Thursday, September 17, 2009

U.S. Updates Export Curbs on China’s Military



U.S. Updates Export Curbs on China’s Military


Recent changes to U.S. export-licensing policy make it tougher for China to buy some high-tech goods that could be used in military items, but they also allow certain Chinese customers to buy things without licenses.

The changes, announced June 15 by the U.S. Commerce Department’s Bureau of Industry and Security (BIS), are intended to address concerns about China’s military modernization and to balance commercial exports with national security concerns.

“This new rule builds higher fences around the most sensitive technologies to hedge against a rapid and opaque Chinese military build-up. At the same time, it will boost civilian high-tech trade by making it easier for U.S. companies to compete and win in China,” said Mario Mancuso, undersecretary of Commerce for Industry and Security.

The changes create a new program, called the Validated End-User (VEU) program, which will take applications from Chinese firms, vet them, and allow the ones that pass to receive certain U.S.-controlled items without individual export licenses, said one BIS source.

The vetting will be done by the End-User Review Committee, which is chaired by Commerce and includes State, Pentagon and Energy representatives. The committee will look to see that the applicant has complied with export-control rules, engaged only in civil end uses, and has not helped spread weapons of mass destruction, among other criteria.

The first roster of companies could be announced as early as the end of July, the source said.

“As the program expands and matures, it could facilitate millions of dollars of U.S. exports to China,” the source said.

The changes also put 20 new products and associated technologies and software on the list of items for which export licenses are required.

The Commerce Department also changed the way it classifies controlled exports, reducing the number of classes — called Export Control Classification Numbers — from 46 to 31. The 31 categories include aircraft and aircraft engines, avionics and inertial navigation systems, lasers, depleted uranium, underwater cameras and propulsion systems. The list also includes program proof and validation software that allows automatic generation of source codes and navigation direction-finding equipment.

“This list was carefully developed by the Departments of Commerce, Defense and State to target militarily useful items not widely available on world markets,” said the BIS source. “A rigorous technical analysis, incorporating the results of extensive outreach and dialogue, considered military applicability, foreign availability and commercial impact as factors for selection.”

Chinese Foreign Ministry spokesman Qin Gang said there was a contradiction between the stiffer rules and U.S. desires to reduce its trade deficit, which hit $262 billion last year.

“It’s a matter of concern to the U.S. to seek to end its trade deficit with China,” Qin said. “I hope the U.S. takes an active, constructive approach to it. To meet that end, it’s imperative to ease controls on high-tech exports. China is interested in buying more things than just airplanes, soybeans and beef.”

Last year, the Commerce Department received 1,421 license applications from Chinese firms, approved 1,376 exports worth a total of $231 million, and denied just 45 with a total value of $17.7 million.

Some argue that the new restrictions are a reflection of a muddled policy on China by the Bush administration.

“If China is such a big security threat, why is the Bush administration indifferent to the migration of U.S. manufacturing to the Middle Kingdom?” said Loren Thompson of the Lexington Institute, Arlington, Va. “Why can’t it bring itself to pressure China on floating the yuan? I think this shows an administration that can’t figure out what it wants or believes.”