosure
QUESTIONS AND ANSWERS FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL,
DEPARTMENT OF ENERGY, SUBMITTED BY SENATOR AKAKA
In your report, you stated the State Department does not have an
established interagency fora to discuss routine munitions license
applications and that there is no process for escalating disputed
applications. You concluded that this issue should be addressed.
Question 1: What steps have DOE taken with the State Department to
rectify these issues?
Answer: This question was referred to the Department's Export
Control Task Force for response.
You indicated that the NTSP Division (Nuclear Transfer and Supplier
Policy Division) believes the dual-use dispute resolution escalation
process works adequately.
Question 2: Do you believe the process could be improved and if so,
how?
Answer: Our review of the Department's export licensing process
did not identify any major concerns with the escalation
process. A concern was raised regarding the level of the
Department's representation at meetings of the Advisory
Committee for Export Policy. However, this concern was
subsequently addressed by the Under Secretary in his April 21,
1999, letter to the Department of Commerce on this issue.
I understand the Commerce Department, including concurrence from
the Departments of State and Defense, granted DOE a special
comprehensive license (SCL) authorizing the export of dual-use nuclear
controlled items to certain entities in Russian and the Newly
Independent States. A SCL authorizes the export of specific categories
of items to pre-approved end-users for pre-approved end-uses without
the requirement to obtain individual licenses for each export order or
shipment.
The SCL requires, however, the implementation of an Internal
Control Program (ICP) to ensure compliance with the license conditions
and administrative and screening elements.
Question 3: Did you conduct a review of this license? If not, do
you plan to conduct a review of the Internal Control Program (ICP) for
this sensitive license to ensure DOE is adequately implementing the ICP
requirements?
Answer: We did not review the special comprehensive license,
which was not within the scope of our review of the
Department's export licensing process. We are continuing to
evaluate potential export control issues for possible future
reviews. The ICP is one of the issues which we shall consider
in this process.
Your review of the 60 dual-use ``non-transferred'' cases indicated
that Commerce should have referred one (1) case to DOE because the end-
user was a nuclear end-user. Your report further notes that Commerce
ultimately returned the application without action.
Question 4: Do you know why Commerce returned the application
without action?
Answer: The nuclear end-user was a Russian nuclear power plant.
It was included in an agreement on safeguards between the USSR
and the International Atomic Energy Agency (IAEA) in 1985 and
was on the 1997 list of Russian/USSR IAEA-safeguarded nuclear
facilities. As a safeguarded civilian nuclear power plant,
Commerce determined that it is not subject to Section 744.2 of
the Export Administration Regulations and the license was
returned without action to the applicant. The Department of
Energy, we are informed, is not in agreement with the Commerce
position. We have recommended that Energy resolve this matter
with the responsible Department of Commerce officials.
In your 1993 report, you recommended an assessment of the staffing
level in the NTSP Division. In this report you also recommend a review
of the staffing levels.
Question 5: What is the status of this review?
Answer: This question was referred to the Department's Export
Control Task Force for response.
Question 6: In your opinion, how many employees should the NTSP
Division have to properly fulfill its licensing function?
Answer: We are not in a position to determine the appropriate
level of staffing necessary to perform export license review
activities. As was evident from the information elicited at the
June 23 hearing on this matter, there are a substantial number
of export license applications to be reviewed by the
Department. We concluded that this workload justifies our
recommendation that the Department conduct a review of the NTSP
Division workload to determine the appropriate staffing level.
Based upon your 1993 report recommendation and subsequent
information you received, you requested your Office of General Counsel
to opine on a possible conflict between Section 12(c) of the Export
Administration Act of 1979 regarding the protection of company
proprietary information and the 1981 Executive Order 12333 regarding
the ``United States Intelligence Activities.''
Question 7: What are the specific issues that may be in conflict?
Answer: A concern was raised by the Department's Senior
Intelligence Officer (SIO) that he was not able to
appropriately exercise his intelligence oversight
responsibilities under Executive Order 12333. Reportedly, the
SIO was unable to access information regarding intelligence
analyses that were conducted in support of the export license
review process. This lack of access was purportedly the result
of protections afforded to export control information by
Section 12(c).
