House Hearing on Export Transshipment Reveals Upcoming Bill to Withdraw China's MFN
On July 22, 2010, the House Foreign Affairs Committee’s Subcommittee on Terrorism, Nonproliferation, and Trade held a hearing on exports entitled “Transshipment and Diversion: Are U.S. Trading Partners Doing Enough to Prevent the Spread of Dangerous Technologies?”
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Testifying at this hearing were the State Department’s Acting Assistant Secretary of its Bureau of International Security and Nonproliferation and the Bureau of Industry and Security’s Assistant Secretary for Export Administration.
Chairman Says He Will Introduce Bill to Withdraw China’s MFN Status
During a discussion at the hearing on whether China was concerned about being sanctioned or losing its access to the U.S. market for failing to prevent illegal diversion and transshipment of sensitive U.S. technologies, Subcommittee Chairman Sherman (D) stated he soon intends to introduce legislation that would, six months after enactment, end most-favored-nation (MFN) status for China.
UAE, Malaysia, and China Remain Transshipment Hubs of Concern
During the question and answer portion of the hearing, the Chairman noted that, although the United Arab Emirates, Malaysia, and China have made progress on paper in improving their systems for preventing unlawful transshipment of sensitive technologies, they remain transshipment hubs of great concern.
In response to questions, the Commerce Department noted that it has only one full time employee in UAE to do end user verifications.
State Dept Tools Include UN Resolutions, PSI, Multilateral Regimes, and EXBS
The State Department’s approach to combating illicit transshipment and diversion consists of various policy and programmatic efforts, including:
UN Security Council resolutions - several United Nations Security Council Resolutions require countries to prevent transfers, including by transshipments, through their seaports and airports, of prohibited items.
PSI - the Proliferation Security Initiative (PSI), a global effort that aims to stop trafficking of weapons of mass destruction, their delivery systems, and related materials to and from states and non-state actors of proliferation concern.
In response to a Subcommittee question, the State Department noted that China is not a PSI signatory.
Multilateral control regimes - working with multilateral export control regimes, such as the Missile Technology Control Regime (MTCR) and the Australia Group (AG); and
EXBS program - the Export Control and Related Border Security Assistance (EXBS) program, the U.S. government’s premier initiative to help other countries to improve, or, as appropriate, develop their export control systems. In the next 24 months, EXBS plans to deliver 70 bilateral trainings to 39 countries on transit- and transshipment-related topics.
BIS’ Tools Include Entity List, Outreach, End-Use Checks, Etc.
According to the written BIS testimony, BIS utilizes various tools to combat unlawful transshipment and diversion, including (i) the Entity List; (ii) Temporary Denial Orders; (iii) outreach events with the public and private sector; (iv) Office of Export Enforcement (OEE) end-use checks; (v) Export Control Officers at U.S. embassies in Beijing, China; Abu Dhabi, UAE; New Delhi, India; Moscow, Russia; the U.S. Consulate in Hong Kong; and Singapore (newly posted in FY 2010).