Question 8: What is the status of your General Counsel's review of
this issue?
Answer: This question was referred to the Department's Export
Control Task Force for response.
I believe it is critical for NTSP Division analysts to have access
to raw intelligence data to complete their analysis of license
applications.
Question 9: What measures has the Assistant Secretary for
Nonproliferation and National Security taken with the Office of
Intelligence to rectify this critical problem?
Answer: This question was referred to the Department's Export
Control Task Force for response.
Question 10: The IG Report recommends redrafting the policy on
foreign visits and drafting new guidance for hosting foreign nationals,
including new guidelines for deemed exports.
LWho is responsible for determining when a deemed
export license is required?
LIs the U.S.-Russia Lab-to-Lab program subject to
these requirements?
LWhat is the Lab-to-Lab program's record of requesting
deemed export licenses?
LHow many deemed export licenses have been granted for
the Lab-to-Lab program?
LHave any deemed export license [sic] been requested
for the U.S.-China Lab-to-Lab program?
LHave any deemed export licenses been granted for
Chinese nationals associated with this program?
LWhat are the criteria for requesting deemed export
licenses for sensitive countries?
LHas DOE requested any deemed licenses for exports of
sensitive information to India?
Answer: This question was referred to the Department's Export
Control Task Force for response.
Question 11: The IG Report does not address foreign students.
LAre foreign students who are attending U.S. universities
working on lab-sponsored projects?
Answer: During our review, we determined that there were a
number of foreign national students, including post-doctoral
students, at our laboratories.
LAre any of those projects sensitive in nature? Are any
such projects related to DOE's Stockpile Stewardship program?
Answer: This question was referred to the Department's Export
Control Task Force for response.
LAre background checks done on foreign students from U.S.
universities who are working on lab-sponsored research?
Answer: This question was referred to the Department's Export
Control Task Force for response.
LHave such students been granted security clearances?
Answer: This question was referred to the Department's Export
Control Task Force for response.
LWill the IG recommendations be applied to foreign
students?
Answer: Foreign students at the laboratories are subject to the
same export licensing requirements as foreign nationals.
Accordingly, any recommendation regarding foreign nationals
will include foreign students at the laboratories.
LETTER FROM ERNIE J. MONIZ, UNDER SECRETARY OF ENERGY, DEPARTMENT OF
ENERGY, TO CHAIRMAN THOMPSON
Department of Energy,
Washington, DC.
July 14, 1999
The Hon. Fred Thompson, Chairman,
Senate Committee on Governmental Affairs,
U.S. Senate,
Washington, DC 20510
Dear Mr. Chairman: On June 10, 1999 Gregory Friedman, Inspector
General of the Department of Energy, testified regarding the Dual-Use
and Munitions List Export Control Processes and Implementation at the
Department of Energy.
Enclosed are answers to questions 1, 5, 8, 9, 10 and 11, submitted
for the record by Senator Akaka. The remainder of the questions, 2, 3,
4, 6 and 7, has been submitted to you in a separate letter from the
Inspector General's Office.
If we can be of further assistance, please have your staff contact
John C. Angell, Assistant Secretary for Congressional and
Intergovernmental Affairs.
Sincerely,
Ernie J. Moniz
Enclosures
SUPPLEMENTAL ANSWERS TO QUESTIONS SUBMITTED BY SENATOR AKAKA, FROM THE
EXPORT CONTROL TASK FORCE, DEPARTMENT OF ENERGY
Question 1: In your report, you stated the State Department does
not have an established interagency fora to discuss routine munitions
license applications and that there is no process for escalating
disputed applications. You concluded that this issue should be
addressed. What steps have DOE taken with the State Department to
rectify these issues?
Answer: The Assistant Secretary for Nonproliferation and
National Security (NN) has signed a letter to the Assistant
Secretary for Political Military Affairs at the Department of
State requesting the convening of an interagency meeting to
initiate discussions regarding the need for an interagency
dispute resolution process for escalating munitions license
applications under dispute between reviewing agencies.
Question 5: In your 1993 report, you recommended an assessment of
the staffing level in the NTSP Division. In this report you also
recommend a review of staffing levels. What is the status of this
review?
Answer: The review is ongoing. The Department of Energy (DOE)
is going over staffing levels for the Nuclear Transfer and
Supplier Policy (NTSP) Division in conjunction with its overall
annual budget preparation and submission process. The issue is
also receiving the attention of a special Secretarial task
force on export controls. The assignment of Federal personnel
to any given function is dependent upon several factors,
including available funding and overall allotment of Full Time
Equivalent (FTE) slots provided to DOE. Staffing levels for the
Nuclear Transfer and Supplier Policy (NTSP) Division are
developed through a periodic review of existing, as well as
anticipated requirements. Future requirements are identified at
the division level and coordinated with the Director, Office of
Arms Control and Nonproliferation, and the Assistant Secretary
for Nonproliferation and National Security (NN) to ensure that
NTSP's staffing needs are considered along with those of other
NN offices and DOE at large. Ultimately, NTSP's final
allocation is dependent upon the number of Federal slots
available to the Department, and the prioritization of staffing
needs by the Department.
Question 8: Based upon your 1993 report recommendation and
subsequent information you received, you requested your Office of
General Counsel to opine on a possible conflict between Section 12(c)
of the Export Administration Act of 1979 regarding the protection of
company proprietary information and the 1981 Executive Order 12333
regarding the ``United States Intelligence Activities.''
What is the status of your General Counsel's review of this issue?
Answer: The Office of the General Counsel has concluded that
there is no conflict and the basis for that conclusion will be
described in a memorandum the Office of the General Counsel
expects to complete no later than this month.
Question 9: I believe it is critical for the NTSP Division analysts
to have access to raw intelligence data to complete their analysis of
license applications. What measures has the Assistant Secretary for
Nonproliferation and National Security taken with the Office of
Intelligence to rectify this critical problem?
Answer: The NTSP has been discussing with the current
Director of the Office of Intelligence arrangements for greater
access to Intelligence Community resources for its export
control analysts. In the meantime, the Office of Intelligence
has established a permanent liaison position with the NTSP to
provide relevant intelligence analyses on an as-needed basis,
until a more permanent solution can be implemented.
Question 10: The IG Report recommends redrafting the policy of
foreign visits and drafting new guidance for hosting foreign nationals,
including new guidelines for deemed exports.
Question 10A: Who is responsible for determining when a deemed
export license is required?
Answer: Responsibility for export control compliance is
shared among DOE headquarters, laboratory and facility
managers, and program officials. By the end of the month, the
Department will have a new policy with respect to unclassified
foreign national visits and assignments and DOE foreign travel.
The new policy will ensure that the consideration of the need
for an export license is part of the visits and assignments and
foreign travel approval processes. The Secretary of Energy has
undertaken steps to ensure that ``deemed export'' controls are
made an integral part of the approval process for foreign
national visits and assignments throughout the DOE complex.
The Under Secretary of Energy has chartered an export control
task force with representatives from the Secretary's office and
relevant headquarters program offices. This group has reviewed,
and will continue to review, export control issues relating to
DOE facilities, including the issue of deemed exports. The task
force has updated the DOE Guidelines on Export Control and
Nonproliferation, which provides guidance on when an export
license may be required. Specialized training programs are
planned for laboratory personnel who participate in
collaborative programs with foreign nationals. An active,
flexible communications channel between headquarters and export
control experts in the field will be established to ensure all
DOE facilities receive appropriate guidance on export control
policies.
Question 10B: Is the U.S.-Russia Lab-to-Lab program subject to
these requirements?
Answer: The U.S.-Russia Materials Protection, Control, and
Accounting (MPC&A) program and all other DOE cooperative
programs with Russia and the Newly Independent States are
subject to U.S. export control requirements. To ensure
compliance with export control regulations, the MPC&A program
has hired two staff members and detailed one Department of
Commerce (DOC) employee to DOE headquarters to assist in
acquiring export control licenses from DOC. Other DOE
cooperative programs also have taken steps to ensure that all
initiatives are reviewed by export control experts and that all
appropriate export licenses are obtained.
Question 10C: What is the Lab-to-Lab program's record of requesting
deemed export licenses?
Answer: In large part, the MPC&A Program operates under an
international cooperative license granted by the Department of
Commerce (DOC) in 1997, valid for a four-year period and can be
extended for one additional four-year period with the
concurrence of DOC. The license grants authorization for
transfers of certain controlled technologies to participating
Russian institutes. More than 560 requests to use this license
have been approved by DOC. This covers approximately 17,000
items and totals more than $20M in goods.
Question 10D: How many deemed export licenses have been granted for
the Lab-to-Lab program?
Answer: Approximately 250 individual validated licenses
(IVLs) were granted by the Department of Commerce, authorizing
the transfer of both commodities and technologies to specified
Russian institutes under the DOE Lab-to-Lab programs. There is
no special application for a ``deemed export'' license; the
IVLs obtained by the programs authorize the transfer of
technology to the Russian institute regardless of whether the
transfer occurs here or abroad.
Question 10E: Have any deemed export licenses been requested for
the U.S.-China Lab-to-Lab program?
Question 10F: Have any deemed export licenses been granted for
Chinese nationals associated with this program?
Answers: Steps have been taken to ensure that Chinese
assignees to the National Laboratories working on arms control
and nonproliferation projects of mutual interest, under the
U.S.-China Arms Control Exchange program, formerly known as
U.S.-China Lab-to-Lab program, such as atmospheric modeling,
are given access only to software or other technologies that do
not require export licenses. DOE laboratories applied for only
a small number of licenses from the Department of Commerce--
seven were equipment-related; none would have fallen into the
realm of deemed exports.
In keeping with legal and political constraints on the U.S.
side, all activities were unclassified and avoided any
technical discussion of nuclear weapons matters. They focused
instead on exclusively non-sensitive public domain information,
which was limited to arms control, nonproliferation (including
export controls), and safeguards.
The U.S.-China Arms Control Exchange program was recognized
to be sensitive from the outset because of the institutions
involved, and special measures were taken to oversee and
control the proposed U.S.-China interactions to preclude
discussion of any sensitive subject material or inappropriate
transfer of information or technology. All of the interactions
under the program were closely monitored by the U.S. Government
through an Interagency Contact Group, chaired by the Department
of State (DOS), which was organized to review plans, specific
activities, progress, and in some cases, complete briefing
packages. The Group included the Departments of Energy (DOE),
State (DOS), and Defense (DOD), the former Arms Control and
Disarmament Agency (ACDA), the National Security Council (NSC)
and the Intelligence Community (IC).
Question 10G: What are the criteria for requesting deemed export
licenses for sensitive countries?
Answer: The majority of interactions between DOE laboratory
scientists and foreign nationals occur in the realm of public
domain information and fundamental research, and therefore,
fall outside the scope of U.S. export controls. When a DOE
program has been determined to involve a transfer of technology
not in the public domain, the proposed transfer undergoes a
thorough review by export control experts at the DOE laboratory
or facility to determine if the technology requires an export
license to the country involved. A transfer of controlled
technology to a foreign national requires a license only when
the technology is export-controlled to the home country of the
foreign national.
The process used to determine which interactions require an
export license application includes the following steps:
LCareful subject matter review within the U.S.
laboratories by the program manager at each laboratory;
LReview by classification experts and the Export
Control Coordinator at the laboratory/facility; and
LReview by DOC upon request of the Export Control
Coordinator at the laboratories.
Additionally, other steps in the review process can include:
LSubsequent review by DOE personnel overseeing the
program;
LReview by DOE Headquarters of any sensitive-country
foreign travel and foreign visits and assignments; and
LFinal review by an interagency group (such as that
overseeing the China Arms Control Exchange Program).
Question 10H: Has DOE requested any deemed licenses for exports of
sensitive information to India?
Answer: According to our records, DOE has not applied for an
export license to transfer any sensitive information to India.
DOE currently has no active programs of cooperation with India
that involve the transfer of export-controlled technology.
After the 1998 nuclear tests and in keeping with U.S. sanctions
policy, DOE suspended all programs of cooperation with India
and Pakistan.
Question 11A: The IG Report does not address foreign students. Are
foreign students who are attending U.S. universities working on lab-
sponsored projects?
Question 11B: Are any of those projects sensitive in nature?
Question 11C: Are any such projects related to DOE's Stockpile
Stewardship program?
Answers: Much like the Department of Defense, the Department
of Energy and its laboratories maintain relationships with
universities. These relationships make significant
contributions to our scientific research. Foreign students
attending U.S. universities may be involved in unclassified
research projects related to the Stockpile Stewardship program.
Foreign students on-site access to DOE labs are subject to the
same restricted security measures as other foreign scientists
access.
Question 11D: Are background checks done on foreign students from
U.S. universities who are working on lab-sponsored research?
Answer: Background, or ``indices'' checks, are conducted on:
(1) all foreign nationals from sensitive countries, and (2) all
foreign nationals from any country who are to visit a secure
area or discuss a sensitive technology while at DOE. These
checks are completed by both the FBI and CIA, and the results
are routed through the Office of Counterintelligence to the
requesting facility.
Personnel security background investigations, on the other
hand, are only done in instances where an individual is an
applicant for a DOE access authorization (personnel security
clearance).
Question 11E: Have such students been granted security clearances?
Answer: All requests for access authorization for any foreign
national are processed through the Office of Security Affairs.
In order for a foreign national to be granted access
authorization, there must be a bilateral agreement between the
United States and the individual's country of citizenship which
covers the specific information that would be released to the
individual. Such bilateral agreements exist only with the
United Kingdom and France. In addition, the program office
having responsibility for the information to be released must
attest that the individual is uniquely qualified for the work
and that there are no U.S. citizens available having the
necessary skills, knowledge, and ability to do the work. There
are no more than 12 foreign nationals holding DOE access
authorization in the entire DOE complex. These are all high-
level professionals, most from the United Kingdom and Canada.
None of the foreign nationals holding DOE access authorization
are from sensitive countries.
LETTER TO HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF
ENERGY, FROM CHAIRMAN THOMPSON
Committee on Governmental Affairs,
U.S. Senate,
Washington, DC.
July 9, 1999
The Honorable Gregory H. Friedman
Inspector General
United States Department of Energy
1000 Independence Avenue, S.W.
Washington, DC 20585
Dear Mr. Friedman: During the hearing on June 10, 1999 regarding
the Dual-Use and Munitions List Export Control Processes and
Implementation at the Department of Energy, you were requested to
provide the Committee with the following items for the official record:
1. LChairman Thompson: Follow up on the precise number of
foreign nationals visiting the Oak Ridge, Lawrence Livermore,
Los Alamos and Sandia Laboratories;
2. LSenator Voinovich: Report on the adequacy of staffing at
the Nuclear Transfer and Supplier Policy Division of the Office
of Nonproliferation and National Security at the Department of
Energy and what that office is doing to remedy any problems in
this regard; and
3. LSenator Voinovich: Report on current and planned Energy
Department policies regarding who may host a foreign national
visitor to a national laboratory and what responsibilities such
hosts have.
In order to ensure a complete hearing record, I would appreciate it
if you would return your written responses to these requests to the
Committee on Governmental Affairs by Friday, August 20, 1999.
If you have any questions, please contact Christopher Ford of the
Committee staff at (202) 224-4751. Thank you for your kind attention to
this request.
Sincerely,
Fred Thompson
Chairman
ANSWERS TO QUESTIONS FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL,
DEPARTMENT OF ENERGY
Question 2: According to the Inspector General's testimony,
Energy's intelligence capabilities are not being fully utilized in the
processing of export cases. What measures are being taken to ensure
that Energy's intelligence capabilities are fully utilized?
Answer: Since the initial IG's report on the Department's
Export Control activities, collaboration between the Nuclear
Transfer and Supplier Policy (NTSP) Division and the Office of
Intelligence has been strengthened. This effort is helping to
ensure that export control analysts have ready access to
intelligence information required to make informed decisions on
export applications. Because of these changes, NTSP now has
more flexibility to utilize the Field Intelligence Elements at
the National Laboratories, including Lawrence Livermore
National Laboratory to provide independent assessments of end-
users on export license applications. The NTSP is discussing
with the current Director of the Office of Intelligence
arrangements to provide NTSP export control analysts greater
access to Intelligence Community resources. Until a more
permanent solution can be implemented, the Office of
Intelligence has established a permanent liaison position with
the NTSP to provide relevant intelligence analyses on an as-
needed basis.
Question 3: According to the Inspector General's testimony, the
Nuclear Transfer and Supplier Policy Division in the Office of
Nonproliferation and National Security may not be adequately staffed.
Question 3A: How is the staffing level determine?
Answer: The assignment of Federal personnel to any given
function is dependent upon several factors, including available
funding and overall allotment of Full Time Equivalent (FTE)
slots provided to the Department. DOE determines staffing
levels for the Nuclear Transfer and Supplier Policy (NTSP)
Division through a periodic review of existing and anticipated
requirements. Future requirements are identified at the
division level and coordinated with the Director, Office of
Arms Control and Nonproliferation, and with the Assistant
Secretary for National Security and Nonproliferation (NN) to
ensure that NTSP's staffing needs are considered along with
those of other NN offices and the Department of Energy at
large. Ultimately, NTSP's final allocation is dependent upon
the number of Federal slots available to the Department, and
the prioritization of staffing needs by the Department.
Question 3B: What is the staff shortfall?
Answer: Given the importance that the Department attaches to
export control and the increasing responsibilities of the NTSP
Division, the Department is committed to ensuring that the
Division has the resources necessary to carry out its mission.
The Secretarial task force on export control is currently
reviewing options for strengthening DOE's implementation of
these requirements and is assessing, among other matters, the
need for increased staff in the NTSP Division and at the
National Laboratories.
Question 3C: Are there vacant positions, do additional positions
need to be authorized, or both?
Answer: The NTSP Division currently has one position that is
vacant, for which recruitment is currently under way. The
possible need for additional positions is a subject of the on-
going review of Departmental export control activities noted
above.
Question 3D: What measures are being taken to address this?
Answer: The Department is reviewing NTSP's staffing needs in
conjunction with the work of the Secretarial task force to
strengthen DOE export control efforts. In addition, possible
future staff increases are being considered as part of the
development of the FY 2001 budget. In the meantime, one
laboratory technical expert has been assigned to Headquarters
to provide on-sight technical support to DOE's export license
review activities.
Question 3E: How long will it be before the division is adequately
staffed?
Answer: The mission of the division is rapidly expanding.
Several of the contributing factors include: (1) implementation
of a major export control initiative designed to address full
compliance with all export control laws in the DOE complex; (2)
increased responsibility related to the review of Department of
Commerce dual-use licenses; (3) the re-enactment of the Export
Administration Act; (4) declassification and decommissioning
activities within the DOE complex; and (5) future multilateral
activities. Once the on-going review of staffing needs is
completed, any recruiting of new personnel that may be approved
could be completed in a matter of months.
Question 4: According to the Inspector General's testimony, there
appears to be widespread noncompliance with regulations requiring
foreign nationals visiting the labs to obtain deemed export licenses
prior to having access to unclassified, but sensitive, information.
Apparently, internal Energy guidelines are unclear. As a result, Energy
hosts were not aware of, or did not understand, the regulations, and
several hosts did not appear to appropriately exercise their host
responsibilities. The Inspector General did note that your new security
initiative includes establishing the Office of Foreign Visits and
Policy Assignments (``Office'') within the Office of Security Affairs.
Please explain the process through which the Office will approve
foreign scientists for visits to or work at the labs, and how the
Office will determine the level of access granted to foreign
scientists. Please outline how the Office will control the access of
foreign scientists, who are either visiting or working at the national
labs, to sensitive unclassified or classified information for which a
deemed export license would be required? What are the criteria for an
Energy employee to be a host to a foreign scientist? Will this Office
issue guidance to employees regarding the responsibilities of being a
host? Please explain the process. Will this Office conduct oversight to
hosts to ensure that regulations are being followed? Please explain the
process.
Answer: Revision of DOE's existing Foreign Visits and
Assignments policy is currently underway. The Department of
Energy is continuing to improve its efforts to establish an
effective policy, including the development of a systematic
approach to the DOE review and approval process, as well as
providing a mechanism for management accountability. This
effort also will include the improvement of standard DOE-wide
operating procedures and the implementation of education and
training programs for management officials and hosts. DOE
expects to complete the process shortly at which time we will
more fully respond to the questions posed here.